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Preventing Loss at the Checkout with Video and AI

Video analytics from new CDW partners can help retailers improve employee training, boost customer service and rapidly identify suspicious transactions.

At the National Retail Federation’s NRF PROTECT 2022 loss prevention, digital fraud and cyber risk event in Cleveland, there was a clear consensus among retailers: The risk of inventory shrinkage has increased noticeably over the past couple of years. 

Much of this comes down to staffing issues. With labor shortages continuing to be a challenge, many retailers are turning to technology for help. Implementing self-checkout solutions can alleviate the challenges associated with labor shortages, but it also increases the risk of theft.  Some retailers may also consider lowering their hiring standards to fill open positions, but that too comes with additional risk and, in many cases, higher rates of employee theft and fraud.

Inflation may also play a role. With paychecks not stretching as far today as they did a year or two ago, cases of shoplifting and theft are more prone to increase.

CDW recently announced several new solutions and services that utilize artificial intelligence to identify transactions of interest. Here are three types of transactions that can help stores identify loss.

Intentional and Accidental Checkout Errors Add Up for Retailers

Many of us have probably received a free drink at a bar or coffee shop, benefited from a friend’s employee discount, or received some other type of extra service for free at one point. It may not seem like a big deal at the time, but for retailers, it is a multibillion dollar issue called sweethearting.

However, not all instances of inventory shrinkage are malicious. For instance, a cashier may have intended to use a keyboard shortcut to scan multiple items at the same time but only charged the customer for one item. Advancements in AI and video allow loss prevention teams to compare the number of items visible in a video to the number of items in the point-of-sale transaction and automatically flag transactions of interest.

This is extremely valuable, because the task of identifying issues and tying the video back to the transaction is extremely time-consuming. By flagging transactions of interest and identifying trends and benchmarks, retailers can more effectively determine where theft is occurring and where training is needed.

How to Prevent Scan Avoidance at Self-Checkout

I recently saw an eye-popping statistic: 1 in 5 shoppers admit they have not paid for all their items at self-checkout at least once. Find that hard to believe? Try asking a group of friends that aren’t in the industry. I think you will be surprised by the answers.

Here again, the ability to instantly identify transactions of interest can help stores make informed decisions that reduce shrinkage. For example, a retailer might realize that most of these scan avoidance situations occur after 8 p.m. That retailer may want to add additional staff near the self-checkout area; they may want to close self-checkout after a certain time of day; or, in extremely high-risk locations, they may want to remove self-checkout entirely.

Where Is the Customer?

When a transaction occurs and a customer is not present, red flags go off in the mind of a loss prevention professional. The challenge is identifying when this is occurring. There are many reasons why this type of transaction may occur, but very few of those reasons are good for the retailer.

Fraudulent gift card activations, transaction voids followed by the cashier taking money out of the till, and product returns with no customer present are all examples of potential areas of shrinkage. Some of these issues are difficult to catch because savvy cashiers know that loss prevention teams often don’t have the resources to research smaller transactions. However, now that cameras can understand the world they see and tie video to a transaction to be easily reviewed, the game is changing.

Retailers need to balance their level of risk with the demands of their brand to deliver on an exceptional customer experience. By having a dashboard that displays transactions of interest and ties those transactions directly to video of what happened, retailers are able to make more informed business decisions.  

Most retailers report inventory shrinkage numbers that range between 1 and 3 percent of their total revenue. Given those numbers, it’s easy to see how a system that meaningfully reduces fraud and theft can quickly pay for itself.

Story by Andy Szanger, a director of strategic industries for CDW, who leads the team responsible for bringing new solutions to market and delivering industry expertise. Szanger has more than 27 years of experience in the IT industry, with a heavy focus in the retail sector, and regularly speaks at industry events such as the National Retail Federation’s Big Show. He has helped many high-profile retailers implement solutions to enhance their customers’ experience, gain better insight into their business and how to use technology as a competitive advantage for their brands. Prior to CDW, Szanger worked in the retail industry and served as the assistant store manager in charge of operations for a big-box retailer, where one of his many responsibilities was overseeing the loss prevention team.

Andy  Szanger

Andy Szanger

Director of Strategic Industries
Andy Szanger, CDW's director of strategic industries, leverages over 27 years of IT industry experience, particularly in retail. He assists high-profile retailers in implementing solutions to enhance customer experience, gain business insights and utilize technology as a competitive advantage. Previously, he held operational roles in the retail industry, overseeing loss prevention teams.