Is it Time to Upgrade Your Loss Prevention Technology?

A woman in Laredo, Texas was caught in a Home Depot using a baby stroller to hide stolen items. Ten men needed only about 30 seconds to steal close to $30,000 in merchandise from a North Face store in Pleasant Prairie, Wisconsin. Loss Prevention Magazine reports that in May, masked gunmen stormed a cell phone store in Strongsville, Ohio and made off with its entire stock of phones. With such crimes on the rise, retail business owners should probably ask themselves: Is it time to upgrade my loss prevention technology? 

Although the 2019 NRF National Retail Security Survey shows that the average shrink rate of 1.38% has remained steady over the past few years, it still reflects an estimated $50.6 billion impact on the industry. And with the increased number of opportunities afforded to thieves, fraudsters and cybercriminals, investment in loss prevention technology looks like a wise move. 

“The traditional (loss prevention) person is focused on tangible things in brick and mortar,” Tom Meehan, CFI, former Bloomingdale’s corporate manager of data, systems, and central investigationstells Loss Prevention Magazine. “But today, by the time your loss is tangible, it’s already out of control.” 

Defining Shrinkage

The NRF says retail shrinkage can be lumped into three broad categories – external theft, internal theft and administrative errors. Robberies, or external theft, which ranges from shoplifting individual items to organized retail crime (ORC), tops the list for shrinkage. Internal theft is employee theft, which can include return fraud, vendor fraud, and sweetheart deals – theft or fraud involving an employee and accomplice. Administrative errors range from the mistakes at the checkout counter to inventory mismanagement. 

Graphic of man in black beanie and mask.The NRF survey shows the increase in shrinkage is spread evenly across the board. Respondents noticed the greatest increases in: 

  • In-store sales – 43% 
  • Online sales – 30.2% 
  • Multichannel sales (buy online, pick up in store) – 22.2%  

Technology is Opening Doors … 

Retail’s evolution from conventional sales in brick-and-mortar storesto multichannel transactions with both online and in-store customers has proven to be a double-edged proposition. Multichannel retail allows businesses more opportunities to sell. However, it also opens them up to more forms of theft and fraud. 

Other issues affecting loss prevention efforts include: 

A tight job market which makes it harder for businesses to thoroughly evaluate job applicants

A rising level of shoplifter violence that includes strong-arm robberies and workplace shootings

Increasing demands of sales floor associates

Cybercrime is another door retail business is finding difficult to monitor. Cybercrime can range from theft of company data to theft of cash through electronic payment terminals. Target Corporation lost up to 40 million credit and debit card numbers of their shoppers to a data breach during the 2013 holiday shopping season. 

… And Closing Doors  

Loss prevention technology that guards a business’s data and payment collection starts at the point of sale – the payment terminals – and stretches into its computer network. It includes everything from PCI-compliant payment terminals to business network hardware and monitoring by retail technology providers. 

According to Cisco CEO Chuck Robbins, his company blocked 7 trillion threats to its customers which factors out to 20 billion each day. 

“A comprehensive digital platform is essential to improving a business’s security. The bad guys have gotten very sophisticated, especially the past couple of years. It’s important to have a multi-tiered approach to security,” says John Oetinger, director of Managed Network for Paladin Data Corp. “It’s also wise to have a company that provides the platform to manage security. It’s not enough just having antivirus, patch management and backup files for your retail system. Professional system management can spot problems in a system and eliminate them before users even notice.” 

The advanced in-store loss prevention technology that allows multichannel retail transactions has also provided business owners with new tools to combat shrinkage. They include point of sale (POS) analytics, video surveillance analytics, fingerprint identification at the point of sale, and facial recognition technology. 

According to the NRF survey, nearly two-thirds (63%) of retailers have implemented some form of POS analytics and another 25% plan on putting it to use by 2020. The point of sale system is the retail platform for a business and the hub of transaction data. So, it makes sense that it should also be the base camp for loss prevention technology.

