Case Studies

IP video to target shrinkage

by Mark Rowe

We’ve helped one of our retail customers to nearly halve its shrinkage from 0.81pc to just 0.44pc within just the first two years, writes Peter Greener, Channel Business Manager, Milestone Systems UK.

In so doing, the number of employees caught in the act increased five-fold. Furthermore we now know this sort of success story is highly repeatable for other retail customers.
One of the key reasons for rising investment in open standards and IP-based video management systems by the retail sector has been the fact that technology providers are increasingly able to demonstrate this sort of rapid Return on Investment (RoI).

Put simply, a new breed of video management software (VMS) offerings (including XProtect product line by Milestone Systems) can integrate very effectively with retail Point of Sale (POS) systems to deliver high resolution video recordings on-screen, alongside known ‘high risk’ transactional events. This makes discovery and analysis of irrefutable evidence much easier than it used to be.Rapid ROI can be achieved in this market because, frankly, there are a lot of losses to prevent. On average 1.29pc of retailers’ sales turnover is lost in retail shrinkage, or $128.5 billion globally, according to Global Retail Theft Barometer 2013-2014. The largest source of loss, 38pc of total shrinkage, comes from theft by shoplifters. Employee theft is the second largest source of shrinkage, accounting for 28 per cent of total losses.

Closer to home, in the tax year 2013-2014 crime cost the UK retail industry a total of £603m. That’s 18pc higher than the previous 12 months, according to the latest British Retail Consortium (BRC) research published in January. Shoplifting, cyber-crime and fraud is now at its highest since the BRC’s current recording system began in 2004.

We’ve devoted considerable R&D resources in recent years to developing a series of sophisticated investigation tools to help retail customers search known ‘fraud scenarios’ and find evidence of such events very quickly. So what are the secrets of success?

POS and VMS integration

The starting point is to enable seamless integration between POS systems and Milestone XProtect Transact or XProtect Retail. We developed these two products as add-ons to our standard VMS software. The second key to our success stems from our open architecture that allows for our solutions partners (or eco-system partners as we prefer to call them) to integrate their own software solutions. The combined solutions make it possible to tackle retail shrinkage head on, while future-proofing the investment as new issues emerge. We’ve been working closely with our partners to garner a detailed understanding of how specific retail ‘scams’ operate. We now have eco-partners that can analyse various modes of behaviour which are often early indicators of theft. Here are a few examples:

Zero transactions

The majority of retail theft today is still out of the till or cash drawer. So if tills are opened without an associated transaction, it is important for retailers to be able to isolate these events and if till rolls do not reconcile with actual cash (or vouchers, or cheques) in the till; then managers need to be able to investigate these events more closely. It is possible to pull up each such event in Milestone XProtect Retail and run sequences of video recordings associated with them.

Loyalty card abuse

With the rise of the use of loyalty card bonus points given out as a reward for doing more shopping with specific retailers, employees have also been cashing in. A common scenario in recent years has seen cashiers collecting the bonus points of customers that fail to bring their loyalty cards with them into the store.

In some cases this has led to points from hundreds of transactions being assigned to employees or friends’ loyalty cards in a single week. Again, systems can be set up to recover and view events associated with specific loyalty cards. By viewing video recordings alongside these suspect transactions, it becomes clear very quickly if an employee is pulling out their own loyalty card when the customer does not produce one.

Modified or manually entered

Events like modification of pricing or manual entering of prices offer opportunities for cashiers to pocket the difference between the full price and the discounted price the customer should have received, for example. Again, searches can be made and corresponding video evidence displayed alongside the relevant transaction data.

Outside business hours

All too many fraudulent events happen first thing as tills are being stocked or last thing before cashiers head for home. It is important to be able to search on the first transactions of the day and last transaction of the day for each cashier. Many retailers also want to be able to analyse all transactions done outside business hours – just before customers come in and when most employees are focusing on doing their specific job to make sure they are ready for the opening of the store.

Gift cards

Gift card payment processing is another area rich with opportunities for employee fraud. Many customers rely on the cashier to inform them how much credit is left on a gift card after a specific transaction. What if the cashier tells the customer their card is now out of credit and asks for some additional cash to cover the remainder owed, when in reality there is still credit on the card? They can potentially pocket the gift card with credit still on it and any additional cash given over by the customer. For this reason gift card transactions are often checked for anomalies.

XProtect Retail offers 20 pre-defined queries designed to enable rapid recovery of video relating to the above and many more types of transaction events which could also show evidence of employee theft. Search results are displayed as a transaction list, with corresponding video recordings. Retailers can configure their own searches if they are concerned about loss through new behaviours like ‘sweet-hearting’ for example. This is when employees give staff discounts to friends and family.

IP video migration

With such advances in IP video systems and retail analytics it is perhaps no surprise that the August 2014 ‘CCTV in Retail’ survey of 278 major UK retailers, conducted by the Centre for Retail Research, found that 60pc of UK retailers plan to migrate from analogue-based CCTV to a new network video system within the next three years. Interestingly, nearly a third (31pc) have already upgraded to IP video.

We believe that the primary driver (and source of funding) for the move to newer and more feature-rich technologies like the Milestone XProtect product range, is to have open platform software that allows for implementation of professional analytic software used both for loss prevention and physical security. However, once this investment has been made and RoI delivered through reduced shrinkage, these new systems can also deliver a raft of additional operational benefits – including people counting, dwell-time analytics, facial identification, heat mapping, queue management and customer experience improvements. When these benefits are also considered alongside loss prevention benefits, investment in new IP video systems looks very compelling indeed. Little wonder then that more and more retailers are making the switch to IP video.

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