1. 50 Years of Growth, Innovation and Leadership
Retail Loss Prevention—
Using Wireless to Stop the Stealing!
A Frost & Sullivan
White Paper
www.frost.com
2. Frost & Sullivan
Introduction & Overview ............................................................................................................ 3
The Retail Landscape: Overview & Key Challenges .................................................................... 3
Different Types of Retail Industry Participants ............................................................................ 3
Key Challenges in the Retail Sector ............................................................................................. 3
The Common Element: Loss Prevention ..................................................................................... 4
Impact of Loss on Business Operations ........................................................................................ 5
Key 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 6
Key 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 ..................................................................................... 8
Introduction to Sprint’s Solutions for Loss Prevention .............................................................. 8
CONTENTS
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 and
The 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 of
reduce cost of operations. Retailers are under considerable wireless for loss prevention for Store retailers that
pressure to deliver better value to their customers in display and sell merchandise to the general public
order 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 new
effectively 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—includes
technologies 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—includes
sales 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 Grocery
management 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—includes
loss 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 general
According to the North American Industry Classification purpose department stores, warehouses and
System (NAICS) – a standard classification system used superstores, and others.
by the Federal Statistical Agencies – the retail sector as a
whole comprises of “Establishments engaged in retailing Key Challenges in the Retail Sector
merchandise, generally without transformation, and It is critical for retail industry participants to develop
rendering services incidental to the sale of merchandise.” effective growth strategies to overcome the main
Further, the NAICS segments the retail space into industry challenges. It is not only about improving the
the 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 proactively
sale locations that are located and designed to attract implement strategies that deliver long-term financial
walk-in customers. Non-store retailers, on the other hand, benefits. These can be conflicting objectives, as delivering
employ 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. Frost & Sullivan
an 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 supply
require 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 effectively
to running their businesses. The retail industry has to and generate suitable margins in the ultra-competitive
constantly evaluate how to achieve the best ROI for retail landscape.
their investments in key technologies and processes
which help them achieve good margins, and yet they The tough economic conditions have unfortunately led
cannot afford to cut corners on how much they are to an increase in cases of shoplifting which makes it
able to deliver to the customer. Frost & Sullivan believes more important for all types of merchants and retailers
businesses that are able to manage these conflicting to maintain a close watch over their wares at all
requirements are more likely to emerge stronger from points—sourcing, supply chain, in-store display and
the existing economic slowdown. sales chain. National Retail Federation (NRF), a global
retail trade association, states in its 2010 Organized
The 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 this
THE COMMON ELEMENT: menace, thus increasing their costs significantly.
LOSS PREVENTION
According to the National Association for Shoplifting
There are hundreds of different categories of retailers Prevention (NASP), a private nonprofit tax-exempt
in the United States. The challenges faced by a large [501(c)(3)] organization, there are approximately
retailer are diametrically opposite to the challenges 27 million shoplifters (or 1 in 11 people) in the
faced by a small convenience store. For example, a United States today and more than 10 million people
large 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 including
smaller 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 indicate
revenues. While improving the customer experience is that shoplifting (and theft) can affect any retailer, at
definitely important for a mid-sized store, differentiating any location and at any time and the only way to
its services from those of larger, discount stores prevent losses is to continuously monitor the merchandise
operating in the neighborhood could be the most as soon as it leaves the production facility all the way
important 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. 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 location
There are both immediate and long-term impacts of
information can be further leveraged for retail
loss 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 immediate
loss for the retailer (assuming that the retailer has
Loss Prevention in the Supply Chain
already paid for these items). On the other hand, if an
employee steals a company laptop that contained Wireless solutions that enable tracking of the
sensitive information (such as customers’ email merchandise along the supply chain can be used for
addresses, 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 Range
laptop – the retailer will have to disclose this loss to
Wireless Technologies
the public, and may also have to face any potential
lawsuits that could be filed against it for negligence. Asset Tracking and Monitoring technologies such as
The same laptop could also have other information RFID can be used for monitoring the inventory along
such as updated inventory levels, loss of which could the supply chain. These passive RFID tags are read by
force the retailer to manually run an inventory check RFID readers that are placed along the appropriate
again. This could bring the store operations to a virtual locations in the supply chain and can be used to
halt until the inventory information is updated again. monitor the movement of goods all the way to the
Keeping goods securely locked in display is not a good retail outlet. Even active RFID tags could be used for
option 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 Area
allocate the cost of their losses (and loss prevention
Wireless Technologies
initiatives) across different departments and some
retailers are even contemplating increasing cost of GPS-based mobile technologies running on wide area
their 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 about
KEY MOBILE TECHNOLOGIES FOR each and every item in this manner, the vehicles (or
LOSS PREVENTION—SUPPLY CHAIN even the large boxes) carrying the merchandise can be
AND IN-STORE fitted with a GPS transmitter that can be used to
track the movement of the items from the manufacturing
Frost & 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 fitted
chain 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 virtual
supply chain is concerned with both types of loss boundaries and can send an alert if a vehicle (or an
prevention, while a small outlet (such as a convenience item) outfitted with the appropriate GPS equipment
store ) may be more interested in loss prevention goes outside these boundaries.
