Applied technologies in retail

July 2009 Integrated Solutions

Realising ROI on solution initiatives is difficult in any economic climate, but even tougher in a recession.

Employees are typically a retailers largest expense. Both from a remuneration and loss perspective. When automation and improved accuracy reduces this cost by even a small percentage, there is a constant significant impact on the bottom line.

Identity access management (IAM) implemented as a process management solution and not an infrastructure maintenance component with 'Inteliliteracy' provides what most businesses seek. Vital statistics and intelligent information on their greatest cost – employees. While employees are also deemed your greatest asset in the context of IAM they are generally referred to as a cost factor for the reasons I have just mentioned. Extended IAM solutions must also provide vital intelligent information on your greatest asset 'your customer' for a sustainable business model where customer facing initiatives will become your differentiator.

Tom Cruise, a US special agent, has his iris scanned in a store of the future in the block buster movie Minority Report. A virtual store assistant provides him with personalised promotions based on his shopping history and previous preferences. A far cry from our in-store experience today? Absolutely. Biometric solutions, camera solutions, parking solutions, access control, labour management, customer loyalty programmes and self checkouts could be making serious inroads into tackling issues like internal fraud, enhancing the customer experience, promoting in-store activity and increasing the shopper conversion rate, thereby contributing to your core business and bottom line.

Biometrics are used to verify the identity of employees at the POS and other locations such as restricted stock rooms, cash count centres etc. This technology has the power to reduce internal fraud, reduce shrinkage and apply labour practices such as eliminating buddy clocking which is when employees clock in for their absent colleagues.

Dereck Sigamoney, Bytes Systems Integration
Dereck Sigamoney, Bytes Systems Integration

Beyond traditional features

Traditional RFID aims to resolve purely the control and management of stock. Whilst this is a fundamental component within the operations of any retailer the opportunity to address the divide between the business and the customer is a highly rewarding one with significant benefits at both ends. A new breed of cellular phone technology is about to hit the South African streets. Cellular phones with built in RFID will enable retailers to know when the customer carrying the phone is in-store. Imagine telling me about the batch of rolls that just came out the oven, or the fresh tuna catch that has just arrived in-store whilst I am in the store. The opportunity to immediate-direct-market to me becomes real, offering me information that is relevant and now.

Camera solutions that monitor specific individuals and merchandise helps us locate possible criminal activity. A retailer in Ireland found that an imported alcohol spirit was high on the shrinkage list – consistently. Logging the item within their CCTV camera solution and tracking the merchandise whenever it moved within the store helped them identify that staff were consuming significant quantities of the high end beverage before shift starts, during breaks and just prior to store closing. This also accounted for the incorrect calculations identified during cash up. Big problem, easy solution.

The importance of this kind of solution is clear when you consider that employees are responsible for a very significant percentage of retail fraud. Some analysts put the percentage as high as 80%.

Retailers wanting to reduce employee fraud can choose to use binary or traditional keys, magnetic cards or buttons on POS devices to identify the employee on duty. Both these lend themselves to different opportunities for fraud because keys and cards can be reproduced or exchanged between members of staff. I merely see this as automating a risky solution. Fingers, eyes, faces and hands cannot be reproduced or exchanged.

Biometric technology eliminates these risks. Fingerprints and other biological information, which is always unique to the person involved does not require a non-transferable policy attached to it. Biometric solutions on the employee side no longer require businesses to invest in keys and cards or replace those that are lost or damaged. In addition, they can easily protect access to restricted areas of the store or to sensitive data stored in the back office. Biometric technology also lowers the total cost of ownership for the retailer.

Fraud and theft control

The turnover of employees today is so great and the threat of sabotage and corporate espionage so prevalent that retailers need secure solutions to protect against fraud that could create far reaching impacts not only related to physical losses but also damages to their brand. In an environment like South Africa, the threat to one’s safety is a critical factor. Any adverse effect experienced by shoppers in-store will undoubtedly harm the brand and the affinity to the brand. Have you thought about the retail crime syndicates that will increase to a level we have not seen yet in South Africa during the FIFA 2010 World Cup? Ten million visitors create the perfect ground for card swapping, card skimming and identity theft.

