Why retailers can’t afford to accept losses as “part of the game”

After six months at Nedap, one thing has stood out to me: every retailer faces losses, but not every retailer approaches them in the same way. Losses are often seen as inevitable. A certain level of theft, administrative mistakes, or process inefficiencies is accepted as part of running a business. Yet in conversations with retail leaders, I’ve noticed a clear divide. Some view losses as a controllable business metric. Others see them as a given, as long as they stay within limits. That difference in mindset has a major impact on results.

Food for thought #1: What does your organization’s approach to loss say about its broader culture and priorities?

Looking at loss through a consultancy lens

Before joining Nedap, I spent my years as a consultant, helping organizations align strategy, operations, and innovation. That experience has taught me that problems like loss prevention are rarely just operational or technical. They often reflect how well an organization connects people, data, and processes. When I look at loss prevention through that lens, it’s clear that the retailers achieving the best results are the ones who see loss not as a separate issue, but as part of how their business performs. They manage it with the same focus they apply to sales, margin, and customer experience.

The cost of acceptance

On average, fashion and sports retailers lose about 1.6 percent of their revenue through a mix of theft (both internal and external) and operational errors (National Retail Federation, 2023). 1.6 percent might not sound like much, but in absolute terms it’s significant. For this example, let’s assume operational losses account for 0.6 percent and theft for 1.0 percent.

For a retailer with €2 billion in annual revenue, reducing theft losses from 1 percent to 0.25 percent would generate roughly €15 million in additional profit. Not only because fewer goods are stolen, but because those items remain available to sell at full margin. Of course, this is a simplified illustration, the actual impact depends on factors such as sell-through rates and margin structure.

I’ve spoken with retailers who’ve managed to reduce theft losses to below 0.25 percent of revenue. They’re not relying on luck; they’re systematically attacking shrink, tuning daily operations to make them safer and more effective.

The result is straightforward: every item that isn’t lost can be sold, and every reduction in loss directly supports margin. Loss prevention isn’t a cost center. It’s a performance driver.

From technology to behavior

At Nedap, we often talk about visibility. By this, we mean knowing exactly where your stock is and what’s happening in your stores. But visibility is only valuable when it leads to action. Reducing losses requires technology, but it also requires focus, accountability, and the right behaviors across the organization.

Food for thought #2: Does your current technology truly drive new behaviors or simply measure existing ones?

It’s about understanding that sustainable improvement happens when technology, data, and people work together. It’s not a one-off project, but a continuous process of learning and adjusting.

Looking ahead

In my next article, I’ll take a closer look at how the retail approach to loss prevention differs between the US and Europe, and what each can learn from the other.