Leveraging Technology to Combat Internal Retail Theft

More than ever before, retailers are turning to technology to combat the plague of internally caused shrink.

By "empowerment" I mean the cashier's ability to handle transactions of all kinds without management's approval or intervention. Some may jump to the conclusion that the solution must then be to lock things down tightly at the point of sale and require management approval for every little thing that can possibly come up. The down side to this approach is, of course, that customer service and customer throughput would suffer greatly, which also impacts the business. The key is to find the right balance between adequate customer service and adequate cashier security.

Tools of Combat
Approaches currently used to combat retail internal theft generally fall into three categories: employee management, traditional loss prevention programs and products, and technical loss prevention applications.

Employee management. According to the 2002 National Retail Security Survey, one of the key components to minimizing shrink in general lies in achieving a low level of employee turnover (20 percent or less per year). Retailers use a variety of pre-employment screening methods in an attempt to hire the best employees available. Some of the more widely used screening methods include
• employment verification,
• criminal background checks,
• verification of references,
• drug testing, and
• testing designed to measure and predict overall honesty.

Traditional loss prevention programs and products. Several programs and products have assisted in loss prevention for years. These include
• loss prevention awareness programs,
• investigations,
• honesty shopper services,
• interrogations,
• credit/check collections,
• audit services,
• telephone hotline services,
• civil recovery services,
• EAS/tag systems, and
• CCTV surveillance.

Technical loss prevention applications. New technologies and applications have emerged that require the loss prevention and IT departments to work together to implement them. Below is a summary of loss prevention approaches that usually require some level of support from retailers' IT groups.
• Advanced CCTV applications (remote digital storage, remote video network)
• POS exception monitoring applications
Åž POS data-mining applications
• Case management applications
• POS/CCTV integration
• Access control

Some of these newer applications work because they combine two different technologies. A good example of this is data mining applications, which have historically handled only data, that have recently developed capabilities to interface with store-level digital video systems. By doing so, they not only add value to their own applications, they leverage the retailer's IT infrastructure and deliver more value by integrating with existing digital video systems.

The decreasing costs of store-level and remote data storage have allowed retailers to store larger blocks of POS data and digital video, increasing their abilities to leverage technologies like those mentioned above. And with higher-speed networks becoming more common in retail, the user can now very often gain access to these systems remotely as well as at store level. Remote access to combined data mining/digital video applications allows for remote incident inquiries, which can result in more effective incident review and yield significant hard savings in travel for the loss prevention manager.

There are still more technologies emerging over the horizon to fight retail shrink, such as RFID coupled with GPS, supply chain management solutions, and even biometrics. Already used in certain non-retail applications, facial recognition; hand readers and retinal scanning may soon find their way into retail applications. If you find that hard to believe, consider that there are already several time-and-attendance systems on the market that use biometrics in order for the employee to clock in and out.

Growth and change brings with it at least a few challenges. One of the biggest challenges for many retailers is having an adequate IT infrastructure to implement some of today's newer, network-based applications. Though higher-speed networks are becoming more common in retail, they aren't yet prevalent. There are many retailers that still operate with low bandwidth. The issue here primarily is cost, but there can be other factors as well.