Omnichannel

Taking loss prevention beyond ORC and theft

The traditional definition of “shrink” is insufficient to capture the complexity of the challenge. Retailers need to expand their definition even further, going beyond crime and beyond their front doors to start unpacking total retail loss.

Photo: Generated by AI. Adobe Stock.

July 15, 2025 by Jamie Kress — Director of RFID Sales, Sensormatic Solutions

Loss prevention leaders have been focused on curbing organized retail crime activity over the past few years.

Headlines about the increased violence and financial impact of these coordinated attacks turned ORC into retail's primary adversary, making "loss" all but synonymous with "ORC" for many organizations.

However, the problem is that loss isn't that simple, and preventing it means looking far beyond theft and fraud.

The traditional definition of "shrink" — which focuses on inventory loss due to external (e.g. shoplifting, ORC) or internal (e.g. employee theft) factors as well as administrative or process-related errors — is insufficient to capture the complexity of the challenge at hand. To succeed in an increasingly competitive market, retailers need to expand their definitions even further, going beyond crime and beyond their front doors to start unpacking total retail loss.

Hide-and-shrink

Loss within retail enterprises is as broad and complex as in any other business. Tech companies don't consider supply closet thefts or stolen licenses to be the only ways the business loses money, right? Every shortfall in efficiency or an under performing project gets analyzed, quantified and integrated into a holistic assessment of the organization's total financial standing.

The same should be true in retail, but a heavy focus on combating crime, reducing theft and minimizing shrink has pulled resources from other key drivers of lost revenue. Lost time, lost merchandise, lost labor and equipment failures are all part of the "total retail loss" puzzle. Unknown drivers are important too.

To fully conceptualize shrink within their operations, retailers need to expand their understanding of loss to include missing merchandise or opportunities:

• On the sales floor. Theft isn't the only way items are not available for customers to buy. Though it is often regarded as the "cost of doing business," spoiled, damaged, overstocked or misplaced merchandise is also "lost."
• At the register. There's a lot of focus on bad actors at self-checkouts, but points-of-sale run by employees also drive losses in their own ways. Human error — items bagged but not scanned or mismanaged returns, for example—can have the same result as maliciously stolen products.
• In the backroom. A retailer's operational practices can also correlate to losses of both inventory and less tangible resources like man hours. Poor organization in storage facilities, lack of visibility into scheduling or consistent "no-shows," manual cycle counts, inaccurate tagging and countless other practices lead to discrepancies between performance and projections.
• In the supply chain/transit. Shipping delays, errors, material shortages, manufacturing missteps and more can all affect a retailer's bottom line. Furthermore, product recalls can tarnish retailers' reputations — even if the issue has nothing to do with the seller — as shoppers might associate their bad experience with the store rather than the brand that produced the item.
• In the boardroom or at headquarters. Leadership might not like to hear it, but their decisions can drive losses throughout the enterprise. Leadership's commitment to efficiently invest in the technology, people and process is vital to the teams across the enterprise delivering the targets and goals that drove the business decisions.
• In the court of public opinion. Commercial liabilities can contribute to losses both in the form of unexpected expenses and — as noted above — damage to reputation. In fact, this is one of the most commonly overlooked drivers of loss, as byproducts of disappointing customers on your core brand values. shrink — like out-of-stocks that delay online order pickups — can impact customer experiences, leading to lost sales or loyalty.

All these factors and others are part of the "total loss" puzzle for retailers, just as they are for businesses in other sectors. However, with so many potential sources of loss to consider, just getting started can feel complex.

And it's true; developing a more holistic approach to LP means rethinking the way business is done and curating a delicate balance between sometimes-competing priorities. The good news is that all total retail loss initiatives start in the same place, regardless of where they may end up. To tackle total loss, LP specialists must think more like other types of businesses, adopting a multi-faceted, data-driven approach that embraces insights from every corner of the organization.

The full picture

The first step is partnering with departments throughout the enterprise to centralize, standardize and reconcile data to gain a comprehensive understanding of how their practices impact the bottom line. From there, teams should audit this database to identify gaps — areas of the store or business that are not yet included in the data collection program.

For many retailers, the most glaring gaps in visibility will be in the supply chain, storage facilities and other areas of stores that are not often targeted for thefts. Luckily, the technologies that retailers already use to understand loss can also be used to highlight the less obvious causes of loss that most impact their bottom lines.

Many retailers already use radio-frequency identification to track where, when and how thefts occur, but RFID can also highlight other losses. When added to merchandise at the source rather than upon delivery, RFID tags and sensors beyond the retail floor (or in previously unmonitored areas) can gather data about merchandise's entire journey. Tagging at the source also saves time so store associates can focus on other tasks, and ensure items are properly tagged and compliant.

Another mainstay of existing retail technology suites, video surveillance and analytics help ensure retailers always have eyes on their operations, allowing them to scrutinize customer behavior and foot traffic to refine promotions, programs and implementations. They can also show potential risks associated with poor store layout or inadequate customer service. When used in storage and manufacturing facilities, advanced video tools can identify back-end factors that drive losses, helping them make informed decisions that optimize stores and elevate the shopper experience.

Once all areas are accounted for from source to store, retailers can use prescriptive and predictive analytics systems and services to identify all the different points in their operations that eat into bottom lines —and how best to fix them.

• Are employees forgetting to scan items? Invest in training focused on how their actions contribute to or detract from overall loss mitigation efforts.
• Are shipping delays preventing customers from picking up online orders? Warehouse and delivery data might show that a particular vendor keeps falling short, allowing leadership to reassess the partnership.
• Are customers abandoning carts? Examine staffing practices alongside traffic data to refine labor allocation to reduce wait times and improve service.

Over time, this approach cultivates a culture of continuous improvement, with each adjustment changing the organization's loss profile and the next step forward. If done well, every subsequent change will bring retailers one step closer to understanding and mitigating losses, no matter where they originate, while improving operations from end to end. This proactive approach empowers retailers to implement strategies that not only address inventory losses but also improve the overall customer journey, enhancing value for both the business and its patrons.

Stop losses, start growth

In a world where every dollar lost can impact not only a retailer's bottom line but also its standing in the marketplace, it's crucial for LP leaders to think holistically.

Addressing all the factors that contribute to total retail loss—from the moment a product is manufactured to its journey to the buyer — will ensure that retailers can thrive in an increasingly competitive environment. By adopting this comprehensive approach, retailers will be able to redefine loss to not just combat theft but promote sustainable growth and long-term success.

About Jamie Kress

---