Safe as houses
Your mother in law probably says this: “If you’re forewarned, you’re forearmed”.
“Yes, it’s a very old saying, but it still applies today,” says Mark Gentle, MD of Checkpoint Systems for Australia and New Zealand.
The days of managing shrinkage with a keen beady eye, stock counts, and a few precautionary CCTVs are over.
Australian stores, and the people who shop and steal within them, are moving at faster pace than ever. “It’s all changing dramatically,” says Gentle.
From self scan checkouts, to rapidly morphing POS systems, all the way through to store layout; there’s simply more things to be forewarned about in 2012. This can be overwhelming for retailers – and the latest crime statistics reflect this.
According to the Global Retail Theft Barometer 2011, Australian retailers experienced a 2.9 per cent increase in shrinkage in just one year.
More importantly, shrinkage as a percentage of sales is increasing, with 1.43 per cent, or almost $2 billion, lost by local retailers last year.
Internal theft is also becoming more worrying for retailers, with employee theft now outweighing shoplifting in Australia, according to Checkpoint Systems’ reports.
Australian stores sit in the top 30 per cent of internal theft globally, with average steals being $200 from “shoppers” versus $2000 by retail employees.
The good news surrounding all this doom is that technology is responding at a similarly fast rate, with some intriguing trends starting to hit the market.
Watching your customers
Loitering customers have always been a tough one for retailers to monitor, with a fine line between shopping behaviour that’s either simply indecisive or is a precursor to stealing.
New forms of monitoring systems have really started to respond to this conundrum in the last 12 months.
“What we’ve been looking at until now for cameras instore is just a static type of device,” says Michael Day, regional retail sales for ADT Security.
“But more recently cameras have integrated people counting systems that have a directional ability and can single in on loiterers.”
The days of CCTV as a visual deterrent are also ending – the new guard of mainstream systems can actually do things on their own accord.
“If somebody is loitering, these systems will send out silent alarms,” says Gentle. “They can look at whether somebody is staying in one spot, whether it’s aisles, queues, or near problem spots like cosmetics.”
They can also be implemented to monitor staff, in particular attendants who should be looking after the hot spots of self scan checkouts.
“The possibility of shrinkage increases widely for self scan checkouts if the attendant isn’t in position. Now systems can pick up if that’s the case,” says Peter Butler, retail products manager for IBM Australia.
IBM specifically has an intriguing development: a patented video surveillance solution likely to be deployed nationally in the next six to 12 months.
It comes with several years’ retail success in the US in the arenas of grocery chains, department stores, and “drug stores” (pharmacies).
“Department stores like Macy’s in the States have shown good results,” says Butler. “I’m surprised a little about the drug retailers, but they do experience a lot of high dollar sales for items like cosmetics, and therefore get high shrinkage.”
So what does it do? In layman’s terms: “it marries everything together”.
This brings us to the broader instore security trend of convergence.
A wider convergence
Convergence across different mediums of retail technology has been notably increasing in the last two years. Last edition of Inside Retail we focused on the merger of point of sales (POS) and customer relationship management (CRM) systems.
It appears that security systems are starting to merge with POS, too.
“In the past there’s been standalone static devices, but today one system can deliver back reporting,” says Day.
“We’re trying to converge the devices and then deliver and report back to them online.”
Butler agrees that this trend “makes a lot of sense”.
“I don’t know if it’s a really big trend yet in Australia, but it’s the clear way to go for the future,” he says.
“The best way to describe it is that it puts a connection behind the back of your POS and your video surveillance.”
That information is then merged together and fed back to the retailer for analysis.
For instance, the system could accrue every sale under $1 in a month, feed the information back out for reporting (say in the form of an email), and look for suspicious anomalies.
If such suspicion arises, then the linked video surveillance can easily go back to those points of sale for visual evidence.
This could be particularly useful for solving sweethearting disputes, such as boxes of beer being swiped at the unit level, instead of ringing up for the whole case.
Admittedly, it doesn’t sound cheap at this stage. Gentle says retailers with existing quality POS systems will find the transition to systems like this much easier.
“It comes down to the basic infrastructure of what the retailer already has,” says Gentle.
“You can have a closed loop within a store quite easily and cheap these days, but if you want somebody in head office to visualise it, you need far stronger infrastructure.”
