Recession Shift
Retail is one of the most sensitive markets in uncertain financial times. “From my experience, when the economic outlook is not too good, the mid- to low-end retailers are the ones that start to shrink their security spending,” said Patrick Lim, Director of Sales and Marketing, Ademco Far East. “However, high-end retailers tend to be more consistent and spend more during a recession.”
Spending did not necessarily increase, but shifted downward. “Where we used to go after just the high-end retailers whom are not thriving in the marketplace, consumers are looking for deals, which has opened the door to outlets and discount retailers,” said Jim Shepherd, National Account Manager at Protection One. “The market for budget merchandise has boomed because other retailers reduced or shut down locations, providing prime real estate for these discount retailers to take advantage of.”
Retail and commercial accounts are handled at a dedicated central station, where operators are trained to speak with management and resolve customer issues. “In retail, the loss prevention department is normally the primary decisionmaker who determines how monies are spent on security and life safety technologies,” Shepherd said. “One of their primary focuses is to combat shrink. They don't put in a camera or an alarm because it's necessary; they invest in technology when it has a proportional impact on shrink or produces an ROI in a one- to three-year time frame.”
Budgets have taken a hit, so security teams must stretch their dollars to find solutions to problems. “If you talk about new installations, they have the luxury to design a system to fit the application from the beginning,” said Kostas Mellos, Commercial Leader for Video and Transmission for Interlogix, UTC Fire & Security. “What you see in existing retail operations is that they expand to sites that are not as well attended. With that comes the challenge of using infrastructure in the existing parts of stores.”
Smaller budgets mean fewer returns for retailers. “The recession has meant a slowdown in user spending, and many retailers have opted to lower prices — and thus profit margins — during the recession,” said Becky Zhou, APAC Sales Director for Arecont Vision.
Security? Not My Problem
At any retailer, security cannot interfere with profitability. The network primarily records sales and cannot afford downtime. Adding anything to the network, such as IP video, immediately gets shot down by the IT department over bandwidth concerns. Security equipment is seen as an expense and not an investment that delivers benefits.
Explaining the business case for security must account for retail priorities. “With our retail customers, we are mostly concerned with addressing their operational needs,” Lim said. “Integration is becoming more important, as security systems seek to be an integral part of retail operations and can improve operational efficiencies. Large retailers are beginning to realize that they cannot be adopting piecemeal solutions, as it will cost them more in operation inefficiencies.”
In retail, the network is tied to revenue. “It's the connection from the store to corporate; they will never jeopardize the functionality of that,” Shepherd said. “If security takes the network down, you can't record sales and that's far more important than any camera put in.”
Because the main business network is reserved for PoS and business information, it has priority over security. “We seldom push for transmission of video over that network,” Lim said. The intrusion alarm system will usually run on an independent PSTN line, with backup transmission over IP or wireless if possible.
IP video is frequently questioned in retail applications, requiring a dedicated network. “The solution is, in most cases, a semiparallel network that resides together with the IT network, but share some or all of the infrastructure equipment, such as switches and routers,” Akesson said.
However, adoption of IP solutions remains sluggish for their upfront cost. “Unless it supports other business intelligence or other departments, there is not always an advantage to putting in a network camera to catch a bad guy,” Shepherd said. “From my perspective, if I sell IP systems and charge three times the money, my customers will call to ask why it didn't change the shrink number. Just because the video is pretty doesn't mean it's better.”
Communication between the loss prevention and IT teams determines whether a retail solution is successful, as each team has unique concerns. “You have the IT group that knows how to deal with data, virtual networks and partitioning data to different parts of the organization,” Mellos said. “For security and loss prevention, all they care about are results. Are we seeing shrinkage? Can we get to the data or video fast?”
Retail Requirements
As security affects the network and existing equipment, mandates may cause resentment against security. This makes security seem a burdensome tax on business. While retail is not as heavily regulated as gaming, a store must comply with local legislation, such as fire codes. “In most countries, only retailers that handle high-value goods are required by insurance companies to have a mandatory video surveillance system and alarm monitoring,” Lim said.
China passed legislation this year on midsize to large retailers and shopping centers, requiring video for areas such as safes, warehouses and ingress points, said Zhou of Hikvision. For food safety, businesses that handle food must record identifiable footage of whoever comes in contact with products. While this represents a great opportunity for security, it places the burden on retailers who are stretched thin.
Local legislation may dictate how retailers use their security. “Some stores are not allowed to store the images they have recorded and can only use the data they have gathered through intelligent video such as people counting, for which the requirements are less strict,” Akesson said.
Handling Sensitive Data
Data management for retailers may be affected by requirements, such as the Payment Card Industry Data Security Standard (PCI-DSS) governing how payment information is processed in the U.S. “In the quickserve restaurant (QSR) industry, PCI-DSS compliance is a major legally mandated security requirement,” said Mike Davis, Loss Prevention Manager of By The Rockies. It is the second largest franchisee of Carl's Jr. and Hardee's brands, as well as Taco Bell, Pizza Hut and Dunkin Donuts.
Video is not directly covered by PCI standards, but By The Rockies selected a solution that was compliant. “In the future, some insurance underwriters may require QSRs to have video surveillance systems in place to purchase an insurance policy because of the added protection against unfounded slip and fall, sexual harassment or other liability claims,” Davis said. “Having video evidence of the claim enables a company to fight false claims and mitigate damages during litigation. For instance, if a customer claims he slipped on an unmarked wet floor, but the video clearly shows signs marking the area, a court may decide to award less than if there was no video of the event.”
Managing payment information takes both physical safeguards like locking computers up and logical measures like passwords. “I had the chance to visit the back-end operations of a retailer. There were stacks of customer information lying around on the floor, while staff had easy access to the room,” Lim said. “The merging of enterprise physical and logical access control solutions is going to make it easier for responsible retailers to beef up their security.”
On the IT side, data management practices are fairly well-established. “Many retailers have adopted a centralized data management approach,” said Tom Coyle, VP of Information Solutions for Avery Dennison. “You can build firewalls at the back-end rather than have exposure out at the store level.”
RFID usage has raised privacy concerns before, as each tag is a unique identifier. Industry groups such as GS1 and the Voluntary Interindustry Commerce Solutions (VICS) have developed privacy guidelines for retailers. “Many retailers are oriented to ‘opt-in' solutions where customers have the choice to remove RFID tags from apparel items,” Coyle said.