Target store loss prevention programs are a key approach to help us to drive down shrink at those stores that experience the highest loss rates. They are designed to focus our resources on the areas of the company where losses are highest. Certainly, the most compelling reasons to implement a high-shrink store program revolve around profitability. This approach is intended to deliver the best results in a shorter period of time.
As part of a high-shrink store program, the top stores from a loss standpoint are identified. The performance of the stores are examined to identify possible causes of shrink, pinpoint weak processes and policies that may be contributing to shrink, and initiate programs that will lead to improved performance.
While target store loss prevention programs may come in a variety of names, shapes, sizes and formats, the objectives of these programs are similar. These programs are designed to focus additional attention and support on those stores that are identified as being problematic. Every store must benefit from our support and reflect our mission, and we must remain consistent in our message and proactive in our approach.
However, the objective of a target store loss prevention program is to concentrate our efforts and resources where we can have the greatest impact on the business.
In general terms, target store loss prevention programs are based upon the 80/20 rule. That is to say, 20 percent of the company’s locations will typically account for 80 percent of the company’s shrink problems.
Careful consideration must be given to how these stores are identified. We may establish inclusion as a target store in terms of shrink percentage, by shrink dollars, or a combination of both. A store that produces a high volume of sales may have a lower percentage of lost dollars, but in relative terms, those dollars may be significant.
Conversely, a store with low sales volume may have a higher percentage of shrink, but fewer dollars than the high volume store. These and all other relative factors may be considered as we establish the objectives of the program and the elements that determine inclusion. We must reach a consensus on what factors are most important to the goals of the loss prevention department—The protection of our assets, the safety of our customers and employees, and ultimately the profitability of the company.
High Risk vs. High Shrink
While both can and should be considered, it is important to make the distinction between high-risk stores and high-shrink locations when determining inclusion in a target store loss prevention program.
High-risk locations are those that for any number of reasons are considered more prone to theft, robberies, and/or other types of crime. Market and location are common denominators of high-risk locations, for instance. High-risk stores may also include stores that have a historical tendency to experience shrink issues for various reasons. High turnover rates, habitual management issues, and other factors may also contribute to a store being labeled as a high-risk location.
High-shrink locations are those locations that are currently experiencing higher than average shrinkage, regardless of the causes behind the shrink.
Identifying a location as a high-risk store does not necessarily indicate that it will be a high-shrink location. The high-risk designation identifies that the store has the potential to be a high-shrink location and/or otherwise demand our attention and consideration. By the same respect, high-shrink locations may result regardless of whether the store carries a high-risk designation. Every store has the potential to become a high-shrink store simply based on the results of an inventory.
When classifying a store as high risk, a thorough review of the factors that cause shrink is typically conducted. Some of the indicators considered when designating a store as high risk may include:
- Does the store have a history of retail shrink problems?
- Is the store prone to high external theft incidents?
- Is the market area prone to other types of crime?
- Has the store experienced a significant number of internal cases, or internal cases with significant dollar loss?
- Are neighboring locations, and/or other retailers experiencing high shrink results?
- Are there poor management practices in place, or weak or poorly trained managers? Is there a lack of leadership?
- Are the store associates properly trained? Is there high employee turnover?
- Are operational controls being followed? Do additional controls need to be put into place?
- What other vulnerabilities exist from an internal and external perspective?
Initiating a Program
Once we have identified our high-shrink and high-risk locations, we must then consider the number of stores that we can comfortably address with the target store loss prevention program without sacrificing resources needed to help us manage our other locations. Finding a balance that considers the overall needs of the company is our starting point. The process should involve an organized, methodical approach to addressing shrink problems and reducing losses.
Whenever possible, a thorough assessment of each location should be conducted. A complete review of all aspects of operational compliance should be completed. Employees may be interviewed and asked for their input and assistance. By examining the available information and identifying the potential causes of shrink, we are then better armed to implement changes that will reduce opportunities for loss and improve shrink results.
Stores may benefit from a variety of solutions, such as electronic article surveillance systems, CCTV, increased staffing levels, refunds management systems, burglar alarms, roll down gates over windows, and a host of other physical security tools.
However, the effectiveness of every tool is relative to the hand that holds it. In order to be most effective, we need to couple these tools with increased and improved training and awareness programs, stronger management teams, consistent and/or improved operational controls and other measures that will enhance the quality and effectiveness of our employee base.
Training, capital improvements, and other benefits provided through the corporate offices will be a contributing factor in the success of the program. A carefully planned and well-managed target store loss prevention program can have a substantial impact on the performance of these stores. It can drive results by focusing resources on the stores that need it the most. With the necessary support and appropriate attention, these programs can play a significant role in the overall success of the loss prevention department and the company as a whole.
By capitalizing on opportunities to enhance our knowledge and education, we are making an investment in our own future. To learn more about target store loss prevention programs involving computer forensics and the certification process, visit losspreventionfoundation.org.
This post was originally published in 2016 and updated April 10, 2018.