01 Aug 12 Video analytics is the trend setter for loss prevention technology in the retail sector

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In today’s soft economy, shrinkage is a major concern, either due to theft or human error. The Global Retail Theft Barometer 2011, conducted by the Center for Retail Research, established that shrinkage in 2010-2011 rose to USD 119 billion, an increase of 6.6 percent from 2010.

The chief cause was theft, by both shoplifters and employees, contributing to 78 percent of total shrinkage. In a white paper, the same organization also demonstrated that an increase in spending on loss prevention (LP) was associated with a reduction in shrinkage, based on data collected over 10 years. Another study, from independent research firm Preference Research, also determined a strong correlation between reduced LP spending and increased retail shrink.

Trends in LP expenditure
Global expenditure on LP activities actually rose by 5.6 percent this past year, but retailers spent their dollars in different areas compared to past years. An analysis of the shift in sentiment of implementing policy designed to reduce shrinkage is illustrated in the exhibit titled ‘New loss prevention policies’.

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Excluding numbers for employee hiring and training practices as an LP measure, unveils that increased spending on crime prevention, both hardware and software, was widely adopted in the retail sector in 2011 (55 percent), with only a further 35 percent intending further expenditure. However, spending on LP security equipment, both hardware and software, declined in three major geographies (North America, Europe, and Asia/Pacific), in 2011, as compared to 2010.The second largest increase in LP technology, between 2010 and 2011, was in acquiring new CCTV video surveillance with 29 percent of retailers installing CCTV cameras, and 24 percent expecting to acquire more CCTV cameras in the near future.

In-store technology implications on the future of LP

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In a recent study conducted by RIS on Technology in the Retail Sector, store-level LP topped the in-store technology list. A majority of retailers (47 percent) indicated that they were either up-to-date on LP tools or were in the process of upgrading.Less than a quarter of the respondents, 17 percent, plan on upgrading their LP tools within the next year. Store-level LP tools are similar to server technology implementation. The key differentiator is the burgeoning market of video analytics and tunnel scanning at supermarkets.

The benefits of video analytics

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A significant use of video analytics is to use network cameras to boost LP, where IP cameras help verify fraud versus internal human error, and also help in sales by customer counting, as IP videos are easier to search and tag.According to the Store Systems Study conducted annually by the RIS, almost half of the respondents plan on upgrading their CCTV Camera (50 percent) and DVR technology (48 percent) to prevent LP. Only 42 percent of retailers plan to use video analytics in their LP systems.Checkpoint Systems’ report on Loss Prevention Budget Trends disclosed that a majority of respondents (72 percent) cited better integration of LP systems with security systems, such as CCTV and video, and with back-office IT systems, such as CRM and inventory management, as tools to convince upper management to not reduce spending on LP systems. By integrating video surveillance with POS store operations, real-time shopping issues can be effectively dealt with. This includes analyzing EAS alerts to determine if there are legitimate or false positives, and remote video viewing capabilities, which will allow investigators to indentify loss activities from anywhere in the world or country.Video analytics help the retailer dig deeper into store-level task management, such as shopper tracking to prevent theft. This technology is gaining status as a building block of LP, with retailers showing a strong future interest.

ValueNotes Research
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