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LOSING IT:
A RETAIL DIVE PLAYBOOK
New Technologies Can Help Retailers Mitigate Loss
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In 2014, U.S. retailers lost upward of $32 billion due to shoplifting and worker theft, which accounted for 70 percent of their overall shrinkage.1
etail loss is one of the biggest issues
retailers have to deal with on an
almost daily basis. Preventing that
loss is not an easy task to undertake, but it’s
one that all retailers must address. An article
from the Harvard Business Review notes
that, “longer supply chains, growing product
assortments, and labor cuts have contributed
to making loss prevention ever more
challenging.”2
But advances in loss prevention technology
are helping retailers stem the tide of products
and revenue literally and figuratively walking
out the door. More sophisticated closed circuit
television capabilities are available, video
analytics are more widely available, and the
combination of the two provides retailers a
better way to stop loss before it starts. With the
right systems in place, retailers can lower their
shrinkage numbers, and keep more of their
products and revenue where they belong.
“BRAND STUDIO3RetailDive.com
hen people think of preventing retail
loss, cameras placed strategically
around the store pulling grainy, black-
and-white images of shoplifters are probably
what jump to mind. And yes, that’s a good
description of how closed circuit television
started out.
But it’s come a long way since those fuzzy-
image days.
Closed circuit television (CCTV) has long been
a staple in retailers’ loss prevention strategy; in
fact, 83 percent of retailers believe it reduces
theft, according to one study.3 Considering how
long CCTV has been around — the first CCTV
surveillance was installed in 1942 —it may be
an old standby for loss prevention, but it’s also
a reliable one.
Over the years, these surveillance systems,
while seemingly basic, have increased in
sophistication with the improvement of
resolution and greater coverage of the store,
says Ankur Garg, loss prevention specialist
with RetailNext.
Systems are now digital rather than analog
and can tie into a host of electronics, from
laptops to cell phones, and integrate with other
technologies like RFID.
Advancing Established Technologies
CCTV not only still plays a vital role, it’s been enhanced over the years.
W
Bob Moraca, VP of loss prevention for the National Retail Federation
When an event occurs, a retailer can look in the video log and see when it occurred, the person who took the item, and then look ahead to see where the person went from there.Dave Donnan, partner with A.T. Kearney, retail consultants“
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< < <
“CCTV not only still plays a vital role, it’s
been enhanced over the years,” says Bob
Moraca, vice president of loss prevention for
the National Retail Federation. Equipment
has gotten smaller and wireless technology
makes it possible to put a camera anywhere,
eliminating the need to run wires through walls.
More important, the advent of video analytics
has made CCTV more indispensable than ever
in loss prevention. Video analytics can take
footage from CCTV and pinpoint faces and
movement to identify when a loss occurred.
“It provides the ability to go back and forth in
time,” says Dave Donnan, a partner with A.T.
Kearney, retail consultants. “When an event
occurs, a retailer can look in the video log and
see when it occurred, the person who took the
item, and then look ahead to see where the
person went from there — did they leave the
store, or hand the item off to someone else?”
Video analytics also allows retailers to look
backward and see when and how the person
came into the store, whether through the front
doors, for example, or a back channel. Video
analytics are still evolving, but the technology
is proving useful to retailers as it analyzes
video for suspicious activity, including tracking
people and items as they move around the
store, noticing when things get left behind,
when people are loitering in a specific area,
or, with very advanced analytics, using facial
recognition software to identify thieves.
The latter, says Garg, has proven itself in other
areas, such as government buildings and
banks, but isn’t as widespread in the retail
world. But, it’s a piece of loss prevention that
retailers should keep an eye on as it develops.
A
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< < <2015 Global Retail Theft Barometer
study found that the U.S. leads the
world in employee theft. A dubious
endowment, but the numbers don’t lie:
Employee theft makes up about 43 percent
of loss in the U.S. Globally, employee theft
accounts for only about 29 percent.4 Employee
theft can be tough to catch, and often
employees will simply keep stealing until they
get caught.
Internal theft is why many retailers incorporate
robust exception reporting software into
their loss prevention strategies. Rather than
catching an issue after six months, a year or
multiple years of theft, Garg notes, the software
installed at POS systems can catch it much
sooner, when it’s a $500 issue rather than a
$5,000 one. The software also can track the
number of discounts given, both in a singular
capacity or relative to other employees, Garg
The Exception Unfortunately Proves the Rule
Exception reporting software amps up transaction verification systems, looking at how many voids come in on a shift, or how long a register is open. “
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says, and call out when further investigation
might be needed.
“Big retailers with thousands of stores have
invested in this software,” he notes, while many
smaller retailers have not. Such a heavyweight
of a system isn’t always needed for retailers
that may only have a handful of stores. There
are “lighter-weight” solutions, however, that are
available for smaller retailers.
