Bill 159, Private Security and Investigative Services Act, 2004
Loss Prevention in the Retail Sector
When looking at the application of this legislation to the retail sector, it is important to remember that retailers are not willingly in the loss prevention business. Reacting to crime is an act of self-preservation. Retailers implement loss prevention strategies and the subsequent costs into their business plan in order to survive in a competitive environment. Unlike third party providers of investigative and security services, for retailers there is no profit in making an arrest. However, the cost of doing nothing to mitigate crime in retail is potential business failure accompanied by the resulting loss of jobs.
When thinking about crime occurring in a retail store, most people think only of shoplifting. Over time, retailers have struggled to have this activity properly identified as the criminal offence of theft. Theft is part of a much larger problem called inventory shrinkage . But in fact, there are a variety of other retail crimes not covered under the shrinkage umbrella, including credit card fraud, counterfeit currency, robbery, breaking and entering and numerous other criminal activities. All these crimes significantly affect retail sales, the availability of product for sale, the safety of employees and customers, increased consumer costs, higher insurance premiums and increased deployment of staff time and resources, just to name a few.
For the past two decades, RCC has undertaken the annual benchmarking of financial losses attributed to inventory shrinkage by retailers across Canada. The disappearance of these assets is attributed to a combination of internal and external causes: employee defalcation, customer theft, administrative errors, and vendor dishonesty.
The 2004 Canadian Retail Security Report determined that the cost of all crime in some retail environments is almost one half of net profits. Inventory shrinkage was the most significant factor in this result. Inventory shrinkage in Canada represents a loss of more than $3 billion per year or approximately $8 million per day. Using the percentage of retail establishments in Ontario (38 per cent) to extrapolate a provincial figure, inventory shrinkage in Ontario represents approximately $1.14 billion annually, or just over $3 million per day.
Shrinkage does not include costs for retailers to train staff in ways to prevent losses, or investment in asset protection personnel and technology such as closed circuit television and electronic surveillance tags. In 2002, the direct cost of personnel and equipment to curb the cost of crime was $520 million. Again using the percentage of retail establishments in Ontario as a starting point, this represents spending by retailers in Ontario of just under $200 million annually to mitigate losses to crime; the equivalent of about 2000 additional police officers on the streets. Thus for retailers, it simply makes good business sense to prevent crime. Retailers most often take a holistic approach to loss prevention; everyone from Sales Associates and Cashiers to the President and Chief Executive Officer are involved in maximizing safety and ensuring profitability. This total integration of loss prevention into the fabric of the business aims to protect people and property from all threats thereby ensuring survivability in a competitive environment.
While ultimately any loss prevention strategy must meet the needs of the retailer in providing a great place to shop, work, grow and invest, by being implicitly linked to the mission, vision and values of the company, loss prevention strategies inevitably differ significantly across the retail sector. One size does not fit all.
For example, with respect to training, the types of skills necessary to thwart criminal activity range across the retail sector from almost non-existent and reactive to highly professional and proactive. Small businesses or "mom and pop" retail operations are long on hours and short on loss prevention skills and training. In contrast, in large retail settings there is a division of specialties that often overlap in the protection of people and property. It is not uncommon for staff other than loss prevention officers to have responsibility for occupational health and safety, internal investigations, auditing, risk management and staff training. While some retailers develop personnel as specialists within a specific task, other retailers develop "jacks of all trades". Staff training emphasizes each particular merchant's philosophical approach to loss prevention.
Despite these differences in approach, retailers agree that the protection and response to crime occurring in the business is increasingly becoming a business responsibility. In 2003, more than 100,000 people were arrested in retail stores in Canada for criminal offences. It is important to note that very few civil torts or criminal complaints related to these arrests were reported. This is not surprising, as retailers have invested way too much in promoting and marketing their company to risk an incident that would adversely affect public perception. Having all interaction between the retailer and a culprit managed in a professional manner is ingrained into the training and philosophy of the retail approach to loss prevention. Improperly interacting with a culprit is contraindicated.
While the responses to loss prevention come in a variety of types, responsibilities, training and challenges across the retail sector, they all share the same goal of diminishing losses and increasing profitability. Retailers have already done their due diligence in relation to training for in-house retail loss prevention officers, and request that any proposed changes to the Act recognize this and allow flexibility for retailers to continue to adapt to the unique environment in which they operate.