Fraud is one of retail’s biggest problems
Fraud can have a greater impact on your business than a simple loss of profits. Theft, fraud, or human error can damage a retailer’s reputation and affect customer loyalty, but you can take steps to prevent these issues.
Fraud has significant financial ramifications for retailers, with online retail fraud costing more than $12 billion annually, according to PYMNTS. Omnichannel businesses are especially at risk for losing hard-earned profits because there’s more opportunity for fraud and theft than businesses that operate only as brick-and-mortar stores or online shops. Regardless of how a retailer chooses to sell, loss prevention is a key first step in helping ensure that profits end up where they belong—so your business can thrive and grow.
What is loss prevention?
Loss prevention is a big liability for any business, but it’s especially common in retail. In a retail setting, profit loss can arise from something as straightforward as shoplifting, or it can be as subtle as an administrative error or employees offering improper discounts to friends, acquaintances, or relatives.
Loss prevention creates a defence against the many ways that fraud and theft can damage businesses. In brick-and-mortar retail stores, loss prevention might involve installing security cameras or training employees to spot fraudulent returns. For an online retailer, a loss prevention strategy can include software that detects purchasing anomalies like delivery addresses that differ from billing addresses, requiring debit card verification to make purchases, or automatically setting purchase limits to mitigate criminal activity because very large orders can indicate attempted fraud.
In short, loss prevention includes any measure that businesses take to help protect revenues and mitigate fraud.
Loss prevention in retail
Loss prevention is crucial for both omnichannel retailers and brick-and-mortar stores—a sound strategy for minimising profit loss improves your bottom line and can help your business grow.
Some of the most common approaches to loss prevention in retail include:
- Security tags. These can discourage shoplifting and alert staff when it does occur. Special equipment is necessary to remove or deactivate the tags properly. Many security tags contain ink that damages the stolen item if the tag is removed by force. Clothing retailers most often employ this type of loss prevention.
- Closed-circuit television. This is a highly effective method for recording and monitoring retail spaces or preventing break-ins. Even the presence of a sign alerting shoppers or would-be intruders that they’re on camera can discourage theft.
- Training. Employees can go a long way in preventing losses caused by human error. They can unintentionally contribute to profit losses by mislabeling items or by making simple accounting errors or other preventable mistakes. Proper training and cultivating a workplace culture where employees feel valued can have a positive impact on loss prevention.
- Organise items to keep them out of reach. Some retailers keep commonly stolen items protected in locked cabinets, with spider wrap, or behind counters. If popular or easily stolen items are harder to access, they’re less likely to be stolen.
- Position staff strategically. The more staff members you have around the store, especially near popular items, the harder it will be for someone to take those items—or to get away with them if they do try to steal them.
Fraud prevention goes digital
Tags and training aren’t the only approaches to loss prevention. Modern technology solutions can also help protect against fraud. Data, for example, represents a key line of defense for today’s retailers.
Modern technology solutions use data from common transactions such as item returns or discounts to identify patterns and detect fraud. Using AI and machine learning, technology solutions can help make you more informed and efficient to help protect your business.
For example, software such as Microsoft Dynamics 365 Fraud Protection can tap into the power of the Internet of Things (IoT) to help monitor merchandise. By creating a network of connected devices and sensors, stores can use real-time data to make sure items are restocked quickly or to detect anomalies. For example, a “smart” shelf can send store managers alerts when an item is getting low, but if the system generates an alert when the manager knows something was recently restocked, it could indicate theft.
Additionally, retailers can use IoT to alert employees when the doors to a high-price or high-theft item are left open too long, decreasing the opportunity for thieves to access these items. Alerts can also let employees know when shoppers enter the store, preventing anyone from coming in undetected.
What to consider when evaluating software
When evaluating loss prevention software, try to find comprehensive tools that can help you understand data and act on it quickly. Look for offerings that create detailed reports with which you can drill down and gain insights to better identify where and how fraud occurred. A robust solution should include features that help you:
- Detect irregularities in an omnichannel ecosystem.
- Improve efficiency by detecting patterns in historical data.
- Protect accounts with device fingerprinting.
- Use scorecard reports to measure key performance indicators and monitor loss prevention performance.
- Tap into the power of adaptive AI technologies.