The growing popularity of “the cloud” is making things more affordable. In the past, reporting on trends to find the source of shrinkage was unachievable for smaller retailers.
“Cloud-based in simple terms means a bunch of the data we can manage is put into a network. It’s putting the information off on a storage network so you don’t have to pay,” says Gentle.
“If you’re a small retailer, rather than have a capital investment for storage, it’s better to have it cloud based instead.”
Beyond the merger
Outside of converging platforms, there are some other interesting things happening in singular technology.
The security gate, a very 90s trend, could be due for a revival as store attendants decrease in numbers and self scan checkouts increase.
Luckily, the technology has moved past those unsightly bulky detectors, with more aesthetically pleasing solutions that can be used across the store.
One product that recently scooped a prestigious industry award by readers of the German publication, Handelsjournal, is Checkpoint’s Alpha Nano Gate.
It’s essentially an antenna or small gate designed to be installed in retail stores’ “unprotected zones” – places where thieves tend to hide or attempt to remove security devices.
It’s best suited to bathrooms, emergency exits, lifts, and fitting rooms, and also activates an Electronic Article Surveillance (EAS) alarm when unpaid merchandise leaves a store.
Anti-jamming devices are also becoming more sophisticated, says Day, with newer versions able to alert authorities with a silent alarm.
Anti-skimming devices are similarly evolving, as card use becomes ever the more widespread, especially in the debit category.
“A POS device that is targeted for fraud will have a negative financial impact on the retailer and may also cause reputational damage that could affect a retailer in the long term,” says Belle Lewis, product specialist, Kensington Computer Products Group.
She says fraud on proprietary debit cards with PINs has decreased slightly since well-publicised skimming episodes between 2009 and 2010.
Yet, “disturbingly”, credit, debit and charge card fraud has increased from 58.9 cents to 74.3 cents in every $1000 transactions.
Lewis says physical security, such as Kensington’s new ClickSafe device, is best to go above and beyond software and electronic management of terminals. The device works by literally locking a terminal when its unattended; preventing any nasty tampering.
Apparel with radio frequency identification is a newer trend in fashion retail, but its nowhere near widespread yet.
“There’s been a lot spoken about this technology and how retailers can actually achieve return on investment. Its adoption is now starting to increase dramatically,” says Gentle.
“I think in the next three years it will be a trend in Australia,” he says.
Back to basics
CCTV, special fixtures, and radio frequencies are all fine, says Checkpoint’s Gentle, “but the other side is your own people”.
Complex systems, like those highlighted by IBM earlier, will help catch out and deter employee-led shrinkage, but there’s an arguably easier solution. Prevention.
“It’s a question of how you develop and train your staff. If it’s a ‘who cares, that’s management’ ideology, then they’ll have no loyalty,” says Gentle.
Loyalty can of course be hard to foster in the retail industry, which is historically dominated by casual workers on a lower salary base.
Aldi is one retailer that’s initiated an exemplary regime of paying slightly above AWARD on a rotating roster for every section of the store.
“Everybody has to work at every function. They have to take ownership and this builds loyalty,” says Gentle.
And then there’s the pre-screening of employees before they even get the chance to work.
“The biggest thing that the retailers have to worry about is maintaining competitiveness by avoiding any unnecessary costs like shrinkage,” says Martin Lazarevic, founder of National Crime Check (NCC).
NCC offers a service that turns around police checks for employees in the space of days, with 95 per cent complete in 10 to 12 business days.
“If you wanted to go through police services, it’s four to six weeks to get information back. Waiting four weeks is just not doable when hiring in retail,” says Lazarevic.
It’s not just about finding out if a potential store employee has a risk of theft attached. There’s also the chance of significant crimes, like murder or assault, which NCC has uncovered numerous times in retail applicants.
“It’s a personality test as well,” says Lazarevic.
And then there’s the other golden nugget of retail: customer service. “At the end of the day, if you have less staff numbers then you have a less protected store,” says Gentle.
“There’s technology, but some of protecting your store is just as simple as communication with customer service.”
* This feature first appeared in the April/May 2012 edition of Inside Retail Magazine. For more stories like this, subscribe to Inside Retail Magazine’s bi-monthly print edition here.
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