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Solving shrink

Theft is a billion dollar problem faced by Australian retailers each year. According to the Centre for Retail Research, in 2011 retail shrinkage in Australia is estimated to have caused losses of more than $2 billion dollars, placing Australia 18th in the international shrinkage rankings.

In the same year, the Global Retail Theft Barometer (GRTB) reported a rise in global shrinkage of 6.6 per cent, but retailers did fight back, with loss prevention security rising by 5.6 per cent to $28.3 billion.

“The security budget is frequently one of the budgets that is trimmed first,” says Grant Sixus, sales manager of retail security provider, Vitag.

“Retailers are incredibly cost conscious at the moment, and want to stretch every dollar as far as they can which makes a lot of sense.Therefore, technology providers have to deliver something more than what traditional security has delivered before,” adds Sixus.

Traditionally, shrink technology was focused on stopping a shoplifter or catching a staff member with their hand in the till, but today many security systems are providing data that can be used not only to prevent shrinkage but to assist with other aspects of business.

“Like all technology, prevention systems are changing,” says Michael Day, regional sales manager at ADT Security Services.

“Whilst shoplifters are developing their own technology or methods, the systems themselves are also becoming more intelligent to alert the retailer,” Day says.

Loss prevention technology, such as people counters, specialty tags, and CCTV, are becoming more proactive, now monitoring instore behaviour and also pinpointing potential security threats and possible vulnerabilities. Department store chain, David Jones, has installed foot counters on the doors and lifts of refurbished and new stores.

The counters will not only act as a shrinkage prevention tool, but will enable the chain to count the foot traffic in its stores, helping the department store argue its case for rent reductions in shopping centers where it believes customer numbers are dwindling.

Security streamlines

Omni-channel has been the buzzword flying around the sector for some time, and in the security sector it’s no different. Many merchants are beginning to streamline their security processes into one ‘proactive’ system. Integrating CCTV with analytics which links to a point of sale (POS) device enables retailers to identify fraudulent transactions in real time, rather than having to wait for the end of the day when reconciling transactions.

“If you have an alarm activation on an EAS system that can be linked to the CCTV system or, the CCTV system can be linked into your point of sale (POS), when retailers are going back to review any systems or occurrence in their environment, they are able to stamp the exact date and time, and link more than one activation together,” says Day.

ADT Tracking Technology

“There are also detection systems today that are intelligent enough to alert the retailer there is someone with an anti-jamming device or a foil metal bag within the store,” he adds.

Electronic locks, roller shutters, bollards, and other physical barriers are also being included in this new streamlined approach. In November last year, Sydney based fashion designer, Camilla Franks, was subject to a string of ram raids across all three of her Sydney boutiques in Bondi, Paddington, and Darlinghurst, resulting in losses totaling more than $250,000.

“It’s important to stress this integrated approach,” says Jonathon Kaplan, principal of the Australian Trellis Door Company (ATDC). After the robbery Franks began an aggressive security push, installing new electronic systems as well as going back to basics with traditional roller shutters and fixed window bars.

“I keep on saying to people, monitored alarms and cameras are fantastic, but they’re not actually going to keep people out of your premises,” Kaplan said.

Oroton, Pitt St Mall

The uptake of smartphone technology is also being steadily introduced to retail security systems. Security vision company, Mobotix, has released a free app for small businesses, including retailers, which allows users to monitor instore video security systems from an iPhone or iPad.

“Camera’s originally went in for security but now they are more intelligent and people now want to be able to access them remotely,” says Graham Wheeler, business development director at Mobotix.

“This [technology] will change the face of the way people do security in the future,” says Wheeler. In the online space, retailers will be continually faced with potential cyber security threats, meaning e-tailers will need to continually update anti-spyware and virus protection software.

RFID gains ground

In the US, department stores giants Macy’s, Walmart, and JC Penney are currently trialling Radio Frequency Identification (RFID) tagging. While some local retailers are dabbling in the trend, it has not yet been fully adopted into retail.

In Australia, the tagging device is commonly used in libraries. RFID, like a barcode, is an automatic ID system used to identify items. A chip, similar to a small tag, is attached to merchandise, but unlike barcodes, RFID tags can be read from a distance. If an item is stolen with an RFID tag attached, the retailer is alerted in real time.

“The biggest drive that we’re seeing as a company globally is the drive into merchandise visibility, which is RDIF,” says Mark Gentle, MD of Checkpoint Systems.

“What we’re seeing as we implement merchandise visibility, we’re enabling the retailers to reduce out of stocks, maximise on-shelf availability, reduce on hand inventory, and increase sales and margins.” Day believes RFID technology will enter Australia via the global brands already operating here.

“RFID requires tagging right through your supply chain onto the retail floor and then via the POS. To be able to achieve that there’s many challenges throughout the supply chain.

“Some Australian retailers are positioned well to do that because they may have a less complicated supply chain or a supply chain they understand clearly. For some it’s a little harder because their supply chains are more complicated.”

ADT Sensomatic Labels

Gentle agrees, “I think we’re lagging in the employment compared to some of the other areas of the world, but we’re very astute, so in the next 12 months I believe you’ll start to see this technology really take off in Australia in retail, it’s already here in other spaces.” Despite shoplifting rates and organised crime on the rise in Australia, internal shrinkage still accounts for the majority of merchandise loss.

According to the GRTB, internal theft accounted for 35 per cent ($41.7 billion,) of worldwide retail shrinkage in 2011.

An emerging internal trend preventing employee theft is POS data mining. “It allows you to see relationships you wouldn’t normally identify in a manual analytics manner,” explains Sixus.

POS data mining tracks consumer spending patterns, making it ideal for Customer Retail Management (CRM) and employee performance tracking.

Patterns such as excessive voiding or refunds, transactions time, and average employee basket sizes are able to be compared, allowing any suspicions cashier/employee relationships to be highlighted.

“Retailers can take their entire transaction log for every transaction that goes through their point of sale using comparative analytics and algorithms, and that data can be compared state by state, region by region, store by store – right down to a cashier compared to cashier basis.” Despite all these new gadgets on the market, Gentle believes there is one traditional method that still seems to work.

“The key message is that it all comes back to customer service. If you have great customer service and vigilant staff that will complement the business, then it won’t happen.”

This story originally appeared in Inside Retail Magazine. The August/September issue, featuring exclusive coverage of the 2013 Westfield World Retail Study Tour is available now. For more information, click here.

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