All retail eyes are focused on online security and digital transactions during the holiday season. But according to the National Retail Federation (NRF), shoplifting and employee theft accounted for more than two-thirds of inventory shrinkage in 2016. Retailers need to improve their internal security systems to boost their loss prevention abilities and keep their shrink rate from rising above last year’s historical high of 1.44 percent.

Retail store shrinkage is a known part of the industry, but with all the attention centered around cybertheft of customer information and implementing proper security measures at point-of-sale (POS) systems, the age-old problem of losing products at the physical store has taken a back seat.

Leveraging Cybersecurity Technology for Loss Prevention

Technology is playing a larger role across all retail efforts, and some of the tactics employed in the back office to protect the company’s digital data can be expanded to store-level prevention. The specifics of the skills needed differ between cybersleuths and on-the-floor store personnel, but more education and discussion between these disciplines can help.

One technology that is showing a small increase in usage is radio frequency identification (RFID) tags. RFID technology has been available for some years, but the additional cost of the tags and limited use cases have held back deployment in all but the more expensive and larger products. However, regaining some of the losses created by retail shrinkage could help pay for the deployment of RFID technology in more products.

In addition, collaborating with IT on inventory control and supply chain use of itemized RFID holds the potential to improve overall efficiencies. Those changes won’t show up in the shrinkage calculations but could add to overall profitability.

Fixing the Paperwork

The digital supply chain makes the product order and logistics functions faster, easier and more reliable. But for some retailers, that automation may only be in place from the order to the supplier, ending when products land at the store loading dock.

Too many stores still have gaps in their digital processes that rely on manual operation and paperwork, and those undigitized segments can be the holes through which products disappear. Manual systems are prone to simple mistakes that can cause items to be misplaced or improperly counted, at which point they become either actual retail shrinkage or are simply miscategorized. Another possibility is intentional miscounting by employees who are able to move items out the door unnoticed.

Store operations needs to work with IT and security teams to extend the reach of the digital supply chain from the time goods arrive at the store until they make it through the checkout line. The same product tags and numbering systems used for ordering can be used to track shipments received, but they need back-end IT support to connect the software to the store management systems. Progressive retailers are combining standard barcode labels with RFID tags and handheld scanners that automate the recording and tracking of products, eliminating the paper-based systems.

Smile for the Camera

Video surveillance cameras have been in stores for years, but the NRF survey revealed that the use of both hidden and visible live closed-circuit television (CCTV) and remote IP cameras has decreased. Live monitoring of video systems is expensive and subject to human interpretation, but advances in shopper behavior monitoring and even facial recognition can help reduce the cost of surveillance while improving alert capabilities.

Additionally, advanced tracking can deliver benefits to stocking and anonymized shopper behavior studies that can help stores optimize their displays and more efficiently manage shelf inventories. These systems require IT direction and management due to the level of sophistication and dependence on advanced IT infrastructure.

Don’t Sleep on Store-Level Security

Kiplinger predicted that in-store sales would increase by 2 percent during this holiday season compared with last year. With more sales comes more opportunities for unrestrained shrinkage, which is likely to put a dent in retail profits if more attention isn’t devoted to store-level security.

More from Retail

5 Ways to Improve Holiday Retail and Wholesale Cybersecurity

4 min read - It’s the most wonderful time of the year for retailers and wholesalers since the holidays help boost year-end profits. The National Retail Federation (NRF) predicts 2022 holiday sales will come in 6% to 8% higher than in 2021. But rising profits that come at the cost of reduced cybersecurity can cost companies in the long run when you consider the rising size and costs of data breaches. The risk of data breaches and other cyber crimes can make this shopping…

4 min read

Cost of a Data Breach: Retail Costs, Risks and Prevention Strategies

3 min read - Whether it’s online or brick-and-mortar, every new store or website represents a new potential entry point for threat actors. With access to more personally identifiable information (PII) of customers than most industries, bad actors perceive retail as a great way to cash in on their attacks. Plus, attackers can duplicate attack methods more easily since retailers share similar cybersecurity infrastructure. The good news for retail is that the cost of a data breach in the sector remains low compared to…

3 min read

Lessons Learned by 2022 Cyberattacks: X-Force Threat Intelligence Report

3 min read - Every year, the IBM Security X-Force team of cybersecurity experts mines billions of data points to reveal today’s most urgent security statistics and trends. This year’s X-Force Threat Intelligence Index 2022 digs into attack types, infection vectors, top threat actors, malware trends and industry-specific insights. This year, a new industry took the infamous top spot: manufacturing. For the first time in over five years, finance and insurance were not the top-attacked industries in 2021, as manufacturing overtook them by a…

3 min read

Magecart Attacks Continue to ‘Skim’ Software Supply Chains

4 min read - Did your company or e-commerce firm recently buy third-party software from a value-added reseller (VAR) or systems integrator? Did you vet the vendor code? If not, you could be at risk for a Magecart group attack. Magecart is an association of threat actor groups who target online shopping carts, mostly from within the e-commerce platform Magento. The Magecart name is derived by combining ‘Mage’ (from Magento) with ‘cart’ (shopping cart). This type of attack is especially dangerous as it only…

4 min read