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.

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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.”

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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.

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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/