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1 64 MAY
2 Security Shrinks Losses for Retailers By Rosa Chen Possibly the most price-sensitive market, most retailers struggle to allocate funding for security systems. Problems such as user awareness, lack of IT infrastructure, integration complexities and cost considerations make it more important, now than ever, for security companies to double their efforts. Retailers want to see these issues addressed. As of today, analog systems dominate because they cost less than IP. Serious players must be able to work with legacy systems to provide all the benefits of IP-based systems during this transition period. For the near future, analog systems will continue to dominate because most retailers do not have the budgets for expensive network devices and components. Most networks in retail settings today run on old equipment, which cannot handle the bandwidth required for streaming video. Separate networks, therefore, are recommended for video surveillance systems. This way, video will not impact other networked systems such as access control, PoS systems and so on. Hybrid systems are common in today s shops. However, integrating analog with IP-based systems proves to be less simple than claimed. Systems based on different communication protocols mean that full integration is rarely done. Rather, more systems are linked and operated side by side via simple electrical relay contacts. Integration among different types of systems, such as video surveillance and PoS, is also difficult. Hardware, such as DVRs and PoS systems, is often found incompatible and requires new APIs and SDKs to be written for the systems to communicate. As of now, the average retail chain still uses multiple systems access control, intrusion and fire alarms, electronic article surveillance, PoS, video analytics and so on all with separate user interfaces. Most retailers know the benefits but simply cannot afford available solutions. In many cases, the cost of all the security equipment needed surpasses the entire security department s budget. However, as prices for IP-based equipment continue to drop, the market will see increased adoption. With all the benefits of business intelligence, open systems are the way forward. 22 MAY
3 While retailers cut budgets t o t h e p o i n t o f laying off loss and asset protection personnel there was a simultaneous increase in theft. Security wasn t where it should have been, and we have now reached a situation where shrink grew significantly across the board in 2009, said Derek Rodner, VP of Marketing Product Strategy of Agilence. As a result, almost 50 percent of retailers, worldwide, experienced an increase of shrinkage in 2009, said Matia Grossi, Industry Analyst at Frost & Sullivan. The Global Retail Theft Barometer reported that petty crime, such as shoplifting or employee theft, made up more than 70 percent of global shrinkage in Putting Matia Grossi, Industry Analyst at Frost & Sullivan Derek Rodner, VP of Marketing Product Strategy of Agilence this in perspective, the technologies available used to deter or apprehend offenders can make a genuine impact on reducing shrinkage. Within the security industry, retail may be the most rigorously quantified market. Unlike many applications that defend against high-value but rare instances, such as terrorism, retail security deals with constant and daily threats that can be measured, said John Honovich, founder of IPVideomarket.info, in a prepared statement. This helps in calculating ROI. According to the annual National Retail Security Survey from the National Retail Federation, US retailers suffered from a US$36.3 billion in losses to shrinkage in The average admitted dollar Paul Everett, Research Director for the U.S. at IMS Research Vy Hoang, Executive VP of Sales and Marketing at i3international loss for employee theft was $2,672. Depending on the size of the store and total cameras deployed, if systems can catch or deter one or two employee thefts per site, per year, the system may pay for itself, Honovich Market Size Globally, security providers have experienced a slowdown in retail sales. However, increased shrinkage has caused large retailers to continue to or increase spending for security systems, said Shusuke Aoki, Senior Coordinator, Overseas Marketing Group, Panasonic System Networks. In 2009, worldwide spending on products for retail security was estimated to be $3.5 billion, Grossi The North American retail market, comprising video surveillance, access control and intrusion product sales only, was about $650 to 700 million, said Paul Everett, Research Director for the U.S. at IMS Research. The European market was slightly smaller, estimated to be $450 to 500 million. By product breakdown, retail is the largest market segment for video surveillance. However, the North American retail market declined by MAY 2010
