The retail industry is going through tremendous change. Governments are imposing more extensive regulations and higher minimum wages. Amazon and Walmart are making retail much more challenging because they have an edge in technology, distribution, and marketing. In this high-pressure world, retailers need every advantage to stay ahead.
The Four Horsemen of the Retail Security Apocalypse
Security incidents at Target and Sony illustrate what is at stake for retail companies with weak security. In our analysis, there are four forces that put retail firms at risk in the security arena. Theft — from employees and customers — comprise the top two threats facing the industry. Next, retailers with poor security will suffer damage to their brand strength, a critical asset in driving customer loyalty and margins. Finally, time spent recovering from security incidents represents an opportunity cost for retailers who may fall behind competitors.
Handling the enemy with access: Employee theft
Employee theft is a major challenge in the retail industry. According to a National Retail Foundation study, theft cost retailers more than $48 billion in 2016. Approximately 30% of the loss is attributed to employee theft (i.e. $14 billion in losses). Some employees in the industry steal — that is the harsh truth. Store owners and managers need to address this risk by implementing comprehensive security screening and monitoring tools.
Using a consistent system to manage employee access is one way to reduce the risk of fraud. When employees change roles, their system access permissions need to be adjusted promptly to address the situation. For example, if an employee transfers out of the accounting department, his or her security rights need to be changed. Managers will only diligently follow through on this responsibility if it is easy. Avatier’s Group Requester automates identity management for retailers so you can focus on serving customers.
Shoplifting — an ongoing threat
Without customers, you cannot have a business for long. That is why retailers need to address customer theft with care and diligence. Some studies have found the average value of stolen products is increasing. According to the North American Retail Hardware Association, “the average amount stolen per shoplifting incident is $549.” Further, some retailers have been reducing their loss prevention budgets. This reduced defense will likely benefit thieves determined to extract goods from retailers.
Evaluating your company’s shoplifting risk is challenging. Before making any decisions on changing your processes, thoroughly review your inventory management system. If this system is already fully operational, implement “surprise audits” to verify inventory levels. Paying close attention to your inventory and controls will demonstrate your security commitment.
Losing customer trust: The consequences of reputation damage
Crime, theft, and poor security give customers reasons to doubt your company’s reliability. Mistreating a customer comes with consequences in the social media age. Remember the hundreds of articles published concerning United Airlines’ abuse of a passenger in the spring of 2017? It may be difficult to quantify, but these developments directly impact a retailer’s brand. A survey of 700 consumers found that data breaches impact reputation as much as poor customer service.
The long-term consequences of lost customer trust are severe. Retailers may have to resort to expensive marketing campaigns and discounts to regain market share. In some cases, top executives may find themselves answering tough questions or terminated.
Recovering from a security incident takes time and attention away from other critical retail activities. Just take a step back for a moment and imagine all the steps you will need to undertake after a security incident. First, you will need to collect evidence about the incident. Second, you will need to review your technology, processes, and people to identify the weak link. Third, you will need to develop an action plan to address the situation.
While necessary, those activities take time away from launching new products and serving customers. Responding to security incidents also gives competitors an opportunity to emphasize their lack of security problems. It does not have to be this way. You can keep your business momentum focused by staying focused on security.
Further reading on retail security
To continue improving your security systems and processes, take note of these resources:
- North American Retail Hardware Association, External Theft Prevention.
- Security Magazine, Retail Shrink Increased to $48.9 Billion in 2016, June 22, 2017
- Tim Wilson, Study: Data Breaches Make Huge Impact On Brand Reputation, May 14 2014