New Security Challenges

As new technologies evolve in the retail marketplace, retailers and consumers alike must adjust to new ideas and opportunities that have the potential to change the way we do business. On the horizon, many retailers are preparing for the advent of new payment options. Mobile payments are evolving rapidly, and in the coming years are expected to be a commonly utilized alternative to cash, checks and credit cards. However, just as the onset of online banking and billing faced security challenges and setbacks in its early days, so will the new payment technologies in retail.

New Technology Poses Security Risk for Retailers and Challenges LPs

According to the 2011 Mobile Payments Global Survey by KPMG, a majority of companies think that mobile payments will become mainstream in the next five years. These new technologies include mobile wallets, mobile banking and contactless card systems. The study, which surveyed nearly 1,000 companies across the world, noted that while convenience will foster growth, security will impede adoption. In fact, 71 percent of respondents said that security is the main challenge companies face as they develop mobile payment strategies. Retailers will need to proactively prepare to meet these challenges, especially when it comes to loss prevention.

In the future of retail, even completely contactless checkout and payment systems are a possibility. Many technology innovators envision a day when consumers will fill their carts with items from a retail store and walk through the store exit without stopping to pay. They will not be shoplifting, they will simply be utilizing an automated system that reads RFID tags attached to every item, calculates the total, and charges a credit card or bank account the appropriate amount. No more lines. No more scanning. No more price checks. A seamless and instant transaction will make checkout a breeze.

This is where some feel retail is headed in the future. Between now and that time, new technologies will come and go, opening new windows of opportunity for theft, fraud and loss. Yet the precise ways in which shrink will manifest itself is often revealed only with time and experience. This presents a challenge to loss prevention (LP) professionals who are already grappling with the best way to eliminate dozens of other sources of shrink.

Regardless of the technology being adopted, the best practices are simple. In order to maximize the opportunity, LP professionals must evaluate new technology, anticipate challenges, and mitigate risks. Retailers should follow a few basic steps:

1) Test in the lab, not the store. Before rolling out new technologies in stores, retailers should test them in a lab. Many larger retailers maintain these labs in-house, but organizations such as the Loss Prevention Research Council (LPRC) also provide contained environments for testing technologies, their impact on customers, and pitfalls they may face in a retail environment. A bit of knowledge can help LP professionals evaluate the impact of a new technology and recommend tactics for implementation that may reduce losses that would otherwise wreak havoc across live stores and real customers. For example, electronic article surveillance (EAS) was once a technology highly valued for its ability to deter criminals, but retailers discovered it could erode the legitimate customer’s experience when tags were not removed properly. As a result, LP’s trade-off has been to use EAS as more of a deterrent to amateur thieves than a shoplifting checkpoint.

2) Give LP a seat at the table. It is critical that LP professionals have a seat at the table any time a new store technology is planned for implementation. LP can see the technology in the lab and beta environments, collecting valuable insight into the possible losses that may be triggered. It also gives them a chance to understand the processes that will need to be created to mitigate risks and losses, as well as metrics that must be monitored to determine if losses are stemming from the new technology. Self checkout is an example of a technology that many retailers have deployed to enhance customer experience and efficiency, but also introduces risks associated with loss.  LP should be involved early during the proof of concept phase.

3) Don’t forget to track. It can take months or even years to understand the impact of a new technology on shrink and to fully evaluate the ROI. LP must collect data and monitor key metrics over time to effectively reduce shrink. They must also evaluate other factors such as how these technologies impact the customer experience. Retailers will continue to implement and evaluate technologies along the way, adopting some for the long haul and discarding others over time.

The best advice for LP professionals is to be proactive and keep a finger on the pulse of what’s going on. Be sure you are invited to the conversation and share your valuable insight as to the overall impact a new technology can have on shrink and business operations.

Andrew Wren serves as CEO of Wren Solutions, a loss-prevention technology provider helping LP professionals reduce loss, increase profits and rise as he