Four Keys to Loss Prevention in an Omnichannel World


As the centerpiece of today’s omnichannel world, customers expect a seamless experience no matter when, where or how they chose to shop. However, this explosion of multiple shopper scenarios is a significant challenge for retail operations.

Brands not only depend upon a seamless integration between online and in-store point-of-sale (POS) systems, but also contend with a paradigm shift of selling merchandise from a database rather than a physical store.

Without a foundation of accurate inventory, retailers cannot effectively tie together omnichannel execution and the customer experience. And yet, these same systems, which provide so many benefits for retailers, also contribute to potential loss events through cancelled orders, in-store returns of online purchases and merchandise bought online and picked up in-store. While omnichannel retail may be the answer to many retailers’ woes, it also creates numerous opportunities for shrink to occur, whether through human error, internal and external theft, or fraud. The major challenge of managing loss prevention in an omnichannel environment is that most retailers traditionally operate with too many separate business silos.

Integrate Systems for Better Visibility

Omnichannel retailing demands integration between systems (both new and old), departments and operations. Loss prevention, operations and IT departments can no longer operate in a vacuum responsible for their own separate KPIs. Instead, they must take a unified approach to combat loss as a group. The same is true of siloed technology applications. Individual systems that don’t communicate with each other provide very limited, and even no visibility from other channels.

Omnichannel fulfillment is more complex than ever, taking place from different stores and different manufacturers, leaving data disorganized, duplicated, and often inaccessible. To compound the issue, fragmented policies and processes abound that have proven particularly detrimental to merchandise returns, forcing price adjustments, accommodations and overrides – assuming POS systems can validate order information and document entry in the first place.

Key Areas to Break Down the Silos

Executing an effective loss prevention program requires excellent planning, departmental cooperation, and seamless IT integration to mitigate risk.

The following are four key opportunities to break down the silos and help minimize loss opportunities in an omnichannel retail environment:

1. Your online and in-store POS systems should be one in the same. Or at least they should operate as such. Leveraging RFID technology as the lynchpin to inventory visibility, seamless integration between these systems is critical as they can determine how to flag cancelled orders for exception reporting and analysis; prevent customers from returning items in-store that were incorrectly shipped or allegedly not received; and ensure sales associate and POS system accuracy when closing out merchandise pickups in-store.

2. Without accurate, analytical data your omnichannel is ripe for shrink. Having an integrated system that links information from physical stores, online and fulfillment or return centers for each transaction can provide a critical audit trail of potential loss incidents. Each system should have access to the proper shipping and billing information, authorization of system overrides and associate ID for each part of the process, along with information for customer service, including customer complaints of missing items.

Physical stores need the ability to pull data and identify flags, such as what sales associate rung the most returns and exchanges or most price adjustments against the online store. Other warning signs include an invoice used multiple times, customer service accommodations matching a name/address, generic SKUs being used for sales or returns and a mismatch of address or payment method.

For fulfillment and return centers, the most important tasks include identifying multiple system overrides, multiple returns by one associate and weight discrepancies for packages and return items.

3. Visibility into the returns process is not a myth. Every omnichannel retailer needs visibility into data to support online purchases returned to the store. RFID technology can play a significant role by giving each item an individual “fingerprint.”

The ability to uniquely identify each piece of merchandise helps to decrease operator error, while also offering better insight and item and price validation for the return process. To help prevent loss, a retailer’s process should include documenting online order details through POS and dealing with the additional fees and labor costs required to process returns of online purchases.

4. E-receipt procedures are most vulnerable. Outlining when and where electronic receipts can be issued via POS or mobile device is paramount. Loss is all but guaranteed without proper controls for preventing multiple distributions. For example, retailers should implement exceptions to stop multiple receipts going to the same email address and designate electronic attributes to identify when an e-receipt is issued.

As the market for omnichannel evolves, loss prevention strategies must evolve along with it. Retailers need to consider how to integrate both traditional systems, such as POS, order management and innovative technology solutions like RFID-enabled inventory, across all shopping channels to make the new retail paradigm work.

This strategy is the only way to ensure retailers are able to deliver accurate data across the enterprise and collectively analyze key operational areas, such as omnichannel merchandise returns, consistency in pricing and promotions and fraud control. Providing a unified customer experience will require retailers to break down their operational silos, ultimately minimizing loss opportunities and improving overall business operations.

Tony D'Onofrio, is Chief Customer Officerat Tyco Retail Solutions.

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