Biometric solutions that reduce employee fraud, is already a multimillion-dollar business in the Western world, some businesses reporting up to a 90% reduction rate in employee fraud. This means they can accurately determine which cashiers and other staff are working, as well as when and where and what their activities consisted of.

Customer facing biometric solutions! Is there a place for them? The jury is out on this one. Can we reduce credit and debit card fraud? The critical question that needs to be answered is, do customer facing biometric solutions contribute to your core business? And does it provide you with a competitive differentiator? Let us explore this further!

For the right target market and within the correct environment, biometric solutions serve to increase the shopping experience, not just in increased shopping experiences but also to extend and enhance the experience whilst encouraging us to shop more. In order to make use of the self-service checkouts, customers could be required to register in-store at a customer kiosk using a biometric identification panel. Can we incentivise our customers to register and give us their data willingly? It all comes down to how we ask for it.

Loyalty

Once we have this data what do you now know? When the customer shops, what he/she buys, for how much he/she buys, does he/she have children, does the family go camping, do they like long life UHT milk or full cream milk, do they have a dog, does the dog have fleas? You can target market with bull’s eye accuracy. Provide him with optional shopping lists. Tell him about the 12 new fresh dairy lines that you just released. Take an in-store survey at a biometric kiosk. Is he buying your new 'We are green campaign', 'has your new brand campaign yielded the expected results?' This is what I term extended individual and collective identity management.

Everyone said that cellular telephone technology will never take off in South Africa because: 'They' will not know how to use it, assuming that the formal education divide was too great. We are currently the world’s largest adopter of cellular technology and have pioneered many mobile solutions like the contentious Please Call Me facility that Vodacom successfully released a few years ago attributing to unprecedented revenue growth. So will self-service checkouts work in South Africa. I would have to clinically answer yes and all the evidence points to a success story. Initially within the right environment and right target group. In saying that, I am however optimistic that it will have a viral effect as the demand will grow in much the same way it did with cellular technology and be easily adopted into environments we thought not workable.

Imagine cost savings from reduced fraud being passed on to the customer. I can almost hear you cringe in your seat. The retail POS is a strong environment for biometrics as a replacement for PIN numbers or cards. Because verifying the identity of customers and employees using biometrics has a great potential to reduce fraud and enrich the shopping experience.

The acceleration in deployment of biometric technologies reflects recent advances in technology. Inexpensive biometric solutions that work reliably are already available across a number of retail applications.

Retailers can identify employees and customers accurately by scanning a portion of the fingerprint and matching it with another piece of data on record such as a name. The technology can be used in the same way to identify a group of customers, such as members of a loyalty scheme.

Implementation costs are also falling, both for internal and customer-facing applications. Biometric solutions that are used to verify the identity of employees and customers are relatively inexpensive today and as a result, they are increasingly scalable for businesses that want to deploy them across multiple stores and formats.

Integration

Retailers across the world face a number of challenges before they can implement biometric solutions. One key difficulty relates to integration issues arising from disparate IT systems. HQ’s still collect data from their POS systems by running one-way dial-ups. This means it is difficult to access POS data in realtime in a way that would be required for some biometric authentication.

Biometric deployments can often be complex, so intelligent and smart integration work is required to make biometrics work. Box droppers who did well in the technology predecessor space will have to catch up quickly to survive. Retailers must enable information flow from the POS to check authorisation, CRM, labour management and ERP systems. Culminating into dynamic business intelligence cubes that provide life supporting statistics for a sustainable business. Both from an employee and customer perspective in terms of, who does what, when and for how much. Achieving this can require significant initial investment but greater investment returns must be identified and balanced to provide a sound sustainability plan for the business so you do not have to play catch up later.

While handling privacy concerns is critical to the future of biometrics, the genuine test will be whether the technology can deliver rapid return on investment (RROI). For example, while most agree that biometrics will be deployed widely to reduce internal fraud and onboard customers it is merely a matter of time when biometrics will become ubiquitous at the POS, complementing and promoting your core business. Can you quantify a decrease in fraud, both internal and external? Can you measure customer adoption? Can you measure increased basket size, can you measure feet to conversion rates? Yes, do you want to? Can you afford not to? Implementing solutions without quantifying the measurability of the outcomes that promote and enhances your core business has no place in your organisation. Solution providers must demonstrate measurability which translates directly into savings, additions, growth and sustainability.





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