Guardian/recession drives sales in crime prevention technology/Sue Tabbitt/June 2009

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It was a decade ago that the retail industry first fell under the spell of data mining technology, when stories began spreading of a lucrative discovery at Walmart in the US.

A direct correlation had been spotted between sales of beer and nappies on Friday afternoons, indicative of Dads leaving work early and picking up supplies on the way home. Armed with this information, Walmart was able to position timely promotions to encourage more of this cross-selling, driving up revenues and retaining more customers. Convinced by the success story, retailers across the world rushed out to invest in data mining solutions so they could spot and exploit similar trends. The rest is history.

Fast forward to today, and similar innovations are emerging, this time more in keeping with the current climate. Now, data mining is coming into its own in the fight against crime, helping retailers dissect the who, how, what, where and why of in-store theft.

The statistics driving this trend are suitably alarming. KPMG's 2009 Global Retail Loss Prevention Survey suggests that shrinkage (stock loss) can account for up to 3% of a retailer's sales - a hit few can continue to afford to take if they want to keep their prices competitive while retaining a profit.

Shoplifting is the biggest problem, followed by employee theft, so it is in these areas that technology innovators have been honing their offerings.

One such player is Hicom, whose National Information Business System connects town-based crime reduction partnerships, allowing them to share information about known gangs of shoplifters as they move around the country. Hicom also offers a hosted software solution for retailers, Arena, which uses trend-spotting techniques to help reduce in-store theft.

Richard Paterson, business development manager, joined the company from the police, where he wrote a dissertation on the 'preventative process' for combating crime.

Hicom's Arena system has helped supermarkets home in on common thefts, such as batteries and razorblades in supermarkets, and clothing, which Paterson says has been the source of a 20% rise in thefts over the last year, as families strive to maintain their standard of living despite a fall in earnings.

The software takes a full-spectrum approach to the risk, identifying suspicious behaviour and common modus operandi such as concealing bottles of alcohol around or underneath the trolley and then 'forgetting' to pay for them.

"Retailers have to be careful here. This may be someone who's spending £150 a week in the store. Accusing them of stealing without a lot of evidence could be seen as heavy-handed, and retailers don't want to deter these customers too much. That's why the preventative approach is best. For the retailer, it's all about protecting against risk, so they can determine how best to display the goods around the store." So, if batteries and razorblades are found to be easy pickings, the store might position them under CCTV cameras, tag them, or move them to cabinets behind the check-out.

Ask the retailers how effective such measures are and they clam up, flatly refusing to discuss their risk management strategies. Asda, for example, is considered to be among the more proactive stores for theft monitoring, but has a policy of not disclosing anything in this area, keen not to give away its advantage or tip off would-be criminals.

Another technology innovation being exploited by retailers is IP-based CCTV systems, which allow stores and shopping centres to go back and examine the lead up to an incident, via a 'pre-buffer' feature. This can retrieve footage taken up to 60 seconds before an event, in much the same way as Sky+ will capture a whole TV programme even if you were late pressing 'record'.

The technology has other useful crime prevention applications, too - Douglas Court Shopping Centre in Ireland uses it to combat bogus 'slip and fall' insurance claims, where a customer might spill a drink before apparently slipping and causing himself an injury, which he then blames on the store.

Phil Doyle, MD of IP CCTV specialist Axis Communications, notes that many of its systems are used in conjunction with data mining applications, to help predict and therefore deter crime. "One technology solution in isolation rarely works," he explains. "First, you need to understand why a particular crime has been possible. Once you know that, you can combine a range of technologies so they cover all the gaps."

Common thefts identified by Axis range from the more obvious, high-value, easy-to-resell items such as DVD/Blu-Ray box-sets and alcohol, to nappies, cosmetics and pregnancy testing kits. Thefts of meat, cheese and other foods are also on the rise.

And then there are employee thefts. These including 'sweethearting', where employees and customers collude to pass items un-scanned through the checkout, and the wrongful exploitation of gift and loyalty cards.

"Gift cards were a phenomenal innovation but they are very easy to exploit fraudulently," says Kevin Eley, head of business development at Sysrepublic, which specialises in employee-based crime solutions. Examples include staff refunding £50-100 onto a gift card and then pocketing it.

Sysrepublic's Secure hosted software solution can be used to analyse voids along with scanned data from point-of-sale systems, to spot behavioural patterns. It then flags suspicious transactions and other worrying findings to a retailer's loss prevention team, as prioritised 'actions'.

"If you've got lots of employees, how can you have eyes everywhere," Eley notes. "Even with CCTV it's going to be hard to notice if a cashier is scanning bottles of Budweiser while putting champagne in bags."

With echoes of Hicom's initiatives, Sysrepublic is fostering collaboration through its Secure Alliance, encouraging retailers to share their findings. Its members so far include loss prevention professionals from Tesco, Asda, Sainsbury's, Marks & Spencer and HMV.

So is business booming, given the current climate? Apparently so. Despite concerns that retailers are cutting their security budgets, Sysrepublic has seen sales of its solutions grow by 35% over the last year, and a rush of new interest. "It's simple - loss prevention is one of the easiest ways for retailers to save money," Eley concludes.