Retail Loss Prevention Expertise and Research

Enabling the Retail Sector to Sell More and Lose Less

Zalando’s Returns Strategy: A Model for Smarter, Preventative Returns

For some online retailers, over a third of what they sell is sent back at a huge cost, this was one of many research findings from our true cost of returns research project. Click here. The report also included recommendations around leadership, data systems, returns prevention strategies, approaches to lowering the costs, both financial and environmental. As the time when we undertook our research, Zalando was consistently called out as a retailer with a reputation for thinking differently about returns. This article summarises what we know about their approach, which is grounded on a superb paper published in the California Management Review (click here) written by two academics at WHU, Felix Johannes Röllecke and Arnd Huchzermeier, along with David Schröder who at that time (2017) was the Senior Vice President of Convenience, he is now, Co-CEO, at Zalando. These learnings augment our own research and are summarised below, along with a five point checklist to benchmark your own business's approach to returns - the Zalando way. The very first thing to call out is that Zalando treats returns not as an unavoidable cost, but as a data opportunity. They flip the traditional way of thinking, viewing returns as a strategic lever to boost customer satisfaction and lifetime loyalty, not just as a problem to minimise. As they say, happy customers come back! Their approach combines prevention, customer convenience, and intelligent systems. Second, they aim to prevent returns through better decisions upfront They use very high-quality images and videos to show products from multiple angles and in motion, helping customers understand fit and fabric. They leverage "Fit Prediction" tools using machine learning to suggest the right size based on a shopper’s past orders and returns — for example, advising a customer that they have returned items like this previously. They then add rich customer reviews to highlight fit, feel, and fabric, guiding buyers to make more confident choices. Third, they aspire and seek to deliver a frictionless returns experience Zalando’s free, rapid and easy returns processes are central to its brand promise. Pre-paid labels, quick refunds, and app-based returns create trust and loyalty, encouraging customers to keep buying. Returns are seen as part of their great customer service, not a punishment for their shoppers. This convenience has helped Zalando build a powerful data set on return reasons, product performance, and customer behaviour. Fourth, they create data-driven prevention and feedback loops The company analyses return data by product, brand, size, and customer segment to identify patterns and feed them back into product design, supplier selection, and customer guidance. If a product has a high return rate, Zalando works with suppliers to fix issues with fit, photography, or descriptions. Fifth, they leverage technology and add AI integration Their recommendation and sizing algorithms draw from millions of purchase and return interactions to constantly improve accuracy. Real-time dashboards track returns by SKU and region, giving early warnings about products likely to cause dissatisfaction. Their mindset is that every return teaches them something, and to enable and constantly improve their strategy they empower their teams to propose and test new ideas. With the circular economy in mind, they look to turn product returns that they cannot resell or refurbish into value, through their outlet stores, with the worst-condition items (damaged and unsellable) either recycled for materials or responsibly disposed of. Finally, while there is no C Suite officer, such as the Chief Returns Officer, Zalando, the clear link of returns to the customer experience, sustainability goals and cost control, ensures that the accountability and oversight for returns sits with the board, with the operations assuming day to day responsibility for execution. Below might be a helpful five-question self-assessment checklist retailers could use to benchmark themselves against the Zalando way of managing returns: Strategic Mindset: Do we treat product returns as a source of customer insight and loyalty growth, rather than just a cost to minimise? Prevention Through Clarity: Are we helping customers make the right choice first time — using rich imagery, fit tools, and authentic reviews to reduce preventable returns? Customer Experience: Is our returns process frictionless, fast, and trust-building — something that strengthens our brand promise instead of frustrating customers? Learning and Feedback: Do we analyse return data to identify root causes and feed those insights back into product design, supplier management, and merchandising? Technology, Sustainability, and Accountability: Are we using AI and analytics to predict and prevent returns, recovering value through refurbishment or recycling, and ensuring board-level ownership of our returns strategy? Each “yes” can help you move closer to the Zalando standard — where returns fuel loyalty, insight, and circular value rather than losses. If your business would like to join our retailer ecommerce loss working group and participate in our regular online meetings, the annual innovation summit and new research, then please click here.

