Overview 1
Catalyst 1
Summary 1
Key Messages 2
Shrink is a massive problem worldwide 2
As the economic situation worsens, internal theft will become a greater issue 2
Technology can help identify many of the contributing factors of POS shrink 2
Retailers will invest in sophisticated electronic POS BI applications 2
Analog CCTV will be upgraded to digital in the medium-term 2
The trend is to connect CCTV with BI, but infrastructure and budgets are significant barriers 2
Retailers are ready to talk shrink, but only if the price is right 2
The benefits of technology are not limited to shrink alone 3
As loss prevention technologies evolve, outsourced service models will predominate 3
4
Table of figures 5
Market Opportunity 6
Shrink is a massive problem worldwide 6
Shrink is an organization-wide issue; this report focuses on shrink at the point of sale 6
Levels of shrink vary by country and region but the styles of stealing are always the same 6
Levels of shrink vary according to sub sector 6
High staff turnover in retail contributes to the problem of POS shrink 7
As the economic situation worsens, internal theft will become a greater issue 7
The number of opportunists will increase with the downturn 7
Shrink directly impacts the bottom line 7
Over half of all losses can be attributed to internal shrink 8
Retailers have traditionally focused on customer theft prevention and detection ... 8
... but suffer greater losses from internal shrink 8
Technology can help identify many of the contributing factors of POS shrink 9
There are three major causes of POS shrink 9
Cash drawer theft is easily identified using POS data analysis 10
Refund abuse was unidentifiable prior to BI at the cash register 10
Process error and sweethearting cause the largest shrink at the POS 10
Sweethearting and process error cannot be separately identified... 10
...therefore sweethearting detection methods are not accurate 11
Poor training and inexperienced staff are accountable for the larger part of process error loss 11
Retailers will invest in technology to solve the shrink in order to cut costs 11
Minimizing costs and improving the bottom line is top priority 11
Only low cost solutions will be considered 11
Target retailers with technology to solve the biggest pain points: process error and sweethearting 11
Technology Evolution 12
Retailers will invest in sophisticated electronic POS BI applications 12
The most important thing a retailer can do is to invest in a data mining tool 12
Simple BI applications are not refined enough for retailers' needs 12
High levels of trained resources are needed to maintain data mining capabilities 12
Many retailers will upgrade from analog CCTV to digital in the medium-term 13
CCTV replacement requires major investment, so major upgrades of legacy CCTV to digital are unlikely 14
Hybrid solutions ease the transition to IP-based surveillance 15
Digital cameras will only replace analog if vendors can provide a business case for a network overhaul 15
The trend is to connect CCTV with BI, but infrastructure and budgets are significant barriers 16
CCTV and POS are connected, not integrated 16
Connecting POS data mining with camera surveillance is an attractive proposition 18
Many retailers do not have the hardware and infrastructure in place to connect CCTV and data mining 18
Advanced data mining alone could seem a more attractive proposition 18
Local market knowledge is imperative when offering CCTV installations 18
Some data mining-only packages may be more attractive to retailers in the current economic climate 19
Collusion tagging and outsourced loss prevention are areas to watch in the future 19
Double security with collusion tags - the cost remains too high for most applications 19
As connected CCTV and POS systems develop, collusion tagging will become more prevalent 19
LP will become an entirely outsourced service 20
Retailers want to invest in a solution rather than technology 20
Develop an offering based on the needs of the retailer 20
Partner with local technology suppliers 20
Develop a security offering to meet all the loss prevention needs of a retailer 20
Customer Impact: Shrink is a growing priority in retail 21
Retailers are ready to talk shrink, but only if the price is right 21
Shrink is not a fashionable topic, but profit protection is 21
Retailers will look for a very quick return on investment; if vendors can't deliver, they're out 21
Case study one: Martin McColl - POS and integrated digital CCTV 22
Case study two: Jaeger - Data mining for loss prevention 22
For a vendor, a better understanding of retail is required to overcome barriers to entry 23
There is a lack of communication between vendors and retailers 23
Store managers are closest to the issue 23
The problem is not solved by technology alone; necessary changes in business processes must be addressed 24
Vendors are likely to have to battle negative staff attitudes 24
Selling the benefits of digital to traditional loss prevention managers can be difficult 24
Loss prevention managers are the point of entry, but final decisions are made by the board 24
Changes are taking place in loss prevention departments 24
Before approaching the board, unify the loss prevention and technology teams 24
The benefits of these technologies are not limited to shrink alone 25
Data mining results can be analyzed for a range of cross business uses 26
Video analytics can also be used by marketing and merchandising 26
Surveillance positioned over the POS provides examples of poor practice for staff training 26
An IP network could bring benefit across the whole business 26
Go to Market 27
Understanding retail and building strong relationships should be the top priorities 27
Work collectively with loss prevention, IT and business operations teams 27
Make sure what you sell has a positive impact and is aligned to the issue or pain point the retailer is focused on 28
Investment will be slow, so build a long term relationship by offering additional services 28
When targeting retailers with data mining applications, size matters 28
Partner with systems integrators and consultancy firms to target large retailers 28
Large retailers will consider the most sophisticated data mining applications 29
Sell indirectly to SME retailers ... 29
... with the message that data mining is multi-functional 29
Simple BI packages may be all that is required within an SMB retail organization 29
The addressable market for surveillance systems varies by sub-sector and geography 29
The typical route to market for surveillance hardware vendors is through the reseller channel 29
Digital installations are more likely in fashion retail 29
The surveillance market is saturated in UK, so target the US 30
As loss prevention technologies evolve, so will the way products and services are offered 30
Loss prevention will become a fully outsourced service 30
Data mining specialists in retail will become loss prevention specialists 30
APPENDIX 31
Definitions 31
Methodology 31
Further reading 31
Ask the analyst 32
Datamonitor consulting 32
Disclaimer 32
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