By: Fran Howarth, Practice Leader, Bloor Research
Published: 20th December 2010
Copyright Bloor Research © 2010
The retail industry is one that operates under tight profit margins and the recent economic slowdown has seen those margins put under even greater pressure, with many retail chains reporting that the outlook for consumer spending still remains fragile. Key initiatives in the retail sector revolve around cost-cutting activities, drives to improve operational activities and efforts to reduce shrinkage.
Much of these efforts focus on expanding the use of technology within the retail sector. In the past few years, retailing processes have become increasingly automated, including activities at the point of sale, and processes such as promotion management, forecasting and replenishment. The use of automation for processes previously performed manually has led to efficiency and staff productivity improvements that directly impact the bottom line.
However, through automation, many of the old safeguards such as manual inventory checking and management authorisation have disappeared, opening up further chances for shrinkage to occur. According to the Global Retail Theft Barometer 2010, produced by the Centre for Retail Research, retail shrinkage averaged 1.4% of retail sales across the 42 countries that it surveyed. There have been numerous studies concerning losses from shrinkage within the retail sector. They all vary to some extent, but all agree on one point—losses from employee theft or error account for more than half of all shrinkage, more important than shoplifting in almost all the surveys. Also, employees tend to steal larger amounts; according to the Centre for Retail Research study, average loss though employee theft amounted to $1,890, compared to $438 for shoplifters.
Automation can actually make theft or mistakes easier. For example, the University of Florida found in a recent study that "sweethearting" is the most common type of employee theft, whereby cashiers fail to ring up or scan goods for friends and relatives at the point of sale, or scan in a much cheaper item than the one handed to the customer. Another growing problem is organised crime, whereby criminals may falsify receipts to claim unwarranted refunds or pressure employees to slip them goods or, increasingly, gift cards that can be sold through online auctions.
Retailers looking to combat retail shrinkage, measure promotions, manage staff productivity and identify training requirements now have a new tool available—VigilancePro Retail from activity management software vendor Overtis. The tool is built on its flagship VigilancePro Enterprise product, which is used by enterprises and public sector organisations to visually identify and manage exactly how users access, process, store and transmit sensitive information.
Recognising that there is a specific need for such capabilities in the retail sector, Overtis developed VigilancePro Retail for this vertical, with the software integrated with the point of sale terminal to analyse all transactions made to look for unusual patterns of activity that could point to a mistake being made, such as the wrong change tendered, or deliberate acts of fraud. Every transaction entered by the employee is captured for real-time reporting and analysis and a visual record is captured by linkage with CCTV surveillance systems for evidence of which employee performed which actions.
Retailers will see many benefits from integrating this software into their existing security environments, from reducing profit shrinkage and excessive refunds or under-ringing to improving productivity by identifying areas where staff need extra training. However, it could also have extra advantages, such as preventing customers from abusing or harassing staff, helping retailers to meet health and safety objectives.
Not only will VigilancePro Retail be a boon to retailers, it could also be beneficial to other organisations involved in activities where staff handle money, such as bars, restaurants and fast food outlets, petrol forecourts and in the gaming industry, and casinos in particular. By providing a user-centric view of all transactions, backed up by video evidence, such organisations have a powerful tool available to them to reduce the cost to their business and other problems associated with the insider threat.
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