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WHY INVEST IN POS VIDEO SURVEILLANCE SYSTEM?
Answer: Because it has enormous benefits.
Losses from organized retail crime have topped $30 billion annually in the U.S.– triple what they were a decade ago – contributing to higher prices and out-of-stock problems. Inventory shrinkage from internal theft, shoplifting and vendor fraud has become such a problem that retailers must find better methods of identifying risks and dealing with them quickly and effectively.
Retailers have long recognized the importance of video surveillance to deter theft and vandalism. Now, forward-thinking organizations are taking video technology a step further by leveraging next generation visual intelligence to enhance business performance. New intelligent video analytics, such as people counting and traffic flow analysis, provide statistics on customer behavior and sales conversion rates, while the ability to monitor checkout lineups, stockrooms and loading docks enables store operations to be optimized. Increased emphasis on risk management means video is used to ensure staff and customer safety, minimize liability exposure, and closely manage facilities and assets. March Networks™ digital video systems and intelligent software applications are meeting these needs.
Inventory Shrinkage – The Plight of the Retail Industry
Retailers face an ever growing crisis that is costing them valuable time, resources, and more importantly, revenues. Inventory shrinkage is generating increasing concern among LP (Loss Prevention) managers, because, in a single year, a large retailer could lose up While the average loss from to $19 million as a consequence of fraud and theft1, or about 1.7% of revenues. Without reliable and efficient monitoring systems, 97% of shrinkage initially goes
shoplifting is approximately
undetected2. A staggering $46 billion U.S. industry-wide annual loss is forcing risk
$100 per incident, employee theft managers to rethink their strategy for protecting their assets while maintaining profitability. The degree of instability in the current economy largely prevents is in the range of $600 to $1500,retailers from raising prices without risking market share, thus forcing them to and is therefore often of greater rely on marketing and promotions to generate more business. These challenges make it difficult for retail businesses to generate solid profits, and inventory cause for concern.
Shrinkage is only compounding the problem. In Europe, the total cost of shrinkage is estimated at just over €24 billion or €66 million per day, and retailers have been advised to examine the causes of shrinkage more closely, because this was “the last free money
on the table.” Shrinkage should be viewed not only as a problem, but also as a profit opportunity,where average retailer margins have the potential to grow by 62% through effective shrink management3.
Causes of Shrink
While shoplifting is an ongoing concern for the industry, internal employee fraud continues to be the largest problem. Nearly 47% of all shrinkage is attributed to employee theft, 32% to shoplifting, and the remainder to administrative errors, miscellaneous losses and vendor fraud [Figure 1]. While the average loss from shoplifting is approximately $100 per incident, employee theft is in the range of $600 to $1500, and is therefore often of greater cause for concern.
Activities, including false refunds or voids, ringing in items at a lower price, performing price inquiries to remove cash from the register, or collaborating with other employees to embezzle funds. “Sweethearting” is a significant problem for retailers, making up around 10% of shrink, where an employee and a friend conspire to defraud a retailer through deceptive refunds, or through the purchase of goods for far less than the actual retail price.
Therefore, in order to minimize dishonesty at the checkout, many retailers are turning to digital video evidence combined with POS monitoring as a reliable method for detecting theft and recovering missing funds.
Digital Video
While a few retailers continue to use analog CCTV, many are reaping the benefits of networked digital systems, especially the remote viewing and retrieval of video. Video systems are generally used to keep a close watch on store activities and monitor shoppers as they browse through the aisles. Implemented by as many as 85% of retailers, overt video systems are the most The ability to compile detailed commonly used loss prevention tool, and are rated as the most effective by 23% of case notes with a visual retailers [Figure 2]. Cameras are often covert in areas of concern such as back doors and storage areas, and are considered the second most effective security method.
Reference allows for solid Digital video in isolation is an excellent tool to apprehend shoplifters, but less so to evidence, and reduces the detect fraud because the focus is on store aisles rather than checkout lanes. General observation leads us to believe that the deterrent effect of digital video lasts for about burden of working with 90 days after installation, by which time employees either develop ways to avoid detecwitness testimony alone. tion and continue their unscrupulous behavior, or become less mindful of the system.
POS Monitoring
POS monitoring software applications are designed to spot exceptions to the norm by analyzing data from a store’s point of sale system against set rules and standards determined by the retailer. LP staff can use POS monitoring to spot abnormal behavior and assist them in investigating potentially fraudulent transactions.
With a software menu that caters to loss prevention issues, users can link an exception such as a large refund or suspicious void directly to the receipt and then to the associated video clip. Drill-down capabilities allow the user to commence with a high level overview, and gradually apply more specific searches in order to pinpoint the suspected individual or transaction type. The software can be customized to meet specific needs and expectations, allowing retailers to define queries and alerts based on those issues that concern them most.
Using such analytical tools cuts down on the number of errors and the amount of guesswork that often occurs in fraud and theft cases, allowing LP managers to determine the root causes of shrink, and decide how to handle them in an effective manner. The ability to compile detailed case notes with a visual reference allows for solid evidence, and reduces the burden of working with witness testimony alone.
Video evidence linked to a POS system has become a more viable option for retailers, and according to an industry survey, as many as 32% of LP systems users plan on adopting this technology in future1.
