Retail loss prevention (in some retailers known as Asset Protection) is a form of private investigation into larceny or theft. The focus of such investigations generally includes shoplifting, package pilferage, embezzlement, credit fraud, and check fraud. "Loss prevention" or "LP" is used to describe a number of methods used to reduce the amount of all losses and shrinkage often related to retail trade.
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%.
Cash theft is generally investigated using cash office audits that appear on exception reports and CCTV cameras. Fake gift cards are usually investigated through the use of an electronic journal in which the gift cards are logged.
The passing of merchandise is usually discovered through the use of an exception report in which a particular employee is shown to have an unusual amount of voids or no-sales. Generally merchandise is rung up by an employee and subsequently voided out. The merchandise is then passed to a person at the counter, usually a friend or family member of the employee.
Other forms of employee theft that are discovered via the use of exceptions reports are discount and commission fraud. Discount fraud is the fraudulent use of an employee's discount to reduce the price of merchandise for someone else. Generally this is done by an employee passing their discount card to a friend. Commission fraud is usually accomplished by ringing large return purchases back to another employee or recent ex-employee.
Merchandise theft is often investigated though the use of CCTV cameras and investigator observations. The items stolen by employees tend to be small items which either have a high dollar value or are edible. Stockrooms have a particularly high level of employee theft and are often investigated using CCTV. Loss prevention often tours stockrooms looking for "stashes", out-of-place merchandise, and price tags. Typically, a covert CCTV camera is placed in the areas of high opportunity for theft.
Credit card theft is generally investigated by loss prevention personnel who receive a tip from a local police investigator investigating a stolen card. Typically the use of a stolen card can be easily found using the store's electronic log, which will specify the register at which the stolen card was used. Sometimes CCTV video of the transaction exists and can be used by the police to establish a suspect or close a case. Today, most retailers are not liable for the use of stolen cards, unless they have chosen to override the chip and PIN and accept a customer's signature when they could have accepted a PIN. However, retailers today frequently establish their own credit institutions and issue their own in-store only credit cards. In-store credit fraud is likely to become an increasing problem for loss prevention investigators in the next decade.
CCTV CCTV is an abbreviation for Closed Circuit Television. 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 contain video for months at a time. One drawback of many of these digital recorders is their inability to move and view more than one fixed area of the store. However, new 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 thumb|A tag used for EAS
Electronic article surveillance (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 and are disabled at cashier by either removing the hard tag using a detacher or by scanning label tags over a magnetized strip or label deactivator. If the tag is not disabled it will activate the alarm tower, which is generally located at the exit to 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 bags 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 swap meets. Dual Resonator EAS stickers are printed on thin paper and are difficult to remove. Usually the sticker includes a retailer's company logo and serves as an indication to would-be buyers that the merchandise has been stolen.
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.
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 conducted by a common retail employee who 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 include information pertaining to which employees used a particular register during the day. This information is used by loss prevention investigators to narrow the field of suspected employees.
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.
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.