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Fifteen Years of Loss Prevention, Part 3

Here we are at the third and final installment of the first fifteen years of Loss Prevention magazine. I had indicated in the first two articles that part of the third article would include a future look at some of the most important loss prevention technologies and practices such as RFID. However, it looks like we have run out of room. Therefore, I will dedicate an entire article to that subject in the March–April issue. For now, on to the magazine’s most recent five years.

Shoplifting and Organized Retail Crime

There was not one mention of organized retail crime (ORC) in the January–February 2012 issue. A trend? Not really, but in the most recent years, there have been fewer articles on ORC. Regarding shoplifting, Johnny Custer wrote a very thought-provoking article in the March–April 2012 issue entitled “To Stop or Not to Stop?” He talks about the increasing risk and violence surrounding shoplift apprehensions and whether apprehensions really impact shrink to a great degree. He stops short of offering a firm opinion on the question, but it is very interesting reading and still timely today.

ORC are Retailers to BlameIn the March–April 2012 issue, Albuquerque’s police chief talked about the success of his department’s newly formed Organized Crime Unit and the positive impact it was making on crime in the city. Once again ORC made the cover in the July–August 2012 issue and explored the question: “Are Retailers to Blame?” The answer was, probably not.

Besides a few mentions inside other articles and columns, the next major ORC article didn’t occur until the November–December issue of 2015. In that issue, Jim Lee wrote about the international ORC summit held in Florida. Representatives from eBay and Tyco presented their perspectives and unique thoughts on ORC and its challenges. Representatives from Japan discussed their ongoing ORC issues. The final session was hosted by Read Hayes, PhD, of the Loss Prevention Research Council who discussed ORC deterrence methods.

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In the July–August 2016 issue, Tom Meehan from Bloomingdales talked about the relationship between ORC and cyber crime. The final article during this period featuring ORC was in the September–October 2016 issue. In it, Chris Trlica looked at the booster-fence ecosystem and the phenomenon of legitimate retailers fueling it by buying goods, maybe even their own, that were stolen by ORC gangs.

Crisis Management

Crisis management is another subject that was featured heavily in the early years of the magazine, but saw less coverage in recent years. As speculated previously, this is probably because post-9/11 reaction drove so many articles that many best practices have already been discussed. But not all. TheAlarm Monitoring Crisis Management Cover cover story of the July–August 2013 issue dealt with mitigating and managing threats and acts of violence. The creation of threat assessment teams composed of diverse disciplines that are empowered to act was discussed as the key to effectively identifying and managing threats.

In the July–August 2014 issue, Jac Brittain asked the question “Active Shooter—Is Having a Plan Enough?” In addition to having a good plan, he
discussed the importance of practical training including teaching people how to act and what to do during an actual event. The importance of “see something, say something” was emphasized.

The cover story from the May–June 2015 issue looked at Walgreen’s transition from simple alarm monitoring to the creation of a world-class emergency operations center and its value during recent civil unrest events such as Ferguson, Missouri. In September–October of 2015, Scott McBride of America Eagle outlined some tips to keep international travelers safe. He noted that, in recent years, the most acute traveler needs revolved around medical issues.

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In the May–June 2016 issue, Garett Seivold looked at “Readying Retail for Terrorism’s New Battleground.” The article discussed the vulnerability of retail with its numerous and populated public venues. It went on to offer potential store-level solutions, including communications between retailers, heightened mall security visibility, uniformed guards, and partnerships with law enforcement to review plans. In the fifteenth anniversary issue of September–October 2016, Seivold looked at various crisis preparedness activities and program elements. Walgreen’s and 7-Eleven offered input and insights for the article.

FraudE-Commerce Fraud Cover

We also saw less written about fraud in the past five years. However, the cover article in the March–April 2015 issue looked at e-commerce fraud and the rapidly growing challenge it represents for retail investigators. Fraud investigators from numerous retailers outlined some of those challenges and some of the methods to combat them.

The importance of understanding complicated schemes such as triangulation was discussed along with detailed examples. Also emphasized was the importance for all retail e-commerce fraud investigators to get actively involved in every networking forum available, including national and local meetings and events. It was also noted that ORC is playing an ever-increasing role in e-commerce fraud based on big gains and less risk of being caught.

The National Retail Security Survey and Employee Theft

As in the previous ten years, Richard Hollinger, PhD, continued to write a monthly column focusing on employee theft and the yearly National Retail Security Survey (NRSS) survey. In the March–April issue of 2012, Dr. Hollinger highlighted a recent survey that polled college students about stealing at work. The survey showed that alcohol abuse drove much higher incidents of work-related theft and ex-cons were four times as likely to steal as someone with no criminal record.

