Under control?

Earlier this year a new report into loss prevention, published by Checkpoint Systems and the Centre for Retail Research, showed that loss prevention globally has remained rife since 2001 despite retailers working hard to introduce new technologies, systems and processes to better detect and prevent it.

The report showed that more than three quarters (78%) of loss is still down to shoplifting – either by staff or customers. Retailers continue to attemptto physically protect such products with three quarters of the 50 most stolen products tagged with EAS (Electronic Article Surveillance) source tagging in 2011 – up from 60% in 2007. But the problem of shrinkage remainsa real barrier to profit for retailers.

However Professor Joshua Bamfield of the Centre for Retail Research, who compiled the report, says technology is leading the way in terms of changing how retailers deal with loss prevention with CCTV, RFID and the use of data-mining and analytics proving the most effective in the fight against crime, he says.
The use of digital technology and network video and IP surveillanceis driving change in the CCTV market. Axis Communications manufactures surveillance cameras which combined with digital technology and software can, for example, automatically detect shrinkage– such as items that are bagged without being scanned at self-service checkouts.

The company’s systems also allow live viewing of footage on a range of devices from laptops and iPads to smartphones meaning that feeds can be viewed live from anywhere, and are not limited to being viewed retrospectively or from an operations room as with traditional analogue CCTV. The ability for such systems to also build in more advanced technologies like face recognition is also allowing for big changes in preventing loss.

Analytics meanwhile are allowing retailers to really get under the skin of their business to better understand both the business and its losses. Ana Cunha, retail business development manager at WeDo Technologies, says loss prevention is getting more intelligent and that information is now at the heart of securing against losses. “Big data, in-memory analytics and video analytics are all helping the war against loss prevention – by increasing the speed, performance and the volume of detailed data used for analysis,” she says.

This in turn is encouraging loss prevention and IT teams, as well as other departments, to work more closely together to realise benefits across the business. For example loss prevention teams equipped with control analytics can widen their remit to tackle administrative and bookkeeping errors, inconsistencies across systems causing an impact to the operation, stock accuracy, and errors when ordering, booking in and transferring goods.

One of the biggest, and perhaps most encouraging, changes that the report showed was this change in attitude. Encouraging loss prevention staff to work more closely with the likes of IT, store operations and marketing in the fight against crime, means all can learn more about the business.

Donal Keane, brand marketing manager at cash management specialists Loomis, says safeguarding a business’ cash requires the collaboration of the entire business – from IT to store operations, from chief executive to mobile security guard. “Everything a retail business does is for nothing if it cannot ensure that every penny of the cash taken at the tills reaches its bank account,” he says.

This is a big change in attitude, according to Professor Bamfield. “Traditionally a security manager was an ex-policeman who was good at tackling shoplifters and interviewing criminals. That has changed a lot and people now see it as something more operational. You have to know about loss prevention but also about what shops are all about and how they are run,” he says.

Now retailers are moving from this policing role to a more preventative role with technology at its core. “It’s not all about catching people anymore it’s about getting store staff and managers to take responsibility for stock,” says Professor Bamfield.
Cunha says this is a positive change. “Recent research in the UK shows that on average 51% of loss prevention teams work in stores and 49% in head office. Loss prevention executives are trying to increase their influence across the business by changing the culture of the employees and expanding the reach of loss prevention across the company,” she says. This in itself brings its own rewards because increasing awareness amongst all staff and increasing accountability improves the likelihood of catching thieves both internally and externally.

She believes retailers are also increasinglyinvolving their loss prevention teams in new initiatives to identify possible risks. “We are seeing loss prevention teams called in early in all business initiatives launched, which allows for processes to be thought through in a way that avoids vulnerabilities,” she says.

