Shrink the Shrinkage

    Shrink the Shrinkage

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    Retailers in India are seeing about one-and-a-half to two times more theft than thier global counterparts. In India apparel retail and confectionary suffers the most. Yogesh Dutta, vice president  – Security BU ( Region), Aditya Infotech Ltd, tells how an effective security system can help retailers reduce shrinkage and more..

    Q. Even as global retail theft showed a decline, India continued to top the Global Retail Theft Barometer in 2010. What are the main reasons for the high shrinkage rate in India?

    I completely agree that it is not just the booming retail industry in India that’s making news internationally, but the alarming shrinkage rate as well.

    A significant portion of retail shrinkage is attributable to retail fraud, theft and crime. The fear of theft comes both from the employees and the visitors to the store. In addition, losses due to vendor fraud (including supply-chain losses and theft by delivery employees) also contribute to high shrinkage rate.

    Most importantly, the success and failure of any retail store depends on the percentage of pilferage out of total goods.

    Q. How can an effective security system check pilferage? Do you observe an increasing willingness among retailers – modern and traditional – to install such systems?

    Retail stores are faced with the challenge of showcasing merchandise in easily accessible displays to encourage purchase and increase the sales. In this environment, customers and employees have full access to the valuable inventory that they exchange for money. Typically, a security system to check pilferage in retail stores requires analogue or IP-based surveillance, along with video analytics to secure retail stores as well as to get an alert when any object goes missing from the shelves. Now, modern POS systems can have automatic alerts when specific exceptions are detected.

    POS terminals and video surveillance can work together to enable retail store managers and loss prevention professionals to search and retrieve key loss-prevention metrics and to easily access video recordings of transactions of interest.

    With the mushrooming of malls and large-format retail stores, the retail landscape in India has changed over the last decade. Awareness of thefts —internal, external or organised — has increased over the years. Retailers in India are seeing about one-and-a-half to two times more thefts than their global counterparts. This is driving retailers to try and protect their profits from erosion. There is also an increase in interest in store performance solutions and business intelligence, including tracking people, their movements in the store and the time spend inside the store. It is in this segment that we step in. Retailers have been focusing on operational improvements on the retail selling floor, and we are in a process of constantly enhancing our offerings to ensure retailers adopt contemporary surveillance technologies to manage their stores better.

    Q. Which are the high-shrink verticals in India? What percentage of merchandise is prone to pilferage?

    I think apparel retail suffers the most as does confectionery. As per the latest report, the highest shrinkage rates were in apparel/clothing and fashion/accessories; cosmetics/perfume/health & beauty/pharmacy (1.71 per cent); and vehicle/auto parts/hardware/DIY/ building materials retail (1.64 per cent). The lowest rates were in footwear/shoes/sports goods and sporting goods (0.63 per cent), jewellery/watches (0.81 per cent) and discount/variety retail/warehouse clubs (0.85 per cent).
    Shoplifting still dominates retail shrinkage in India. Employee theft continues to be the second largest source. The internal errors and supplier and vendor frauds further lead to total shrinkage.

    Q. As employees are aware of the limitations of CCTVs, and considering that employee theft accounts for a major share of the total pilferage, is there an ideal location for placing cameras?

    Here, smoke detector cameras and pinhole cameras should be deployed as these are hidden cameras and can be placed on walls or even ceilings. Smoke detector and pinhole cameras are perfect for any indoor or undetectable locations such as backroom, warehouses, etc.

    Q. Generally speaking, how many cameras would be sufficient to secure small/medium/large format stores?

    To achieve full coverage of high theft spots and sensitive areas, a mixed population of cameras is required.

    Megapixel cameras promise a wider coverage of areas and are good at seeing faces close up.

    Domes are in demand for their inconspicuous form, while PTZ cameras are gaining momentum for their tracking capability. When it comes to perimeter monitoring, autonomous PTZ cameras outside the shop track intruders, unusual parkingand loitering with high effectiveness.

