Unfortunately, loss through theft is inevitable in business, but the incidences can be significantly reduced with the right prevention measures. Branko Miletic looks at ways to improve the security of your store.
Some experts estimate nearly 80 percent of all small businesses fail in their first five years. In most cases, the cause is poor management by the business owner, but a recent report by the US Department of Commerce found that anywhere up to 30 percent of all small business failures were due to theft, fraud and large scale retail shrinkage.
Most retail environments are left at risk because of a lack of internal controls coupled with a basic understanding of loss prevention. Retailers should be well versed on the subject of security and be prepared to share this information with their frontline employees. Training staff should be a key preventative strategy in reducing losses, while ensuring a high standard of customer service. The overall goal for retailers should be to create a secure environment where crime is discouraged, and vulnerability and liability to the store is severely limited.
While retail loss, or shrinkage as it is commonly referred, can be a major contributor to the erosion of a business’s profitability, there is much ignorance within even the highest echelons of the retail industry about the extent of the problem and how to overcome it. Most experts agree the psychology behind theft and shoplifting can be simple, with many straightforward strategies that even the smallest retailer can implement to significantly reduce the opportunity for much stock loss.
Businesses continue to lose billions of dollars annually to a variety of crimes that erode their bottom line. In an effort to prevent losses and combat the problem, a multi-faceted approach is always the best defence.
According to loss prevention specialists Charter Resources, the past five years have seen many retailers increasing their investment in retail security, and given the sobering statistics, it’s not hard to see why. “Australian retailers lose around four billion dollars a year through reported shrinkage,” claims Charter Resources director Mike Ramsay, adding that a significant proportion of this lies in the fashion category.
And while theft appears to be on the rise, loss prevention technology has also improved with equal speed in recent years.
While traditional precautions including CCTV (closed circuit television) and tagging continue to be the most popular loss prevention devices for retailers, their functionality has improved considerably. The key is integration.
Mark Norton, general manager of security company ADT, concurs. “There are a multitude of security options available today and ADT has solutions that can be tailored to meet individual needs and emerging trends in the retail sector,” he says. “Camera systems and CCTV are ideal for managing small business theft and importantly, employee theft—the single biggest contributor to inventory shrinkage. CCTV addresses this issue as it monitors the movement of people and goods in any location. CCTV cameras also enable occupational health and safety, and public liability issues to be monitored. With the increase in litigation, employers are more concerned than ever to provide a safe environment for their staff and for the public alike. In the event of claims or prosecutions, CCTV footage can provide valuable evidence.”
Companies such as Honeywell supply integrated systems that include CCTV, access control and sensor-based monitoring. One of the key developments in CCTV has been the emergence of high resolution systems that not only provide standout image clarity but use broadband connectivity in conjunction with a web-based digital video recorder (DVR) to relay real-time footage of shoppers’ activities in-store.
Most handheld PDA devices can also pick up this information, making it easy for proprietors or managers overseeing more than one store to stay vigilant. The technology also allows most CCTV cameras to be controlled remotely and some cameras are even designed to activate in proximity to body heat, explains Ramsay. “Basically, these systems allow the retailer to pick up on unusual activity in store. So, for example, if the same customer has come in three times in one day with no sale, store staff can be alerted and keep their eyes open.”
Integrated systems can also show this visual data alongside the relevant transaction figures for the timeframe in question, facilitating the traceability of the crime. Aside from their core security function, such systems also offer secondary benefits, such as the monitoring of occupational health and safety or visual merchandising standards, both particularly relevant to retailers.
“We always say the technology alone is not enough,” says Ramsay. “Around 50 percent of loss prevention lies in training, so the staff understand how the technology works and how to react to what it is telling them.”
Furthermore, the bigger and more reputable the technology supplier, the better, he adds. “While the initial outlay of going with a well-recognised supplier might be greater, it’s ultimately a better option in terms of maintenance, training and financial backing.”
