info4security Web Exclusive

Retail investment in network video on the rise

10 Aug 08

By Phil Doyle

Network video specialist 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 solutions providers.

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 us because it focuses so much on designing and manufacturing network cameras for professional security usage. In addition, there’s a clear and tangible problem which needs to be tackled collectively: the theft of merchandise from retail stores.

According to the 2007 European Retail Theft Baromoter, 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 that isn’t worrying enough, this percentage was marginally up on the 2006 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 of curbing this growing loss to drive more profit for the bottom line?

Best-in-Class camera solutions

To this end, we’ve been working closely with IBM over the last couple of years to produce a solution founded on Best-in-Class network cameras and IBM’s Smart Surveillance Solution. The latter not only provides 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 understand patterns of customer flow into, around and out of a given store.

Movement may 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 (see the illustrations on the right hand panel of this page). This heat mapping analysis can then be used to help merchandising within each specific store, as well as prevent congestion and maximise sales.

Interestingly, 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 behaviour or loitering is identified.

This intelligent solution maps areas where customers stand or ‘dwell’ to view merchandise, and can be used to judge the effectiveness of Point-of-Sale (PoS) displays. It can also be used to help plan the positioning of particular brands, lines and categories of products within a store.

Negotiating third party advertising space

The intelligence gathered can also be used 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’s also possible to analyse 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. Combining these applications with our own network cameras provides for a deeper layer of proof and intelligence which has proven too difficult and expensive to realise from analogue-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. In one particular store, where our network cameras are being used to cover a section of high risk and high value merchandise, alerts are sent to store security when dwell time exceeds a pre-set period (in this instance 40 seconds). 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.

Our cameras have also been connected and integrated into queue management solutions which provide data on queue length, waiting and total checkout times. This intelligence helps store managers to analyse optimal numbers of checkout aisles and balance staff levels during peak trading times, thus enabling improved profitability while retaining high levels of customer satisfaction. Put simply, that can prove invaluable during lower basket spend, higher throughput periods (such as lunchtimes) where queuing for any time can result in frustrated customers and abandoned baskets.

Network cameras are vital here in showing early signs of impatience which can be dealt with proactively. Network functionality also provides the real benefit of being able to link multiple sites intelligently, achieve higher economies of scale and the improved sharing of data.

Dwell time analysis and facial identification

We have 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 a camera into them to provide dwell time analysis and even enable facial identification for the purposes of tailoring offers to specific customers. In turn, this facilitates cross-selling opportunities and deeper engagement with customers.

There are also clear benefits from integrating network video with Electronic Article Surveillance (EAS) or retail tagging. If alarms are triggered by EAS tags or labels that haven’t been removed, when the time comes that 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.

Collection and storage of video images

Network video 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 centralising the video recording in this way is that key data is unlikely to be lost because local DVRs or VHS recorders were not working properly or someone has forgotten to change the tape.

Book retailer Hughes & Hughes is one of many retail customers to use our network cameras for the support of 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.

Lessons to be learned

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 analogue-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 analogue technology, it’s possible to deliver the benefits of network video through a 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. We would encourage any security professionals in that sector who have yet to discover the business value to take stock of the total cost of ownership and business benefits which can be gained.