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Loss Prevention

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Is it possible for retailers to implement a technology that simultaneously increases sales and profit and reduces shrink and capital investment costs?

“The State of Loss Prevention in Retail: Controlling Losses and Maximizing Profits,” a report published in April by Aberdeen Group, notes that by linking LP tools and strategies to intelligent business solutions like analytic platforms, electronic article surveillance (EAS) solutions and radio frequency identification (RFID) technology, retailers gain real- or near-real-time access to information that gives them the ability to transition losses into profits.

Wayne McBrian, director of loss prevention for Brookstone, says that by using the RetailNext Business Intelligence platform, Brookstone reduced shrinkage between 0.2 and 0.3 percent across its more than 300 stores. With 2011 sales of $372.4 million, that’s an estimated savings of between $745,000 and $1.1 million.

“We have insight into employee behavior that is linked to traffic patterns and conversion rates,” McBrian says. “For example, we use analytics to identify suspicious returns and video to make sure a customer is present during the transaction.”

In the opinion of Blue Montez, director of asset protection for American Apparel, RetailNext is “unique in its versatility.

“Not many retailers have it yet,” he says, “but I think it’s the wave of the future.”

Centralized system
RetailNext’s Business Intelligence platform integrates store-level point of sale data, traffic management data and surveillance camera video into a central store-level analytic database. The raw data is then consolidated and analyzed according to how users at the store, regional and corporate levels want to view trends and exceptions.

Reports and alerts are transmitted to dashboards on each user’s computer at a frequency of the user’s choosing. Some merchandising or operations users may want to see sales conversions for individual stores, Montez says, while LP users may want to see exception reports and video snapshots from high-risk stores.

Until recently, “retailers had to install two different systems to offer video-based loss prevention and video-based traffic counting,” says Tim Callan, RetailNext’s chief marketing officer. “Current state-of-the art in-store analytics solutions make it possible to accomplish both of these functions with a single setup. This saves both capital expenses for installation of cameras and ongoing support costs.”

RetailNext has more than 50 retail and CPG companies on its platform, allowing it to measure the behavior of more than 20 million shoppers per month.

Until about four years ago, American Apparel had been using two platforms to do what Retail Next does as a centralized system. There was a camera surveillance system in one platform to monitor the stores and a separate platform to manage POS exceptions.

Now, because RetailNext captures analytic data in a central platform and makes it available to all of American Apparel’s core divisions, “we all share a common balance, which enhances teamwork and makes us more efficient,” Montez says.

“I can actually go into a store and talk about operations, about conversion rates and scheduling because I have the ability to see that data,” he says. “Operationally, store managers and divisional and corporate operational managers can use that same data to address loss prevention needs by analyzing POS exceptions.

“Our allocators can go into the system and make sure that the stores have followed their allocation setups,” Montez says, “and we can all do this without having to physically be at a store.”

Customizable dashboards
The process has saved time for American Apparel LP and asset protection associates in a variety of ways. “In the past if we were researching 10 refund POS exceptions, it would take at least an hour to go back and compare each exception to its related video,” Montez says. “Now we can see exceptions and video snapshots side by side and we can instantly identify whether there is a problem. It takes about 15 minutes.”

Montez describes the platform as “very simple and easy to use. Everything has icons. I even have the ability to look at every store in the company globally.” Because the platform is very customizable, it was “very easy” for American Apparel to create its own dashboards, reports and alerts and share them among departments.

“I can set up alerts and customize them to any number of exceptions that loss prevention and asset protection need to know about in real time,” he says, including alerts about whether a camera is shut down or goes down or when an associate is ringing up larger transactions or making more refunds than normal.

“It also helps us learn from each other,” Montez says. “Each of our users can create their own exception reports, and if it’s a good idea and it’s generating results, then it may be something that we all adopt and use.”

Most recently, American Apparel’s asset protection department has been conducting random audits of stores “to make sure that asset protection policies and procedures are being followed. We use the system to help us rate stores based on how they are following our procedures,” Montez says.

Corporate LP “can also download video clips of exceptions to serve as proof we send the stores the results of our audits,” he says. “That helps in training and it helps reduce shrink.

Before, store staff knew camera systems were in place, “but sometimes they don’t have a lot of confidence that someone is actually utilizing those cameras,” Montez says. “Once we started sending out those audits with the video clips, we started seeing a huge change in awareness. Now our store staff knows we monitor those cameras and, as a deterrent, that’s contributed to our shrink reductions.”

Reduces expenditures
After implementing RetailNext in nearly 60 percent of its stores and creating, among other things, a separate asset protection department, American Apparel has reduced shrink by 28 percent, Montez says. RetailNext “has played a significant role in that reduction,” Montez says. “By itself, it reduced shrink by 16 percent,” and he expects that figure to improve as more stores implement the system. He also says that, based solely on shrink reduction, each store can achieve ROI on the system within four months.

American Apparel’s chief intelligence officer Stacey Shulman reports that the chain has also significantly reduced its capital expenditures by combining LP and business analytics into RetailNext.

“Purchased separately, traffic management and loss prevention systems would have cost American Apparel up to 40 percent more,” she says. “With RetailNext we were able to bring in something we didn’t have before and got better quality at a lower overall price. Beyond that, we’ve used RetailNext to identify low-converting locations for concentrated attention and driven increased sales in these stores.

Montez says he often describes RetailNext as a tool that gives retailers “the all-in-one place to go. We don’t have separate systems. We share the same system and it’s very positive in that way.”