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Loss prevention is a form of private investigation into larceny/theft. The focus of such investigations generally includes shoplifting, embezzlement, credit fraud, and check fraud. Loss prevention or "LP" is a term used to describe a number of methods used to reduce the amount of all losses and shrinkage often related to retail trade.

The objective is to maximize profits through reducing shrinkage. According to the 2001 National Retail Security Survey, conducted by the University of Florida, retail operations suffered an average annual shrinkage percentage of 1.75% in 2000. Although most retailers experience a shrinkage percentage of less than 2% some smaller retailers often experience monthly and annual average shrinkage percentages as high as 20%. According a study by the National Retail Security Survey 30.6% of shrinkage comes from shoplifting, 46% from employee embezzlement, 17.6% from administrative error, and 5.8% from vendor fraud.

Because of the inherent need for companies to reduce operational costs, there is an ever-present need for experienced LP professionals, particularly in the retail sector. Some colleges like Sonoma Community College in California even offer degree programs in security related industries such as loss prevention. An online Master's degree in Loss Prevention and Safety is available from Eastern Kentucky University.

Types of Loss Prevention Investigations

Shoplifting

Shoplifting is one of the most common property crimes in the United States today. Anyone can be a shoplifter, an important fact for loss prevention investigators to understand. Those who focus on stereotypes such as race and age generally have a difficult time detecting shoplifting. Statistically, shoplifting occurs at approximately the same rate each day of the week and December is the only month where it appears convenience stores suffer appreciably increased losses. The twelve to seventeen-year-old age group is statistically the most active shoplifting group in relationship to its size, followed by the eighteen to twenty-nine age group.

According to the 2004 17th Annual Retail Theft survey conducted by Jack L. Hayes International, 689,340 were shoplifters were apprehended by 27 of the major U.S. retailers. This figure was a 4.86% increase from total of 657,414 shoplifters apprehended in 2003. In 2004, $70,039,564 dollars were recovered from shoplifting apprehensions compared to $68,927,833 in 2003. In 2004, the average dollar value for a shoplifting apprehension was $101.60 dollars.

Most amateur shoplifters tend to spend too much time selecting merchandise and looking for investigators, thus making them much more likely to be detected. Professional shoplifters on the other hand tend to already know what merchandise they wish to steal and move quickly to get it. A common technique used by professional shoplifters is called a "grab and run", in which the shoplifter quickly enters the store, grabs an item, and runs out of the store. Due to the quickness of this technique, professional shoplifters are difficult to catch.

Loss Prevention departments are run very differently from retailer to retailer. Centralized Loss Prevention departments are generally more common with discount retailers. Retailers like Target use a centralized command system in which there are floor people, a department manager, and a district manager. Decentralized Loss Prevention Departments are more common in clothing retailers. Retailers like Dillard's,for instance, have decentralized loss prevention departments in which there are usually only store investigators and sometimes off-duty police officers to assist in the arrest of shoplifters.

Attitudes towards shoplifting have shifted greatly in the last two decades. Retailers now want their investigators to focus more on prevention of theft rather than apprehension of shoplifting suspects. This is a result of numerous false arrest charges over the last two decades that have cost retailers millions of dollars in lawsuits. A false arrest is generally known in the Loss Prevention world as a "bad stop". A bad stop generally occurs when an investigator arrests a suspect who turns out not to have any merchandise.

To combat bad stops retailers have introduced a series of steps designed to help establish probable cause. The number of steps vary from company to company but are usually in some semblance of the following:

• 1. The investigator must see the suspect enter an area or department with no merchandise in their possession.

• 2. The investigator must see the suspect select the store's merchandise.

• 3. The investigator must see the suspect conceal the store's merchandise.

• 4. The investigator must maintain constant surveillance of the suspect and be certain the store merchandise is not discarded.

• 5. The suspect must pass all reasonable points of sale with the merchandise before conducting an apprehension.

Shoplifting incidents rarely go according to the five steps listed above. Investigators must use their best judgment when establishing probable cause. Most retailers today have established certification programs that a Loss Prevention employee must pass before they can make arrests. Usually these programs consist of a buddy system, which pairs a new investigator with an experienced investigator. These programs usually last for several months.

One method of bypassing steps is commonly employed is establishing the selection of merchandise. This is usually done by noting what a suspect had when first observed. If seen later with several items they did not have before, it may be reasonable to assume that the merchandise belongs to the retailer. Many feel strongly that good judgment is key to making successful apprehensions. At times not all conditions can or will be feasibly met to make an apprehension. However it is still possible to prevent the loss.

