December 4, 2017 By Scott Koegler 3 min read

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.

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