It's not widely
known to outside retailers, but employee theft comprises the highest
percentage of retail shrink — more than that from traditional
shoplifters or outside organized retail criminals.
Such internal
theft may involve cash, credit cards, gift cards or something
called “sweethearting.” Sweethearting occurs when
employees give free or discounted merchandise to friends or family.
They accomplish this through cancellations — “as is”
items, returned items, discounted items, void/no transactions
or manual entries — at the register. Sweethearting is particularly
difficult to detect and easy to accomplish at POS terminals.
The good news
is that in recent years, point-of-sale video analysis has been
coupled with exception reporting to uncover fraudulent transactions
instantly. Using video analytics, retailers are able to filter
out the false positives to identify the people and merchandise
involved.
Video analytics
systems use sophisticated video-processing algorithms to allow
a computer to “understand” what's happening on the
camera. The computer tracks both people and merchandise, and it
can determine, for example, if a person is standing next to a
point of sale or if merchandise is placed on a counter. The video
analytics data is stored in a database so it can be reviewed later
in conjunction with POS transactions and exception reports.
By synchronizing
video analytics along with video recordings with POS transactions,
loss prevention professionals can provide a visual verification
along with the items appearing on the terminal transaction. This
detects fraud such as sweethearting through a real-time alert
and visual evidence that an item has bypassed the scanner.
In one recent
case, a major luxury retailer used point-of-sale video analytics
to address a high level of internal theft. The retailer implemented
a video analytics system to flag suspicious behavior and correlate
it with atypical transactions. It used the video analytics system
to flag when questionable returns or void transactions took place
at the terminal without customers being present. The retailer
was then able to produce instant evidence for fraudulent events.
In fact, it has been able to increase the number of internal investigations
concluded in 2007 versus 2006 by some 80 percent. As a result,
the system paid for itself within a few months.
Patrick Sobalvarro is CEO of Intellivid, Cambridge, Mass.
