Retail Loss Prevention using wireless

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White Paper on wireless solutions that aid retail in loss prevention

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Retail Loss Prevention using wireless

  1. 1. 50 Years of Growth, Innovation and LeadershipRetail Loss Prevention—Using Wireless to Stop the Stealing! A Frost & Sullivan White Paper www.frost.com
  2. 2. Frost & SullivanIntroduction & Overview ............................................................................................................ 3The Retail Landscape: Overview & Key Challenges .................................................................... 3 Different Types of Retail Industry Participants ............................................................................ 3 Key Challenges in the Retail Sector ............................................................................................. 3The Common Element: Loss Prevention ..................................................................................... 4 Impact of Loss on Business Operations ........................................................................................ 5Key Mobile Technologies for Loss Prevention—Supply Chain and In-Store ................................ 5 Loss Prevention in the Supply Chain ............................................................................................ 5 Loss Prevention in the Store ......................................................................................................... 5 Impact of Wireless Loss Prevention Technologies—Case Study on Benefits of Video Surveillance 6Key Considerations for Choosing a Mobile Service Provider for Loss Prevention ..................... 7 The Network ................................................................................................................................ 7 Vertical-specific Solution Portfolio and Partnerships ................................................................... 7 Customization Capabilities .......................................................................................................... 8 Pricing Flexibility .......................................................................................................................... 8 Track Record of Proven Deployments ........................................................................................... 8 Customer Care and Support Capabilities ..................................................................................... 8Introduction to Sprint’s Solutions for Loss Prevention .............................................................. 8 CONTENTS
  3. 3. Retail Loss Prevention—Using Wireless to Stop the Stealing!INTRODUCTION & OVERVIEW sales initiatives – including broadcasting and publishing of direct-response advertising, the publishing of paper andThe continued economic uncertainty in the United electronic catalogs, distribution through vending machines,States is driving retailers to consider investments in stalls and door-to-door sales, and others. This Frost &new systems and processes to increase sales and Sullivan whitepaper focuses on the benefits ofreduce cost of operations. Retailers are under considerable wireless for loss prevention for Store retailers thatpressure to deliver better value to their customers in display and sell merchandise to the general publicorder to generate repeat business and emerge as the through fixed point-of-sale stores.preferred shopping destination. However, they also Some high-level examples of such retailers include:have to run ‘lean’ operations and reduce their losses(such as loss from theft) to be able to compete • Motor Vehicles and Part Dealers—includes neweffectively in the current market conditions. and used vehicle dealers, parts and accessories store, and others.There are various ways in which mobile communication • Furniture and Home Furnishing Stores—includestechnologies can help retailers optimize the performance furniture stores and home decoration item stores,of their businesses. The next-generation mobile networks and others.can be used for supporting the logistical, marketing, • Electronics and Appliance Stores—includessales and customer care needs of retailers through appliance, television and other electronic stores,deployments of customizable solutions for reporting, and others.management, personnel training, remote field force • Food and Beverage Stores—includes Grocerymanagement and loss prevention activities. This Frost Stores, Convenience Stores and Supermarkets),& Sullivan whitepaper will illustrate how mobile and others.networks and solutions can help retailers minimize • Health and Personal Care Stores—includesloss of their merchandise (also known as shrinkage Pharmacies and Drug Stores and Cosmetics,losses) and improve margins in their businesses. and others. • Clothing and Accessories—includes men’s,THE RETAIL LANDSCAPE: OVERVIEW women’s and children’s and infants’ clothing& KEY CHALLENGES outlets, family clothing stores, clothing accessories, and others.Different Types of Retail Industry Participants • General Merchandise Stores—includes generalAccording to the North American Industry Classification purpose department stores, warehouses andSystem (NAICS) – a standard classification system used superstores, and others.by the Federal Statistical Agencies – the retail sector as awhole comprises of “Establishments engaged in retailing Key Challenges in the Retail