According to Gino Severin, product manager of shrink management solutions at Checkpoint Systems, Australia/New Zealand, one of the best ways to advertise you have security is signage. “A complete loss prevention solution includes visual deterrents as well as invisible deterrents,” he says. “Having an RF-EAS [radio frequency electronic article surveillance] antenna is one of the best ways of advertising, because the antennas are placed at the front entrance, which provides an instant visual of security.
“It is a well known fact within the security sector that once a thief is aware your store has security they will go to another store. This displacement occurs almost immediately the RF antennas are installed. We have seen cases with some of our customers where their loss has been reduced from around three percent to about 0.08 percent within a two-month stock-take cycle.”
The box-out below gives a more detailed description of RF-EAS and how it works.
Severin believes loss prevention should be viewed as a complete approach, looking at all facets of your retail store. This includes EAS systems, CCTV, alarm system, access control, store compliance auditing, point-of-sale (POS) verification, and so on.
“If your net average profit is at around three percent, and research tells us that by implementing a loss prevention strategy you can regain around 1.7 percent, that equates to an increase of 60 percent growth on your margin,” explains Severin. “In some retail lines a 1.7 percent increase in direct net profit can mean the difference between staying in business or not.
“My view is to look at ROI [return on investment] as an overall measure. Again it comes back to what you are prepared to be losing, rather than how much it will cost you to install a system. In many cases the ROI on the RF-EAS systems is between three to eight months, but the ROI is dependent on your revenue takings, profit margins and the amount of shrinkage. We know from 30 years of experience in the loss prevention industry that when any form of loss prevention is implemented there is a direct positive impact to profit margin. The two go hand-in-hand. Effectively lose less, sell more.”
Up until recently, there has been a misconception that good security is too expensive. Small businesses often operate on the financial brink, particularly during the first few years, and the added expense for security may not seem justified.
In reality, companies that can least afford it usually need the most protection. Security hardware and alarm systems can be expensive, but they’re only a small part of a loss prevention program. Indeed, technology is only one aspect, albeit a crucial one, of retail security. Policies, procedures and training are at the heart of any good security program and normall
y involve little or no added expense.
It would not be wrong to say every business requires some type of loss prevention program, however the nature of the program will vary according to individual business needs, so some conscious planning is always necessary.
Business Security Tips
• Secure your perimeter—ensure walls and gates are maintained and secure.
• Fit a monitored alarm.
• Do not store materials close to the perimeter that could be used to assist entry or exit to your premises.
• Provision of suitably placed street furniture, such as a barrier may assist from vehicular attack (e.g. planters or metal posts).
• Lighting, together with other measures is a deterrent. Sites should be adequately lit with higher levels of lighting in vulnerable areas.
• Ensure access to the roof of the premises is restricted by strategically-placed anti-climb paints or other anti-scale barriers.
• Consider site design to ensure adequate surveillance of stock. The use of convex mirrors, CCTV systems and alarmed goods provide a valuable deterrent.
• Consider having internal doors fitted with coded locks or keycard locks.
• Security-mark all computer equipment and consider bolting valuable items to desks.
• All telephone lines should enter the building underground to protect the integrity of the monitored alarm system.
• Implement a clear desk policy both for business security and the prevention of fire.
What is RF-EAS?
RF-EAS or radio frequency electronic article surveillance is where radio frequency technology is used as the mode of operation for detecting specially tagged merchandise. It is a reliable and safe technology that has many benefits and is the most widely accepted EAS format for retail loss prevention.
EAS is a proven, cost-effective loss prevention technique that has been widely implemented in retail stores for more than 20 years.
Since its initial introduction there have been many significant technical developments that have now made RF-EAS the most cost-effective method of controlling losses due to customer theft. The major developments include:
• self-adhesive paper security labels;
• wide-aisle detection capabilities;
• integration of label deactivation into the barcode scanning process; and
• implementation of source tagging whereby suppliers or manufacturers pre-tag the goods prior to delivery to retail stores.
RF-EAS adapts and integrates into the current retail processing and point-of-sale systems and effectively allows retailers to get on with their expertise in selling their wares. Retailers can rely on RF-EAS systems to watch and protect the merchandise and are alerted to a theft attempt as soon as it happens.