If you’re looking to reduce loss in a retail environment, the first step is to examine exactly where it’s occurring.
This allows retail management to identify the most likely threats to the retail bottom line and devote appropriate resources to reducing it.
So, let’s examine a useful tool that’s been developed by experts to help retailers identify exactly where loss is occurring in-store.
Total Retail Loss
Developed over recent years by Professor Adrian Beck and the Retail Industry Leaders Association, Total Retail Loss is a concept that allows retail management to map out the full scale of all loss within a retail organization.
It breaks loss into four over-arching categories that encompass loss in-store, in the supply chain, via e-commerce and also at a corporate level.
As Loss Prevention Media notes, the value of a Total Retail Loss map is undeniable, “especially in terms of mapping out the scale of loss within your organization and strategically planning countermeasures”.
You can see the full map here, but for the purposes of this exercise, we’ll take a specific look at the loss threats that are most likely to occur in-store.
Major Total Retail Loss threats in-store
When looking specifically at the in-store environment, the Total Retail Loss approach breaks it into two major categories: unknown loss and known loss.
As unknown loss is simply that, retailers should be looking to determine the dollar value of this category than trying to ascertain where exactly it’s occurring.
The known loss category is more detailed, breaking defined loss into threats that are either malicious or non-malicious.
Malicious loss is the type of loss that is purposefully perpetrated against a retail outlet either internally or externally and encompasses:
- External theft
- Internal theft (employee theft)
- Customer fraud
- Voucher/loyalty card scams
- Burglary, criminal damage and arson
- Cash theft
These are the type of threats that retailers combat via product protection (including electronic article surveillance and security tags), staff screening, policies and procedures, retail analytics, CCTV, and general security.
No malicious threats
The non-malicious threat category is slightly larger and encompasses factors like human error and wastage.
These types of threats are addressed through systems and procedure, along with staff training.
Non-malicious threats include:
- Missed returns
- Lost profit from out of stocks
- Natural disaster losses
- Cash loss
The value of TRL mapping
As mentioned, the in-store category of the Total Retail Loss map is just one element.
The map also encompasses supply chain loss (including malicious threats like internal theft), e-commerce loss (such as theft in transit and counterfeit returns), and general corporate loss (such as fraud and non-malicious loss like regulatory fines and workers compensation claims).
Together, it paints a comprehensive picture of exactly where loss is occurring throughout an organization, and retailers can then assign a value to each section.
This helps define where resources need to be directed, and the tools which need to be employed to help mitigate the threat.
By consistently mapping loss across an organization, retailers can also make useful comparisons overtime periods to better understand what strategies are working and what needs to be specifically targeted or improved.
Because the reality is loss also changes over time as part of a continuing battle that retailers wage against changing trends and threats.