Guard dogVirtual Guard Dog

Point of sale and video surveillance analytics is the eyes and ears in determining where a business’s weak points are when it comes to loss prevention. Working together they can plug those holes and reduce shrinkage. 

Security providers like Watcher Total Protection integrate with point of sale systems to marry sales transaction data and video surveillance to protect stores from shoplifting and retail fraud. They allow businesses to look up and review digital video of transactions. They display specific products sold, invoice amounts, payment types and the actions taken by the cashier. It makes spotting theft and fraud easier and more efficient. 

Health and beauty products and power tools are two of the leading targets of theft, according to Watcher. This kind of software and point of sale integration allows businesses to: 

  • Manage operations 
  • React to customers more effectively 
  • Prosecute shoplifters and employees who steal
  • View systems through mobile connections 

“With a point of sale integration,” says Nathan Looper, of Watcher Total Protection, “you can see (on the screen) anything that is on that receipt. What’s really nice about the Paladin integration is we get that data (in real-time) as stuff is scanned. Some point of sale systems, when they do the integration, we actually don’t get that information until a receipt is printed.” 

Analytical Approach 

Beyond the checkout stand and its video cameras, public view monitors, which display surveillance images from all areas of a store, have proven to cut shoplifting by up to 80%. 

“Video analytics is the capability of automatically analyzing video to detect and determine if an anomaly has taken place based on a set of instructions built into the video software,” says Robert Moraca, National Retail Federation vice president for loss prevention. “The technology is able to count items, superimpose the register receipt over the video and then track things like item count compared to the register receipt, voids, returns and even instances where the cash register drawer has been open too long.” 

Analytics allows retailers to identify incidents that lead to theft, establish relationships between them and adjust or change businesses practices to reduce them.  

According to the NRF study, better than 60% of retail businesses have already implemented point-of-sale analytics and another 25% plan on it by 2020. However, the adoption of other forms of loss prevention technology is going much slower. Only about 34% of stores have enlisted a video analytics provider, slightly more than 17% are utilizing fingerprint identification at the point of sale, and 11% are using facial recognition in their stores. 

Technology of the Trade 

Burglar alarms, digital video surveillance, use of armored cars for deposits, point of sale analytics and customer-visible close circuit monitors are the top five loss prevention methods currently in use. A little more than 92% of retail businesses use burglar alarms. Use of digital video recorders (84.1%) increased the most over the previous year, up 9.5%. Use of armored car pickups was the only one of the top five to decline, dropping 6.4%. 

Use of merchandise alarms, including radio frequency identification (RFID), is the fastest growing trend in loss prevention technology, rising 25.4% in 2018. Other popular trends include use of Acousto-Magnetic (AM) electronic security tags and check approval database screening system. AM tags are similar to magnetic and RFID loss prevention tags but are preferred by some retailers because they provide fewer false alarms than other systems. 

Other Steps 

Loss prevention technology isn’t the only way to slow theft. 

Employee training is a valuable tool in deterring theft. Associates should be trained to be vigilant both inside and outside the store. Product knowledge is also a big part of deterring theft. Some shoplifters swap UPC stickers or tags on items they want to steal for those on cheaper items. Solid product and pricing knowledge prevent these kinds of schemes. 

“A successful program to reduce (shrinkage) at POS leverages both technology and training,” Lisa LaBruno, senior vice president for retail operations at the Retail Industry Leaders Association (RILA), an industry organization, tells CSO Online. “Among the key components of associate training is making every employee feel like he or she has a responsibility to prevent shrink from occurring.” 

Interacting with your customers is another way to reduce shrinkage, according to Curtis Baillie, an independent security management consultant. He says attention is the last thing shoplifters want and if they are getting it from sales associates, they’ll most likely take their “business” elsewhere. 

Monitoring your garbage is another theft deterrent. Some shoplifters drop items into trash bins inside and outside a store to collect later. So, keeping an eye on the garbage can keep merchandise on the shelves. 

Loss prevention technology is continually evolving as it deals with new and increasing threats. Often, the best defense is to use the new tools technology provides to deter the onslaught. 

Brian Bullock