Tackling the Self-Checkout “Walkaway” Problem

In September, we asked retailers via a short questionnaire to share their current thinking on the problem of walkaways, how they defined it, how they measured and monitored the problem, the scale and nature of the problem, the current interventions in place, and their future investment plans. To discuss these findings, we will have a working group meeting on February 4th, click here to register for that meeting. In the meantime, here are the research findings & conclusions from the eighteen retailers who responded to the survey. How do these retailers define the problem? Retailers describe “walkaways” as cases where customers leave the self-checkout area without completing payment, even though — to colleagues, cameras, or other customers — it looks like they have paid. Sometimes these are accidental (customers think they’ve paid when they haven’t, made even more plausible with soft declines on contactless payments), and other times they are deliberate thefts. Retailers view the issue as a mix of human error, poor user experience (UX), and opportunistic behaviour — a growing problem as more shoppers use self-checkout. How they do they measure and monitor the problem? The survey found most retailers track walkaways through multiple data sources: CCTV footage and POS transaction data are cross-checked to identify baskets scanned but not paid for. Some use AI video analytics to detect “suspicious” behaviours such as scanning then leaving early, or failing to present payment. Exception reporting is becoming common — flagging transactions with no payment but with items scanned. A few retailers measure “walkaway shrink” as a percentage of all self-checkout transactions, typically between 0.3% and 0.7% of self checkout sales value, although some reported much higher figures in certain store formats. Several retailers admitted they don’t yet have reliable data — meaning the true scale may be larger than currently visible [or smaller] How big is the problem for these retailers? Almost every retailer agreed the issue is getting worse. With self-checkout participation and the use of contactless payments growing (in some cases from 70% to 80% of transactions), even small error or loss rates now mean millions in lost sales / profit each year. Some retailers estimated that walkaways now make up 20–30% of all losses linked to self-checkout. What are these retailers doing about the problem now? Current measures fall into three main areas: Staff training and presence – Many retailers have reinforced colleague training so attendants can spot risky behaviour, engage customers, and respond quickly. Some use “human nudge” tactics — for example, attendants saying, “Would you like a receipt?” as a subtle reminder to pay. User Experience (UX) design – Several have updated screen layouts, payment prompts, and sound cues to make it much clearer when a transaction is complete. Others added stronger on-screen “You haven’t paid yet” messages and louder audio tones to prevent honest walkaways. Physical deterrents – Many have now added exit gates, cameras above each checkout, and signage reinforcing that all purchases must be paid for. Some also use coloured lighting or digital screens to signal “payment complete.” What are their future plans and investments? Retailers are planning to move from manual detection to automation and analytics-driven prevention: AI-powered camera systems that track customer movement and payment completion. Smart exit gates linked directly to POS systems that only open after payment. Predictive analytics to identify high-risk stores, times of day, and transaction types. Continued investment in staff training, focusing on how to balance customer experience with loss prevention. Testing audio and visual UX redesigns that reduce confusion and prompt customers more clearly to pay. In conclusion, The survey shows that “walkaways” are a growing and emerging risk, fuelled by greater SCO participation and use of contactless as a means of payment. Retailers are responding by combining better design, smarter data, and automated controls to close the gap — aiming to protect sales while keeping self-checkout convenient and trusted. As a next step for retailers, here is a five question checklist to assess your readiness to change based on the survey results from this sample of eighteen retailers. #1: Do we really know the size and shape of our walkaway problem? Are we accurately measuring incomplete or unpaid self-checkout transactions using data from POS, CCTV, and analytics tools? Can we break down where, when, and why walkaways happen — by store, time of day, or basket type? #2: Is our self-checkout experience designed to make “payment complete” unmistakable? Are on-screen prompts, audio tones, and visual cues clear enough to prevent accidental walkaways? Have we tested our user interface and payment flow with real customers to spot points of confusion? #3: Do our store teams know how to spot and stop walkaways? Have SCO hosts been trained to recognise high-risk behaviour and use friendly interventions (e.g., “Would you like your receipt?”)? Are staffing levels and visibility at self-checkout right for peak times? #4: Are our physical and system controls fit for purpose? Do we use gates, cameras, or sensors connected to the POS to ensure payment before exit? Is there a clear escalation or alert process when a transaction fails to complete? #5: Are we investing in automation, analytics, and culture change — not just reaction? Are we using real-time dashboards, AI detection, or predictive analytics to flag issues automatically? Do store leaders treat walkaways as a preventable process issue, not just shopper dishonesty? If you answer “no” or “not sure” to several or all of these questions, your business may have some opportunities to strengthen its readiness — moving from manual reactions to a data-led, customer-aware, and automated prevention strategy to reduce walkaways and cut losses. If you would like your business to become part of the self checkout working group, please click here to go to the landing page and sign up to our next meetings.

