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Ask the Expert: The State of Loss Prevention

Interview with Ned McCauley

Ned McCauley
Ned McCauley

McCauley is a well-known technology innovator in the retail industry. He has more than twenty years of experience in Sensormatic’s retail business, where he has focused on go-to-market strategy and helping drive the adoption of EAS, video, and RFID technology. McCauley is always one step ahead and understands how to accelerate growth. Prior to joining Sensormatic, he was a senior leader in a successful start-up, earning Inc. Magazine’s award for the fastest-growing private companies. McCauley was recently appointed to the board of directors for the Loss Prevention Foundation.

To get a better look at how loss prevention is responding to the current moment—and how it can expect to adapt in the future—we spoke with Sensormatic’s Ned McCauley to get his perspective.

What is the most consistent pain point you’ve heard from those in LP recently?

Organized retail crime (ORC) comes up in every conversation I have with asset protection leaders. We know that this problem has grown incrementally year over year, and this has occurred alongside the explosion of e-commerce. So for retailers, the good news may be that the business is growing. The bad news is that the digital marketplace also provides the opportunity to fence merchandise stolen from physical stores.

Who do you think is on another level when it comes to their loss prevention strategy?

I think that there are a lot of great leaders in the AP business, and Macy’s, which has been a great account of Sensormatic Solutions for a long time, is one of them. They have been on the cutting edge of advanced technology because they’ve been able to leverage the smart-sensor footprint that has come forward with RFID. Additionally, the strategic omnichannel practices they’ve put in place have enabled the Macy’s team to leverage smart exits in a way that not only drives down shrink, but also informs buyers and merchants of out-of-stocks.

That’s key when we think about loss prevention. On one side, you’re helping reduce exposure to margin compression. On the other side, you can help drive sales by having proactive indicators around out-of-stocks.

How do you see loss prevention evolving over the next ten years?

Loss prevention and asset protection folks have been asked to play many roles over the past few years. Whereas loss prevention has traditionally focused on the business problem of shrink, more recently I’ve seen increased focus on what I would call life-safety issues, brought about in large part by the pandemic and a rise in violent crime. These issues have introduced a need to keep shoppers and associates safe through compliance, social distancing, temperature checks, and the like, but have fallen under the umbrella of loss prevention.

How do you protect associates? How do you protect shoppers? How do you protect the brand? These questions have become front and center for the loss prevention community. I think this is an area in which they will continue to invest, evolve, and become more relevant across the overall retail operation.

How has shrink integrated into more areas of a retailer’s business? And what is the impact on the retail C-suite?

The growing challenge of shrink has a number of drivers. We know there’s a spike in violent crime. And we know that various states have changed some laws to increase the threshold for what constitutes a felony; therefore, that deterrence isn’t what it used to be. On top of that, there is the front‑end transformation many retailers have undergone.

Increased utilization of self- checkout, assisted checkout, and various omnichannel processes—like buy- online, pick-up in-store (BOPIS) and buy-online, pick-up at curbside (BOPAC)—means the line is now fuzzy. There is not the impression of control that retailers have relied on for many years. In other words, shrink has increased not only because society has changed, but also because the impressions of control have disappeared. And that creates larger leakage points and higher shrink rates. Therefore, you have the need for more advanced technology, more strategic thinking, and for the loss prevention community to deal with it.

Loss prevention executives are now brought into more conversations, not only because margins decline as shrink grows, but also because, as customer experience rises to the top of everyone’s priority list, there are tradeoffs to manage. How do you manage customers so that their experience delights them? At the same time, how do you protect them and reduce shrink? Those tradeoffs are difficult things to square, so many loss prevention executives today are brought into those conversations that they perhaps weren’t in the past.

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