Retail loss prevention

Average global shrink rates as table by region, ranging from a high of 1.85% in the US to a low of 1.75% in Asian Pacific.[4]

Operational errors are inadvertent human errors. Operational errors occur when associates do not follow existing business best practices and policies or a company lacks the proper best practices and policies to ensure work is performed with minimal human error. Operational errors also occur due to a lack of proper training for associates.

External theft is when customers intentionally cause shrink by theft, fraud, or vandalism. Also known as shoplifting, thefts that occur in retail settings are done during business hours and involve the lack of security and prevention measures. Theft prevention can be done by reducing the opportunity to steal in the store through placing prevention mechanisms in place.

Internal theft is when company employees intentionally cause shrink by theft, fraud, vandalism, waste, abuse, or misconduct. Since associates have access to the entire building and during non-business hours, they are capable of costing the company substantial losses over a longer period of time.

Internal theft is typically identified by reporting systems, first-hand visual/CCTV surveillance or tips from coworkers. It frequently occurs via dishonest operation of the Point Of Sale (POS) system.

Internal theft traditionally causes more loss to a business than external theft due to the increased opportunity available to internal staff members. "A well-informed security superintendent of a nationwide chain of retail stores has estimated that it takes between forty and fifty shoplifting incidents to equal the annual loss caused by one dishonest individual inside an organization."[5]

Internal loss is caused by associates including internal theft. Examples of such losses include staff members stealing products, cashiers not ringing sales through the tills and keeping the payment for themselves, package pilferage, staff selling products at discounted prices as a third-party distributor, "sweethearting" by giving products for free to other parties by staff, colluding with maintenance staff or external contractors to steal products, and under-ringing merchandise on the tills for other parties so they end up paying less for the items. Internal loss, as with other forms of shrinkage, can be classified as either "malicious" or "non-malicious".

The malicious internal loss is shrinkage caused by individuals from within the business such as staff members and cleaning staff and anyone else involved internally in the company. Internal shrink accounted for 35 percent of shrink to businesses in 2011.[6]

Non-malicious shrinkage can result from a number of operational failures within the business structure. The processing of returned or damaged stock, for example, can cause articles to be removed from inventory and discarded (which contributes directly to shrinkage) rather than sold at a discount, donated, returned to vendors for credit, or otherwise removed from inventory in a manner that minimizes financial loss.

Most large retailers have in-store loss prevention employees who are trained to apprehend shoplifters. This can come in the form of uniformed security officers, undercover security, or both. Each state allows stores to apprehend and detain shoplifters under shopkeeper's privilege laws. Apprehensions are typically a last resort after attempts to recover merchandise fail. An attempt to recover merchandise is known as a recovery or a "burn" and is generally one of the primary job duties of loss prevention associates. Many retailers operate in-store loss prevention teams including Target, Walmart, Macy's, JCPenney, Nordstrom, and Sephora. Teams generally have anywhere from 1-15 individuals depending on location.

The development of electronic article surveillance (a magnetic device attached to the merchandise that would trigger an alarm if removed from the store, also called EAS) led to an increase in arrests; however, many cases have been dismissed due to lack of observation of the crime.[7] A later effort, called "benefit denial" by Read Hayes, was intended to reduce the incentives for people to take the items by destroying the usefulness of items that were improperly removed from stores through the use of measures such as exploding dye packs (ink tags).[1]

Different types of CCTV

CCTV (Closed Circuit Television) is the use of a surveillance system to record any theft or misconduct. It has been widely used all over the world and has affected the decrease in crime globally. It is used to strengthen the central control, responsiveness and crime combating capacity which increases the efficiency and effectiveness[8] of the retail loss prevention methods and strategies.

A receipt scanner gate at an IKEA store in the Netherlands

Many retailers require customers to show their receipt to an employee to confirm that merchandise has been paid for. This can be done by loss prevention officers, as is the case with Target, or by store employees, as is done at Walmart and Costco. Fred Meyer, an Oregon based hypermarket, has begun to contract external security to perform receipt checks.[9][10]

Certain membership stores, including Costco, require customers to comply with receipt checks as terms to their membership.[11]

Some retailers now require customers to scan their printed receipt on an optical scanner before they can exit the store. Customers are held within a barriered area, and an automatic gate is opened by scanning the receipt as proof of purchase, allowing the customer to leave. Some supermarkets in the United Kingdom introduced receipt scanners in 2022-23, following a 22% increase in shoplifting linked to the cost-of-living crisis, but the systems proved unpopular with customers and attracted some negative public reaction.[12][13]