4 6 percent in 2009, with a forecast of 1 percent growth for 2010, Everett The decline was steeper in Europe, with a 15-percent drop last year and a 5-percent fall expected for Apart from video, total spending on retail technology systems will exceed $20 billion by 2014, according to an ABI Research report. This figure, however, includes equipment such as PoS systems, payment terminals, barcode scanners, PoS printers and electronic article surveillance (EAS) systems. Wi t h i n c re a s e d i n t e g r a t i o n between retail equipment and security systems, opportunities are limitless. However, loss prevention budgets are small. According to the National Retail Security Survey, loss prevention budgets accounted for only 0.3 percent of retailers 2007 annual sales, and of that budget, 30 percent was used for capital equipment such as security systems, Honovich Lack of Regulations Despite increasing needs and demands, there are few regulations for retailers on physical security. The only requirements are those issued from insurance companies, usually for a loss prevention program that can include alarm monitoring or video surveillance systems, Grossi T h e m o v e m e n t t o w a rd s I P, however, pulls in different decision makers such as IT managers and CIOs to address compliance issues of data protection/handling together with network management and data storage, Grossi continued. As a result, retailers rely on the advice of consultants, manufacturers and installers to determine what their security needs are, and which systems are appropriate. Limited Awareness In general, most retailers are overwhelmed with the amount of product choice and information available, said Vy Hoang, Executive VP of Sales and Marketing at i3international. Furthermore, many retail organizations are just discovering the information and insight their surveillance cameras can provide, said Kathryn Howe, VP of Sales and Marketing at BVI Networks. Therefore, there is a gap between the available technology and its capabilities, and the general retailer s awareness. For the last 10 Kathryn Howe, VP of Sales and Marketing at BVI Networks Jerry Garrett, MD of Convergence Systems years, loss prevention providers focused on decreasing fraud. Today, there is a vital shift in the market. Manufacturers are recognizing that the bigger problems, including operational, promotional, supplychain, and training issues, are what lead to shrink, Rodner Site Requirements Regional differences between the U.S., Europe and Asia Pacific show security priorities are not universal. The Global Retail Theft Barometer reported that in 2009, customers committed the majority of fraud occurring in Asia Pacific and Europe. In the U.S., staff caused the most shrinkage. Different systems protect against internal and external theft. For example, PoS systems integrated MAY 2010
5 with video surveillance can better document transactions handled by employees. EAS systems and RFID tagging can prevent customers from walking away without paying for their goods. Moving along the supply chain, the site also has an effect on system selection. Warehouses, grocery stores, department stores, boutique shops, supermarkets and malls have different issues and requirements. At warehouses, most systems require the use of video analytics. We have found directional alerting and area alarms to be the most important. These systems should be integrated with access control, said Huw Edwards, MD of icode Systems. Large warehouses deploy directional alerting analytics to optimize the packing process. These analytics ensure the correct operation of such policies. In a grocery store, customers might lack the necessary IT resources to select and maintain networks. Often times, we need to tell them where to place the cameras, how to focus the cameras and what types of networks they need, Rodner There are Payment Card Industry compliance issues that grocery retailers have to understand, and we help them out if they don t. Thousands of transactions happen daily in grocery stores, emphasizing throughput and making shrinkage much more difficult to find, as opposed to a large department store, Rodner continued. A cashier at a department store may spend significant amounts of time alone in his or her department. With the amount of inventory available, refund fraud, where employees take something and process a return on a gift card, is high Thousands of transactions happen daily in grocery stores, making shrinkage much more difficult to be detected. on the list of concerns. PoS systems are used in both cases, yet the type of fraud found can vary, meaning that simpler systems that do not record all transactions can easily overlook this. For EAS systems, some malls may require retailers to comply with certain unobstructed door widths, which is a need to be considered when setting up entry and exit gates. EAS performance can be limited by gate width, said Paul Chamandy, VP of New Business Development at Avery Dennison. The reading widths of most EAS gates have been designed to fit the width of typical entrances found in single shops and boutiques. However, overhead systems are better suited and being increasingly used for wide, unobstructed entrances found in malls. Parking lots for department stores and malls are another area of concern. Cameras need to monitor for incidents and provide safety for customers to come and go, said Johan Akesson, Director of Business Development in the Retail Sector at Axis Communications. If retail stores are located in areas that are less safe in the evening, customers will feel safer shopping at venues with monitored parking lots. Other security concerns apart from fraud can prompt the use of technology such as RFID. At a mall, RFID bracelets can be issued to children so that they don t get lost, said Jerry Garrett, MD of Convergence Systems. Choosing the Right System Not only do retailers need to choose the right system for their needs, they also need to become more aware of the various uses security systems can be used for. Business intelligence combines information gathered for security and channels to improve marketing and operations. It is clear security and loss prevention systems providers need to support and consult retailers about the range of available options, as well as the benefits and real-life challenges involved in deploying these systems MAY 2010
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