9 Loss Prevention Strategies for Small Retailers

effective loss prevention strategies small retail businesses retailers

Last year, over 432,000 dishonest employees and shoplifters were apprehended by 21 major retailers. Over $188 million was recovered by these thieves. 

Loss prevention happens whether you own a large chain of stores or just a small mom and pop shop. It's important to find ways to prevent theft not only from the general public but your employees as well. 

Learning retail loss prevention techniques will help you save time and money. You'll be able to stop a crime before it even happens in some cases.

If you're looking to learn about the different types of store theft, keep reading. We're sharing with you nine loss prevention tips you can implement today. 

Understand the Four Types of Inventory Shrinkage

Inventory shrinkage happens when there is a difference between how much merchandise a retailer has on record versus what the actual physical count of merchandise on hand is. 

Some of the inventory shrinkage is due to issues such as operational errors as well as internal and external losses. However, the other three causes are:

  • Employee theft
  • Shoplifting
  • Return fraud

Each cause has its own specific loss prevention methods to employ. In order to make any of the methods effective, there must be a basic loss prevention plan developed. 

Create and Implement a Basic Loss Prevention Plan

Those in senior management must all commit to implementing the new policies. These policies should be communicated and embedded at all levels of employment from the cleaning crew to the CEO in order to work. 

All tactics must be evidence-based. Otherwise, you may end up with a modern-day witch hunt. 

Hold all store workers accountable for their actions. Empower them with the ability to take appropriate steps should they see signs of theft. 

Employee Theft

Employee theft can involve the following types of methods:

  • An employee stealing merchandise
  • Stealing from the cash drawer (often in small amounts)
  • Not ringing up friends and family members or allowing them to use their employee discount
  • Ringing up fake returns while issuing fraudulent gift cards

Implement Procedures to Prevent Employee Theft

To prevent employee theft, you can implement procedures like changing your store's current culture. When employees are happy at work, they tend to be more invested in the store's overall success. Employee turn-over also decreases and fewer acts of theft are seen. 

Begin by auditing your hiring practices. Before you hire anyone, consider who will act as your best defense against employee theft instead. 

Hire the Right People

Hire people you think have high amounts of integrity and you feel are trustworthy. Next, train your employees properly. Help them learn how to spot shoplifters and fraud. Proper training should also reduce administrative errors as well. 

You should also consider hiring a loss prevention manager. If you're experiencing a lot of theft, hiring someone full-time to help spot and prevent theft from happening is worth the money. If it's not in your budget, consider working with a loss prevention consultant. 


The most common way a theft occurs is through shoplifting. But there are some ways to prevent shoplifting from happening. 

Security mirrors ensure that employees can have their eyes on shoppers at all times and from all angles. Security mirrors also are helpful in ensuring employees don't decide to steal from you, either. 

Surveillance Cameras and Warning Signs

Surveillance cameras help you monitor the store. They're also great to use in case someone denies any wrongdoing. You have them caught red-handed on camera. 

Posting signs that state your intent to prosecute shoplifters can also help deter would-be thieves. Reorganize your store so that there are no dark or unmonitored areas where it's easy for thieves to conceal items. 

Good Organization and Excellent Customer Service

Keeping your store well organized also helps you know exactly what you have and where it's supposed to be kept. Good organization makes it easier to spot when something goes missing. 

Another handy tool is to provide your customers with excellent customer service. It's harder for shoplifters to steal when there is staff everywhere. 

Have greeters at the front door and keep your fitting rooms staffed. Not only will your customers appreciate having an employee at arm's length when they need their help, but it also makes it that much harder for thefts to occur. 

Return Fraud

There are several ways in which return fraud can occur such as:

  • Returning merchandise that's been used
  • Returning merchandise that's been stolen
  • Returning merchandise bought with counterfeit money
  • Returning merchandise using fake receipts
  • Returning already exchanged merchandise

Return fraud is the hardest to prevent because it's not always easy to spot. It took Amazon months to realize one customer was returning boxes filled with dirt rather than the merchandise they were expecting. Not opening up those boxes immediately resulted in a $370,000 loss from one customer alone.

However, adopting a well-planned return and exchange policy that's always enforced by your employees will help tremendously. 

Train Employees to Spot Return Fraud

Train your employees on how to spot return fraud. They can't help if they aren't aware of the typical methods thieves use. 

Have your employees request customers to provide an ID to track returns. This method will help you flat and deal with customers whom you've noticed unusual or frequent return behavior. 

Require Receipts in Order to Receive a Cash Refund

Always require a customer brings in their receipt if they want a cash return. While you can allow for returns without a receipt, they should only be for store credit or exchanging the item. There should be no exceptions to this rule. 

Stay Up With the Latest News in Retail

The more you know about loss prevention, the easier it is to adopt policies and procedures to protect your store against it. But another way to ensure you don't lose any more money is to stay up with the latest retail news.

Learning new ways to boost employee morale and increase productivity will all help to raise your earnings potential. Keep reading our blog for more business tips.

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