The State of Loss Prevention in Retail Controlling Losses and Maximizing Profits April 2012 Deena M. Amato-McCoy ~ Underwritten, in Part, by ~
April 2012 The State of Loss Prevention in Retail: Controlling Losses and Maximizing ProfitsRetailers are eager to combat loss across their enterprises. However, many Analyst Insightretailers are learning that relying on historical data will not keep them one Aberdeen’s Insights provide thestep ahead of recurring shrink. Companies understand that Loss Prevention analysts perspective on the(LP) technology solutions are a mission-critical cost to doing business in the research as drawn from an21st century. Retailers need to link existing loss prevention tools and aggregated view of researchstrategies to intelligent solutions such as: analytics platforms, Electronic surveys, interviews, andArticle Surveillance (EAS) solutions and Radio Frequency Identification data analysis(RFID) technology, to gain real-time – or near-real-time – access toinformation and transition these losses back into profit.Data from Aberdeens December 2007 benchmark report Real-Time LossPrevention: Changing the Game in Store Fraud, indicated that 81% of Best-in-Class retailers conducted historical theft analysis at the headquarter-level.While the LP department must champion and manage all shrink-fightingstrategies, those with access solely into historical data are clearly at adisadvantage. Retailers that use LP risk management strategies, supported byintelligent solutions, will reduce fraud-related and operational losses.Sustained use of these processes by retailers will ultimately enhance profit,customer satisfaction, and employee and customer safety. Aberdeensurveyed 52 retailers in March 2012 to understand the current pain pointsand strategies that are shaping LP strategies, and prompting the use of moreintelligent solutions.The 21st Century Loss Paradigm: A Loss of ProfitWhile retailers are used to exclusively focusing on the shrink caused byinternal and external issues, new business issues have transformed loss totake on a new meaning. Areas such as organized retail crime, as well as theimpact of several other factors (including data-related losses; online fraud;returns fraud; poor management of product movement across complexsupply chains; intricate promotions applied at point-of-sale; monitoringlifecycles of perishables, and measuring raw materials and demand of finishedproducts across fresh departments) are all contributing to enterprise losses.A mere four years ago, 70% of 254 specialty retailers indicated that high-value merchandise and fraudulent point-of-sale transactions were theirhighest shrink-related risks, according to Aberdeen’s report, Effective LossPrevention Methods: The Specialty Retail Story. Fast-forward to 2012, the topcomplexity for retailers is data-related. Data in Figure 1 indicates that over athird (35%) of retailers reported that they lack credible data to forecast lossevents, these losses are only bound to increase, further burdening already-This document is the result of primary research performed by Aberdeen Group. Aberdeen Groups methodologies provide for objective fact-based research andrepresent the best analysis available at the time of publication. Unless otherwise noted, the entire contents of this publication are copyrighted by Aberdeen Group, Inc.and may not be reproduced, distributed, archived, or transmitted in any form or by any means without prior written consent by Aberdeen Group, Inc.