Sectormerchandise, generally without transformation, and It is critical for retail industry participants to developrendering services incidental to the sale of merchandise.” effective growth strategies to overcome the mainFurther, the NAICS segments the retail space into industry challenges. It is not only about improving thethe two main categories of retailers—‘Store’, and customer experience—businesses also have to look at‘Non-store’ retailers.1 Store retailers operate point-of- optimum approaches to reduce costs and proactivelysale locations that are located and designed to attract implement strategies that deliver long-term financialwalk-in customers. Non-store retailers, on the other hand, benefits. These can be conflicting objectives, as deliveringemploy different retailing methods for their outreach and an improved customer experience normally requires 1 NAICS Association Retail Industry Overview—http://www.naics.com/censusfiles/NDEF44.HTM#N44-45 frost.com 3
  4. 4. Frost & Sullivanan increased spending in the appropriate facilities and types are not only interested in cutting down their in-personnel, while a strong focus on margins may actually store losses, but also in reducing losses in their supplyrequire a reduction in spending on what some retailers chain. As mentioned, a loss is a cost to the retailers,may consider ‘non-core’ facilities that are not critical which directly impacts their ability to compete effectivelyto running their businesses. The retail industry has to and generate suitable margins in the ultra-competitiveconstantly evaluate how to achieve the best ROI for retail landscape.their investments in key technologies and processeswhich help them achieve good margins, and yet they The tough economic conditions have unfortunately ledcannot afford to cut corners on how much they are to an increase in cases of shoplifting which makes itable to deliver to the customer. Frost & Sullivan believes more important for all types of merchants and retailersbusinesses that are able to manage these conflicting to maintain a close watch over their wares at allrequirements are more likely to emerge stronger from points—sourcing, supply chain, in-store display andthe existing economic slowdown. sales chain. National Retail Federation (NRF), a global retail trade association, states in its 2010 OrganizedThe key challenges in the retail sector include: Retail Crime (ORC) Survey that ORC costs retailers nationwide an estimated $15 to $30 billion annually. 2 • Improving the In-store customer experience—to According to the same survey (featuring responses generate higher sales and improve customer loyalty from 124 executives representing department/large box • Driving efficiency in business operations—to stores, discount, drug, grocery, restaurant and specialty achieve higher margins (including cost cutting strategies) retailers), 89.5 percent of the retailers polled indicated • Loss prevention—In-store loss prevention, and loss that they had been a victim of organized retail crime in prevention in the supply chain the past 12 months. Nearly half of these retailers were forced to allocate additional resources to fighting thisTHE COMMON ELEMENT: menace, thus increasing their costs significantly.LOSS PREVENTION According to the National Association for ShopliftingThere are hundreds of different categories of retailers Prevention (NASP), a private nonprofit tax-exemptin the United States. The challenges faced by a large [501(c)(3)] organization, there are approximatelyretailer are diametrically opposite to the challenges 27 million shoplifters (or 1 in 11 people) in thefaced by a small convenience store. For example, a United States today and more than 10 million peoplelarge superstore may feel that judicious management have been caught shoplifting in the last five years.of inventory is paramount for higher efficiency, while a Shoplifters steal from all types of stores includingsmaller convenience store located in a gas station department stores, specialty shops, supermarkets,needs to decide what type of services it should offer drug stores, discounters, music stores, convenience(besides just coffee) that could help bring in additional stores and thrift shops. 3 All these statistics indicaterevenues. While improving the customer experience is that shoplifting (and theft) can affect any retailer, atdefinitely important for a mid-sized store, differentiating any location and at any time and the only way toits services from those of larger, discount stores prevent losses is to continuously monitor the merchandiseoperating in the neighborhood could be the most as soon as it leaves the production facility all the wayimportant factor. Regardless, retailers of all sizes and through to the final sale. 2 NRF 2010 Organized Retail Crime Survey—http://www.nrf.com/modules.php?name=News&op=viewlive&sp_id=940 3 Shoplifting Information and Statistics—http://shopliftingprevention.org/WhatNASPOffers/NRC/PublicEducStats.htm 4 frost.com