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The July–August issue of 2012 noted the interesting fact that most companies experienced lower-than-expected rates of employee dishonesty during economic downturns and periods of high unemployment. Dr. Hollinger gave an overview of the 2011 NRSS results in the September–October issue of 2012. Average retail shrink came in at 1.42 percent of sales, the lowest in the twenty-year history of the survey. Employee theft was noted as the biggest shrink driver at 43.9 percent of the total. Total shrink losses were listed as $34.8 billion.

In March–April 2013, Dr. Hollinger cited a recently published academic study called “Can Wages Buy Honesty?” that concluded higher employee wages, especially in retail, might actually reduce shrink. I guess we will have to wait and see what happens in California now that its minimum wage is $10 per hour and headed to $15 per hour over the next four years.

In the November–December 2013 issue, Dr. Hollinger took a first look at the 2012 NRSS results. Overall shrink percent was at 1.47 percent, up from the 1.42 percent in 2011. Employee theft continued to be rated as the biggest shrink driver at 4.9 percent of the total. In the March–April 2014 issue Dr. Hollinger gave more detail on the 2012 NRSS noting that LP budgets actually rose slightly as a percent of total sales. The survey also found that stores in enclosed malls had below-average shrink at 1.09 percent.

In the January–February 2014 issue, a recent Kessler International study was quoted as saying that 95 percent of employees reported stealing from their companies, up from 79 percent in its 1999 study. Some of the theft admission included pens, paper, and other small office supplies, but the number was sobering, nevertheless.

In September–October 2014, Dr. Hollinger discussed a recent study by Dana Baxter entitled Who Is Taking the Shirt Off Your Back? A Multi-Method Analysis of Theft at a Specialty Retailer. Contrary to expected results, Baxter found that high manager and employee turnover were not highly correlated to shrink. Another observation was that “lifestyle” centers in wealthier suburban neighborhoods consistently suffered high levels of loss and that rural stores showed less of a shrink problem.

A feature article in the January–February 2015 issue looked at the 2013–2014 Global Retail Theft Barometer. The study was based on in-depth phone and written survey interviews conducted in twenty-four countries among 222 retailers. Results showed that 49 percent of retailers listed EAS antennas, labels, and hard tags as the most effective loss prevention solutions. Also seen as very effective were keepers and 3-alarm accessories for high-theft items. Mexico was called out as the country with the highest shrink at 1.7 percent of sales. US respondents listed employee theft as the largest contributor to shrink representing 42.9 percent of the total problem.

In the July–August issue of 2015, Dr. Hollinger covered sample results from the 2014 NRSS. Overall shrink came in at an all-time low of 1.38 percent of sales. Grocery showed the highest shrink at 3.23 percent. But it is well known that grocery struggles with spoilage and out-of-date product, which is sometimes included in shrink numbers. Men’s and women’s apparel retailers came in at 1.17 percent. The average employee theft case was valued at $1,547 and the average shoplifting case at $318.

In July–August 2016, Dr. Hollinger looked at the NRSS results from 2015. Shrink remained low at 1.38 percent, but it still cost retailers $45.2 billion. It was noted that for the second year in a row, shoplifting slightly surpassed employee theft as the greatest cause of shrink.

Loss Prevention Technology

As called out above, some subjects saw fewer articles in the magazine over the past five years. Just the opposite is true for articles dealing with technology. I counted a whopping thirty-five articles dealing with various forms of loss prevention and retail technologies from 2012 to 2016. And, of course, the first one, in the May–June issue of 2012 centered around RFID. Bob DiLonardo noted that, once again, RFID in retail was a matter of when and how, not if. He said the primary message from the recently held RFID Journal Live’s tenth-anniversary conference was that RFID works and that seven years of developing standards was paying off. It was also noted that a Bloomingdale’s case study had been used to champion the technology for the retail industry. A feature article on American Apparel in the July–August 2014 issue highlighted its dedication to and reliance upon RFID technology for loss prevention and inventory control purposes.

In the same issue, Bob DiLonardo looked at a survey around self-checkout and its connection to dishonesty. Conducted in the UK, the survey asked, 2017-01-13_18-14-10“Have you ever cheated at supermarket self-service checkout?” A majority (58%) said no because they were afraid of being caught. But 30 percent admitted to everything from cheating by entering cheaper fruit items to walking off without paying. DiLonardo noted that the industry was still undecided about the risks versus rewards of self-checkout.

