Structuring The LP Function

Retail loss prevention (LP) must be understood within a context of return on investment (ROI) analysis. Without a clear indication of ROI, there is no case for investing the time, money and resources necessary to staff, administer and monitor an LP function. Without a positive ROI, a retail organization is better off accepting the loss as a part of doing business while investing nothing to reduce the profit drain. However with an effective LP function in place, gains can be realized, losses mitigated and profitability increased. The benefits are real.

LP success relies on an organization's ability to anticipate and manage loss, while creating an LP team who will learn and grow with each experience. Also vital to LP success is the structure of the function that is put into place.

However, despite the potential benefit of LP, many retail organizations are investing less in the function. According a recent University of Florida National Retail Security Survey, the average LP budget has dropped 0.43 percent of sales. The decline in LP spending at many retail organizations can be attributed to downward trend in shrinkage, as well as budget-trimming measures by company management - which tends to vies LP as business expense rather than a cost centre – in response to lagging sales and profits. Thus "do more with less" has become the mantra of LP.

So, with losses in billions and a constrained fiscal environment, how can a retail organization maximize its returns on capital and payroll investment and consistently provide clear, measurable ROI, on LP efforts? Smartly structuring the LP function may be the simplest and most cost-effective answer.