As any retail business owner knows, or will find out in time, shrinkage is a serious issue to deal with. While most of the fiscal year will be spent trying to work toward turning a profit, the margin between staying in business and falling short is a matter of a few small percentage points in terms of overall revenue.

“In 2008, The National Retail Survey Final Report said that retailers experienced shrinkage of 1.51% to sales, and that translates to roughly $36.6 billion in retail lost annually (Greggo).”

In fact, “… total global losses from shrinkage are probably much higher, perhaps equating to as much as $232 billion a year (Beck).” It stands to reason then that every retail business, regardless of size or resources, must consider security as a vital investment in its long-term success.

As technology advances, so do the techniques that criminals use to steal products, services, cash, and even the identities of retail customers. It is incumbent upon these businesses to have effective security measures in place to protect not only its investment, but also those of its customers.

CCTV, IP, and VDMS Security Options

CCTV

Most traditional retail business security options for the past several decades revolved around closed-circuit TV (CCTV). These systems generally consist of a series of surveillance video cameras connected to an internally housed and maintained recording system, such as a digital video recorder (DVR).

IP Security

IP security is a “protocol suite for securing Internet Protocol communications by authenticating and encrypting each IP packet of a communication session (Kent).” In other words, communications such as credit card transactions, emails, or video are translated into digital signals and sent across the Internet.

The adoption of IP continues to grow worldwide, and in the video surveillance industry it is predicted that implementation of IP video surveillance will grow over 200% from 2010-2012 (IPVideoMarket.info).

VDMS

A Video and Data Management System enables retail businesses to integrate their data intelligence, such as transactions or people counting, with the video from their video security system.

The integrated video and data intelligence allows retailers to track daily receipts, inventory, and even their customer demographics. Used in conjunction with IP security cameras, VDMS is one of the most powerful security options available for retail businesses.

Security Strategies to Focus On

Even with the most state of the art security equipment in place, or with 24-hour surveillance from a private security company, there are things that any business owner or manager should keep in mind in order to protect their investment, their employees, and their customers.

1. Lighting

Infrared technology is quite effective for little to no light situations. From SMART IR to wide dynamic range security systems, even retail businesses that remain in the dark at night will be protected.

The systems can be used with stealth – which means that the potential thief wouldn’t even know the cameras are being used – depending on the frequency of the infrared light, or be visible, depending on the retail owner’s needs and preferences. When choosing the right infrared illumination, it is important to consider location, weather conditions, and range.

2. Background Checks

Perform background and reference checks on all employees. You want to know who is working for you, but there are plenty of laws and regulations that control this practice. While contacting previous employers may seem like an ideal situation, many will not divulge much information about the employee other than the basics, such as when they started working there and when they left. Lawsuits for slander have effectively truncated this method of background checking.

Checking on a person’s credit history is also not advisable and is currently under scrutiny in Washington, DC. The best way to know who is working for you, or who you plan to hire, is to make sure that they are who they say they are.

Verify their ID, check their addresses, places they’ve lived and worked, and if there are any discrepancies or outright lies, address them on it. There could be a good reason or they could be trying to hide something.

Be careful about running a criminal background check as many states prohibit employers from even asking about this or discriminating against an employee based on past criminal behavior. However, the more you know about your employees, the people handling the cash flow in your retail business, the better protected you will be. (Hoover)

3. Cash Controls

Also, cash controls are vital to modern business. Cash controls can include:

1. Applying register accountability (require each employee to sign in and out whenever using a register and handling transactions)
2. Journal tape review (ensure that each employee’s journal receipts match actual sales)
3. Post-void authorization review
4. Cash refund authorization review
5. Tracking cash variances (monitor all employees’ register overages and underages to determine if there are discrepancies)
6. Deposit verification

4. Security Systems

A video security system is one of the most important pieces to protect a retail business from loss due to theft. Security systems can alert police and other professional services to potential break-ins, can monitor who is coming and going through the store, and establish a deterrent to vagrants wandering by the store.

The more measures that a business puts in place for security the more it reduces loss due to theft, fraud, or other forms of shrinkage. Security is essential to protecting one’s business and any measures that are put in place should be considered an investment, not an expense.

While the business may not see a boost in revenue, it will notice a reduction in loss and that, in itself, is increased profit margins.

Deciding Which Security Solution is Ideal

No two retail businesses are the same. While one may be a stand-alone operation, another might be part of a larger company. Deciding on which security solution is ideal for any given business requires an audit of the business’s history, management practices, goals, and budget.

1.51% of sales lost to theft (shrinkage as a total) could be a small retail business’s entire annual profit. Depending on the amount of sales each year, a modest investment in security could drastically reduce that amount of loss.

Integrating a multi-faceted security approach (IP along with VDMS, for example) is one of the most effective ways to protect the business and its investment.

Beck, A., C. Peacock. New Loss Prevention: Redefining Shrinkage Management. Palgrave MacMillan, New York, NY:2009.

Greggo, A., M. Kresevich. Retail Security and Loss Prevention Solutions. Taylor and Francis Group, LLC, Boca Raton, FL: 2011.