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Loss Prevention: What Do the Mob, eBay and Winona Ryder Have in Common?

Loss prevention experts like Tiffany CSO David McGowan say closer integration among security disciplines will go a long way toward managing the retail industry's myriad risks.

McGowan: As the industry migrates from traditional VHS tape over to digital storage, the ability of these systems to integrate with different management systems gives you tremendous opportunities. We have a J.D. Edwards management system that tracks some of our inventory in the manufactory processes. This management system actually interacts with the Loronix video system we're using in our manufacturing location. So as it tracks inventory financially, you can keep a video record as well, and one ties into the other. If you truly want to know what's happening with an asset, you can actually see it. There must be aspects of a store's physical design that can deter retail theft as well.Rogers: Picture a Target store. The domestics department, where the pillows and blankets are sold, has very high shelves. You walk down one of those aisles and you are in the valley of the shadow of death, where you fear no security officer will observe you stealing. Frankly those are the highest concealment locations in a Target store. If we were to lower those risers, we couldn't [display] as much product, but you'd certainly be able to increase your loss prevention capabilities. So you always have a trade-off. We're in the business to sell merchandise, so we just have to get more creative in the valley of the shadow of death.

McGowan: Our stores used to be set up by salons. You'd come into a store and you'd go one way into the high-end jewelry, estate jewelry and diamonds, or you'd go into another salon, which would be the silver jewelry, entry-level gold items and tabletop items. If you were in one salon, you couldn't easily see into another. We've really changed that to a more open environment so that you can now look clear across to the other side of the store. That was primarily driven to be more inviting to our customers, but by default it helped us out from a surveillance point of view. Our cameras and security officers stationed on the floor now have a full view of the entire store. Security success is often measured by the absence of certain activities. What metrics or techniques do you find useful for measuring the loss prevention group's performance?McGowan: First of all, if nothing happens, that's our greatest achievement, particularly from any of the external threats that we face on a daily basisrobberies, burglaries, switches and thefts, which usually entail large-scale losses. Something we're looking into aggressively this yearbecause security at Tiffany transcends retail and goes into manufacturing and distributionis to come up with metrics that will give us a greater sense of goal achievements or comparison achievements versus previous years. We're looking at a number of different approaches: using an annual loss expectancy type of formula, or we're also looking at more well-known processes like the Six Sigma approach to quality assurance and sales. Ironically, corporate management can create roadblocks to a successful loss prevention program. Is there a reluctance to admit the problem, similar to companies that get hacked but don't want to talk about it?Rogers: I think in retail [the problem] stems from a historical perspective that loss prevention was really sales prevention. Today, loss prevention practitioners understand the economics of their responsibility far better than any of their predecessors did, and we operate almost completely on a return of investment basis.