Exception reporting software amps up
transaction verification systems, looking at how
many voids come in on a shift, or how long
a register is open, for example, as both are
indicators that employees could be tampering
with funds in the register, Moraca adds. Retail
management or loss prevention teams can
set parameters at the retail level of what they
want checked. For example, if employees are
supposed to do a safe drop at every $500,
the reporting software knows when this is or
isn’t happening. What’s more, when the right
processes are in place, it makes it that much
easier for management to identify where
systems are or are not being followed, and
improve upon them for better loss prevention.
“Those checks keep the organization in order
and help the operation,” Moraca says. “The
transaction verification system is of high value
for that.”
< < <
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n their own, CCTV and video analytics
or exception reporting software
provide useful benefits for mitigating
retail loss. But the real power is in combining
the two into one robust system.
Linking CCTV and exception reporting software
adds a more in-depth look into potential theft.
Overhead cameras, for example, can track
the number of items at a register, and almost
instantly compare that number to the register
receipt to ensure all items were rung up and
added up properly. If something is amiss, an
alert can be sent directly to the store manager
or loss prevention team’s cellphone or email.
“When you talk to retailers, you learn there
are so many complex ways employees have
learned how to game the system,” Garg says.
And for retailers who don’t integrate video and
The Power of Two
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“exception software, it can take them five times
longer to do an investigation into employee
misconduct.
When these systems “talk” to each other,
retailers can easily review a specific transaction
by typing in the transaction number and pulling
up the associated video.
Increasingly, retailers are finding employees
facilitating transactions without a customer
present. Those transactions are more
suspicious than ones with a customer in
front of an employee. Integrating exception
software and video analytics means being able
to track the number of voids, returns or cash
transactions — when employees can void and
then pocket the cash — and determine if those
transactions involved an actual customer, or a
phantom one.
With this combination, retailers, “can treat this
situation the same way they would treat a no-
receipt refund,” Garg says. “And that’s a safe
use of video analysis in a retail space for loss
prevention purposes.”
For retailers who don’t integrate video and exception software, it can take them five times longer to do an investigation into employee misconduct.
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here’s no one-size-fits-all solution
for retail loss prevention. To devise
the best strategy for their stores,
retailers should first measure how severe
their loss is, from category to SKU, says A.T.
Kearney’s Donnan.
“Figure out the major areas where you’re
losing, and then use those as your initial
focus,” he says. Look at the deterrents
you have in place, from electronic article
surveillance to CCTV cameras in visible
places, and make sure they’re what that store
needs.
“Rather than putting loss prevention
technologies across your entire store hoping
they’ll prevent all of your theft,” Donnan
advises, “start working on your top five loss
categories, and then move on to the next five.”
Start moving the needle with the appropriate
technologies for each category.
Employing the right technology is a necessary
loss-prevention step. Moraca says using
CCTV with a public-facing monitor is an easy
way for retailers to get started if they haven’t
already. While the average person would
see themselves on a monitor and fix their
hair, straighten their tie or give a goofy wave,
Technology & Beyond
someone with the ill intent to steal from you
will be wary of already being seen.
“Criminals take the path of least resistance,”
Moraca says. “So they’ll go to a softer target
where there is no CCTV, because they don’t
want to be caught. The public-facing monitor is
a good deterrent.”
T
A lot of loss still takes place because either employees are not trained well, or they think they can beat the system.“Bob Moraca, VP of loss prevention for the National Retail Federation
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And with the technology in place, retailers
must integrate the human element — their
actual employees — into their loss prevention
strategy, or risk making the entire effort moot.
“A lot of loss still takes place because either
employees are not trained well, or they think
they can beat the system,” says Moraca. “I
joke that there are about 20 different ways an
employee can steal from you. The problem is
each new employee thinks they’re the first one
to ever invent it.”
Though it may sound counterintuitive,
teaching employees the specifics of how
loss is incurred, Moraca says, is actually one
of the best ways a retailer can prevent loss.
“You’re teaching them how to misappropriate
funds or merchandise, or cash or credit card
information, because it shows them what
you’re looking for,” he explains. “But you’re
also asking them to be your eyes and ears, and
teaching them what to look for as well, and
emphasizing that it’s everyone’s job to do this.”
The first technology platform to bring e-commerce style shopper analytics to brick-and-mortar stores, brands and malls, RetailNext is a pioneer in focusing entirely on optimizing the shopper experience. Through its centralized SaaS platform, RetailNext automatically collects and analyzes shopper behavior data, providing retailers with insight to improve the shopper experience real time.
More than 250 retailers in over 50 countries have adopted RetailNext’s analytics software and retail expertise to better understand the shopper journey in order to increase same-store sales, reduce theft and eliminate unnecessary costs. RetailNext is headquartered in San Jose, CA.
Learn More
Sources
1 http://fortune.com/2015/06/24/shoplifting-worker-theft-cost-retailers-32-billion-in-2014/
2 https://hbr.org/2007/11/lessons-from-the-leaders-of-retail-loss-prevention
3 http://www.ifsecglobal.com/two-thirds-retailers-cctv-planning-introduce-mobile-access/
4 http://fortune.com/2015/01/26/us-retail-worker-theft/
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