Free Newsletter
Register for our Free Newsletters
Access Control
Deutsche Zone (German Zone)
Education, Training and Professional Services
Government Programmes
Guarding, Equipment and Enforcement
Industrial Computing Security
IT Security
Physical Security
View All
Other Carouselweb publications
Carousel Web
Defense File
New Materials
Pro Health Zone
Pro Manufacturing Zone
Pro Security Zone
Web Lec
ProSecurityZone Sponsor
ProSecurityZone Sponsor
ProSecurityZone Sponsor
ProSecurityZone Sponsor
ProSecurityZone Sponsor
ProSecurityZone Sponsor

CCTV and data mining to help reduce retail shrinkage losses

Datamonitor : 05 February, 2009  (New Product)
Datamonitor report examines the future role of data mining technology combined with CCTV in assisting the reduction of retail shrinkage and POS fraud
Amounting to over $100 billion worldwide, point of sale (POS) shrink - loss incurred through cashier error, theft and fraudulent POS transactions, is having a hugely damaging impact on retailers profit margins. Over half the losses can be attributed to it and in a new report, 'Using Business Intelligence and CCTV to Reduce Shrink in Retail (Strategic Focus)', independent market analyst Datamonitor predicts global retail shrinkage will climb to almost $115 billion by the end of 2009. With global retail sales growth in the tough economic climate expected to be small or even non-existent, technology such as data mining used in conjunction with CCTV is one of the key solutions being tipped when it comes to retailers investing in technology to combat shrink and improve the bottom line. Moreover their dual-use beyond loss prevention means they can also be utilized for marketing and merchandising purposes.

"Retailers have long focused their attention on customer merchandise theft. Efforts and big budgets have been spent on expensive closed circuit television (CCTV), digital recording, electronic security tagging, and alarms to prevent and monitor customer theft, says Christine Bardwell, retail technology analyst at Datamonitor and the report's author. "But attentions are shifting. Over half of shrink can be attributed to internal loss, and general employee- and cashier-caused shrink, whether intentional or not, is a now a massive concern in most retail organizations."

Process error and 'sweethearting' are the biggest causes of loss from internal shrink
The three biggest causes of loss at POS are cash theft, fraud and process error.

'Sweethearting', a form of theft involving collusion between an employee and customer, (usually a friend or family member), falls under all three categories, because it can involve cash theft and/or fraud and is very difficult to distinguish from process error. Retailers agree that process error and sweethearting combined, form the biggest part of loss incurred at the POS.

Technology can help identify many of the contributing factors of POS shrink

There are two technologies at the forefront of the fight against the major causes of shrink at the POS. Data mining is used to identify patterns that identify cash theft, fraud, and process errors, while CCTV provides visual evidence to separate actual shrink from false positives.

A data mining application is relatively inexpensive. It quickly highlights weaknesses and fraud in the system and has a huge deterrent effect: as stealing employees are caught, it will discourage others. It is also useful for picking up external crime scams such as organized refund fraud and credit card fraud, as data mining will quickly establish if a card has been cloned and is refunded at stores all over country.

A major advantage for using data mining rather than a simple exception reporting or business intelligence (BI) application is that retailers can monitor multiple aspects, such as the cashier, location, product, and credit card details. Using train of thought analysis, the system can re-write queries.

The benefits of these technologies can also be used for marketing and merchandising

Data mining and CCTV have uses that extend beyond loss prevention. Retailers can also benefit by using them for marketing and merchandising. Data mining can assist in providing data for overall performance and, more specifically, basket analysis and customer loyalty. Video Analytics can aid marketing and merchandising. Staff training could benefit from CCTV footage. Internet protocol (IP) networks could help retailers realize further cost savings across the business.

British clothing brand Jaeger rolled out a loss prevention program with a view to cut fraud by a fifth. Shoplifting was only 30% of the problem: analysis estimated that internal theft accounted for 42% of losses, and process errors for 21%. In August 2008, Jaeger completed the implementation of a data mining system. Data from the POS and other sources such as the supply chain, product development and design are merged to allow Jaeger to identify sources of loss. The system enables the retailer to spot process errors and potential fraud, and is also being used for basket analysis. Jaeger expects to improve its bottom line by 2%.

Virgin Megastores in the US provides a good case study for the overall benefits of IP. The retailer has networked 'Digital Listening Stations' which allow customers to play album samples and search through the inventory in stock at that location. In addition, the IP WAN is connected to IP phones, servers, kiosks and POS registers. If there is a problem with any device, an alert is triggered.

Technology vendors will need to prove to retailers that the investment will deliver a quick return through a trial or working case studies before a retailer will part with their money.

Bardwell concludes:

"Retailers need to be efficient in dealing with shrink. Loss prevention (LP) will be a high priority in the coming years because of the hard business climate so there will be growing pressure on retailers to invest. Using technology to uncover internal fraud quickly will enable them to discipline or retrain the staff responsible without further damage to the bottom line."
Bookmark and Share
Home I Editor's Blog I News by Zone I News by Date I News by Category I Special Reports I Directory I Events I Advertise I Submit Your News I About Us I Guides
   © 2012
Netgains Logo