Chapter 1 – The Origins of Loss Prevention

The Origins of Loss Prevention

The world of Loss Prevention is a pretty broad space. It can be found in many industries, processes, applications, and focus areas. For example, within the insurance space, loss prevention might be discerned as reducing the frequency of incidents or injuries or reducing or mitigating the amount of loss related to various exposures. Loss prevention in the financial industry might be recognized as a focus on data loss exposures, fraud, or reducing margin losses. In the retail industry, loss prevention is primarily evidenced by reducing shrinkage due to theft, damage, or other areas of loss. For the purposes of this book, the fundamental objective is to explore retail loss prevention.

With this in mind, it seems fitting to begin at the beginning, at the onset of retail loss prevention as it is understood today.

According to King Rogers, one of the LP industry’s leading loss prevention executives, one would need to look back to the 1960s to understand the origins of retail loss prevention. In those days, most retailers referred to their loss prevention departments as “security” (Rogers, 2003). Those serving in security department roles often exhibited a police-like demeanor, behaving in a dry and unemotional way, often acting in a polarized and unforgiving manner. Unfortunately, this deportment produced similarly unfavorable and dispassionate results.

In an article by Pedro Ramos titled Prevention and Asset protection and a Look at What’s Next, Ramos explains that these security teams were often staffed by retired cops (Ramos, 2022) who did little more than watch for shoplifting and employee theft. Using rudimentary tools and manual processes they would investigate crimes like merchandise return fraud and hot check writing. Their tasks were largely reactionary and impulsive, far from proactive.

Communication between security departments and senior management teams was poor at best. If there were any communication it was typically negative – either lawsuit or claim related. There was a minimal perceived benefit to assisting or partnering with security departments. In the most extreme cases, security departments were treated with disdain. Many folks within retail organizations dissociated themselves from them, lest they be considered sympathetic or supportive of their practices.

Of course, this dysfunctional structure benefited neither the security department nor the senior management teams. In fact, the lack of cooperation and support between the two served only to increase losses. Over time, it became apparent that a proactive approach would be necessary if losses were to be curbed.

Throughout the 1970s a new paradigm emerged – the concept of loss prevention or preventing losses before they occur. Rather than avoiding one another, loss prevention professionals and senior management teams began working toward solutions that reduced losses and increased profits. The value of loss prevention and the positive effects it could have on profitability were soon realized.

Loss prevention teams began to take on a more proactive approach. Their efforts were aided by technological advances in software and video, as well as groundbreaking tools like EAS and RFID. Respect for loss prevention professionals began to grow, and it wasn’t long before leaders began to perceive loss prevention as a valuable resource.

Very soon after, senior management began to recognize the potential of loss prevention and the impact it could have on the business overall. An organization’s profit could be positively impacted due to decreases in fraud, shortages, accidents, etc. It was not long before loss prevention departments began to emerge across all enterprises. In some instances, loss prevention departments were renamed to asset protection departments, a fitting name that inferred a broader scope of influence toward the success of the retailer.

Over the course of several more years, loss prevention expanded into more diverse areas of retail business. Loss prevention departments were called upon to protect supply chains, mitigate cargo theft and organized retail crime, eliminate vendor manipulation and fraud, and many other areas focusing on reducing the losses retailers were experiencing. The notion of brand protection was emerging and quickly became another area where loss prevention departments were enlisted to protect retailers’ reputations and public images.

In fact, loss prevention teams’ efforts continued to expand and benefit companies. It was not uncommon to discover loss prevention leaders playing instrumental roles in the development of policies and procedures. Rather than acting in a law enforcement manner, loss prevention members began offering skills that directly contributed to shrinkage reduction, sales and margin increases, and improved brand protection, thus contributing significantly to the bottom line.

Gone are the days of security teams roaming the sales floor and busting bad guys. Practices once thought valiant such as tackling shoplifters, detaining thieves, and monitoring video cameras for hours on end are no longer principal components of loss prevention. Rather, the utilization of technology to quickly identify and address exposures has become paramount. Organized and data-driven strategies are now the order of the day. Loss prevention and asset protection leaders who employ this approach greatly expand their influence and more powerfully impact their companies in positive ways.