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Facial Recognition
Loss Prevention

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This article was published in the June 2016 issue of STORES Magazine.

With facial recognition tools, do benefits outweigh privacy concerns?

Facial recognition technology has progressed through several generations, been tested in the workplace and is employed on a daily basis by transportation venues, casinos and law enforcement.

So why aren’t retailers making wider use of it, either to identify known shoplifters or to personalize visits of loyal customers when they walk into the store?

The technology may be in wider use than most people suspect, but some merchants are hesitant to publicize their efforts and risk having them be misinterpreted by privacy advocates. As with video surveillance, facial recognition raises fears of privacy invasion, but these can be overcome, says Colin Peacock, visiting fellow at the University of Leicester in England and strategic coordinator for Efficient Consumer Response Europe’s Shrinkage and On-Shelf Availability Group.

“I think privacy is a concern. However, what history has taught us, especially in the United Kingdom, is that when consumers perceive there are benefits for them personally … then there will be a better acceptance,” Peacock says, “with the benefits outweighing privacy concerns for the majority. I think the same will be true of facial recognition. If consumers perceive a benefit, then acceptance will be good.”

Walmart has publicly acknowledged testing facial recognition technology; the company abandoned it because it showed little or no return on investment.

Walmart has publicly acknowledged it has tested facial recognition technology but then abandoned it. When Fortune reported last fall that Walmart had been using technology developed by facial recognition software vendor FaceFirst in an unspecified number of its stores, a Walmart spokesman said the project was terminated because it showed little or no return on investment. “We were looking for a concrete business rationale,” he said.

That correlates with what Peacock says about the slow adoption of facial recognition technology among retail businesses. The first hurdle is cost and infrastructure, because “facial recognition requires new cameras and extra bandwidth/servers,” he says.

Other hurdles include work process changes required of retailers in order “to document those individuals the system needs to ‘look’ for and, in turn, the adoption and use of the alerts,” Peacock notes.

Another challenge comes in changing the behavior of store associates. “[It’s] not easy to approach someone in the store who may already have been banned. This requires confidence and training,” Peacock says. “This is very important to get right, for many reasons. With staff turnover so high … a lack of training may lead to the wrong outcomes.”

Consumers’ choice

Even when reports of a store using facial recognition technology turn out to be unfounded, it can still be enough to bring out the privacy posse.

“You’re getting into this area of creepiness, really, where you may not know that this is happening and you may not know how much this is actually happening,” says Geoff White, a lawyer with the Public Interest Advocacy Centre in the Canadian capital of Ottawa.

Conjuring hypothetical mishaps, White asks, “What happens once you’ve stored someone’s data with a profile based on their face? How safe is it from hackers? Who has access to what information, and what other type of information is it being correlated with?”

Another critic of facial recognition technology is Alvaro Bedoya, founder and executive director of the Center on Privacy and Technology at Georgetown University in Washington, D.C., where he is a professor of law.

“You cannot delete your face, and once companies have enrolled you in a facial-recognition system there are few limits to what they can do with that information,” Bedoya says.

“Consumers must be given a choice as to whether or not this powerful technology will be used on them. Any set of privacy guidelines that doesn’t do that is an Orwellian farce.”

Representatives from various industries and businesses including Google and Facebook have been in discussions with privacy groups and advocates concerning guidelines for the use of facial recognition technology. But Bedoya says current proposals provide “zero choice” for consumers over whether or not they want their facial data to be recorded and collected.

More from NRF PROTECT

Learn more about loss prevention strategies, tactics and technology from brands including Meijer, Bloomingdale’s, Dunkin’ Brands, Williams-Sonoma and more at NRF PROTECT 2016, June 14-16 in Philadelphia. Learn more.

‘An additional safeguard’

Biometric technology, including facial recognition, has a place in retailers’ loss prevention armory, says Adrian Weidmann, managing director of design and analytics agency StoreStream Metrics.

“As long as shrink continues, and it will, bricks-and-mortar retailers have no choice but to leverage and test all available technologies to limit their losses due to shoplifting,” he says, noting that the National Association for Shoplifting Prevention estimates there are 27 million shoplifters in the country; 10 million have been caught over the past five years.

The economic pressure of shoplifting “will force retailers to leverage all available technologies to address this challenging problem,” Weidmann says.

Addressing facial recognition specifically, retail consultant Mark Heckman says the technology “will continue to be considered as an additional security safeguard against fraud, shoplifting and even VIP shopper identification.

“The key to mollifying the consumers’ privacy concerns lies in the communication to the shopper as to why these technologies are beneficial to them,” Heckman says. “Given the increasing number of credit card fraud cases, stolen identities and other personal information breaches, I believe most consumers understand that it is to their benefit to make sure they are who they say they are when a payment card is being used.”

In reality, he says, “Given the increasing number of security cameras both inside and outside retail stores, the majority of shoppers are already aware that they are being watched. Surely there will be privacy advocates who will find fault with some of the more invasive techniques, but ultimately it will be the consumer who will decide if the measures provide more benefit than inconvenience or intrusion in their personal lives, not an advocacy group.”

Sales of facial recognition software and equipment were $2.8 billion worldwide last year and are predicted to increase to $6.19 billion by 2020.
MarketsandMarkets

Beyond security

Moving beyond loss prevention and security uses, facial recognition has obvious applications for personalization marketing to frequent shoppers when they move around stores.

“With increasing competition from online sources, retailers have to become much smarter about how they engage with consumers,” says Allen Ganz, enterprise director of the biometric solutions division of NEC America, which has a facial recognition software product called NeoFace. “This is a new kind of data for retailers, and once this information is utilized it’s addictive.”

Bloomberg earlier this year identified Walmart, Giorgio Armani and Macy’s as exploring or testing facial recognition, though Macy’s has denied that is true and Walmart says it ceased its trials before the end of last year.

MarketsandMarkets estimates sales of facial recognition software and equipment were $2.8 billion worldwide last year and forecasts they will increase to $6.19 billion by 2020.

How and where retailers employ facial recognition is an emerging story in the bricks-and-mortar world, with the biggest questions being how fast and how far the use of such technology will move beyond loss prevention.

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