25 minute read
BENCHMARKING
Understanding Data Analytics in Loss Prevention
The focus of our next benchmarking survey will be data analytics. In our survey of loss prevention practitioners, this topic was ranked second highest after emerging technologies in terms of interest.
Prior to undertaking the survey, we thought it important to first map out what the term “data analytics” may mean to the loss prevention industry—it is certainly a phrase now widely used but is open to a wide range of interpretations and definitions. Equally, the way in which data analytics is performed can vary enormously, ranging from something as simple as an Excel spreadsheet sent to store managers to the development and use of customized systems that integrate data flows from across the entire retail business. Moreover, understanding the range and breadth of data sources that can be used as part of data analytics performed by the loss prevention function is also important.
Working in a Data Lake
In the not too distant past, loss prevention was often described as “living in a data desert” with inventory-driven shrinkage numbers, which were only available a few times a year, being the primary driver of most business intelligence. Fast forward to today, and instead of deserts, retailers now refer to having “data lakes,” vast quantities and types of data covering many aspects of the operation. While undoubtedly preferable, moving from a state of data famine to data feast presents its own challenges in terms of prioritization, management, and control of the data.
The term data analytics is typically used to describe the collection, interpretation, and dissemination of data in order to describe, predict, and improve the performance of a business. Analytics can be undertaken in many ways, but it is important to distinguish the difference between it and other forms of data-driven systems that provide routine alerts and responses, such as exception-based CCTV systems and EAS alarms. These types of systems routinely generate “data” upon which individuals may react, such as a security guard responding to an alarm at a store exit triggered by an active EAS tag or a member of staff approaching a customer who has triggered an alert at a smart shelf. However, the process typically lacks any form of analytical interpretation. Certainly though, the aggregation and subsequent analysis of this type of data would be data analytics—the key difference being the steps taken beyond simply responding or reacting to data-based prompts.
It is also important to distinguish the difference between data analysis and data analytics—the former is the interrogation of data sets, while the latter is viewed more broadly as the analysis, interpretation, and use of data sets to make better informed business decisions. In addition, while data analytics can be used on single data sources, it is normally associated with multiple data sources and the use of advanced statistics and predictive models. In this respect, data analytics moves beyond simply answering simple questions from data sources—how many refunds store X performed yesterday—to using the data sources to enable the business to make better and more-informed decisions—is the current refund policy being applied correctly across the business, and if not, what changes need to be made to ensure that it is?
How the process of data analytics is performed varies enormously across the retail industry. Some companies prefer to “build” their own analytics capability internally, using the expertise and resources available within their businesses, while others opt for using third-party technologies. A visit to any of the major retail loss prevention conferences and associated exhibit halls reveals a plethora of providers now offering a wide array of data-analytics packages. Others adopt a blended approach using internal resources for some analytical functionality and
Beck is a professor in the criminality department of the University of Leicester in the UK where he is primarily focused on research on retail crime and shrinkage issues. He can be reached at bna@le.ac.uk.
Palmer is CEO/president of PCG Solutions, a loss prevention consulting, training, and education firm. He can be reached at wpalmer@pcgsolutions.com.
Peacock is a visiting fellow at the University of Leicester and strategic coordinator for both the ECR Europe Shrinkage and On-shelf Availability Group and the Retail Industry Leaders Association Asset Protection Leaders Council in the US. He can be reached at colinpeacock@hotmail.co.uk.
All are frequent contributors to both LP Magazine US and European editions.
In the not too distant past, loss prevention was often described as “living in a data desert” with inventory-driven shrinkage numbers being the primary driver of most business intelligence. Fast forward to today, and instead of deserts, retailers now refer to having “data lakes,” vast quantities and types of data covering many aspects of the operation.
continued from page 36 external systems for other elements. In addition, the location and availability of the human resource to perform the analysis and interpretation steps of data analytics varies considerably—this may reside in the IT department, it could be a specialist function within the loss prevention team, or it could be a service provided by a third party. It could also be a task carried out by a full-time specialist or be something tagged on to the duties of staff employed to perform a range of tasks.
Analytics Uses
Preliminary analysis of how LP teams are using data analytics suggests it is being used in at least three ways, based on the type of analysis being performed, the frequency with which it is done, and the type of employees using it. ■ Operational data analytics—Typically, automated systems based on multiple data sources and computer algorithms designed to push results to a given audience to trigger organizational responses. This can take the form of data dashboards where the intended audience is guided both in the interpretation of the results and how they might best react to them in order to make business improvements.