Self-checkout was also the topic discussed by Dr. Hollinger in the January–February 2013 issue. He talked about the beginnings in the UK followed by gradual growth in the US and that it threatened one of the most important retail traditions—the one-on-one relationship with regular customers during the checkout process. It was called out that at least one grocery chain had removed self-checkout, not for theft but because of reduced customer interaction.

Benefit-denial technology was the subject of a feature article by Dr. Read Hayes in the September–October 2012 issue. Benefit denial is technology that renders an item useless until it is legitimately sold and the retailer eliminates the benefit denial feature. This could be the simple removal of an ink tag to the more sophisticated “programming” of a cell phone to make it work after the sale, but not until. Dr. Hayes quoted Tim Fisher, then at Best Buy, as saying that “benefit-denial technology has the potential to positively impact losses throughout the entire supply chain, making products useless until legitimately purchased.”

In the November–December 2012 issue, Jack Trlica wrote a feature article around what leaders need to know about RFID in retail. In it he recapped some information from a recent webinar hosted by the magazine. A panel of industry experts noted similar facts and issues that have surrounded RFID for years:

  • It’s coming but is not truly here yet,
  • Item-level RFID is the future,
  • On-shelf accuracy is critical to omni-channel retailing, and
  • RFID may be useful in combination with EAS tags, but it would mean a huge infrastructure realignment.

In the same issue, it was announced that Best Buy was conducting an initial trial of benefit-denial technology in conjunction with Dr. Hayes and the LPRC. The test concentrated on newly released video games that are physically locked until decoupled by the clerk with a wireless signal after a legitimate sale.

2017-01-13_18-14-28Later in the same issue, mobile payments were described as “the next big security headache.” Fears of compromised consumer financial information and payment problems for retailers from security breaches were noted.

Facial recognition was the cover story of the May–June 2013 issue. Described as “having the potential to change the rules of retail,” author Chris Trlica advised caution around poor execution or abuse that could have far-reaching negative consequences. It was also noted that the technology was typically too expensive for retailers, but was becoming more economically feasible. The potential uses for loss prevention were discussed, but so were concerns over privacy issues. Like RFID, facial-recognition technology is real and exciting, but widespread deployment may or may not be in loss prevention’s future.

The brave new world of mobile point-of-sale (POS) was once again on the cover of the September–October 2013 issue. The pros and cons plus the vast potential of the technology was outlined by Chris Trlica. “Line busting” was quoted as an early appeal to retailers, especially during peak sales periods. Freed-up floor space was also listed as a plus, and SKU lookup could improve customer service. But the many challenges of mobile POS were also discussed including the physical security of the actual devices, unauthorized uses, and potential data breaches.

In the same issue, Kevin Plante looked at the myriad of new and advancing store technology components and the fact that, while a boon to sales and operations, some may drive loss prevention crazy. Plante looked at the plusses and minuses of e-receipts, smart safes, mobile POS, and self-checkout, among others. The art of using social media in LP investigations was also discussed. The conclusion—technology usually helps, but it can hurt if we don’t pay attention.

In November–December 2013, Bob DiLonardo was back discussing “Technology Innovations That Made a Difference.” He focused on the forty-year evolution of cameras from tube electronics to PC boards in smartphones. Included in the discussion were camera housings, remote-controlled pan-tilt-zoom (PTZ), video recording, and POS transaction data on video. He concluded that the metamorphosis to “mass surveillance/intelligence systems” is complete.

In the cover article of the January–February 2014 issue, Bob DiLonardo began a two-part series on the “20-Plus Years of EAS Source Tagging Innovation.” He talked about Knogo, Sensormatic, and Checkpoint as visionaries in the EAS space and described their early years. He outlined competing EAS technologies such as AM and RF and the advantages/disadvantages of each. He went on to describe the beginnings of source tagging, its evolution, its importance, and its legacy.

In his column in the same issue, DiLonardo talked about RFID and EAS standards being set and the ratification of a new version of the electronic product code (EPC). The new version was touted as improving security, adding versatility, and adding privacy protection for consumers. RFID was back again in a May–June 2014 article discussing the “ROI for RFID in Retail.” Retailers surveyed listed improved inventory accuracy as the main appeal of RFID followed by assuring on-floor availability and improving operating efficiencies. Shrink reduction was listed as fourth. In an interesting twist, in-store LP was listed as the most current actual user of RFID.