Some investigators have been known to attempt forms of consent searches in an attempt to obtain probable cause without legally detaining a person. It may be explained to the customer "we need to check your receipt to be certain you were not double charged." or some other reason. However such techinques, while not false arrest may still result in the firing of an Loss Prevention Investigator if it is a violation of company policy. Others feel all steps must be met before any action is taken. This second approach is used to protect the company from law suits resulting from "bad stops" which insult innocent shoppers. The exact defintion of a "bad stop" varies from business to business, it is generally understood as false arrest.

The strict adherence to the rules of apprehension have also come about as some criminals try to defraud the loss prevention industry by "egging on" or pretending to steal as a way to get LP officers' attention while others in the store really are stealing or simply to get themselves arrested falsely for use in suing the company. Some companies like Sears have taken a "hands off" policy to detaining shoplifters due to past law suits.

Embezzlement

Employee embezzlement is the theft or taking of property or funds entrusted to an employee by an employer. The most common type of retail embezzlement is cash theft. Other types of employee embezzlement include ringing up fake gift cards, passing merchandise, discount fraud, and of course theft of merchandise. Embezzlement investigations are widely known in the Loss Prevention industry as internal investigations.

According to the 2004 17th Annual Retail Theft survey 63,289 employees were apprehended for dishonest activity. This figure is an increase of 4.01% or 60,850 employes in 2003. Retailers recovered $42,468,681 dollars from incidents steming from employee dishonesty in 2004, an increase from the 2003 figure of $40,025,937. The average case value for an apprehened dishonest employee in 2004 was $671.03. This figure is notable, since it is almost seven times more than the case value for the average shoplifter apprehension.

Employee embezzlement is usually handled by experienced investigators who generally have five or more years experience in the loss prevention industry. 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 reports in which a particular employee is shown to have a 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 who usually is 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 usually discovered again by the use of exception reports. Discount fraud is the fraudulent use of an employee's discount to reduce to the price of merchandise for someone who is not eligible for it. Generally this done by an employee passing their discount card to a friend so they can receive the employee discount. Commission fraud is usually accomplished by ringing large return purchases back to another employee or to an employee who has recently left the retail establishment.

Merchandise theft is often investigated though the use of CCTV cameras, investigator observations, and rumors floating around the store. Usually the items stolen by employees tend to be small items with high dollar value or edible. A particular high area of employee theft that is investigated using CCTV is often the stock rooms of a store. As a result Loss Prevention often tours the stock rooms looking for "stashes" or out of place merchandise as well as price tags or other areas of opportunity. Typically a covert CCTV camera is placed in the areas of high opportunity for theft.

A recent trend with larger retailers is to actively pursue prosecution against employees who are embezzling. Generally this is because employee embezzlement cases usually carry a far higher case value than shoplifters and in most jurisdictions embezzlement is codified as a felony offense. At times this can lead to lengthly investigations that can last for months. Even still particularly in small dollar cases many retailers still subscribe to the theory that they will never recover their losses and release an employee suspected of embezzlement outright.

Credit Card Theft

Typically stolen credit cards find their way into retail stores as much as or more than online retail websites. This is usually for several reasons: the first is because retailers generally have relaxed their procedures for checking credit cards, so time spent at the cash register can be hastened. Second is the anonymity that a credit card thief enjoys by purchasing merchandise first-hand and not having to leave an address for merchandise to be mailed to as would be required by an online retailer.

Credit card theft is generally investigated by loss prevention personnel who receive a tip from a local police investigator who is investigating a stolen card. Typically the use of a stolen card can be easily found using the store's electronic journal log. Using the electronic journal log, loss prevention investigators can locate the register where the stolen credit 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 when they already know who the suspect is. Today, most retailers are not liable for the use of stolen cards issued by banks and credit card companies. However, retailers today are frequently establishing 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.

Some of the inherent problems with in-store credit lay in proper associate training. Temporary cards are regularly given out to customers who forget to bring in their own card. Mail fraud may also be used to intercept cards and when they are used it often goes unseen for days if the ringing associate fails to check ID or if the true card holder never calls in a complaint. In the opinion of several experts, many retailers make adding a new name to an existing account far to easy.

