Network Video Offers An Important Route To Reducing Shrinkage For Retailers

Axis Communications is seeing strong demand for its network video products in the retail sector following an extended period of engagement with a range of retail solutions providers.  Phil Doyle, managing director of Axis Communications (UK), points out some of

the more successful and practical applications of network video in the sector.

The natural focus of any discussion about the use of network video in the retail sector is on shrinkage or loss prevention.  This is a logical fit for Axis because it focuses so much on designing and manufacturing network cameras for professional security usage.  In addition, there is a clear and tangible problem which needs to be tackled collectively: theft of merchandise from retail stores.

Rise of shrinkage within retail sector

According to the European Retail Theft Baromoter 2007, a massive 42% of all shrinkage or £20,906 million was lost through ‘customer' theft and a further £17,464 million (35.2%) as a result of theft by employees.  So collectively over three quarters (77.2%) of all shrinkage is attributed to theft of merchandise in Western Europe.  Sadly, UK retailers have to wrestle with this problem more than many of their counterparts in the region:

the UK lost 1.34% of sales turnover to shrinkage in 2007, turning in the second poorest figures in Western Europe.  As if this wasn't worrying enough, this percentage was marginally up on 2006's figures.  With actual percentages of shrinkage showing little or no reduction year-on-year and the level of absolute retail sales increasing, isn't it time to look at new ways to curb this growing loss in order to drive more profit to the bottom line?

Network video monitoring solutions

To this end, Axis has been working closely with IBM over the last couple of years to produce a solution built on best-in-class network cameras and IBM's Smart Surveillance Solution.  A solution such as this enables proactive monitoring of would-be thieves in-store and recording of individuals to provide video evidence of theft, but also combines this with an insight to help store managers, merchandisers and retail operations managers to understand patterns of customer flow into, around and out of the store.

Network cameras can be integrated with other technologies to provide improved analysis

Movement can be displayed as a ‘heat map' which illustrates the main paths which customers naturally take as they move through a store - with red showing high volume traffic.  This heat mapping analysis can then be used to help merchandising within each specific store; as well as to prevent congestion and maximize sales.  This data can also provide a ‘best practice' store layout model for future stores.  By adding in the ability to monitor dwell time in high risk areas, proactive action can be taken if suspicious behavior or loitering is identified.

The intelligence gathered could help to negotiate third-party advertising space within a store, with prime locations commanding higher levels of spend by brands.  Combined with basket and item spend (provided by POS software), it is also possible to analyze whether individuals spent time looking at a product or promotion but didn't purchase and then feed this vital intelligence back to the brand owners.  Merging these applications with network cameras provides for a deeper layer of proof and intelligence which has proved too difficult and expensive to get from analog-based CCTV cameras.

As noted above, dwell time analysis combined with network video is already being used in stores to offer early warning signs of theft.  This form of ‘exception reporting', which many retailers are now adopting, can result in the apprehension of would-be thieves before they are able to leave the store. 

Value of network video solutions in retail sector

Intelligence gathered from network cameras can be used to analyze customer behavior

Security cameras have also been connected and integrated into queue management solutions that provide data on queue length, waiting and total checkout times.  This intelligence helps store managers to analyze optimal numbers of checkout aisles and balance staff levels during peak trading times, thus enabling improved profitability whilst retaining high levels of customer satisfaction.  This can prove invaluable during lower basket spend, higher throughput periods, such as lunch times where queuing for any time can result in frustrated customers and abandoned baskets.  Network cameras are vital here in showing early signs of impatience that can be dealt with proactively.  Network functionality also provides the real benefit of being able to link multiple sites intelligently and achieve higher economies of scale and improved sharing of data.

Axis has also been working with several POS solution providers including Bizerba which has specific expertise in retail systems for weighing and labelling fresh produce.  Its Class E Touch Screen scales now offer the option of embedding an Axis camera into them to provide dwell time analysis and even enable facial identification for the purposes of tailoring offers to specific customers, thereby facilitating cross-selling opportunities and deeper engagement with customers.

Network video integrated with electronic tagging systems enables tracking of high-value items

There are also clear benefits from integrating network video with Electronic Article Surveillance (EAS), or retail tagging as it is sometimes called.  If alarms are triggered by unremoved EAS tags or labels, as unpaid, high-value items leave the store, shop managers and security personnel can be sure that network video systems have captured not only the moment of exit from the store but also followed the movement of these goods around the store from the point of view of anticipating and intercepting suspects proactively before they reach the door. 

Network video also offers the very real advantage of networking the collection and storage of video images from cameras set in a number of stores all over the country.  The system can be easily triggered to store only images that meet certain exception thresholds.  These exceptions might be linked to dwell time or EAS tag movement for example.  The benefit of centralizing the video recording in this way is that key data is unlikely to be lost because local digital video recorders or VHS recorders were not working properly or someone has forgotten to change the tape.

Irish book retailer Hughes & Hughes is one of many retail customers to network cameras to support day-to-day store management decision-making.  Senior managers there have used cameras to check on trading activity in their stores

during busy periods and adjust staffing levels, all remotely by viewing images from these stores over the internet on their laptops.  In addition to the obvious anti-shoplifting benefits and maintenance of adequate staffing levels, Hughes & Hughes and Douglas Court Shopping Centre in Cork, Ireland, have also found network cameras invaluable for checking the validity of so-called ‘slip and fall' insurance claims, most of which have proven to be fraudulent and had previously been costing their businesses an enormous amount of management time and expense to settle.

Future of network video solutions in retail sector

In summary, the retail sector is now seeing that network video solutions are unlocking new possibilities in terms of cutting losses, increasing sales (and therefore maximising profitability), improving understanding of the customers and ensuring high levels of customer satisfaction which itself is encouraging repeat and return sales opportunities in the future.  So much so in fact that we are now seeing retailers prohibiting the installation of standalone analog-based CCTV systems without first considering the potential of creating an IP-Surveillance network to compare the total cost of ownership and incremental benefits which can be gained.  Even in cases where investment has already been partly or wholly sunk in analog technology, Axis is delivering the benefits of network video through its range of video encoders.

We know that retailers who have already investigated the move to network cameras are becoming increasingly convinced that these benefits have a significant impact on their bottom line and we would encourage anybody who has yet to discover the business value to take stock of the total cost of ownership and business benefits which can be gained.

Phil Doyle
Managing Director
Axis Communications (UK)