With advancing technology comes the ever-increasing risk of data breaches. That was the subject of two articles in the July–August 2014 issue. The Evolution of LP Profirst focused on building a new defense team to guard against and manage data breaches. The second recapped the cyber-security panel discussion from the 2014 RILA Asset Protection Conference. Both articles contained common themes including the challenges and threats to retail and its customers, funding IT security adequately, and the importance of LP working closely with IT.

The cover article of the September–October 2014 issue found Jack Trlica and Jac Brittain looking at the evolution of the LP professional. The main theme was around how technology is rapidly changing the retail landscape and how successful LP professionals must keep up with all technology, not just LP technology.

In the March–April 2015 issue, Bob DiLonardo looked at consumer credit and debit card hacking and noted that 83 percent of the documented attacks were perpetrated using only five techniques:

  • Distributed denial of service (23 percent)—focused on a single target, virtually shutting them down,
  • Structured Query Language injection (19%)—compromising customized data views, so the customer receives the wrong item or price,
  • Unknown (18%),
  • Defacement (14%)—attack on a website that changes its appearance, and
  • Account hijacking (9%)—hijacking of account information.

A feature article in the May–June 2015 issue saw Lee Pernice looking at mobile payments and their impact on LP. Various mobile devices and techniques such as mobile payments, mobile commerce, mobile POS, and mobile tablet POS were discussed. A survey of retailers found that they attributed 3 percent of all lost revenue to their mobile channels. The same group saw mobile transactions growing an estimated 47 percent in the coming five years. The need for LP professionals to get actively involved in mobile payments and the potential fraud downside was emphasized.

Attacks on POS systems and payment card data theft was also discussed in the same issue. Common skimming techniques such as making a rub of a card, rigging ATMs or gas pumps with readers to steal data, and physical modifications of POS terminals were outlined.

In a July–August 2015 feature article, Colin Peacock posed the question “Where Next for EAS?” He suggested retailers audit their current EAS systems in terms of product and training, removal devices, deactivation rates, EAS pedestals, and alarm management. He advised using this audit RFID Coverinformation to build a more effective EAS system. He also advocated looking at new stop-theft technologies such as (you guessed it) RFID. He also talked about smarter fixtures, smarter cameras, and smarter mobile devices.

The cover article of the November–December 2015 issue focused on mobile scan-and-pay (MSP) technologies and their impact on retail losses. While
the many benefits of MSP were discussed, the potential impact on theft and loss were also discussed. Things such as non-scanning and scanning errors, verbal abuse against staff during audit checks on purchases, and transaction fraud or fraudulent use of payment wallets were called out as issues.

The cover story of the January–February 2016 issue looked at the state of video examining where we are, where we’re going, and how we get there. An online survey regarding the use of video in retail was completed by nineteen RILA members in 2015 representing over 37,000 stores. Some survey results were:

  • Analog remains the dominant camera technology.
  • DVRs remain the dominant video management system (VMS).
  • Remote monitoring is coming of age.
  • Integration is still a ways off.
  • Use beyond LP is still a gray area.
  • There is mixed interest in video analytics.

Regarding the future, the authors advocated conducting a SWOT analysis around the user’s current video landscape and creating a detailed plan for the future based on the result of that analysis. Development of compelling business cases for non-LP users was also discussed.

Once again, and one of the final technology articles in the past five years, RFID made the cover of the May–June 2016 issue. In that article, Lee Pernice outlined some history and talked about use cases for RFID and ROI metrics. The usual advantages of total inventory visibility and on-shelf accuracy were discussed. One expert described RFID as the biggest breakthrough since the barcode. But in the end, proponents are still advocating analyzing the business for RFID applications. No huge successful implementations were called out.RFID in Retail cover

Shrink Reduction and Loss Prevention Programs

Articles covering retailers’ shrink-reduction plans and LP programs were not plentiful in the last five years. One might guess that the improving shrink results highlighted in the NRSS indicate that the programs discussed in the first two installments and those like them are working so well that there is not much new to discuss. That is probably not totally true. So in the next twelve months, we will make a concerted effort at the magazine to reach out and find some new and innovative programs to report on.

One interesting article from the September–October 2015 issue talked about the concept of engaging merchants in protection of merchandise. It discussed RILA’s study looking at the relationship between retail buyers and the asset protection function. Surprisingly, only 32 percent viewed asset protection as a partner in driving sales. Only 10 percent indicated that asset protection was something they routinely talked about. The survey’s authors called out ways that buyers can help reduce shrink including identifying product that may need additional security tagging or protection and working with vendors on product packaging to better protect high-theft items. Buyer input on theft-prone product as well as sensitivity to supply-chain processes was also highlighted. The use of data analytics and open communication between LP and the buying organization was cited as being critical to improving influence and relationships.

