Industry Vertical

Navigating the Ever Evolving Threat Landscape

A look at some of the technology trends impacting today’s loss prevention managers

• By Jumbi Edulbehram
• Jun 01, 2015

No matter where you look in the retail sector today, the market seems to be in a perpetual state of transition when it comes to security. Whether you are implementing data security technology to fend off threats from cyberspace, upgrading point-of-sale (POS) terminals to deal with the migration to chip and PIN technology, or installing advanced asset tracking devices to mitigate organized retail crime rings, retail is truly a dynamic and fast-evolving vertical.

The same also holds true when it comes to loss prevention: Traditional security measures, such as video surveillance, are now being used to not only help reduce shrink but to deliver real-time business intelligence that can help retailers improve their operations and increase their bottom line. Today, the role of loss prevention teams is being viewed in a whole new light. The physical security purchase, which was previously made begrudgingly, now brings benefits beyond loss prevention and allows the department to become an “agent of profit” for the business.

A Model for Security ROI

The retail sector is one of the markets most frequently cited by industry pundits as being a model for how video surveillance and other security technologies can deliver tangible return-on-investment results. In the past, video served only as a post-incident investigations tool to defend against bogus slip-and-fall cases or to potentially identify shoplifters; today, store operations and other personnel can now leverage surveillance footage to analyze how customers and employees behave in their stores.

The two most common types of video analytics being used by retailers today include:

People counting. This analytic is proven to be extremely valuable to retailers as it enables them to calculate their customer conversion rate which, simply put, is a measurement of how many shoppers out of all the customers who came through the doors during a given time, actually purchased something. There are many large retailers that even today do not employ this simple analytic.

Customer traffic patterns and heat mapping. This allows store managers and those within a retailer’s marketing department to determine how long people dwell near an end cap or another sales display which could influence how and where certain types of merchandise are placed throughout the store in the future.

Improved sales are one of the benefits of video analytics, but there are also numerous customer service applications, which become increasingly vital as brick-and-mortar stores struggle to compete with online retailers. For example, if lines begin to build at checkout or return counters, the system can alert managers that another employee needs to be assigned to this area.

Video analytics also can be used to determine where a customer may need shopping assistance, such as finding the right size shoe or accessing merchandise that is locked in a case. Without having some way to alert store managers about areas that may be understaffed, customers could become impatient and walk away, which results in a loss of sales—not just of one item, but potentially of a whole basket.

In addition to the growing popularity of analytics and business intelligence features provided by video surveillance, the industry is continually moving toward increased integration of different technologies and systems in retail environments. Historically, store POS, access control and video platforms all operated within their own silos, but more retailers have started to realize the benefits that can be realized by tying these disparate systems together.

The Fight to Find Funding

Despite these technology advances, many retail organizations have been reluctant to make significant technology upgrades in their stores. This is due not only to substantial investments they have made in existing systems, many of which are still analog, but also to the costs of installing new security equipment. In many cases, the network infrastructure necessary to support new technology across an entire chain of stores is simply too expensive.

Another issue many retailers have in common is a lack of cohesive integration between their various security systems. Nearly every subsystem within a store has traditionally operated in a silo, but that has recently started to change as an increasing number of these systems have become IP-based. Rather than operating a bunch of disparate platforms, the trend now is to place these systems on a single server on one network if there are benefits to be gained by integrating information from them.

Like many other vertical markets, retailers often have viewed security as a cost center rather than a department that contributes to their profitability. As a result, security and loss prevention managers receive their budget in drips and drabs, which makes it difficult for them to make a long-term, strategic investment in widespread security upgrades. This means that the rollout of new security technology at some retail organizations may take between four to five years.

Although budgetary constraints have traditionally hampered the efforts of loss prevention managers to upgrade security across their organization, the fact that video surveillance and many other network-based systems now fall under the purview of IT has resulted in a shift in where the budget for security technology now comes from. Unlike the analog systems of old, which were managed and purchased by loss prevention, IT has a store technology refreshment cycle budget that is commonly used to upgrade various security components on a much more regular basis.

New Technologies Present New Opportunities, Challenges

Aside from finding new ways to leverage video surveillance, there has not been a great deal of innovation recently when it comes to loss prevention solutions. The use of radio frequency identification (RFID) technology for merchandise tracking has made some gains, but by and large it has yet to be adopted throughout the industry. While electronic article surveillance (EAS) solutions can alert loss prevention officers when someone tries to sneak an item through the front doors, RFID can notify security when someone has taken multiple pieces of merchandise from a store shelf, which can be a sign of possible organized retail crime activity.

With regard to retail, in general, there are several trends that could significantly impact the market moving forward. One that has recently begun to pick up momentum is mobile POS with the introduction of Apple Pay on the iPhone 6 and iPhone 6 Plus. Numerous retailers have already announced compatibility with the service, which provides customers with a more seamless and secure way of making purchases.

From the perspective of loss prevention, however, store security personnel are just beginning to figure out how to deal with Apple Pay and how it might be exploited. Internal theft accounted for 43 percent of shrink, according to the last Global Retail Theft Barometer in North America, and Apple Pay might be a new tool for employees to steal. For example, the age-old practice of “sweethearting,” in which an employee scans a much lower priced item in place of a more expensive one, could be exacerbated by mobile POS. The same also goes for the proliferation of self-checkout registers, which have also become a huge source of loss for many retailers.

The threats posed today by active shooters and terrorists have also forced retailers to reexamine and improve their communications technology. In a mall, for example, tenants often have no direct connection to the security department. However, as more devices are brought onto the network—whether surveillance cameras or voice-over-IP platforms—retailers are at least establishing means by which they can enable their employees to communicate more quickly and much more effectively in the event of an emergency.

This growing level of connectedness also enables corporate security managers and others who are not on-site to be able to look in on the situation and communicate with instore personnel, as well as local first responders, to coordinate an effective response. At last, the value that loss prevention technology can bring to a business will prompt the C-suite to view the department as a true internal business partner. This will only help promote a top-down culture of loss prevention, which will be embraced all the way to the shop floor.

This article originally appeared in the June 2015 issue of Security Today.