  5. 5. Retail Loss Prevention—Using Wireless to Stop the Stealing!Impact of Loss on Business Operations easily support surveillance solutions (such as video surveillance) while network features such as locationThere are both immediate and long-term impacts of information can be further leveraged for retailloss of merchandise on a retailer’s margins. For example, security requirements along the supply chain.theft of goods from a store is a direct and an immediateloss for the retailer (assuming that the retailer has Loss Prevention in the Supply Chainalready paid for these items). On the other hand, if anemployee steals a company laptop that contained Wireless solutions that enable tracking of thesensitive information (such as customers’ email merchandise along the supply chain can be used foraddresses, billing credentials and others), it increases loss prevention. These solutions are described below:the liability of the retailer beyond simply replacing the Asset Tracking and Monitoring—Short Rangelaptop – the retailer will have to disclose this loss to Wireless Technologiesthe public, and may also have to face any potentiallawsuits that could be filed against it for negligence. Asset Tracking and Monitoring technologies such asThe same laptop could also have other information RFID can be used for monitoring the inventory alongsuch as updated inventory levels, loss of which could the supply chain. These passive RFID tags are read byforce the retailer to manually run an inventory check RFID readers that are placed along the appropriateagain. This could bring the store operations to a virtual locations in the supply chain and can be used tohalt until the inventory information is updated again. monitor the movement of goods all the way to theKeeping goods securely locked in display is not a good retail outlet. Even active RFID tags could be used foroption for the retailers as they could see reduced this purpose, though they tend to be more expensive.sales by doing this. Retailers are currently forced to Asset Tracking and Monitoring—Wide Areaallocate the cost of their losses (and loss prevention Wireless Technologiesinitiatives) across different departments and someretailers are even contemplating increasing cost of GPS-based mobile technologies running on wide areatheir merchandise to make up for their losses. 4 mobile networks can be used for real-time asset tracking. While it may not be practical to know aboutKEY MOBILE TECHNOLOGIES FOR each and every item in this manner, the vehicles (orLOSS PREVENTION—SUPPLY CHAIN even the large boxes) carrying the merchandise can beAND IN-STORE fitted with a GPS transmitter that can be used to track the movement of the items from the manufacturingFrost & Sullivan believes retailers will need to prevent locations or the warehouses to the retail outlets.both in-store losses as well as losses along the supply More expensive items can also be individually fittedchain for maximum benefits. A large retailer (such as with a GPS transmitter for real-time location tracking.Wal-Mart) that controls a significant portion of its Geo-fencing technologies can help in setting up virtualsupply chain is concerned with both types of loss boundaries and can send an alert if a vehicle (or anprevention, while a small outlet (such as a convenience item) outfitted with the appropriate GPS equipmentstore ) may be more interested in loss prevention goes outside these boundaries.within the store since they don’t really own the supplychain. Both these types of losses can be prevented by Loss Prevention in the Storeusing appropriate wireless solutions for asset monitoring Wireless security and monitoring solutions that run overand tracking, surveillance, and even wireless alarm mobile networks can be used for loss prevention insidesystems. The powerful mobile broadband networks can the retail store. These solutions are described below: 4 NRF 2010 Organized Retail Crime Survey—http://www.nrf.com/modules.php?name=News&op=viewlive&sp_id=940 frost.com 5
  6. 6. Frost & SullivanVideo Surveillance monitor the situation in real time in case of an incident,Video surveillance systems running over high-speed and to collect visual evidence of the crime that couldwireless networks can be used to monitor the shopping help the retailer in a court of law. Sensor-basedaisles and storage areas in the store. These types of technologies such as weight monitoring systems cansurveillance system can also be installed outside the be used for providing additional security featuresstore premises (in the parking lots, for example). It is within the retail environment. For example, an alarmsignificantly easier to install new cameras and to move could go off if an expensive item (such as a displayexisting units to newer locations within the same piece) is lifted by unauthorized personnel from itsstore (for seasonal display adjustments, for example) stand. As is the case with intrusion detection systems,when the video feed is backhauled over high-speed the appropriate security personnel can be informedwireless versus running cables to each camera unit. and real-time video feeds used to monitor the situation.Wireless video surveillance implementations could Impact of Wireless Loss Prevention Technologies—also enable new retail locations to be set up with the Case Study on Benefits of Video Surveillanceappropriate security apparatus without having to runcables to each retail outlet or each installation point. Frost & Sullivan’s research on video surveillance equipment indicates that there are multiple benefits toRFID Technologies installing video surveillance systems in a store:Short range wireless technologies can help notify thestore employees and security personnel when an • Visibility of camera systems provides aattempt is made to take merchandise out of a store deterrence factor.illegally. While barcodes have been used in the past • Shoplifters can be immediately identified andfor package identification etc, passive RFID tags can appropriate security staff notified.be used to raise an alarm if an