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What Is Loss Prevention? The 411

5 min read
loss prevention officer doing retail security

Loss prevention is any step taken to lessen the possibility of something of value being lost to the company. This could be goods, property, people, health, and even insurance payouts. This is why this industry can seem so wide–it’s everything from security personnel on the ground to employee training. 


What Are the Kinds of Loss Prevention?

The simplest way to understand loss prevention is through how it is commonly used. The most common one is retail loss prevention. 

Retail loss prevention

Of a company’s total sales, retail loss will add up to 1-2% of the revenue. It might not seem like much, but losing $1-2 of every 100 dollars the company makes adds up to significant numbers. What kinds of retail loss do stores and companies face?

First, shoplifting. It adds up to 36.5% of total retail loss. In this day of multiple CCTVs and open security presence, it may seem weird. However, CCTVs only point one direction, company staff only have two eyes each, and no one can ever really cover all the bases. Here are some security responses to shoplifting:

  • Focus on discouraging shoplifting rather than catching shoplifters in the act. It’s easier and more straightforward. Signs reminding customers that there are CCTVs and security personnel are a good deterrent. 
  • Keep your CCTVs monitored. If you want to catch shoplifters in real-time, don’t just review the 24-hour footage after the cycle is done. Have someone monitoring the screens and tracking your customers.
  • Arrange your merchandise neatly, and limit your shelf stock. Neatness and limited stock discourage shoplifters because they subconsciously feel like their actions will be noticed, or the stock perceived as missing. 
  • Remind employees to interact with customers. The more shoplifters are reminded of the store staff, the more discouraged they will be to make a move that can be spotted any time.

Second, return fraud. Simply put, it’s when someone deliberately returns or exchanges a product with a store in a fraudulent way (with stolen, counterfeit, or obviously used goods). The return or exchange causes some kind of loss, in the product or in revenue. As you and your employees already know, return fraud creates a tension between “customer first” policies and anti-fraud measures. So how can you draw the line in the right place? 

  • First, No Receipt, No Return. It’s something most people expect anyway, so it should not be perceived as rude. On the employees’ side, there should be no exceptions to the rule. 
  • Second, check your goods regularly for minor damage, stains, unraveling seams, and the like. If you need to mark their price down or tag them in the system, do so. At least when someone comes by trying to return obviously used items, you’ll have an idea of how true that might be. 
  • Third, encourage online transactions or re-crediting returns to cards. That way the details go online. If it’s a cash return, you can request an ID or something that helps you identify the buyer. 

Third, employee theft is a large part of the challenge, and it can cause up to 50% of the store’s loss. That shouldn’t be a reason for hyper-vigilance or paranoia. In terms of opportunity and presence, they have the most chances for this. 

What does employee theft look like? 

  • Time padding: extending hours for overtime pay with less output 
  • Office supply skimming: taking usually small or bulk office supplies for personal use
  • Sweethearting“: giving employee discounts to certain favored customers
  • Cash register skimming
  • Merchandise theft 

How can you beef up your security in this area? 

  • Have at least two people handling the finances at any one time. One person can receive cash and do the actual transactions; another can balance the books. Or you have two at the cash and the same two balancing the books, but one point person for each. 
  • Make your employee handbook clear on policies and consequences. (If they don’t read it, it’s their loss rather than yours.) It sets expectations, and legally protects you if it turns into a case. 
  • Make integrity a touchpoint of hiring. Skills can be added; integrity is a character trait. 
  • Make the workplace a good place to be. The more your employees enjoy being at work, the less they will want to risk what they have through theft or fraud. Employee theft happens twice as much as it did just 16 years ago. The more stress there is between employee and employer, the more at risk the employer is of being a target of “revenge theft.” Understanding where your employees are at and what’s going on in their lives helps if you need to give them time off or more flexible hours. It reduces their opportunity, but also gives them leeway to find and use other resources instead of considering theft. 

Lastly, administrative error will inevitably lead to losses. No matter how automated your systems are, one wrong entry can invalidate an entire amount. How can you keep your admin errors to a minimum? 

  • Have a process where every step must be hit. It does not need to be a long process. It can be at least 3 steps, as long as you ask: who should see this? Who should approve this? Who should double-check this? Ensuring no exceptions lowers possibilities of admin error. 
  • Have regular internal audits. You might want to outsource this, just for convenience, but it should help reduce administrative errors and let you catch discrepancies before anyone else finds them. 

Other Kinds of Loss Prevention

One is ensuring safety at your workplace. What you are really protecting is liability risks, and reducing insurance or health costs. Another is data privacy; you are protecting your credibility as a company and reducing losses through fraudulent transactions. Anything that reduces the full potential gains of a company is loss; anything preventing that is loss prevention. 

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