People, Education, and Diversity

The Loss Prevention Foundation became a reality in 2006. As Gene Smith stated in an interview in 2009, the foundation’s mission is “to advance the loss prevention profession by providing relevant, convenient, and challenging educational resources.” And it has done just that. As of this writing, 1,650 professionals have obtained their LPQ or LPC certification. And based on current and projected enrollment, that number will soon be over 2,000.

As in the previous five years, every issue of LP Magazine from 2012 to the present has contained a column featuring the Loss Prevention Foundation. Numerous industry professionals talked about the value of the foundation to the LP industry and the personal value of certification to all who have completed it. Congratulations goes out to foundation leadership and staff, plus all those in the industry who have provided tremendous support over the years.

In the cover article of the January–February 2012 issue, Kathleen Korwica outlined the “Nine Practices of the Successful Security Leader.” Among those practices was the creation of a robust internal awareness plan, making sure senior management is aware of security/LP’s mission, working as a helpful resource to business leaders, and understanding and adapting to the corporate culture and business goals.

Melissa Mitchell wrote a compelling cover article for the May–June 2012 issue describing the community involvement efforts of numerous LP departments and individuals. In the same issue, Bruce Tulgan talked about how to be effective when you and your boss work remotely. Tulgan was back again in the September–October 2012 issue proclaiming “Not Everyone Gets a Trophy.” In the article, Tulgan offered tips for managing Generation Y.

In the November–December 2012 issue, Gene Smith announced the establishment of the Loss Prevention Foundation Memorial Fund. The original purpose of the fund was to aid the families of LP professionals who had lost their lives while on duty. The fund has now been expanded to also offer support to any LP professional whose family may be facing serious economic hardship.

The cover article of the March–April 2014 issue focused on the International Organization of Black Security Executives (IOBSE). The article described the origin and foundation of the organization, its contribution to the industry, and its ongoing support of diversity in the workplace. In the same issue, Bruce Tulgan moved on to Generation Z. He talked about how those born between 1996 and 2009 will be driven by social media, human connections, and a global mindset.

In the September–October issue of 2014, Jac Brittain talked about the reality of racial profiling, its negative effect on people and business, and how it can and must be avoided in the LP industry. In May–June 2015, Walter Palmer focused on improving your store visits and that fact that one question can make a big difference—“Can you please tell me about the successes you’ve had and progress you have made since my last visit?”

In the July–August 2015 issue, Jack Trlica announced the retirement of Bob DiLonardo and went on to thank him for his huge contribution to the magazine over the years. The good news is that DiLonardo hinted he may continue to contribute an article now and then. And he has. The next issue, September–October 2015, found Jim Lee saluting DiLonardo and conducting a full-length interview with him.

In the March–April 2016 issue, Jim Lee interviewed four senior LP executives about their challenges, professional development, and career goals. Common themes were the importance of continuing education including LPQ and LPC and the need to gain broader overall business experience. In the May–June 2016 issue, Jim Lee’s interview subject was Dr. Richard Hollinger of the University of Florida who had just announced his retirement. Dick Hollinger CoverDr. Hollinger, like Bob DiLonardo, was one of the most regular and valuable contributors to the magazine in its first fifteen years. It will be very different not hearing from him in every issue. But we certainly hope Dr. Hollinger will continue to contribute to the magazine now and then like DiLonardo.

In the interview, Dr. Hollinger advised Lee that the NRF has agreed to continue the NRSS and that he would still contribute his time and expertise to that effort. In the September–October 2016 fifteenth anniversary issue, Dr. Hollinger described his first column in the preview issue of the magazine in 2001. It contained a discussion about The Container Store and its consistently low shrink numbers. He went on to say that the situation is still the same today and recognized Joan Manson, vice president of loss prevention, benefits and payroll, for her long tenure and successful efforts in keeping shrink very low.

And there you have it—the end of our fifteen-year journey. It’s been a great ride for LP Magazine and promises to be just as exciting and informational going forward. I hope I am around in fifteen years to write three more installments. And as promised, I’ll be back in the March–April 2017 issue looking at RFID and other parts of the LP industry and where the next few years may take us.

As a reminder, most of the articles mentioned here are available at PDFs are available by contacting editor (at) lpportal (dot) com.

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