Frequency of use: daily or weekly.
Typical user: store managers or LP associates in field or store-based roles. ■ Tactical data analytics—The use of data streams that can be interrogated by
LP teams to resolve specific issues more quickly and efficiently, for instance the investigation of specific anomalies such as above-average rates of refund frauds or out of stocks. This type of analytics is typically pulling data from business systems. Frequency of use: on an ad hoc basis. Typical user: LP investigators or regional management. ■ Strategic data analytics—The assessment and review of multiple data sources to enable the LP senior management team to develop medium- and long-term strategic decisions for the business. This type of analytics is typically pulling data from business systems. Frequency of use: quarterly or yearly. Typical user: senior
LP executives.
One of the key elements in these three types of analytics is the extent to which the systems employed are used to push or pull data to recipients. As can be seen, a functionality increasingly offered by third-party analytics providers is the collation, interpretation, and dissemination of operational data analytics, typically to store managers, that will not only give them data specific to their situation but also potential interventions that may improve their performance. This data is largely generated automatically and is “pushed” out by the system. For some, this is increasingly being described as “prescriptive analytics”—in effect data analytics but with greater emphasis placed on helping the end user improve business performance. At the strategic data analytics level, where the data is more likely to be “pulled” from the system, some companies refer to the use of “predictive analytics”—another variation on data analytics where the various data streams are collated and analyzed with an end goal of making predictions about what future key data indicators are likely to be. For instance, stores may be offered estimates of what their levels of shrinkage, refunds, or cash losses are likely to be based upon historical data and other changes to their environment.
Data Sources
As mentioned earlier, the range and depth of data sources used in data analytics by LP teams can vary enormously depending on the scope and nature of the department, the data streams readily available within the company, and the type of IT hardware and software being used. Detailed below are various data streams most likely to be used in data analytics: ■ Security systems and operations—
CCTV images; EAS data; access control and alarm records; investigation results; records of internal and external theft; safety incidents; workers compensation; general liability. ■ Store operations data—Stock audit results, stock adjustments; product damages data, spoilage data. ■ Point-of-sale data—Transaction data, refund information, self-scan audit data. ■ Payment data/cash control—Cash over/shorts; deposit shortages; check write-offs; gift card/SVC-losses or fraud; credit card write-off; card payment information; credit card charge backs. ■ Employees—Staff turnover; performance reviews; management and employee
tenure; staff engagement/morale survey results; number of full-time versus part-time staff. ■ Crime data—Local police crime statistics; third-party risk models. ■ Store profile—Type; size; sales volume; mall, strip, or street; layout; number of entrances; age of store. ■ E-commerce data—Customers frauds; credit card charge backs; damages; errors; rate of returns. ■ Supply-chain data—Unknown losses; vendor short shipping; picking accuracy; in-transit losses.
As can be seen, the potential data sources are many and varied—the data lake is increasingly fed by myriad data tributaries. Undoubtedly, these suggestions are but a snap shot of what some companies are now using, but the power of data analytics is to enable retail executives to begin to make sense of this wealth of data to improve the quality of the decision-making in the business.
Over the next few weeks, we will be reaching out to those companies that have previously contributed to the loss prevention benchmark series to gather information, based upon the framework outlined above, to understand how they are thinking about and using data analytics. In particular, we will be asking about: ■ The types of data analytics they are using (operational, tactical, or strategic). ■ How they are delivering data analytics in their business (internal, third-party provider, and so forth). ■ What human resource they are employing. ■ The types of data they are making use of when undertaking data analytics.
As with all the loss prevention benchmark surveys, the results will be made freely available to the US loss prevention community. As we design the survey instrument, based upon the discussion points above, we would very much welcome any comments and suggestions you might have to help us navigate your retail data lake and how you use data analytics. The topic is hard to define but potentially of significant interest as more and more data points become available to those working in the loss prevention function. For as the old sage Edwards Deming put it, “Without data, you’re just another person with an opinion.”
A MALL WITHIN A STORE?