within the store since they don’t really own the supply
chain. Both these types of losses can be prevented by Loss Prevention in the Store
using appropriate wireless solutions for asset monitoring Wireless security and monitoring solutions that run over
and tracking, surveillance, and even wireless alarm mobile networks can be used for loss prevention inside
systems. 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. Frost & Sullivan
Video 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 could
wireless networks can be used to monitor the shopping help the retailer in a court of law. Sensor-based
aisles and storage areas in the store. These types of technologies such as weight monitoring systems can
surveillance system can also be installed outside the be used for providing additional security features
store premises (in the parking lots, for example). It is within the retail environment. For example, an alarm
significantly easier to install new cameras and to move could go off if an expensive item (such as a display
existing units to newer locations within the same piece) is lifted by unauthorized personnel from its
store (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 informed
wireless 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 Surveillance
appropriate security apparatus without having to run
cables to each retail outlet or each installation point. Frost & Sullivan’s research on video surveillance
equipment indicates that there are multiple benefits to
RFID Technologies installing video surveillance systems in a store:
Short range wireless technologies can help notify the
store employees and security personnel when an • Visibility of camera systems provides a
attempt 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 and
for 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-based
move 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 regulatory
the store, for example). Other Electronic Article compliance, reducing liability against potential
Surveillance 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 Other
Sensor-based Technologies Frost & Sullivan believes that video surveillance systems
can reduce shrinkage losses by 0.5 to 1.0 percent
Intrusion detection alarm systems can use wireless
points in less than 12 months. Figure 1 shows how
communication to inform the appropriate security
video surveillance systems can help reduce shrinkage
personnel in case of an intrusion (or a break-in) into a
for a national retailer with 500 stores over a three
retail outlet. These systems can be integrated with
year time period.
video surveillance systems to activate video feeds to
6 frost.com
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 & Sullivan
Figure 1 assumes an annual average sale of $20,000,000 The Network
per retail outlet and an annual increase in sales of 10
It is important to choose a mobile/wireless provider
percent per outlet. Shrinkage is assumed as 1.5 percent
with broad network coverage, high uptime and enough
for all three years, while reduction in shrinkage due to
capacity to support high-bandwidth security applications
installation of video surveillance is assumed to be 0.5
(such as video surveillance). Both outdoor, as well as
percentage points. As seen in Figure 1, a large retailer
in-building coverage are important for supporting the
could 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 be
of a video surveillance solution. Other loss prevention
able to provide real-time location information for
technologies can further help generate additional
asset monitoring and tracking which is critical for loss
savings, which can easily justify investments in retail
prevention in the supply chain.
loss prevention solutions (such as video surveillance).
Vertical-specific Solution Portfolio and Partnerships
KEY CONSIDERATIONS FOR CHOOSING
The mobile operator’s ability to offer complete, end-
A MOBILE SERVICE PROVIDER FOR
to-end implementation for retail loss prevention is
LOSS PREVENTION
important. The solutions should also be scalable to
support the retailers evolving requirements. Loss
Network capabilities, vertical–specific expertise and
prevention solutions comprise of a hardware endpoint,
partnerships, customization capabilities, pricing flexibility,
a software application and the network connectivity
and a track record of proven deployments are some
for reporting and feedback. It is virtually impossible
important considerations when choosing a mobile service
for mobile operators to develop all the different
provider for supporting the retail security requirements.