Cheque Fraud

Cheque fraud is generally accomplished in one of two ways. The first is writing a cheque 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 the crime of forgery. The second method is cheque kiting, in which the suspect writes a check for a high dollar purchase and withdraws the funds from their account before the cheque clears. Cheque kiting is usually done when suspects establish a fraudulent account under a false name at a banking institution.

Retailers reserve the right to reject cheques for whatever reason. Most low-level store employees have no experience in detecting forgery and cheque kiting, and thus these stores are very prone to be the target of such fraud. Typically when cheques are rejected by store management, the suspect raises issue with the manager in question in hopes that they will pass the cheque. Commonly those who create fraudulent cheques hire minorities to make purchases at a retailer. When a cheque is rejected a common scare tactic to get the retailer to accept the check is to claim racial bias.

Sometimes an experienced investigator can detect obvious forgery by examining the cheque document or by calling the bank to verify that the account actually exists. When a false cheque is passed sometimes investigators can salvage it by taking it to the bank before the suspect has the opportunity to withdraw the funds. Typically cheque fraud is done by a large group of non-local individuals who travel from state to state. Typically purchases are made in the late afternoon right as banks are closing. Typically when an account actually exists, fraudulent or not, the suspects are usually able to withdraw the funds before the retail store can detect the fraud.

Attempts to Professionalize Loss Prevention

A large number of retailers have established centralized command structures in an attempt to control Loss Prevention much like other departments are in the retail industry. Typically the centralized command structure consists of the typical floor or low level investigator who is paid as a hourly employee. Next is the Loss Prevention Manager who is in charge of the Loss Prevention department at the store level. Generally the Loss Prevention Manager has been in the industry for significant period of time and is paid a salary. The District Loss Prevention Manager is the next level; this person is in charge of overseeing the operations of several stores within a geographic area. Generally the District Manager has college degree in combination with significant amount of loss prevention experience. Some retails such as the 99 Cent Only Store have hourly district investigators that have the authority to terminate or prosecute any store employee or manager with probable cause.

Several notable problems have plagued the loss prevention industry over the years. Loss Prevention departments have been accused of such things as favorism towards investigators and in some cases even employee who may be dishonest. Some investigators have been known to make up apprehensions or merchandise recoveries to advance themselves within the field. The most prevalent problem is known as "LP black listing" in which, a particular investigator would be barred from employment due to tight nit nature of the loss prevention industry. Recent attempts at professionalism within the industry have gone a long way to eliminate these issues.

Some retailers have gone as far to change the name of their loss prevention departments to "Assets Protection." Assets Protection departments usually include more aspects of the private security industry such as employee and customer. Some companies believe that the term "Loss Prevention" has stigma attached to it and that Assets Protection sounds more politically correct in modern retail.

Problems with Investigators

For the most part, Loss Prevention Investigators tend to develop one of the three types of personalities towards their work. The personality traits that develop are similar to those of police officers.

The Type A Investigator: Typically this type of investigator has a strong anti-crime personality and experiences early success upon entry into Loss Prevention. However, as apprehensions and merchandise recoveries become less frequent, this personality starts to take risks that others wouldn't. Many of the problems associated with this type of investigator are customer complaints, bad stops, conflict with employees, and sometimes fights with shoplifters.

The Lazy Investigator: This investigator usually comes into the industry with no experience and assumes that the job is one that will be easy. However, when the investigator quickly discovers how difficult loss prevention investigations can be they become frustrated and adopt a lazy, dismissive attitude. This type of investigatior will often miss even the most obvious of theft.

The Analytical Investigator: This is the least common type of investigators, most investigators fall into the category of either the Type A or Lazy Investigator. Usually the analytical investigator has some educational background and typically gets their career off to a slow start much like the Lazy investigator. However, as the analytical investigator gains experience they usually become very good at what they do. Typically the analytical investigator makes sound rational decisions based on the situation they find themselves in. Typically the as the analytical investigator proceeds into their career they frequently find their work unchallenging and sometimes unrewarding. In addition, most analytical investigators feel that they are underpaid for the work that they do.

A common frustration among loss prevention professionals is the perception of being seen as glorified form of security. Both industries typically do use the same or similar equipment. Loss prevention professionals see themselves as being proactive, while the security industry is often as reactive in nature. The line between security and loss prevention has become increasingly blurrly with recent advent of uniform door guards and preventive measures to control safety, shoplifting, and embezzlement.

