What does loss prevention mean?

Every store buys products it plans to sell. Some of those products never become sales. They get stolen, broken, miscounted, or taken through fraud. Loss prevention is the work of closing that gap.

You will also hear the term asset protection. In most companies it means the same thing.

What is shrink?

Shrink is the gap between the inventory your records say you have and the inventory you can actually find. If your system shows 1,000 jackets and you count 970 on the shelves and in the back room, 30 jackets have shrunk.

The National Retail Federation tracks this every year. Its 2023 National Retail Security Survey found an average shrink rate of 1.6% of sales for fiscal year 2022. That added up to $112.1 billion in losses, up from $93.9 billion the year before.

Where do retail losses come from?

Most of it comes from four places.

• External theft. Shoplifters, including organized groups. In the NRF survey, external theft made up an average of 36% of total loss.

• Internal theft. Employees taking cash or products. The same survey put this at 29%.

• Process errors. Wrong counts, receiving mistakes, price errors, markdowns that never got entered.

• Vendor fraud. Short shipments and billing games on the supply side.

Theft inside and outside the store together made up about 65% of shrink. The rest came from mistakes, damage, and other causes.

What do loss prevention teams actually do?

The daily work is less dramatic than TV makes it look. A team might:

• Review cameras and incident reports

• Train staff on returns, cash handling, and how to approach a customer politely

• Run inventory counts and look for patterns in the gaps

• Look into cases that seem like fraud

• Work with local police on serious incidents

• Check that safety rules are being followed

Which loss prevention methods work best?

No single one does. Stores that do well stack several, because every method has a weak spot.

• Staff on the floor: a strong deterrent, but it costs payroll and nobody can be everywhere.

• Locked cases and tags: they slow thieves down, and they slow honest shoppers down too.

• Cameras: useful for review, but footage only helps if someone looks at it.

• Policies and training: cheap and effective, as long as people follow them.

• Data review: shows patterns, though often after the loss has already happened.

Where does AI video fit in?

Here is the usual problem. Most stores already have cameras, and almost nobody has time to watch them. A retailer with a few hundred locations has thousands of video feeds.

AI video intelligence watches those feeds all day and flags activity that looks like theft, fraud, or a safety problem. A person then looks at the alert and decides what to do.

Spacture AI works with the cameras a retailer already has, with no camera replacement required. Across 500+ US retail locations, Spacture AI delivers 87% alert accuracy, a 74% reduction in false alerts, and a 43 second response time.

Frequently asked questions

Is loss prevention the same as security?

Not quite. Security protects people and property. Loss prevention focuses on protecting profit, which includes security but also covers fraud, process errors, and inventory accuracy.

What is a good shrink rate?

It changes by store type. NRF’s survey average was 1.6% for fiscal year 2022. Compare yourself to stores like yours, and pay close attention to whether your own number is going up or down.

Where should a small retailer start?

Count inventory on a regular schedule, write down where the gaps show up, and fix the biggest one first. Fancy tools can wait.

Will AI replace loss prevention staff?

No. AI points people toward the moments that need attention. People still make the decisions.