Cash Loss: The Case For Change - Retailer Updates

In our annual update, the working group discussed their latest initiatives to reduce cash loss, many with losses less than 0.1% of cash takings while reducing the costs and complexities of handling cash, which for some of the retailers in the working group can still be up to 40% of all their transactions / sales. What emerged were three current challenges, dilemmas and concerns First, social engineering, in USA especially, the retailers reported the growing threat of cash scams, counterfeit currency and fraud through POS, especially gift cards and bank deposit requests. Second, some retailers are now adding cash as a payment option for self checkouts [typically self-checkouts are launched as card only] with one reporting that their self checkout participation had grown from 70% to 80% with cash as a new payment option, however this then came with a corresponding increase in handling costs, with new and different types of risk levels. Finally, in USA, a new problem related to cash is the planned withdrawal of the one cent coin, many retailers reported in the meeting how they are looking to plan to round cash totals, to update systems, educate customers, and to be guided by national laws and guidelines on the transition. The working group then heard retailers share three broad initiatives that they are taking to prevent loss, reduce risk, improve controls and automate cash processes. #1: Cash Automation & Smart Safes This was the most mentioned, for some of the retailers, they had been in use for over 12 years while others had just deployed, others were on the edge of some trials. Smart safes automatically count, validate, and securely store cash, providing stores and the home office real-time dashboards and provisional bank credits overnight. What the retailers shared was that smart safes can help a) lead to a dramatic reduction in theft and reconciliation errors, b) less manual handling of cash and reduced back-office workload and finally, c) improved accuracy of reporting through direct integration with POS and treasury systems. #2: Closed-Loop or Recycler Systems The goal behind these systems is to create a *fully closed cash loop**, removing human handling wherever possible. The recycling systems dispense and accept cash automatically, issuing floats to tills at the start of shifts, or as one retailer put it, loans, and then reconciling at the end. The benefits include a) reducing internal theft and counting errors, b) providing continuous tracking of cash movement and finally, c) automation and improved store productivity #3: Enhanced Data Dashboards & Reporting Tools Finally, several retailers talked about improved visibility to the data on cash loss via dashboards and then the analytics was for them a major breakthrough. These dashboards ingested POS, treasury, and smart-safe data, to display, and to then allow for real-time monitoring and store-level accountability. To help turn insight to action, several retailers sent “nudge” alerts or push notifications for store teams when anomalies were detected. And one retailer shared how they had created a dedicated "cash loss tzar" role within their AP team to take ownership of the data, the dashboard and compliance and then working with the stores that were not delivering the right level of compliance and results. In conclusion, the key insight from this meeting on cash losses was that that retailers’ innovation priorities are shifting from manual process improvement to automation, analytics, and AI-assisted controls, with a clear goal of creating a secure, low-touch, data-driven autonomous cash ecosystem. As a next step, and based on the insights from this meeting, here are five questions you could ask about your business to assess your readiness to better manage cash loss, and bring down the costs associated with handling cash. Are we actively protecting our stores from cash scams and fraud? Do our teams know the latest social engineering tricks (e.g., fake “bank” calls, fake “head office” gift card requests, suspicious refund requests)? Do we train and re-train staff on counterfeit detection and POS fraud, especially on gift cards and cash refunds? Do we have a simple, clear “Stop & Check” procedure before approving unusual cash or gift card transactions? Have we fully costed and risk-assessed cash at self-checkout? If we accept cash at self-checkout, do we understand the extra costs (maintenance, jams, cash collection, repairs, extra staff time)? Have we reviewed how cash at self-checkout changes our risk profile (theft, abuse, collusion, sweet-hearting)? Do we regularly review self-checkout exception reports for cash (voids, overrides, high refunds, unusual patterns)? How ready are we for changes to cash (e.g., removal of the one cent coin)? Do we have a clear plan for rounding rules on cash transactions, aligned with national laws and guidance? Are our POS, pricing, and back-office systems ready to support rounding and any new tender rules? Do we have a simple customer and colleague communication plan (signage, FAQs, training) to avoid confusion at checkout? Are we using the right level of automation (smart safes / recyclers) for our cash volumes and risks? Do we know which stores would benefit most from smart safes (high cash, high variance, high theft risk, high labour cost)? Have we assessed closed-loop / recycler systems for busy or high-risk sites to remove manual cash handling where possible? Are our safes / recyclers integrated with POS and treasury so we get real-time visibility, clean reconciliations, and provisional credit? Do we treat cash loss as a data problem, not just a process problem? Do we have a single dashboard showing cash loss, variances, and trends by store, till, shift, and colleague? Do we use alerts or “nudges” to flag unusual cash patterns in real time (e.g., repeated small shortages, suspicious gift card use)? Is there a named cash loss owner (person or team) who reviews the data, follows up with stores, and drives continuous improvement? Retailers can use these five questions as a quick readiness check, maybe as team exercise, using the scoring system “no” or “not sure” to identify convergent and divergent viewpoints within the team, that can lead to new actions and initiatives and pointers towards building a more secure, low-touch, data-driven cash ecosystem. If you would like your retail business to be part of the working group, click here for the landing page and join our mailing list to get a weekly email on upcoming meetings and new research.

