Retailers stock up on theft analysis tools

Data mining software tackles loss through internal fraud, says Dave Friedlos

Data mining tools help cut till theft

Department store chain House of Fraser is overhauling its data mining tools to improve the visibility of theft and reduce internal fraud.

Last year, theft cost UK retailers £3.9bn, half of which was attributed to internal error and fraud, according to the European Retail Theft Barometer.

With internal theft growing at a faster rate than theft by the public, retailers are increasingly installing and upgrading their systems to monitor transactions.

Richard Lawrance, loss prevention support manager at House of Fraser, says investment in technology to reduce internal theft has traditionally been low compared with efforts to combat external thieves.

‘Shrinkage such as processing incorrect refunds, discount abuse and till theft are still as prevalent as modern types of fraud,’ he said.

‘So, we are using bespoke data mining tools to reduce loss.’

The firm is changing how information in its Oracle data warehouse is analysed and presented to provide more detailed reports specific to each store.

B&Q says internal theft accounts for a significant proportion of overall fraud, partly because there are so many points at which it can happen.

‘Theft can happen anywhere from the supply chain to the till,’ said B&Q national security and fraud manager Richard Davies. ‘The number of methods is high, from issuing bogus refunds, to voiding transactions, under-ringing total sales and simply giving away items to friends.’

The DIY giant is using data mining tools from vendor IntelliQ, which allow it to drill down and identify trends between transactions, stores and operators in a matter of minutes.

The British Retail Consortium says the amount of theft detected is still relatively small.

‘It is important for retailers to get the structures in place to reduce theft and many are increasingly adopting new technologies,’ said a spokesman.

‘Stock management software, till monitoring software and radio frequency identification (RFID) can all help identify where items go missing.’

Retailers have not invested significantly in technology to cut fraud because increased competition means many are struggling simply to stay in business, says Freeform Dynamics analyst Martin Atherton.

‘The ability to analyse stores, departments and tills in a timely and detailed manner could help retailers understand where problems may be present and act to stop them sooner,’ he said.

‘But investing in IT can only really work if done in tandem with broader improvement schemes, such as tying reduction of shrinkage to store targets, improving training and showing commitment to reducing theft at all levels.’

Cut the losses