OmniChannel Model Challenges Retailers’ Battle Against Loss Prevention

Retail is full of acronyms. There’s POS (point of sale), CRM (customer relationship management) and KPI (key performance indicator), old-line terms associated largely with physical stores.

But what about BOPIS, BOSS and BORIS?

“Buy online pickup in store,” “buy online ship from store” and “buy online return in store” mean a retailer is operating in a sophisticated omnichannel environment, employing the latest technology strategies to enhance selling, including online, mobile retail and social media marketing.

While exploiting new technologies is a good thing for retailers, change can be vexing, according to findings from a PricewaterhouseCoopers retail industry survey examining loss prevention and theft management.

In fact, technology is making it more difficult for retailers to prevent, detect and manage loss, including in the area of inventory management, says Steve Zawoyski, U.S. enterprise risk management leader at PwC.

“At the core of omnichannel is the concept that a customer can securely purchase and receive their product in any manner they desire,” Zawoyski says. “For many retailers with legacy pre-omnichannel operations and systems, ensuring secure and dynamic customer purchasing and fulfillment is a significant challenge. Beyond the well-documented data breaches and information security risks, many retailers struggle with ensuring supply chain inventory accuracy.”


In transitioning from bricks-and-mortar to bricks-and-clicks, the report states that retailers will need to rethink loss prevention strategies and capabilities to ensure they can remain competitive. Many companies have not fully integrated new technologies that are necessary to effectively combat loss in omnichannel, the report says.

One key recommendation from the report: Retailers should embrace the process of root cause analysis while increasing their use of data analytics to better spot and mitigate shrink. Zawoyski says 59 percent of respondents reported they are employing data analytics and end-to-end root cause analysis as a primary tool to identify losses.

“Omnichannel is expanding the retail landscape, increasing risks and putting a strain on vital resources,” Zawoyski says. “Effectively leveraging advanced analytics and end-to-end root cause analysis allows retailers to assess, strategize, plan and deploy risk mitigation programs.”


PwC suggests several techniques for enhancing root cause analysis. Retailers can use cross-functional teams to develop hypotheses and analyze results, leverage data analytics and systems process mapping to test hypotheses, develop a loss reduction strategy and corresponding mediation plan based on results, identify/decompose drivers of loss and quantify their impact over time, and develop dashboards and diagnostic tools to monitor and track root causes of loss over time.

The report states that those retailers who find success managing omnichannel loss can outpace competitors — citing as an example a major U.S. retailer that was able to reduce shrink by more than 70 percent over six years, from more than $950 million to less than $250 million annually.

“When retailers properly diagnose risk drivers they can flag problems earlier in the cycle and minimize business impact,” Zawoyski says.


primary sources of shrink and loss in retail stores including internal theft, external theft, system issues, fraud

Note: These results represent a significant shift in the industry. In the past, most retailers have reported that internal theft was significantly higher than external theft, due to employees’ access to cash registers, alarms and inventory.

Source: PwC 2015 Retail Industry Survey

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a retail store warehouse

“For many retailers with legacy pre-omnichannel operations and systems, ensuring secure and dynamic customer purchasing and fulfillment is a significant challenge.” – Steve Zawoyski, PricewaterhouseCoopers