attempt is made to • Point-of-Sale integration for exception-basedmove the item outside the store (by placing a RFID monitoring for preventing internal thefts.gate reader along the entry and the exit points in • Ensuring customer safety and regulatorythe store, for example). Other Electronic Article compliance, reducing liability against potentialSurveillance technologies can also be used within a fraudulent claims by employees and customers.store to prevent shoplifting. • Outdoor monitoring to prevent burglary and other organized crime.Intrusion Detection Alarm Systems and OtherSensor-based Technologies Frost & Sullivan believes that video surveillance systems can reduce shrinkage losses by 0.5 to 1.0 percentIntrusion detection alarm systems can use wireless points in less than 12 months. Figure 1 shows howcommunication to inform the appropriate security video surveillance systems can help reduce shrinkagepersonnel in case of an intrusion (or a break-in) into a for a national retailer with 500 stores over a threeretail outlet. These systems can be integrated with year time period.video surveillance systems to activate video feeds to 6 frost.com
  7. 7. Retail Loss Prevention—Using Wireless to Stop the Stealing! Figure 1 Year 1 Year 2 Year 3 Average Annual Sales (per Retail Outlet) $ 20,000,000 $ 22,000,000 $ 24,200,000 Shrinkage Percentage 1.5% 1.5% 1.5% Annual Shrinkage Losses(per Retail Outlet) $ 300,000 $ 330,000 $ 363,000 Reduction in Shrinkage 0.5 Percentage Points 0.5 Percentage Points 0.5 Percentage Points Annual Shrinkage Losses After Deployment $ 200,000 $ 220,000 $ 242,000 of Video Surveillance (per Retail Outlet) Annual Savings(per Retail Outlet) $ 100,000 $ 110,000 $ 121,000 Number of Retail Outlets 500 500 500 Total Annual Savings for the Retailer $ 50.0 Million $ 55.0 Million $ 60.5 Million Source: Frost & SullivanFigure 1 assumes an annual average sale of $20,000,000 The Networkper retail outlet and an annual increase in sales of 10 It is important to choose a mobile/wireless providerpercent per outlet. Shrinkage is assumed as 1.5 percent with broad network coverage, high uptime and enoughfor all three years, while reduction in shrinkage due to capacity to support high-bandwidth security applicationsinstallation of video surveillance is assumed to be 0.5 (such as video surveillance). Both outdoor, as well aspercentage points. As seen in Figure 1, a large retailer in-building coverage are important for supporting thecould generate cumulative savings of more than loss prevention initiatives in the supply chain and$165 million within three years of deployment within the store. The mobile network should also beof a video surveillance solution. Other loss prevention able to provide real-time location information fortechnologies can further help generate additional asset monitoring and tracking which is critical for losssavings, which can easily justify investments in retail prevention in the supply chain.loss prevention solutions (such as video surveillance). Vertical-specific Solution Portfolio and PartnershipsKEY CONSIDERATIONS FOR CHOOSING The mobile operator’s ability to offer complete, end-A MOBILE SERVICE PROVIDER FOR to-end implementation for retail loss prevention isLOSS PREVENTION important. The solutions should also be scalable to support the retailers evolving requirements. LossNetwork capabilities, vertical–specific expertise and prevention solutions comprise of a hardware endpoint,partnerships, customization capabilities, pricing flexibility, a software application and the network connectivityand a track record of proven deployments are some for reporting and feedback. It is virtually impossibleimportant considerations when choosing a mobile service for mobile operators to develop all the differentprovider for supporting the retail security requirements. components of loss prevention solutions in-house—These aspects are described in detail below: frost.com 7
  8. 8. Frost & Sullivanspecialized partners that understand the key requirements Track Record of Proven Deploymentsof the retailers can add significant value to the deployments Mobile operators with proven deployments that haveby bringing in the necessary hardware, software and served the loss prevention requirements of differentproduct integration expertise. Retailers should look types of retailers are likely to be considered a ‘safeat both the range and type of partnerships (i.e., both bet’ by prospective retailer customers. Loss preventionquantity and quality of partnerships) that mobile solutions are sometimes expected to generate savingsoperators have and evaluate how these partnerships of millions of dollars for retailers over the lifetime ofcan enable the mobile operators to support their their deployments, which is why retailers should definitelyunique requirements. request for verifiable customer references and case studies that clearly indicate how others have benefittedCustomization Capabilities from deploying a particular mobile operator’s loss prevention solution(s).A one-size-fits-all approach certainly does not work inthe retail environment, where aspects such as thedesired scale of the implementation, number and type Customer Care and Support Capabilitiesof retail outlets to be outfitted with loss prevention The mobile operator’s ability to provide consultativesolutions, retailer’s budget, existing retail security sales and support capabilities on an ongoing basis issystems (and need for integration with these), indoor also critical for a successful