    A fully networked system for remote access is a must. Specifications on local recording with a network interface enable video to be captured and preserved locally while allowing real-time remote monitoring over the network. Without a physical visit to each site, central monitoring enablesobserving a large number of stores.

    Parking lots of department stores and malls are another area of concern. Cameras need to monitor these for incidents and safety of customers to come and go. If retail stores are located in areas that are not safe in the evening, customers will feel protected only if the parking space of the store is monitored.

    Q. Is there a better way to arrange the merchandise to check retail shrinkage?

    Rapid shrinkage — the combination of shoplifting, employee theft, administrative mistakes and vendor fraud — goes directly to the retailer’s bottom line. First, think from the perspective of the shoplifter. Anticipate the merchandise that will be most attractive to shoplifters, like luxury retail items, and then deploy security arrangements around that merchandise.

    Q. How should security be provided in the backroom of a store to help check pilferage?

    The receiving process is unstructured in many retail organisations, with no written policies and procedures. Consequently, the backroom accounts for an estimated 10 per cent of all retail shrinkage in a store. Vendor fraud and employee theft are responsible for the vast majority of receiving shrinkage.

    The use of intelligent cameras with motion detection and active tampering alarm helps to quickly detect suspect actions at the backroom of the store. Sophisticated video motion analytics spot anomalous activities, and cameras automatically send images to your PC or mobile. This also saves time earlier wasted in responding to false alarms.

    Q. Even as modern retailers have begun to install security systems, most of the mom-and-pop stores are yet to see the benefits of going this way. Do you have a specificplan to educate them on this?

    Due to high shrinkage rate, momand-pops stores are gradually realising the importance of security systems. Not only do small retailers and shopkeepers should choose the right system for their needs, they also should try to become more awareof the various purposes the security systems can be used for.

    We pay a lot of emphasis on training, as readymade manpower is not easily available in this field. Aditya Tech Summit, one of our facets, is completely dedicated to impart updated technology and product training to our channel partners through round-the-year seminars and road shows.

    We are planning to do a 50-city tech summit in August 2011, in which our team will go and educate people in these cities, like a mini security exhibition on the move. We will invite existing and potential channel players from different industries, including retail, to benefit from this.

    Q. What are the major deterrents to the increasing deployment of security systems by Indian retailers?

    Legacy systems remain the primary barrier to intelligence. Most of the retail stores are still relying on manned guarding. However, it has its own limitations. I believe with the advent of new technology, hi-tech security can prove to be a boon to the retail industry. With intelligent surveillance solutions and video analytics, digital security can provide far better solutions than manned security.

    Hence, I would recommend that the combination of manned security and electronic surveillance should be deployed at retail stores to check pilferage.

    Q. How much does a retailer have to spend on installing various security systems? Does the return justify the investment?

    The cost of retail security systems will range from a few hundred to several thousand rupees, depending on the number, model, brand and technology used. Every store has a unique set of security needs, depending on factors such as product and service offered, physical layout and average number of customers on a given day. A furniture shop, for example, will require a different retail security system than a store selling handheld digital products.

    We understand the need of the customer, bridge the solution to that, and then execute it keeping our levelof quality control in mind because it has been designed by us.
    In retail industry, budget restrictions prevent retailers from purchasing dedicated cameras for analytics. But they do need to understand that analytics help store operators better understand the customer behavior.

    Retailers should first understand the advantages of ROI and its usage in prevention of crime. Video surveillance systems are easily costjustified based on the money they can save and the peace of mind they provide.

    Q. What kind of future do you anticipate for the retail security systems industry in India?

    According to the 2008 Global Retail Theft Barometer Survey, global inventory shrinkage costs retailers US$ 104.5 billion, every year equivalent to 1.34 per cent of total sales.

    The retail vertical will continue to provide ample opportunities for security vendors, with a growth rate between 5 and 15 per cent, depending on the geographic region. Emerging markets, Asia-Pacific region in particular, with a growth rate of around 10 per cent, offer a number of opportunities for vendors.

    This interview was originally published in June 2011 issue of Images Retail