BRICK-AND-MORTAR RETAIL REIMAGINED
Once the symbol of American retail strength that was exported across the globe, the mall is seeing a hazy future. As people shop more online and want something different from their downtime, the mall has become a destination that is approached as a last resort rather than a first choice.
There isn’t a great deal to do at the mall other than spend money on goods. Shoppers’ attention spans are short. If you want to grab their attention, then online is the way to do this with low prices and great offers. It feels so easy to order online and get it delivered to home or work. Add in the fear of crime from pickpockets, robberies, and assaults, and you have a place that holds no attraction for a growing number of Americans.
Malls are becoming dinosaurs. There is real danger of becoming extinct as the declining numbers of visitors leaves stores unwilling to take vacant units. The future looks bleak in many ways. But it doesn’t have to be this way. The future of offline shopping must look different from the past. Consumers have changed. It is time for retail to change too. What if we have a mall within a store?
What Is a Mall within a Store?
A mall within a store brings the experience into play. People may be shopping online, but expenditure on experiential shopping is growing and looks to be the future of healthy retail. You may be able to get items online from a retailer with much lower overheads, but you can’t get a spa experience, a manicure, a workout at a gym, or the latest juice mix at a juice bar.
The old model was to build a mall, add on a cinema and a few restaurants, and watch the money roll in. Modern retailers need to be smarter than this. People want to feel good about themselves. There is big money spent on wellness, and this ever-growing market of people with disposable income should be the target market for the “new” retail. It has become stale and not kept up with the trend for dealing online. This must change and deliver consumers something that they will tell all their friends about.
What Are the Benefits?
People are spending more on themselves. A busy work life and the stresses of balancing the work-life person they want to be means that there is a desire to keep fit, feel great, and follow a better lifestyle. As more baby boomers leave the workplace, they have a lot of disposable income and heaps of time to spend on anything they like. They are conscious of their health and are looking for sound advice.
This is where the mall within a store comes in. It appeals to people who want that experience. While they are in-store, they more often than not will spend money there too. It is a win-win for the retailer that can make the most of their space (so many traditional retailers have large stores that are underutilized) while attracting a loyal audience. In Seth Godin Purple Cow speak, these are the sneezers that will let the rest of the world know what you are all about.
We are looking at making a mall a safe haven for the right audience. People will flock to a location that can provide protection from the weather, a reason to visit, and a variety of experiences. Imagine the whole family of several generations arriving at a mall and all having a reason to spend time there. Now the mall must move to within the confines of the shop. But the next question is what to do with all the space that has been generated in this move.
What Happens to the Rest of the Mall?
We create some empty space with this concept. The mall within a store can lead to many other aspects of the mall becoming duplicated, then redundant, and then vacant. Obviously, this isn’t the long-term
solution to delivering a safe place for people to shop. The solution of what to do with the rest of the mall must come from somewhere.
There are other services that fit perfectly into this model and provide people with even more reason to visit the location. Thinking about the auxiliary services (for some, these will primary services), one could imagine using the space to cater to those with pets, which is often a no-no in malls, perhaps providing pet health services or an indoor dog park.
People use a variety of other services on a regular basis. Making the mall a destination in itself will generate more foot traffic. Adding other options, such as media stations,
financial institutions, health services, education provision, and an indoor play area, will make the mall a more attractive place for the whole family to visit together. Giving a wide range of reasons to make a visit to the mall, coupled with the experiences that online shopping simply cannot deliver, will make it a destination. Attracting the whole family and catering to pet owners changes the dynamic.
How Does This Feel for Loss Prevention?
Sadly, a greater footprint can bring with it more potential issues for security and loss prevention. Criminals could see the new mall as a place where they can practice more pickpocketing or antisocial behavior. The result is that the loss prevention team needs to beef up its presence and provide a different model to protect the assets of all stakeholders. The new mall will meet different challenges from a diverse clientele, possibly longer access hours and a transient custom. The loss prevention services across the mall must evolve.
As the rules of the game change, the different departments of a retail organization must keep up. To think this is just a challenge for operations or marketing isn’t looking at the whole picture. The skills used by the asset protection team will have to develop to meet these demands. Analysis will need to be carried out to see the new pinch points for losses as the customer profile and habits change over time. Doing things the old way just won’t do any more.
