Retail loss prevention (in some retailers known as
asset protection) is a form of private investigation into
larcenyLarceny is a form of theft. It was an offence under the common law of England and became an offence in jurisdictions which incorporated the common law of England into their own law. It has been abolished in England and Wales, Northern Ireland and the Republic of Ireland...
or
theftIn criminal law, theft is the illegal taking of another person's property without that person's freely-given consent. The word is also used as an informal shorthand term for some crimes against property, such as burglary, embezzlement, larceny, looting, robbery, shoplifting, fraud and sometimes...
. The focus of such investigations generally includes
shopliftingShoplifting is theft of goods from a retail establishment...
,
package pilferagePilferage is the theft of part of the contents of a package. It may also include theft of the contents but leaving the package, perhaps resealed with bogus contents. Small packages can be pilfered from a larger package such as a shipping container...
,
embezzlementEmbezzlement is the act of dishonestly appropriating or secreting assets, usually financial in nature, by one or more individuals to whom such assets have been entrusted. It is a kind of financial fraud...
,
credit fraudCredit card fraud is a wide-ranging term for theft and fraud committed using a credit card or any similar payment mechanism as a fraudulent source of funds in a transaction. The purpose may be to obtain goods without paying, or to obtain unauthorized funds from an account. Credit card fraud is also...
, and check fraud. "Loss prevention" or "LP" is used to describe a number of methods used to reduce the amount of all losses and
shrinkageIn financial accounting the term inventory shrinkage is the loss of products between point of manufacture or purchase from supplier and point of sale. The term shrink relates to the difference in the amount of margin or profit a retailer can obtain...
often related to retail trade.
The objective is to maximize profits through reducing retail theft, also known as shrinkage.
Retail loss prevention (in some retailers known as
asset protection) is a form of private investigation into
larcenyLarceny is a form of theft. It was an offence under the common law of England and became an offence in jurisdictions which incorporated the common law of England into their own law. It has been abolished in England and Wales, Northern Ireland and the Republic of Ireland...
or
theftIn criminal law, theft is the illegal taking of another person's property without that person's freely-given consent. The word is also used as an informal shorthand term for some crimes against property, such as burglary, embezzlement, larceny, looting, robbery, shoplifting, fraud and sometimes...
. The focus of such investigations generally includes
shopliftingShoplifting is theft of goods from a retail establishment...
,
package pilferagePilferage is the theft of part of the contents of a package. It may also include theft of the contents but leaving the package, perhaps resealed with bogus contents. Small packages can be pilfered from a larger package such as a shipping container...
,
embezzlementEmbezzlement is the act of dishonestly appropriating or secreting assets, usually financial in nature, by one or more individuals to whom such assets have been entrusted. It is a kind of financial fraud...
,
credit fraudCredit card fraud is a wide-ranging term for theft and fraud committed using a credit card or any similar payment mechanism as a fraudulent source of funds in a transaction. The purpose may be to obtain goods without paying, or to obtain unauthorized funds from an account. Credit card fraud is also...
, and check fraud. "Loss prevention" or "LP" is used to describe a number of methods used to reduce the amount of all losses and
shrinkageIn financial accounting the term inventory shrinkage is the loss of products between point of manufacture or purchase from supplier and point of sale. The term shrink relates to the difference in the amount of margin or profit a retailer can obtain...
often related to retail trade.
Sources of loss/shrink
The objective is to maximize profits through reducing retail theft, also known as shrinkage. According to the 2006 National Retail Security Survey, retail operations suffered an average annual inventory shrinkage percentage of 1.57% in 2006. According to the survey, shrink is divided into 5 categories:
- 46.8% from employee theft,
- 31.6% from shoplifting
- 14.4% from administrative error
The results of improper Administration or execution of the research task are administrative errors. Such errors can be caused by carelessness, confusion, neglect, omission or some other blunder.Four types of administrative error are:...
- 3.75% from vendor error
- 2.86% from unknown error.
Although most retailers experience a shrink percentage of less than 2%, some smaller retailers often experience monthly and annual average shrinkage percentages as high as 20%.