deployment. Retail lossversus outdoor deployments, and others determine prevention solutions can have extremely high levels ofthe best approach. It is important for the mobile requirements around reliability since even a smalloperator to incorporate all these requirements and duration of downtime could lead to significant losses.deliver customized implementations that can help The mobile operator’s ability to troubleshoot andretailers achieve the best return on their investments resolve any technical issues quickly is an importantin loss prevention technologies and systems. The parameter to consider as well. Round the clockability of the mobile operators to deliver these types customer care and support, remote asset monitoringof specific solutions within the required timeframe is capabilities, availability of field technicians and evenan important parameter for the retailers. service level agreements (SLAs) should be examined by the retailers to ensure consistent performance ofPricing Flexibility the retail loss prevention apparatus.The mobile operator should be able to offer multiplepricing models for its loss prevention implementations. INTRODUCTION TO SPRINT’S SOLUTIONSLarge retailers may want to own their own endpoint FOR LOSS PREVENTIONequipment to have greater control over these assets,while smaller retailers may prefer a turnkey deployment Sprint is a leading provider of retail loss preventionthat is offered to them on a pay-as-you-go model to solutions in the United States and has developed anallow them to avoid large upfront investments in the entire ecosystem of strategic partners that enables ithardware. The mobile operator should be able to to serve the needs of different types of retailers. It hasaccommodate all these pricing expectations and build loss prevention solutions in the U.S. retail segment.some of the cost of the hardware into the servicecost to ease the burden on retailers who don’t havethe capacity for large upfront payments. Current Sprint solutions for loss prevention in the supply chain include—advanced asset tracking and 8 frost.com
  9. 9. Retail Loss Prevention—Using Wireless to Stop the Stealing!location determination implementations, geo-fencingand alerting solutions, and others. These solutions areoffered in partnerships with leading vendors such asTrimble Navigation Limited, TeleNav, Nimble WirelessInc., Sendum Corporation, Omnilink Systems, OnAssetIntelligence Inc., and others that are leaders in theirrespective fields and bring in valuable expertise to themix. Availability of a large retail loss prevention productportfolio enables Sprint’s retail customers to deploythe most suited implementation for their uniquerequirements. Clearly, Sprint has focused on gettingthe right partners to build the right ecosystem forretail security requirements.For in-store loss prevention, Sprint offers a portfolioof video surveillance and intrusion detection systemsthat can be used for remote monitoring. Sprint’s next-generation IP-based video surveillance systems run onits nationwide high-speed wireless network and includeinnovative accessories such as mini DVRs, networkDVRs and analytics (such as behavior recognition andpattern identification).These solutions are offeredin partnership with vendors such as VaraSightTMSurveillance( a division of Feeney Wireless, LLC), I2CTechnologies, Crime Point, and others that contributeto Sprint’s product portfolio with affordable, certifiedand easy to deploy surveillance and alarm systems.A nationwide high-speed wireless network, acomprehensive portfolio of loss prevention solutions,flexible service pricing, robust enterprise customercare and support, numerous proven deployments, andflexible billing options are examples of some of theunique offerings for loss prevention from Sprint. Theseassets have enabled Sprint to deliver a compelling setof solutions to prevent losses in the supply chain andwithin stores, which has translated to higher marginsand enhanced satisfaction for Sprint’s retail customers. frost.com 9
  10. 10. Silicon Valley San Antonio London331 E. Evelyn Ave. Suite 100 7550 West Interstate 10, Suite 400, 4, Grosvenor Gardens,Mountain View, CA 94041 San Antonio, Texas 78229-5616 London SWIW ODH,UKTel 650.475.4500 Tel 210.348.1000 Tel 44(0)20 7730 3438Fax 650.475.1570 Fax 210.348.1003 Fax 44(0)20 7730 3343 877.GoFrost • myfrost@frost.com http://www.frost.comABOUT FROST & SULLIVANFrost & Sullivan, the Growth Partnership Company, partners with clients to acceleratetheir growth. The companys TEAM Research, Growth Consulting, and Growth Team Membership™ empowerclients to create a growth-focused culture that generates, evaluates, and implements effective growth strategies.Frost & Sullivan employs over 50 years of experience in partnering with Global 1000 companies, emergingbusinesses, and the investment community from more than 40 offices on six continents. For more informationabout Frost & Sullivan’s Growth Partnership Services, visit http://www.frost.com.For information regarding permission, write:Frost & Sullivan331 E. Evelyn Ave. Suite 100Mountain View, CA 94041Auckland Istanbul São PauloBangkok Jakarta SeoulBeijing Kolkata ShanghaiBengaluru Kuala Lumpur Silicon ValleyBogotá London SingaporeBuenos Aires Mexico City Sophia AntipolisCape Town Milan SydneyChennai Moscow TaipeiColombo Mumbai Tel AvivDelhi / NCR Manhattan TokyoDhaka Oxford TorontoDubai Paris WarsawFrankfurt Rockville Centre Washington, DCHong Kong San Antonio

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