Reducing Retail Shrinkage: How to Beef Up Security and Prevent Loss in Your Store


Shrinkage (aka: Public Enemy #1 for most retailers), can eat up a significant amount of your profits. According to the National Retail Federation, retail shrinkage amounted to $34.5 billion in 2011, and a big chunk of that was due to theft or fraud.

That’s why it’s critical to constantly stay on top of protecting your store. Keep your systems up-to-date, be vigilant about spotting fishy behavior, and see to it that your staff is adequately trained to deal with security issues.

To help you do all that, below are some of the most common causes of retail shrinkage along with security tips to help you prevent them.



A common problem among retailers, you can prevent shoplifting with the following steps:

1. Recognize the signs – Educate yourself and your staff on how to spot shoplifters. Keep an eye out for people who:

  • Avoid eye contact
  • Spend a lot of time glancing towards associates or cashiers
  • Go in and out of the store repeatedly without completing a purchase
  • Wear bulky clothing (i.e. jackets or coats) when unnecessary
  • Enter with a large group

2. Make sure your associates acknowledge and welcome people into your store – Instruct your associates to greet customers by telling them that they’re nearby if the shopper needs anything. Often, simply showing people that the staff is on top of things would be enough to deter those who are up to no good.

3. Keep your store tidy – Always keep your shop properly organized so you can easily spot if anything is missing. Arrange products (especially theft-prone items) in such a way that most, if not all of them are visible to you at all times.

4. Use in-store analytics tools – You’ve likely heard about the benefits of in-store analytics when it comes to sales and marketing, but did you know that you can also use analytics solutions to improve store security? Video surveillance tools, for instance, will enable you to see where people lingering and why, while foot traffic information coupled with inventory and POS data can help you detect discrepancies or unusual inventory patterns.


Return Fraud

Dealing with returns can be tricky. On one hand, you need to enforce policies that prevent people from pulling a fast one on your business. However, being too uptight can alienate customers who have legitimate reasons to return their purchases.

There aren’t any hard and fast rules when it comes to handling returns. You’ll have to craft a policy that works for your specific business, and also strikes a balance between good customer service and loss prevention.

Here are some general best practices you should consider:

1. Request for proof of purchase – Ask customers to provide a receipt with their returns to prevent people from returning stolen goods.

2. Request for identification – If returns are a huge issue in your store, you may want to create customer profiles so you can track return frequency among your shoppers. Ask customers for their ID when they’re returning their purchases so you can check them against your database.

3. Keep your return policy visible – Prominently display your return policy in your store and have it on your receipts so customers know your rules from the get-go.

4. Use fraud detection solutions – If creating customer profiles and tracking shopper returns becomes too time-consuming or inefficient, you should consider looking into third-party vendors that can do these things for you.

One of the biggest players in return fraud is a company called The Retail Equation (TRE) which has created customer profiles for more than 27,000 stores. TRE analyzes data points like return frequency, dollar amounts, and purchase history and notifies retailers of suspicious activities.


Employee Theft

Worried about theft being an inside job? The following steps should help you prevent sticky fingers among your staff:

1. Hire the right peopleImprove your hiring process. See to it that every person you take on board meets your high standards–not just skill-wise, but (more importantly) in terms of character. Run background checks, call up their references, and be thorough with your interviews so you can effectively gauge if they’re a right fit.

2. Be a great place to work – A happy workplace encourages ethical behavior. Create an awesome environment by keeping communication lines open, promoting fair employment practices, and giving a ton of positive reinforcement.

3. Perform audits – Regularly (or even randomly) going through your company’s financials will enable you to spot discrepancies and suspicious behavior. It also discourages potential fraudsters from attempting do to shady things in your store.

Vendor Fraud

Vendor fraud, which accounts for about 5% of retail shrinkage, isn’t as common as shoplifting or employee theft. But that doesn’t mean you shouldn’t be vigilant about preventing it. Here are some of the things you can do:

1. Mind the paper trail – This may sound basic, but you’d be surprised at the number of people who fail to get things in writing. When dealing with vendors, have all your agreements on paper. Also log all the delivery and shipment details–time, quantity, person who signed for it, etc–so you’ll always have documentation to refer to.

2. Have your experienced employees accommodate deliveries – See to it that whomever signs for shipments knows your products and your vendors well. This will make it easier for them to notice if something isn’t right.

3. Don’t schedule multiple deliveries at once – This enables you to stay focused on one vendor at time and see to it that everything’s in order.


Bottom line

Don’t let those darned fraudsters and wrongdoers get the best of your biz. Make your store more secure AND profitable by implementing the tips above and reducing retail shrinkage.

We’d also love to hear from you. Leave a comment and tell us how you’re preventing fraud and theft in your store.

About Francesca Nicasio

Francesca Nicasio is Vend's Retail Expert and Content Strategist. She writes about trends, tips, and other cool things that enable retailers to increase sales, serve customers better, and be more awesome overall. She's also the author of Retail Survival of the Fittest, a free eBook to help retailers future-proof their stores. Connect with her on LinkedIn, Twitter, or Google+.

  • yamini

    Great Article..It was very informative..I need more details from your side..include some tips..I am working in Erp In India

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