Magazine Article | January 22, 2008

Shrink Prevention: On The Scene And Behind The Scene

Source: Innovative Retail Technologies

Diverse shrink prevention technologies are working to protect the entire store â€" from the till, to the POS, to the safe, to the merchandise.

Integrated Solutions For Retailers, February 2008

According to a growing number of retail LP (loss prevention) executives, prevention starts on the scene — that is, on the store floor: on the shelves, with the customers, and with the employees. It starts in real time with interactive video and audio monitoring, now being used in many stores as shrink reduction tools. But prevention doesn't end there. Other technologies pick up where they leave off — that is, behind the scenes: in the cash drawer, the POS system, and the safe. Together, these very diverse technologies create one complete solution, an emerging trend in total shrink prevention.

Retailers Gain Confidence With
Video Monitoring And Remote Video Audits
"An interactive system — coupled with a well-designed awareness and deterrent program — can and will reduce internal and external risks that drive loss at the retail store level," affirms Mike May, president/CEO of iVerify.US Inc. May says video systems with DVRs are a highly effective loss prevention asset that have traditionally been underutilized as a postevent investigative tool. "When a loss prevention team takes the time to assess the areas of risk and the drivers of loss at the store level, they can design a series of interactions between a remote video monitoring center that leverages the power of the existing video system and delivers a meaningful reduction in loss."
He adds that the system becomes an invaluable tool when the LP department partners with operations, risk, merchandising, and senior management to deliver visibility to store conditions. "It's a powerful thing: desktop access to live multiple video images in real time — images that show views of store traffic, cleanliness, signage, employee/customer interaction, inventory levels, shipping and receiving areas, layaways, and overall store appearance."
In addition, LP staff can choose to add remote video audits that provide ongoing data which is fed back in real time on a wide range of store conditions. This further enhances their ability to address problems as they occur or as they are about to develop.
It is May's experience that when an LP manager deploys interactive video and creates a more secure environment at the store level, both the employees and the customers feel a distinct change in the shopping experience. "The sense that security is always just over your shoulder if you need them gives great peace of mind to a retail associate. The ability to call out and act on persons that are a threat to store security goes a great distance in creating a feeling of a secure store. A remote video audit that is updated on a rolling real-time basis with threshold triggers and historical event summaries quickly points out pass/fail behaviors that need attention," May states. "There is also an emerging trend developing where messaging systems are being coupled with interactive video to deliver the right type of corporate security message along with other customer and employee communications."
According to May, it is the urban specialty retailers that are embracing this service in its earliest developments, with national retailers using these systems at their high-shrink stores, specifically to drive reductions in loss. Eventually, though, May says the service will migrate to more traditional big-box retailers as they gain confidence that it can be deployed in upscale environments without the risk of alienating customers.
May believes it is only a matter of time. "As interactive video and audio is further enhanced — with connection to POS reporting systems and video analytics — VMC [video monitoring center] intervention specialists are able to respond to a wider range of risks and behaviors that need monitoring to reduce store loss."

Automatic Cash Input And Output
Increases Sales Through Customer Service
The primary behind-the-scenes shrink prevention problem for retailers has always been cash shrinkage. "The problem of leaving cash on an island and not linking it online to the POS has been an issue ever since we had the first cash registers in 1884," explains Ed Grondahl, senior VP sales and marketing at Tidel Engineering. But what you may not know is that the technology to integrate the POS to the cash has been around since 2003. "Retailers are just now getting educated on the latest in cash management technology," Grondahl says.
In the past, if the till drawer reached a level of cash outside company policy, the cashier would hit the drop key, then key in, say, $200. The POS would deduct $200 from the till balance, but there wasn't a way to prove whether the $200 actually got deposited in the safe.  "Now, with the technology that is currently available, the cashier only needs to hit drop and begin to load notes in the note validator until complete," Grondahl says. This eliminates counterfeit bills, which is a secondary benefit.  And when complete, the system updates the POS with the exact amount of cash that was just loaded into the safe. It also updates the proper IP (Internet Protocol) address, stating whether the money came from POS #1 or POS #5. There is no manual input of the amount which may, or may not, get deposited.
The benefits of such a system are twofold. One, it eliminates cash theft; two, it reduces the paid labor of all money handlers. "In a c-store-sized business," Grondahl explains, "the manager could spend 3 hours each day in the back office, trying to balance the day's cash.  Additionally, in a larger company, they employ an average of two people, for all shifts and all days, to load money in tills. Then the cashiers come to work, and the first thing they do is count it again, as they are responsible for the total in the till. This new technology allows cashiers to start their own till with nobody around simply by inputting a PIN number and hitting 'start of shift.' The machine then dispenses coins and flat notes exactly to the count and updates the POS with the start-of-shift balance."
Additionally, improved cash input and output enables better customer service. For instance, services that are affected include debit card cash-back, lottery payouts, check cashing, money orders or money transfers, and even the requirement for multiple currencies for stores along the border of any two countries. "It's all about offering the customer more reasons to stop and shop at your location," says Grondahl. "It's about service, handling cash, accounting for every penny, and always interacting with the POS on every transaction. This eliminates any end-of-day out-of-balance."

Eliminating Cash
Shrinkage Is A No-Brainer
In the past, retailers have been slow to implement such preventative technologies. But that won't always be the case. "I believe it's just a matter of education," Grondahl says. The payback on a system to eliminate cash shrinkage is generally 6 to 12 months. Once a retailer looks closely at that, it's an easy decision to move ahead with new technology.
"The impact of eliminating cash shrinkage is pure profit. Every dollar that is not stolen is 100% profit to the bottom line. We've heard shrinkage numbers as high as 3% of sales and more. It's a ton of profit slipping through the fingers of retailers that no longer needs to be tolerated. The highest number from a very major retailer is more than $1 billion in cash shortages that are written off annually. Imagine what would happen to the stock price of any company if it put this kind of money back on the bottom line where it belongs!"