Retailers the world over face the same problem of trying to cut shrinkage while increasing sales. On the one hand, a heavy-handed approach is likely to offend customers and staff, while not addressing the problem only leads to more losses.
Shoprite's Michael Greeff says that as criminals become more sophisticated, it has become necessary for retailers to fight them with technology. However, technology is expensive and can create more problems than solutions if not handled correctly. Greeff therefore advises retailers to be sure of what they need and what they will save through the use of technology before signing any cheques.
"Without technology we would be in a difficult situation," Greeff adds. "Guards are not the way to go as their primary goal is not to reduce shrinkage but to take care of the safety of the people in the store. Optimal technology use is the only real option retailers have for controlling shrinkage effectively."
While South Africa's retailers are facing the same issues as those in the US in terms of feeling the largest losses from internal crime, our buoyant economy has presented local businesses with the benefit of growing profitability, which seems to negate the losses suffered (although it has not actually decreased any of the losses suffered). It is therefore no surprise that we are following the US, where retailers have not had such a boost in profitability, in the adoption of new technologies designed to curb shrinkage.
To understand the problems retailers face, a recent National Retail Survey results published the following information (although the results are from American retailers, they are similar to the situation in South Africa). The survey noted that:
The average shrinkage rate in the 2004 survey was 1,54% of total annual sales (the lowest rate for some time and lower than local figures).
Loss prevention specialists see employee theft as the single most significant source of inventory shrinkage. Locally, both Shoprite's Greeff and i to i technologies' Richard Pople agree with this sentiment. Pople says 40% of local losses originate outside of the company, while 60% are internal.
i to i technologies has been involved in the retail security business for almost 20 years and has seen the advances made in shrinkage prevention. "Today we see retailers relying on various methods for protecting their assets, with the focus intensifying on CCTV and new digital IPTV solutions as well as EAS. And we will soon see a greater reliance on data mining and analysis."
Greeff says that Shoprite is starting to make use of exception management systems integrated with video technology as a proactive crime prevention tool. "We do not want to catch people in the act, but rather collect information as a means to prevent theft and improve training and the quality of staff we employ on the front-end."
Preventing a crime and protecting staff from external pressures to 'look the other way' is far better for morale and the bottom line than a hard-line approach. The common denominator to reducing shrinkage and supporting staff members is information. The more relevant information the retailer collects the more data it can analyse and the better the shrinkage prevention.
Data mining in retail
To cater for the new information demands in the retail industry, i to I technologies is expanding its relationship with US-based Tyco and will be releasing the company's retail data mining and analysis applications in the near future.
Tyco Fire & Security recently announced its acquisition of Retail Expert, a retail data analytics company. Founded in 1996, Retail Expert offers software and services to retailers to enhance operational performance by collecting and analysing data that can help limit losses and improve overall efficiency. The company's software solutions in the areas of loss prevention, vendor management, refund management, pharmacy inventory and shortage, case management and inventory control will expand i to i's existing retail security offerings considerably.
Tyco's Tony D'Onofrio, who is scheduled to speak to retailers in South Africa later this year to introduce the data analytics solution, is certain that Retail Expert will not only improve retail operations, but also reduce shrinkage in businesses around the world.
Finding trends and patterns (exceptions) in shrinkage data will assist companies in preventing losses. However, by combining this data mining with the video footage taken from CCTV installations will provide another layer of data the retailer can use.
The benefit of keeping video records is that it firstly provides concrete proof of the crime being committed should a case have to go to court. More importantly, it also provides a training opportunity for retailers and protection for staff.
Greeff says employees can be better trained how to respond to various situations. Should an employee constantly make mistakes, the data mining solution can highlight the error and call up the video segment to show them exactly what they are doing wrong. And knowing they are under surveillance can also protect staff. For example, if a family member comes to a till point and wants to slip a few goods through without paying, the cashier can simply show them the cameras as a valid reason why 'favours' cannot be done.
Additionally, using Retail Expert's flagship software product NaviStor, retailers will be able to collect data on key performance indicators throughout the organisation and then use that information to make operational improvements, limiting losses and increasing performance.
Experience makes the difference
i to i technologies is already an industry stalwart when it comes to providing retail security products and services. The company is currently in the process of gearing up its information mining capabilities to better support customers in using data to better control losses.
"We have also taken a different approach to serving customers," adds Pople. "Instead of taking a product-based approach, we focus on consulting first to determine exactly what it is our customers need.
"We then devise a solution tailored to their specific environment, making use of whatever technologies will meet their needs. We focus on employing emerging technologies that have been proven effective overseas to ensure we are always on the leading edge of technology and that our customers are a step ahead of the criminals."
i to i technologies also has a customer service division. These employees focus on doing store audits for customers to ensure the rollout is done correctly and is performing optimally.
Shrinkage has always been a problem for the retail industry and businesses have tried various means to control and reduce losses. In today's retail environment, controlling losses without technology is a futile exercise that plays into the hands of the criminals.
i to i technologies has made it a goal to ensure it is always able to offer clients the best advice and technology, along with the best skills in the market to maintain control over their losses. As an added service, it will now also provide the skills and technology that allows retailers to gain an in-depth understanding of their business operations and how to optimise them according to international best practices.
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