Another of the larger problems facing loss prevention today is the wage associated with entry-level investigators. Typically investigators find themselves in dangerous situations that retailers do not provide sufficient training to deal with. Most investigators today are paid under ten dollars per hour. Sometimes investigators decide that the potential danger associated with the position is not worth it for near minimal wage and thus quit or refuse to make arrests.

Bag Checks and False Arrest

One of the issues raised more and more often these day is the issue of the legality of bag checks by retailers. The reason for bag checks is simple, its cheap and it works. Most retailers use Electronic Article Surveillance (EAS) to determine when a bag check should be conducted. Typically EAS sensors are placed on high dollar items to deter shoplifting suspects, however items containing large amounts of metal have been known to set off EAS alarm towers.

Legally retailers can only search a customer's bag without probable cause if a person consents to it. Usually an investigator requests the door personnel to search a bag because a sensor set off an alarm tower, or because of what they or other employees have seen in the store. If store personnel uses force to stop and detain a customer to look in their bag that it may become a false arrest. In some instances, refusual by a customer to consent to bag search will result the customer being trespassed or losing their membership from a store.

Felonies, Misdemeanors, and Local Laws

Laws pertaining to shoplifting vary from state to state. Generally most state laws include an exclusion of limited liability for retailers to conduct searches of persons they believe to be shoplifting. Simply put retailers are allowed by law to detain and question shoplifting suspects for a reasonable amount of time for the purpose of recovery of merchandise. However, these laws generally do not apply to false arrest and excessive force incidents.

Laws vary from state to state pertaining to when a shoplifter can be stopped and apprehended. For example, in Arizona concealment of merchandise is considered a crime and a shoplifter can be stopped as soon as concealment is established. In states like California however, concealment is not a crime and a suspect must exit the store before an arrest can be made.

Some state laws can lead to unusual and severe charges being brought against a shoplifter. In Arizona for example a shoplifter can actually be charged with felony third degree burglary. In California a person can be charged with attempted robbery if they use physical force while attempting to shoplift. In some jurisdictions a person convicted of shoplifting multiple times may face a felony sentence following conviction.

Most retailers follow a generalized corporate guideline which serves as a blanket policy for the arrest of shoplifters nationally, although some smaller retailers still decide their own policies on a store to store basis. Generally these policies state that a shoplifter can only be stopped and arrested after they leave the store. Some retailers like Macy's and Wal-Mart have been known to use local laws pertaining to shoplifting to their advantage.

Generally in most states shoplifting is only considered a felony when merchandise in excess of $250 is stolen. Some states however, classify shoplifting as felony offense regardless of price. In some states like Wisconsin the dollar amount for shoplifting to be considered a felony is $2,500. Most felony shoplifting suspects however, are only charged with misdemeanors by police to process them through the criminal justice system more efficiently. Many misdemeanor shoplifters are released by loss prevention investigators after the recovery of merchandise. Generally these shoplifting suspects are not charged with any crime and are trespassed by store management.

One common example of False Arrest is the detainment of an individual based only on speculation of concealment and not an eyewitness to the act. False Arrests can be costly to companies and often result in lawsuits or large monetary settlements. Settlements being preferred by companies wishing to avoid the negative publicity of court cases. Some jurisdictions render partial immunity to merchants and their employees from being liable for a false arrest as long as they have probable cause to detain.

Equipment, Tactics, and Technology

CCTV camera systems

CCTV is an abbrevation 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 veiw 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 video tapes which were more common in the past. Instead of storing video on a tape many systems now include a computer server that contain video for months at a time. One draw back 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.

In relationship to its effectiveness, the CCTV has to be considered one of the greatest tools ever used in not just Loss Prevention but the security industry in general. Firms which offer leases on such systems have brought the costs down to a point where the franchise owner can consider it economically justifiable. A quality CCTV system including a videotape recorder and monitors (at least one of which is visible to the public) is a proven deterrent with many related benefits. Some related benefits of the CCTV system include protection from employee theft. A well advertised visible system also acts as a holdup deterrent and when thefts do occur, prosecution is simplified.

Covert CCTV Cameras

Covert CCTV cameras are fairly recent innovation within the loss prevention industry. Usually the cameras are small and compact and can be easily moved from area to area. Covert cameras can be easily made to look like fixtures or in some cases boxes inside a stockroom. Most covert cameras are undetectable by the average employee.