A mall within a store will have more licenced vendors—third parties that pay for a slice of the space. This means that costs and services will need to be shared, and the vendors will benefit from training and support in this area. A shared service model, along the lines of how the legal industry operates, will give the best asset protection cover at the best value point. Designing something from the ground up that is fit for purpose wins over adapting current (and possibly outdated) models every time. This will lead to a tiered functional matrix that will provide financial stewardship for the mall within a store where all parties can contribute and benefit from this resource.
What Are the Details Behind This?
It’s all well and good stating that a change must happen, but an active loss prevention team needs to know what this looks like on the ground. Diverse areas of the operation will look very different if we have a mall within a store.
One of the first considerations in any change is communication. How the asset protection team connects with the new clientele of the mall within a store can have a massive impact on behavior. Attracting new customers means that you also attract new age groups and dialects that will need to be integrated into communication. This is often dealt with in recruitment and training, so the emphasis on making sure the team is ready to help the new foot traffic and understand their space is all-important.
This is extended with the fact that the outside world will now be looking over the asset protection team’s shoulder. Every move will be scrutinized. This has positive and negative elements. The decision-making process must be more transparent and open, so people can see the mall has changed. If we want to attract clients back through the front doors, then they need to understand what protections are in place that were lacking when they decided the mall wasn’t for them. Social media and online reviews
show that word of mouth can boost or harm the foot traffic to a leisure activity. Making the new mall a place where the word of mouth is positive takes engagement.
With change comes an assessment of where we are now and where we need to be. With the asset protection team, this takes the form of managing the risk. Moving from one formula to another is filled with potential risk if a plan isn’t assessed and enacted properly. The very bottom line of this thinking is the protection of life. People need to be safe and feel safe in the new and unfamiliar environment. The current mall is associated with antisocial behavior and crime in many parts of the country. Creating a safe haven in the
new mall is paramount. The perfect time to change perception (and it will be perception that persuades people back to this environment) is at the time the mall goes through the conversion.
The customer base will change dramatically in this model and precedes a change in managing this new crowd. Older and younger visitors will be present in greater numbers as will the dog friendly environment proposed above. This changes the dynamic of how asset protection works with the public and alters the potential risks involved. Tracking people can become the main issue. There will simply be more of them to track, and the protection of the vulnerable offers new challenges to teams that might have been looking in another direction in the past. Don’t forget that criminals will also be looking at this new dynamic and how they can exploit it. Keeping
the safe-haven approach takes a new breed of thinking.
This new group of visitors may also necessitate a revolution in the political sensitivity of the personnel employed by loss prevention teams. The cohort of customers will change, almost overnight, so consideration must be made on: ■ A change in the gender makeup of visitors. ■ The increasing number of baby boomers with spare time and money visiting. ■ A potential change in race that visits the mall (moving to being in a situation where this doesn’t become a discussion). ■ The LGBT community and having the right knowledge base to interact.
This again will take the form of training and monitoring because the team you have will need to adapt to this new way of doing business. Change can be frightening for some, so think about the support and guidance that you can give people in the asset protection team to ensure that they transition effectively.
What New Skills Are Needed?
A new way of working for the whole mall looks to the future with anticipation. New skills will be needed to accommodate and welcome the diverse client base that will walk through the doors. With the old mall a thing of the past, you will see customers arrive that maybe have never had the mall experience before. The loss prevention team must be ready for the new challenges that lie ahead. Simply operating the same model in a new environment doesn’t account for the changing nature of the safe-haven mall with all the new components and different sectors this will attract.
Different dialects or languages may well be used by the new visitors. The radius new visitors will be drawn from will increase significantly, leading to potential communication issues if your team hasn’t been prepared for this. An academic center might bring visitors who don’t have English as their primary language. We already know that effective communication drives higher levels of security and lower shrinkage. The asset protection team must take this into account when devising an effective communication strategy with visitors to the new mall. This includes all forms of
communications—signage around the mall, face-to-face communications between team members and the public, and public announcements.
The safety of all the people in the mall is of paramount importance. Letting people know when they must move from one area to another (in fire drills for example) or that they may be subject to additional security measures from time to time is an essential part of welcoming new visitors to the mall. If this new model is to work, then the users of the facilities should feel comfortable and safe at all times. The old mall that leaves people feeling vulnerable has driven away visitors in droves. This must change when the environment alters.
