Reducing the risk of fraud, theft, shoplifting, and other operational losses threatening financial stability is an ongoing and significant task for retailers and all small business owners.
It’s staggering to note that 57% of Canadian small businesses dealt with theft or shoplifting in 2023, and shoplifting costs retailers around $5 billion annually. Furthermore, smash-and-grab robberies are on the rise, impacting jewellery stores and other high-value retailers.
While a comprehensive retail insurance policy is vital to cover any retailer’s brick-and-mortar and online operations, establishing an effective loss prevention strategy is also critical for protecting their finances.
Here’s a quick overview of what a loss prevention strategy is and what it may include:
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What Is a Loss Prevention Strategy?
A loss prevention strategy is a comprehensive plan that’s designed to help retail store owners reduce theft and shoplifting, minimize fraud, and prevent merchandise or inventory losses.
It’s a form of risk assessment that aims to minimize external and internal theft and shoplifting, effectively manage preventable losses, and improve a retailer’s profitability.
What Does a Loss Prevention Strategy Include?
A well-rounded loss prevention strategy includes several measures retailers can take to reduce the threat of financial losses due to theft, fraud, and other factors that may lead to shrinkage. Shrinkage is when a retailer has fewer items in stock than what its inventory record shows, and it can be caused by various factors including theft, administrative errors, and supplier fraud.
Some of the recommended measures for developing a loss prevention strategy include:
- Install bright lighting: Bright lighting inside and outside a store can help reduce theft and shoplifting and enhance video surveillance monitoring.
- Install video cameras: Video or CCTV surveillance cameras installed in strategic locations throughout a store can serve as a deterrent against theft. For instance, security cameras can be placed at entrances and exits, in sections where there are high-value products, and in shopping aisles.
- Use security tags: Electronic article surveillance (EAS) tags attached to items can trigger in-store alarms if a product is taken out of a store without being removed or electronically disabled.
- Inventory management: An effective inventory management system is critical for reducing shrinkage and tracking all incoming and outgoing merchandise or inventory. Closely monitoring inventory levels, routinely conducting physical inventory counts, and investing in an inventory tracking system help reduce tracking errors and prevent losses.
- Employee training: Ensure your employees are trained to spot potential shoplifters or suspicious behaviour and how to handle difficult situations that may arise and lead to theft. Regularly hold team meetings focused on loss prevention tactics and encourage employees to greet everyone entering the store.
- Strengthen cash handling measures: Whether handling physical cash or managing a point-of-sale (POS) system, regularly deposit cash into a safe and keep fewer funds in a cash register. Ensure staff know how to spot counterfeit bills and monitor and secure POS systems to prevent them from being tampered with or compromised.
- Improve in-store visibility: Keep shopping aisles uncluttered and ensure employees have a clear line of sight throughout the store. An open and organized store layout reduces blind spots and the risk of theft and improves the customer experience.
How Does Retail Insurance Help Cover Unexpected Losses?
Business insurance is vital for any small business owner to cover expensive damages, losses, and lawsuits.
Retail insurance, in particular, is designed to protect retailers from a broad range of risks, including shoplifting and internal and external theft. It complements a loss prevention strategy by providing financial protection against unexpected losses that may not be fully preventable through the strategy alone.
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Our licensed, knowledgeable team of brokers will shop our partner network of over 50 insurers to get the low-cost policy your retail business needs and customize it to suit your specific requirements and budget.
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