Electronic Article Surveillance (EAS)

EAS is a deterence system used by retailers to deter shoplifting. EAS involves the use of electronic security towers and electronic security tags. The tags are placed on high dollar items throughout the store and are disabled at cashier registers by scanning them over a magnitized strip. If the tag is not disabled it will activate the alarm tower, which is generally located at the entrance to a retail store. EAS is effective in detering amateur shoplifting, but most professionals can easily bypass the system.

Serial Numbers

Serial numbers are now being commonly placed on high dollar store merchandise. If loss prevention departments record the serial numbers they can subsquently track stolen merchandise if it were to be recovered by the police. Recording serial numbers is usually only done by larger retailers due to the fact that they have district investigators who investigate organized shoplifting over a certain geographic area.

Electronic Journals

Almost every large retail institution has some form of an Electronic Journal. An Electronic Journal records all the transactions that occur in a retail store. Information such as credit card numbers, gift card numbers, refunds, and merchandise voids is all gathered at the point-of-sale. These electronic journals can then be used to view and print facsimile of receipts and in some cases 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 dollar amount added from the register does not match the total the cash audit says it should have. Shortages are used to begin and close cash embezzlement cases that are investigated by loss prevention departments. Generally 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 employees in their investigation into the shortage.

Two-way radio sets

Almost all loss prevention departments have some form of two-way radio communication. This technology is used by investigators mainly to help two-man teams follow a shoplifting suspect in conjuction with the CCTV camera system or to summon assistance when apprehending a shoplifter.

Point of Sale

POS or Point of Sale is a form of electronic journal that allows the loss prevention investigator to see a transaction as it is occurring live. Typically this system is either displayed on a computer screen or on a monitor that is linked to the CCTV camera system. This system has proven valuable in assisting investigators in closing employee embezzlement cases pertaining to merchandise passing, merchandise voiding, and discount fraud.

Exception Reports

Exception reports are compiled on an annual basis into a report. Usually the reports are received monthly or bi-weekly. The reports include information on cash audit overs and shorts, no-sales, flagged returns, and merchandise voids. Exception reports have dramatically reduced the amount of time an investigator needs to spend to detect a possible sign of employee embezzlement.

Ink Tags

Ink tags have been around for several decades and are most commonly used by clothing retailers. The ink tags require special equipment to remove the tags from the clothing. When the tags are broken they spill ink over the clothing, effectivly 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.

Dual Resignator EAS Stickers

Dual Resignator EAS stickers are usually placed on small items such as shaving razors and cold medicines. These items are notable in that they are popular items to sell at swap meets. Dual Resignator EAS stickers are printed on a thin piece of paper and are difficult to remove. Usually the sticker includes a retailers company logo and serves as an indication to would be buyers that the merchandise has been stolen.

Dummy Domes

Dummy domes have become prevalent in all forms of retail loss prevention. Dummy domes do not contain cameras, although they are identical to appearance of domes that do contain cameras. Dummy domes can be stratigically place to herd shoplifters into a particular location or be used as a deterent to shoplifting.

Ceiling Mirrors

Ceiling mirrors were once a staple of the loss prevention industry. Now ceiling mirrors for the most part have be relegated to conveince stores. Ceiling 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.

Refund Checks

Refund checks are aimed at possible fraudulent and high risk refunds. The customer is told they will receive a check in the mail instead of receiving cash or store credit during the actual return. This tactic is typically employed instances where a customer does not have a receipt or their is prior knowledge that the return may be questionable. Generally a loss prevention manager or operations manager will have to approve the release of a refund check. This tactic works well because generally fraudlent refunders will not call the store to complain when they do not receive their check in the mail.

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 often happens both intentionally and unintentionally on behalf of the customer. All estimates for the dollar amount lost in this manor are over $2 billion US per year in North America alone, or $7 per 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 employed camera systems pointed at the lower tray with monitors for each cashier. Neither of these systems work effectively because the problem is the inattentive cashier and not so much visibility. A newer type of system has been released which actively monitors the checkout lane and alerts when an item is detected on the lower tray of the shopping cart. One such system is named HIDEAlert which uses IR sensors to detect the shape of a shopping cart, then scans the lower tray for items.

References

Tom Fearer

nemesis17

VARS

External links

• Retailindustry.com [1]
• Hayes International [2]
• Electronic Article Surveillance Information about used EAS tags and retail security systems
• Eastern Kentucky University [3]
• Retail Security Information about retail security and loss prevention
• Loss Prevention Blog [4]
• Loss Prevention Jobs
• LP Information [5]

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