Communication is at the center of any effective change. All stakeholders want to know what is going on. Those that are already in the mall will understand the current way of thinking but will need to be nurtured along the way to the fresh operation. Those that are using the mall for the first time will walk into an experience with their own expectations. The way you guide them through the structures will make the difference between a future where all parties work together for the good of the mall and a future where there is conflict and separation of interests.
The licenced vendors in the store and the additional service providers in the mall are vital in the effective management of the mall and the risks that may be faced in this new environment. Buy-in at all levels before the mall is opened in its new entity will see a smooth transition. Thinking about how this communication can be delivered in different languages or dialects in an effective manner will be the first step on the road. Communication that is planned with a clear goal in mind will provide a structure to work with. Delivering it in language that is understood by the recipient will make the goals of this communication come true.
The old may well replace the young in the new mall. A place where teens and preteens hang out to harass people and maybe get involved in low-level crime should be replaced by the safe-haven approach. Communicating with troublemakers has its own language—one of authority and low tolerance is seen as the most effective way to remove this potential threat and move it down the road. But this isn’t the kind of language that will appeal to the older clientele that the new mall will attract. Your asset protection team will need to be coached to have nurturing and positive conversations with these new visitors. The current
perception of the asset protection team as policemen should be replaced with the image of enablers and facilitators. Language is at the very heart of this approach. This may take time as the visitor profile changes, but with support and guidance, you can all work together to make the safe-haven mall feel like a natural home away from home for the patrons who will now enter the doors.
Where Does Technology Come into This?
Adopting the latest technology can be seen as the answer to many questions in retail, especially when it comes to asset protection. But there is a large investment here, and it must be considered carefully before hands go into pockets and money comes out. The right technology will become an effective tool in monitoring all the potential pinch points that we have already outlined in this article. Predicting the way loss may happen in a new environment is vitally important. Collecting data to develop modes of behavior is
Introducing LPM Online
An All Digital Companion to LP Magazine’s Print Edition
LPM Online is our newest offering for your reading enjoyment. LPM Online will publish every other month on even-numbered months in between our print editions. The inaugural edition went live in August. You can view it on the LPM Online tab on our website, LossPreventionMedia.com, or by entering LPM-online. com in your browser.
going to help move resources to the most effective places in the future.
The asset protection team must consider what forecast and situational planning demands and alerts will be needed. Effective communication between team members is vital, but formalizing this communication and collating the data is just as important when deciding where precious resources are allocated from then on. In the early days of the new concept of a mall within a store, this will be a huge learning curve for the team. New behaviors, new flows of people, and new customers will inhabit the space, and we will all need to learn from each other. Regular team meetings at that point will bring together shared best practice. The technology systems will allow the team to understand through qualitative and quantitative data interpretation, which will require stochastic tools to predict event probability. This puts them on the forefront when it comes to dealing with potential problems. Going into a new situation blind increases the scare factor many times over. This is all part of the support process.
A mall within a store can change the way people interact with a retail environment. The past and current model of “if you build it they will probably come” isn’t working. Online shopping is over its days of feeling like the Wild West and is now seen as a safer option by many consumers. In contrast, the mall feels like a risk in terms of having a higher price than online stores, putting their person or possessions in harm’s way, and being a hassle in terms of travel.
Making the mall a place where experiences happen, those that you cannot even contemplate online, and adding in vital services creates a mall that can become its own place, almost like an enclosed community or town. The future can look bright if we understand the demands of the consumer. A race to the bottom on price drags other elements of the offline retail space down with it. Service suffers, security takes a hit, and people stay away in droves. A mall within a store looks to provide a space where current and future consumers want to hang out.
This feels like a pretty cool place to visit. I hope we get there.
MAURIZIO P. SCROFANI, CCSP, LPC is a well-known supply-chain asset protection professional with over twenty-five years’ experience in retail and manufacturing. He is a prolific writer and frequent speaker at regional and national conferences. Scrofani is a consultant and general partner with MPS Ventures. He was recently named vice president of supply-chain security and intelligence for ALTO US. Scrofani can be reached at maurizio@mpsconsultants.com.
CUT SHRINK IN HALF
Reduce Labor Up to 80%
Turtle is a multi-function device that is proven to reduce theft, reduce labor costs, and a ROI of 6 months! Learn more @ www.intelligentlossprevention.com
800.747.4665 or 815.877.7464 visit us online at www.southernimperial.com
