Under assault: retailers brace for the holidays
While merchants have spent the past nine months developing plans to drive holiday sales, another group of retail executives has been preparing to deal with the dark side of Christmas.
The executives in question are those charged with asset protection and loss prevention and their efforts could have an unprecedented impact on the bottom line this year. There are a couple reasons why that is likely to be the case, beginning with the nature of competition, the growth of e-commerce and increased threats on a variety of fronts. For starters, the upcoming holiday season will again be intensely competitive with retailers resorting to aggressive promotions that generate store traffic but compress margins. The heightened promotional activity has become necessary as increased online activity erodes store traffic. Meanwhile, in-store inventory is under a relentless attack from enterprising burglars, unscrupulous employees and sophisticated organized crime groups. The combination is not conducive to profitability.
Preserving profits by minimizing shrink is not a new concept in the retail industry, but industry leaders are focused on it like never before. That was evident recently when top retail security experts gathered for a two-day summit hosted by Genetec, an industry leader in video surveillance, access control systems and analytics, all capabilities retailers are increasingly reliant upon to preserve profits.
Some recurring themes and troubling realties emerge from conversations at the Genetec event. For starters, ORC is an acronym used repeatedly by asset protection/loss prevention executives as it has become the bane of the industry. The bad guys have become quite sophisticated, targeting specific retailers with specific techniques. ORC groups know what they want and the typical retail establishment is quite vulnerable when targeted by determined pros. Recent videos shown to attendees at the Genetec event offer disturbing view of thieves who are brazen, calculating and methodical in their efforts to target specific categories and brands that are high valuable and easily converted to cash.
Another issue is the prevalence of burglaries in the retail industry. It’s not uncommon for an operator of several thousand stores to have several burglaries a week. Thieves come in through the front door, the back door and often times through the roof with the method of entry varying by region of the country and type of retailer. An ounce of prevention can be worth a pound of cure when it comes to burglaries since the physical damage done to the building and time needed to repair the structure can be more time consuming and costly than the value of the goods stolen.
Another challenge facing asset protection/loss prevention executives is the perennial issue of dishonest employees. They know a retailer’s inner-workings and can be a tremendous drain on profits and present an even greater challenge if they are working with an ORC group.
With the pressures on retailers’ assets intensifying, one of the biggest sources of frustration is a lack of resource to effectively combat the challenge. The people and technology need to protect a retailer’s assets, especially in physical stores, are increasing at a time when many retailers are under great expense pressure.
Senior retail executives might be looser with the purse strings but they tend to view asset protection/loss prevention as non-revenue generating functions as opposed to profit preservation. That makes budgets hard to come by even thought a compelling return on investment case can be made for deterrence and apprehension measures. For example, video monitoring of stores with state-of-the-art digital video linked to point-of-sale systems offers tremendous potential to identify theft and aid in the prosecution of those apprehended who typically plead guilty when presented with incontrovertible video evidence. Retailers tend to think of video analytics as a means to uncover shopper insights that can be used to develop merchandising strategies, but video analytics means something entirely different to those engaged in asset protection.
In essence, loss prevention professionals are engaged in an arms race of sorts. Every time a strategy is developed or procedure is put in place, enterprising thieves and unscrupulous employees respond with new methods to cheat and steal from retailers. This is especially true in the area of data security where retailers seem to be the last to find out their systems have been breached. In essence, retailers are fighting a war on two fronts between digital and physical.
It is quite the thorny situation and explains why so many of the industry’s leading asset protection executives gathered at the Genetec Retail Summit to discuss opportunities and solutions.