The areas of most vulnerability for retailers currently however involve online retailing and mobile and this is a risk that Professor Bamfield believes many have still to get to grips with. Yet the risks are high. Simon Jackson, chief commercial officer, NetNames, says traditional loss prevention strategies, are no longer adequate to deal with the risks facing multi-channel retailers. “As retailers move large parts of their operations online, they are experiencing a new range of threats including counterfeiters, affiliate websites selling pirate goods, fake receipts, domain name infringements and complex cyber attacks. As a result, all parts of a retailer – IT, eCommerce, stores and marketing – need to come together to develop a successful loss prevention strategy that maximises return on investment and prevents loss of sales,” he says.

Retailers also need to beware of copy cat versions of theirsites.”Today’s cybercriminals are clever and the black-goods market continues to grow as fake websites look more realistic and illegitimate offers are made to be more enticing,” says Jackson who claims one in six products sold today are counterfeits.
There is also a threat from new payment systems, especially those retailers introducing near field communications and mobile or smartphonedevices instore.

The motivation for many retailers for putting free Wi-Fi into their stores is the ability to capture information about their customer and what they are browsing and looking at but Michael Aminzade, director, delivery – EMEA/APAC at Trustwave says this brings its own risks. “High speed connections and the growth of mobile platforms like smart phones are dramatically changing the threat landscape for retail organisations.

In a bid to get their share of the mobile wallet, retailers are adopting higher risk strategies to keep up with the competition and respond to demand from their customers,” he says. Aminzade says a key example of this relates to m-commerce and the decision on whether to develop native apps or stick with web-based apps.

“The benefit of a native app is that it allows the retailer to collect their customer’s personal data and offer a more personalised experience to the consumer based on their known preferences. The challenge however, is the obligation to securely store and protect the data from compromise or loss and the need to ensure that credit card data isn’t retained on the mobile device itself, as this would compromise the payment card industry’s mobile security acceptance guidelines issued in February 2013,” he says.

Professor Bamfield warns retailers of the potential threat from mobile malware in his report and this is already a growing threat, according to a Global Security Report issued by Trustwave in February. Taken from real-world information from more than 450 data breach investigations the report revealed that mobile malware increased by 400% last year over the previous year and the retail sector made up 45% of all investigations.

Cunha agrees it is a big risk: “Technologically savvy fraudsters exploit new vulnerabilities arising from the use of smartphones. Risk areas witnessed within mobile can involve identity theft, snooping, phishing, smishing, billboard phishing, MiM, keystroke loggers and spyware, pretexting, internal fraud, partner fraud, payment charge backs and process manipulation. Retailers are developing skills, mechanisms and new partnerships to assess and control the risks,” she says.

Martin Smethurst, managing director, retail UK& Ireland for Wincor Nixdorf, says the changing nature of technology and payments instore will also mean that retailers will have to ensure their cash management processes keep up if they are not to open themselves up to risk. “As more retailers adopt self-service and kiosk technology it is important that customers are given more choice such as the option of paying with card, and NFC at standalone kiosks. Cash management processes will need to be adapted to suit the new consumer shopping environment, as their technology becomes more closely integrated with the existing POS and back office systems,” he says.

Retailers also have to ensure they are not putting their own staff at risk with their new mobile policies. A number of retailers now have staff equipped with Ipads which can make their own staff or stores vulnerable. Sheena MacKenzie, managing director of LifeSize Touch, suggests a new approach: “While there are practical steps that can be taken to safeguard mobile devices in commercial settings, such as using tracking software, tethering it to some kind of kiosk or mounting it on walls, they still present themselves as high-risk and costly for public use,” she says.

Instead her company has produced a range of interactivefurniture that places devices under toughened glass makes them damage and theft resistant, but still retains the interactive shopping experience.

Retailers are also seeing a spike in fake receipts online which enable criminals to gain access to perfect imitations of “valid” receipts meaning retailers need to consider tools such as watermarks, holograms and invisible ink as well as ensuring staff ake extra time and care when processing refunds.

Retail is changing fast but the problem of the goods that retailers being sell being attractive to thieves is relentless. Retailers have to keep loss prevention top of their priorities or they will pay the price.

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