Cash Loss: The Case For Change - Retailer Updates

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ECR Retail Loss is a global collaboration between retailers, suppliers and academics, working together to better understand and manage the causes of retail loss..

Our community includes 400+ of the biggest global retailers (our current Board members are from Aholddelhaize, Nike, Next, and Tesco) alongside consumer goods manufacturers, academics and researchers. Together, we explore practical ways to reduce shrink, fraud, food waste and other preventable losses across all channels.

Through regular working group meetings, peer-led research, benchmarks and reports, we support loss prevention professionals, asset protection, store teams, and retail leaders in making smarter decisions to reduce shrink, protect assets, and meet rising expectations from customers and stakeholders.

Real world insights influence everything we do to support your teams, stores and operations. From preventing theft to improving inventory accuracy.

Our eight priority areas are set by our members.

Video in Retail: the evolving role of surveillance, AI and analytics in deterring crime
Food Waste and markdowns: reducing preventable waste and aligning shrink reduction with sustainability goals
E-commerce Loss: tackling fraud, returns abuse and delivery risk in online retail
Inventory Accuracy: why better stock data reduces shrink, improves margins and builds trust
On-Shelf Availability: ensuring products are where they should be, when customers want them
Self Checkout: balancing customer experience with effective loss prevention at SCO
RFID in Retail: using real-time data to track goods, reduce shrink, and improve replenishment
Retail Loss, Safety and Security: protecting people, products and profits in an age of rising threats

We help you sell more and lose less by tackling every major form of retail loss:

Shoplifting, employee theft, internal fraud, external threats
Returns abuse, self-checkout manipulation, operational errors
POS system mistakes, stock inaccuracies, spoilage and waste
Supplier fraud, delivery discrepancies, vandalism, and more

We share actionable strategies to prevent loss, strengthen store safety, and improve visibility across all retail operations. That includes smarter loss prevention protocols, upgraded security cameras, AI, facial recognition and POS systems, real-time RFID tracking, enhanced EAS tagging, updated policies and processes and practical training programmes.

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