Loss prevention is a growing concern for retailers today. Between employee thefts, shoplifting and fraudulent purchases, American businesses lose billions of dollars each year. According to the latest fraud report by LexisNexis, these losses could get larger as consumers increase their attempts to defraud merchants.
"Retailers are losing more money to fraud in 2016."
Retail fraud is on the rise
Customer fraud, which includes such actions as unauthorized transactions, bounced checks and deceitful product returns, can add up to big losses for businesses. The 2016 True Cost of Fraud study found that retailers are losing more money to fraud in 2016 than they did in 2015 – every dollar lost to a fraudulent exchange actually costs merchants $2.40 with added fees and product replacements compared to $2.23 last year.
One of the reasons these costs are going up is an increase in fraud attempts. According to the source, monthly fraud attempts jumped by 33 percent from 2015, and as much as 46 percent of those attempts succeeded. These thefts have added up to an 11 percent increase in lost revenue year over year.
This is part of a dangerous trend for retailers. In 2014, fraud cost businesses $32 billion, $9 billion more than 2013, according to Business Insider.
Top sources of retail shrinkage
The National Retail Federation identified shoplifting as the type of fraud that was most costly for merchants in 2014. Shoplifting accounted for 38 percent of the $44 billion inventory shrink losses for that year. Employee theft, however, wasn't that far behind – 34.5 percent of all retail losses that year were from businesses' own staff.
Most stores reported increasing their security budgets to help combat shrinkage, which makes the total cost of thefts even greater. For small- and medium-sized businesses, this level of loss can be devastating. Store owners are forced to choose between spending money to increase their security methods or risk losing that money to fraud.
With the right planning, however, retailers can better allocate their security resources to help their bank accounts from both sides of the issue.
Choosing the right security measures
Surveillance cameras have long been the go-to for retailers who want to curb shoplifting in their stores. With new advances in this technology, merchants can stretch their surveillance budgets by choosing the right equipment to meet their needs. A few well-placed panoramic cameras could serve the same purpose as several standard recorders, according to Security Magazine. While high-tech cameras may cost more individually, they offer clearer footage that makes them more useful to business owners. They also require less energy when there are fewer of them.
The source added that merchants can save on security costs by reevaluating the methods they use to store video data. Newer cameras are more likely to be compatible with cutting-edge digital storage programs, which will give retailers more options for finding a system that works best for their budgets.
While cameras can help catch shoplifters after the fact – and they do act as a strong deterrent for would-be shoplifters – they aren't always helpful for stopping thefts in progress. While large retailers can afford security staff specifically for monitoring cameras, small businesses can rarely justify the expense. In those cases, using sensor equipment can help reduce losses.
These technologies are essential for protecting businesses, but retailers can't forget to overlook the human element. Engaging with customers, like acknowledging them when they come into the store, lets them know that they've been seen. Shoplifters can become distracted and feel watched when they've spoken with store employees, giving an extra benefit to pleasant customer service.
Retailers don't have to spend a fortune to protect their assets, but it's wise for them to do their research and find the right security equipment and techniques to meet their needs.
Security equipment and surveillance industry piece brought to you by Marlin Equipment Finance, a nationwide provider of commercial lending solutions for small and mid-size businesses. Marlin's equipment financing and loan products are offered directly to businesses, and through third party vendor programs, which include manufacturers, distributors, independent dealers and brokers in the security, food services, healthcare, information technology, office technology and telecommunications sectors.