Credit card theft
Stolen
credit cardA credit card is part of a system of payments named after the small plastic card issued to users of the system. It is a card entitling its holder to buy goods and services based on the holder's promise to pay for these goods and services...
s find their way into retail stores as much as or more than online retail websites. This is usually for several reasons. Retailers have generally relaxed their procedures for checking credit cards, to shorten customers' time spent at the cash register. Also, purchasing merchandise first-hand affords a credit card thief some anonymity, as opposed to providing a mailing address for an online sale.
Most retailers are not liable for the use of stolen cards, unless they have chosen to override the
chip and PINChip and PIN is the name of a government-backed initiative in the United Kingdom to implement the EMV standard for secure payments. There is also a similar initiative in Ireland called Chip and PIN Ireland.- History :...
and accept a customer's signature when they could have accepted a PIN.
Check fraud
Check fraud is generally accomplished in one of two ways. The first is by writing a check that is manufactured to look like a real document, which in fact has no real value or no real bank account to back it up. Typically this is done by suspects who are experienced in forgery. The second method is check kiting, in which the suspect writes a check for a high dollar purchase, then withdraws the funds from the account before the check clears. Check kiting is usually done when suspects establish a fraudulent bank account under a false name.
Margin loss and sweethearting
Retail loss prevention departments are becoming increasinly more involved in investigating losses which affect the margin of products and services. Typical areas of investigation include the overriding of PLU prices, price matching from competitors, and reduction of service fees such as delivery or protection agreements. While unintentional margin loss is reduced by educating employees and managers, the term for intentional margin loss is "sweethearting." Sweethearting generally occurs when an employee promises a deal to a customer in order to close a sale, or otherwise reduces the price of merchandise for dishonest reasons. Sweethearting investigations involve research into employees' finding competitor price matches to give to customers; overriding prices for their customers, friends, and themselves; and markdown of fees such as delivery and protection agreements.
Exception-based reporting (EBR)
In the past 10 years, exception-based reporting (EBR) has become a widespread tool for loss prevention in retail organizations. EBR has allowed retailers to easily identify instances of potentially fraudulent activity by using data from the ERP, point-of-sale systems, and more. They no longer have to search through cumbersome sales records to spot patterns of dishonesty.
These are an automated profit increase solutions, providing pin-pointed analysis and guidance for improved merchandise control, compliance assurance, loss prevention and fraud detection.
These solutions are covering all operational areas of the retail enterprise – the POS, store operation, supply chain and purchasing.
Camera systems
CCTV
CCTV is an abbreviation for
Closed Circuit TelevisionClosed-circuit television is the use of video cameras to transmit a signal to a specific place, on a limited set of monitors.It differs from broadcast television in that the signal is not openly transmitted, though it may employ point to point wireless links...
. CCTV camera systems are common to almost all loss prevention departments. The obvious benefits of CCTV camera is that the investigator can gain a better view of a suspect, record incidents, and not reveal themselves to shoplifting suspects. Some retailers use two-man teams in which one person uses the CCTV camera system to detect shoplifters and a floor man follows the suspect and apprehends them.
CCTV camera systems have been drastically modernized in the last decade. Most systems now record digitally as opposed to using videotapes. Many systems now include a computer server that stores recorded video for months at a time. Digital cameras overlooking registers have greatly increased the number of internal cash thefts being resolved.
CCTV is one of the most effective tools ever used, not just by loss prevention, but the security industry in general. Firms which offer leases on such systems have brought costs down to a point where the franchise owner can consider it economically justifiable. A quality CCTV system, including a video recorder and monitors (at least one of which is visible to the public), is a proven deterrent with many related benefits, including protection from employee theft. A well-advertised visible system also acts as a holdup deterrent, and, when thefts do occur, prosecution is simplified.
Electronic article surveillance
Electronic article surveillanceElectronic article surveillance is a technological method for preventing shoplifting from retail stores or pilferage of books from libraries. Special tags are fixed to merchandise or books. These tags are removed or deactivated by the clerks when the item is properly bought or checked out...