components of loss prevention solutions in-house—
These aspects are described in detail below:
frost.com 7
8. Frost & Sullivan
specialized partners that understand the key requirements Track Record of Proven Deployments
of the retailers can add significant value to the deployments
Mobile operators with proven deployments that have
by bringing in the necessary hardware, software and
served the loss prevention requirements of different
product integration expertise. Retailers should look
types of retailers are likely to be considered a ‘safe
at both the range and type of partnerships (i.e., both
bet’ by prospective retailer customers. Loss prevention
quantity and quality of partnerships) that mobile
solutions are sometimes expected to generate savings
operators have and evaluate how these partnerships
of millions of dollars for retailers over the lifetime of
can enable the mobile operators to support their
their deployments, which is why retailers should definitely
unique requirements.
request for verifiable customer references and case
studies that clearly indicate how others have benefitted
Customization Capabilities from deploying a particular mobile operator’s loss
prevention solution(s).
A one-size-fits-all approach certainly does not work in
the retail environment, where aspects such as the
desired scale of the implementation, number and type Customer Care and Support Capabilities
of retail outlets to be outfitted with loss prevention
The mobile operator’s ability to provide consultative
solutions, retailer’s budget, existing retail security
sales and support capabilities on an ongoing basis is
systems (and need for integration with these), indoor
also critical for a successful deployment. Retail loss
versus outdoor deployments, and others determine
prevention solutions can have extremely high levels of
the best approach. It is important for the mobile
requirements around reliability since even a small
operator 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 and
retailers achieve the best return on their investments
resolve any technical issues quickly is an important
in loss prevention technologies and systems. The
parameter to consider as well. Round the clock
ability of the mobile operators to deliver these types
customer care and support, remote asset monitoring
of specific solutions within the required timeframe is
capabilities, availability of field technicians and even
an important parameter for the retailers.
service level agreements (SLAs) should be examined
by the retailers to ensure consistent performance of
Pricing Flexibility the retail loss prevention apparatus.
The mobile operator should be able to offer multiple
pricing models for its loss prevention implementations.
INTRODUCTION TO SPRINT’S SOLUTIONS
Large retailers may want to own their own endpoint
FOR LOSS PREVENTION
equipment to have greater control over these assets,
while smaller retailers may prefer a turnkey deployment Sprint is a leading provider of retail loss prevention
that is offered to them on a pay-as-you-go model to solutions in the United States and has developed an
allow them to avoid large upfront investments in the entire ecosystem of strategic partners that enables it
hardware. The mobile operator should be able to to serve the needs of different types of retailers. It has
accommodate all these pricing expectations and build loss prevention solutions in the U.S. retail segment.
some of the cost of the hardware into the service
cost to ease the burden on retailers who don’t have
the capacity for large upfront payments. Current Sprint solutions for loss prevention in the
supply chain include—advanced asset tracking and
8 frost.com
9. Retail Loss Prevention—Using Wireless to Stop the Stealing!
location determination implementations, geo-fencing
and alerting solutions, and others. These solutions are
offered in partnerships with leading vendors such as
Trimble Navigation Limited, TeleNav, Nimble Wireless
Inc., Sendum Corporation, Omnilink Systems, OnAsset
Intelligence Inc., and others that are leaders in their
respective fields and bring in valuable expertise to the
mix. Availability of a large retail loss prevention product
portfolio enables Sprint’s retail customers to deploy
the most suited implementation for their unique
requirements. Clearly, Sprint has focused on getting
the right partners to build the right ecosystem for
retail security requirements.
For in-store loss prevention, Sprint offers a portfolio
of video surveillance and intrusion detection systems
that can be used for remote monitoring. Sprint’s next-
generation IP-based video surveillance systems run on
its nationwide high-speed wireless network and include
innovative accessories such as mini DVRs, network
DVRs and analytics (such as behavior recognition and
pattern identification).These solutions are offered
in partnership with vendors such as VaraSightTM
Surveillance( a division of Feeney Wireless, LLC), I2C
Technologies, Crime Point, and others that contribute
to Sprint’s product portfolio with affordable, certified
and easy to deploy surveillance and alarm systems.
A nationwide high-speed wireless network, a
comprehensive portfolio of loss prevention solutions,
flexible service pricing, robust enterprise customer
care and support, numerous proven deployments, and
flexible billing options are examples of some of the
unique offerings for loss prevention from Sprint. These
assets have enabled Sprint to deliver a compelling set
of solutions to prevent losses in the supply chain and
within stores, which has translated to higher margins
and enhanced satisfaction for Sprint’s retail customers.
frost.com 9
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