Delivering Effective Loss Prevention in a Complex Retail World
Reflections on retail loss – by professor Adrian Beck
Time to consume: 5 min
15 October 2020
As the global retail sector continues to grapple with the challenges presented by the COVID-19 pandemic, it is easy to forget that prior to its emergence, the industry was already experiencing considerable change and disruption. This was being fuelled by an almost constant stream of new technologies and innovations, and the evolving demands of consumers requiring more choice and flexibility in the way in which they viewed, selected and paid for products. For instance, online shopping has begun to become a dominant presence in more countries, while the desire to reduce points of friction in retail stores has seen a rapid growth in different forms of self-checkout and pay systems being introduced.
While offering the consumer greater flexibility and choice in the way in which they shop is seen as an inevitable and necessary direction for most retailers to take, it is not without negative consequences, not least an increased exposure to the risk of retail loss. Indeed, it increasingly seems clear that as retailers add layers of complexity to their business model and at the same time reduce customer controls that traditionally generate points of friction, then the likelihood of retail losses growing becomes more apparent.
Given this rather challenging scenario, how should retail companies organize themselves to ensure that retail losses remain at a manageable and acceptable level? One way is to consider utilising The Loss Prevention Pyramid – a framework that can help retail businesses begin to develop a more coordinated and sustainable approach to both understand the impact of retail complexity and achieve a workable loss prevention framework within which it can be more effectively managed.
The Loss Prevention Pyramid is based upon research that combined the key ‘habits’ of the best-performing companies. As can be seen, it is based upon 11 key elements and its conceptualization as a pyramid is important – the three foundation blocks are critical if it is going to remain stable and successful.
Setting the Foundations
The bedrock for successfully implementing the Loss Prevention Pyramid is the ability to create, sustain, and embed an organizational awareness of, and commitment to, dealing with the problem of retail loss. This starts at the top of the company with senior management being committed to the concept of loss prevention as an important priority for all parts of the organization and considering it as part of the overall corporate objectives. Without this commitment, the rest of the business will not be persuaded that retail loss matters and is relevant to the organization, nor will the loss prevention department receive the mandate or resources necessary to implement new approaches to tackle the problem.
The second two foundation blocks are also important: ensuring that all parts of the organization take ownership of the problem and that this is embedded in what they do. Many companies have traditionally viewed loss prevention departments as the sole arbiter on all issues relating to security and retail loss. What the model supports is an approach where loss prevention professionals become the ‘agents of change’, working with other functions within the business to develop and operationalize a cross-company response to the loss problem.
Without these three strategic-level factors, it seems clear that any form of loss prevention approach will flounder on the rocks of diffidence, marginalization, and under-prioritization. Getting a broader organizational framework that is conducive to taking loss prevention seriously is imperative.
Providing an Organizational Framework
The second group of factors that make up the Loss Prevention Pyramid relates to the way in which the loss prevention department can influence the functioning of the business through:
Strong loss prevention leadership.
- Provision of high-quality data and data management systems.
- Prioritizing the development of operational excellence.
- Making the most of available human resources.
- Forging intra- and inter-departmental collaboration.
- Encouraging innovation and experimentation.
- Communicating loss prevention imaginatively and consistently.
All these factors are important in themselves and require a specific plan to ensure they are properly developed and maintained, but they are also highly dependent upon each other. For instance, it is difficult to conceive of an effective communication strategy without having access to high-quality data. Similarly, it is difficult to be innovative and experimental, especially in such a competitive market as retailing, without firm and decisive loss prevention leadership.
Operationalizing Retail Loss
The final element of the Loss Prevention Pyramid is that of front-line management responsibility—empowering staff to take responsibility for dealing with the problem of retail loss. Occupying the very top of the Pyramid, this can only be achieved if the other factors outlined above are in place. If they are not, then front-line management will not only have a raft of readymade excuses as to why retail loss is a problem they cannot be expected to take responsibility for, but also, they will not have access to the necessary resources and expertise to manage it effectively. Above all, they will not feel confident in developing, delivering, and managing a retail environment within which shopper satisfaction is considered paramount and which achieves the correct balance between selling and levels of retail loss.
Delivering Effective Loss Prevention in a Complex Retail World
Since it was first developed, the Loss Prevention Pyramid has become an established way for not only retail businesses to think about how they establish a coordinated and sustainable loss prevention strategy, but also benchmark how they are performing against each of the 11 factors that comprise the Pyramid. It is very easy for loss prevention practitioners to become increasingly reactionary in the way in which they respond to changes in their businesses – the Loss Prevention Pyramid provides a useful tool to enable them to be more proactive and progressive in how they deal with an increasingly complex retail world.
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