(EAS) is a deterrence system used by retailers to deter shoplifting. EAS involves the use of electronic security towers and electronic security tags. Hard tags or Sticker tags are placed on items throughout the store manually or are applied when merchandise is made and are disabled at check-out by either removing the hard tag using a detacher or by scanning label tags over a magnetic label deactivator. If the tag is not disabled it will activate the alarm pedestals, which are generally located at the exit of a retail store. EAS tags & labels are extremely effective in deterring amateur shoplifting, but most professionals require a combination of hard tags, labels, and ink tags to keep them in check. Even with the most elaborate anti-shoplifting systems some goods will be lost; this is possible with
booster bagA booster bag is a hand-made item used to shoplift, typically from retail stores, libraries, and any other location employing security detectors to deter theft...
s or simply a "grab and run".
Dual Resonator EAS stickers are usually placed on small items such as shaving razors and cold medicines. These items are popular items to sell at flea markets and swap meets. Dual Resonator EAS stickers are printed on thin paper and are difficult to remove. The high speed packaging application of these stickers was perfected by Craig Patterson (Knoxville, TN) and is a process called Source Tagging. Usually the sticker includes a retailer's company logo and serves as an indication to would-be buyers that the merchandise has been stolen.
Two-way radio sets
Almost all loss prevention departments have some form of
two-way radioA two-way radio is a radio that can both transmit and receive , unlike a broadcast receiver which only receives content.Two-way radios are available in mobile, stationary base and hand-held portable configurations. Hand-held radios are often called walkie-talkies or handie-talkies...
communication. This technology is used by investigators to help two-man teams follow a shoplifting suspect in conjunction with the CCTV camera system or to summon assistance when apprehending a shoplifter.
Point of sale
Point of sale is a form of electronic journal that allows the loss prevention investigator to see a transaction as it is occurring live. This system is either displayed on a computer screen or on a monitor linked to the CCTV camera system. This system has assisted investigators in closing employee embezzlement cases pertaining to merchandise passing, merchandise voiding, and discount fraud.
Audits and reporting
Exception reports
Exception reports are compiled on an annual basis into a report. Usually the reports are received monthly or bi-weekly. They include information on cash audit overs and shorts, no-sales, flagged returns, employees ringing themselves up, fake employee numbers used to avoid commission docking, excessive markdowns and/or discounts, and merchandise voids. Exception reports have dramatically reduced the amount of time an investigator needs to detect a possible sign of employee embezzlement.
Electronic journals
Almost every large retail institution has some form of electronic journal which records all its transactions. Information such as credit card numbers, gift card numbers, refunds, and merchandise voids is gathered at the point-of-sale. These journals can then be used to view and print facsimiles of receipts or checks.
Cash office audits
A cash office audit is usually counts up the cash from transactions at the retailer's registers. A shortage occurs when the amount contained in the register does not match what the cash audit says it should have. Shortages are used to begin and close cash embezzlement cases that are investigated by loss prevention departments. Cash office audits used a particular register during the day. This information is used by loss prevention investigators to narrow the field of suspected employees.
Ink tags
Ink tags have been around for several decades and are most commonly used by clothing retailers. Special equipment is required to remove the tags from the clothing. When the tags are forcibly removed, one or two glass vials containing permanent ink will break, causing it to spill over the clothing, effectively destroying it. Ink tags fall into the loss prevention category called benefit denial. As the name suggests, an ink tag denies the shoplifter any benefit for his or her efforts. Despite this, shoplifters have found ways around them, such as duct-taping the holes through which the ink comes out and then removing the tag with pliers, resulting in little to no damage of the merchandise. This however isn't possible with all ink tags as the holes may not be visible. Another technique used is to freeze the clothing and tag prior to removing it; the frozen ink is unable to spill onto the clothing. Ink tags are most effective if used together with an anti-shoplifting system so that the shoplifter can not use the product and remove the ink tag.
Ceiling mirrors
Ceiling mirrors were once a staple of the loss prevention industry. Now, for the most part, they have been relegated to convenience stores. Mirrors allow loss prevention investigators to watch activity in a high-theft area without being seen. Some loss prevention departments have been known to use mirrors to increase the range of their camera systems.