POS Monitoring and Digital Video – A Powerful Combination
The combination of digital video and POS monitoring software provides LP managers with a solid tool for solving shrink problems in a timely fashion. When suspicious behavior is identified on video, analytical data gathered from a POS system enables further investigation and determination of whether an issue needs to be addressed. If exceptions such as unwarranted refunds or voids are detected with the software, video can assist LP managers to verify which employee made the transaction, and whether or not any fraudulent activity occurred. Cases are more easily resolved using both methods of investigation, as they complement each other and highlight areas that the other may have missed. When solid evidence is presented, it is more difficult to deny, and offenders generally confess. As the POS checkouts are the main focus, LP staff have a much easier task identifying employee wrongdoing, and keeping an eye on activity that may have previously gone unnoticed.
ROI and Benefits
When a POS investigation and video system is implemented, retailers commonly experience a 10 to 30% decrease in shrinkage, and typically realize an ROI within 3 to 12 months. According to a large New Zealand grocery store chain4, a shrink reduction of up to 15% was achieved in just 6 months, equating to a significant increase in revenue. Gross profits in similar grocery stores with a POS monitoring system were generally 3% higher than those without. Further, in a study of 30 stores that had neglected LP investigations for an extended period of time, one store terminated half of its employees in a single week. The video evidence was irrefutable.
A great deal of time and effort can be saved using digital video and POS monitoring, as rapid
system queries and timely alerts cut down on the hours regularly spent on searching and
investigating. According to the LP manager at a major Canadian bookstore chain,
the tool is easy to set up, and provides a more efficient method of resolving cases5.
Similarly, a Minnesota grocery store chain claims that case notes can be pulled
together in as little as 30 minutes, something which was simply not possible with
an analog-based system due to limited functionality and lengthy review times6. By
utilizing advanced system capabilities, up to 35% of internal theft can be identified
in less than two weeks, as opposed to a mere 8% when using other methods.
Furthermore, in the majority of cases, the funds are returned promptly. In fact, as
many as 99% of all theft and fraud cases are solved with the combination of digital
video and a POS monitoring system. Investigations can be wrapped up in as little
as one day, thus leaving more time for loss prevention specialists to look into new exceptions rather
than tediously focusing on a single lengthy case.
Estimating ROI
An important element of investing in any POS monitoring system is estimating the actual ROI a business can expect to realize. While some simply make a best estimate, others develop sophisticated mathematical modeling techniques in order to best reflect their particular environment. Retailers are understandably concerned whether or not the benefits outweigh the initial setup costs, and what level of shrinkage reduction will be achieved upon implementation. Retail ROI Calculators7 provide two methods of comparing the projected reduction in shrinkage with the cost of the digital video and POS investigation system. For example, take a retail chain of 80 stores with annual sales of $250,000,000 and a shrink rate of 1.5%. If shrink improves by 15% annually, the ROI of equipment and installation costs will be realized in just 6.6 months. By using a second model, which focuses on employee theft and fraud only, taking into account recoveries made, as well as the cost of replacing an existing video system, the ROI is 8.4 months
A payback period of under one year is easily approved in most organizations, allowing retailers who implement a POS monitoring system to yield immediate results2. As awareness of the system increases, fraud and theft rates will gradually decrease, and eventually drop to manageable levels.
Additional Benefits
Networked digital video provides benefits far beyond simple theft and fraud
detection, adding to the business justification. Other departments within the
organization can also benefit from the system because digital video represents
an eye into every store.
The operations department can use the system to monitor traffic flow, and keep
track of the number of visitors through video-based analytical people counting.
Such information helps to improve general store operation, and provide efficient
service for customers. Similarly, merchandising placement may be reviewed across all stores, and
store audits can be carried out remotely to check adherence to customer service standards.
Video monitoring assists market researchers to run field tests, observing customer reaction to
new sales displays, and determining whether a particular advertisement generates interest among
patrons. Additional ideas for promotions are developed by reviewing each store, its traffic flows
and its showcases, important for gauging awareness of new products and special offers.
Store designers use video to evaluate the efficiency of the
current layout, and determine whether or not any design
changes need to be implemented. The digital video frees staff
from physically reviewing the area on location, and gives a
broader impression of a store or a number of stores together.
Finally, the security department is able to utilize the system to
ensure that the location is safe and secure. Staff keep an eye on
individuals within the store, and address any issues they may
encounter. Potential hazards, such as blocked fire exits, can be
identified through routine inspections, and possible mishaps
avoided by taking corrective action. Store activity after hours
is easily monitored, and special attention may be given to
problem areas or any suspicious movements.
Conclusion – The Future of Loss Prevention
More and more retailers around the world are discovering the immense benefits of POS
monitoring systems, thereby alleviating some of their shrinkage woes. This state-of-the-art
technology offers businesses a solution that permits instant communication with LP staff, and
ultimately results in more efficient monitoring of every transaction. An impressive 99% of all
theft and fraud cases are solved with the use of digital video and a POS monitoring system, and
many retailers benefit from the results in a short period of time. POS monitoring saves businesses
precious resources and profits, and retailers often witness substantial improvements in staff
accountability and the way their stores are managed. The advantages gained from implementation
make the POS system an essential tool for retail business owners, and indicate a new direction for
the future of loss revention.
"Foodstuffs (Auckland) Ltd., part of a large retail co-operative in New Zealand, needed a digital CCTV system as part of its new loss prevention program. March Networks video recorders and LP Data Mining are used to integrate exception reporting with video evidence, enabling the loss prevention manager to conduct more investigations, while store owners use archived video to resolve customer issues more quickly."
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