Bottom of basket
Bottom of basket loss (BOB), occurs when an item is placed on the lower tray of a shopping cart and the cashier forgets to check the lower tray for items, resulting in the item not being paid for. What makes this form of shrink unique is that it may happen intentionally or unintentionally. All estimates for the dollar amount lost in this manner are over $2 billion US per year in North America alone, or $7 per checkout lane per day. There are a few products on the market to help prevent this loss. The most common are mirrors mounted across the checkout lane. Some stores have camera systems pointed at the lower tray with monitors for each cashier. Neither of these systems work effectively because the problem is not visibility alone, but the inattentive cashier or forgetful customer.
A newer type of system actively monitors the checkout lane and alerts when an item is detected on the lower tray of the shopping cart. The alarm will trigger when anything is on the lower tray including products, bags, or coats, but uses technology to distinguish the difference between a shopping cart and a person or bag passing through the lane, in order to accurately activate and begin scanning for items. Unfortunately, all these types of "alarm" systems have not proven any significant decrease in BOB loss as the cashier tends to ignore these alarms within 3 months of installation. And there is no way of knowing if the cashier simply ignored the alarm.
Consent searches
Consent searches are widely used in law enforcement and are still present in loss prevention today. By asking a customer to consent to a search of their belongings, such as shopping bags and receipts, any illegal search or seizure requirements can be circumvented. Consent searches in some instances can be used to build on previously existing facts to establish the probable cause necessary to detain a shoplifter. The extreme end of establishing probable cause through a consent search has been eliminated except with a few smaller companies who still utilize it.
In modern retail loss prevention, consent searches are most often used by warehouse retailers such as Costco and Sam's Club. The warehouse retailers have made consent searches of their customers' purchases a part of the membership agreement. Although a customer may refuse to consent to a search of their purchase from a legal standpoint, the warehouse retailer does retain the right as a private business entity to strip the customer of their membership or issue a verbal trespass. Warehouse retailers have been able to utilize consent searches to lower their prices on goods and reduce external shrinkage at the same time.
Viewing towers
Although the necessity of viewing towers has been largely eliminated by CCTV camera systems, they still exist today. A tower is usually a centrally located observation platform raised above the sales floor. An investigator can spend time in the tower while searching for shoplifters or investigating employees, much in the same manner as with CCTV. Most towers are now obsolete and being eliminated in many retailers.
Integrity shops
The information gained from an integrity shop can be used to initiate investigations or conduct interviews that could possibly reveal dishonest activity or outright theft. This is also a good way to find out if an employee is attempting to embezzle.
Facial recognition
Facial recognition systems mounted at the point of entry to a store are capable of comparing the faces of people entering the store against a blacklist of known shoplifters. This allows a suitable system to notify store security when a person of interest enters the store, thereby allowing the person to either be ejected from the store (removing the opportunity for the loss to occur in the first place), or alternative allow more detailed surveillance in order to detect a theft occurrence with one of the above systems.
See also
- Authentication
Authentication is the act of establishing or confirming something as authentic, that is, that claims made by or about the subject are true...
- Packaging
- Package pilferage
Pilferage is the theft of part of the contents of a package. It may also include theft of the contents but leaving the package, perhaps resealed with bogus contents. Small packages can be pilfered from a larger package such as a shipping container...
- Shoplifting
Shoplifting is theft of goods from a retail establishment...
- Tamper-evident
Tamper-evident describes a device or process that makes unauthorized access to the protected object easily detected. Seals, markings or other techniques may be tamper indicating.-Tampering:...
- Tamper resistance
Tamper resistance is resistance to tampering by either the normal users of a product, package, or system or others with physical access to it. There are many reasons for employing tamper resistance....
- Store detective
A store detective is employed to deter and detect theft in retail outlets . The term is no longer frequently used in the retail industry. More common terms today with major retailers are Loss Prevention Agent, Detective or Investigator and Asset Protection Officer or Investigator...
External links
- HowStuffWorks
HowStuffWorks is a commercial edutainment website that was founded by Marshall Brain explaining the way many things work. The site uses photos, diagrams, videos and animations to explain complex terminology and mechanisms in easy-to-understand language...
: How anti-shoplifting devices work