Developments in Mobile Scanning Technology: Understanding the Potential Impact on Shrinkage & Loss Prevention.

Lead Research Organisation: University of Leicester
Department Name: Criminology


Mobile-scanning is likely to pose a new set of challenges for retailers that have not yet been explored in detail. One of the key challenges is to understand how mobile-scanning technologies might generate opportunities for theft and how to mitigate for these risks. In addition to this, questions also arise about how mobile scanning will work in retail stores which utilise a range of existing crime prevention interventions - such as tagging and Safer Cases - on a range of products. For example, how will such interventions be used in relation to products purchased by mobile-scan customers? Further questions also arise around whether retail spaces will need to be adapted to implement such technology. Although some of our preliminary discussions with retailers suggest they are concerned about the criminal opportunities that mobile scanning might generate, no research to date has considered how these opportunities might arise and how retailers might mitigate such opportunities. In relation to this, there is little understanding of how existing crime prevention devices - such as Electronic Article Surveillance and Safer Cases - might need to be adapted to allow mobile scanning to be implemented smoothly.

Therefore, this research proposes to conduct an exploratory study of the use of mobile scanning technology by drawing upon the experiences of two major retailers abroad and three in the UK. After an initial review of the research literature in this area, we would conduct visits to Wal*Mart in the USA and Ahold in the Netherlands. Both of these retailers have begun extensive pilots of mobile scanning across a number of their stores and visits will be made with the primary purpose of understanding what issues have been encountered with implementation (both in terms of technological issues and how they have promoted opportunity for theft). These site visits will inform the second phase of the research, which will include a number of interviews with groups of key stakeholders. First, interviews would be conducted with stakeholders at three major retailers in the UK. All three retailers are currently planning to use mobile scanning in the near future and the interviews will develop our understanding of the perceived problems of using this technology, emerging issues in relation to its operation and how the technology might generate opportunities for theft. Second, a series of interviews would be conducted with mobile scanning technology providers and (third) anti-theft technology providers. The interviews with App providers would aim to understand if mobile technology providers have recognised the potential criminogenic impact of mobile scanning and if this has been considered in the design process. The primary aim of the interviews with anti-theft technology providers would be to establish if (and how) they are adapting their products to deal with the change to mobile scanning. Finally, a total of 45 'stress-tests' will also be conducted by the research team. The stress-tests will involve using mobile scanning at retail sites to explore the potential for criminogenic exploitation and the extent to which current systems and store procedures minimise/identify these risks.

Ultimately the research will be used to inform the retail community about the technological and criminogenic issues that are generated through mobile scanning. It is hoped that lessons from the research will also inform retailers about the future roll out of mobile scanning. However, the research will also be of use to the academic community. Although mobile scanning represents a significant shift in the way customers are able to purchase items, little academic research has considered the potential criminogenic impact. Therefore, the research also has the potential to inform academic research in relation to commercial victimisation, design and crime, and crime prevention.

Planned Impact

Recent discussions with retail members of ECR Europe's Shrinkage Group suggest there is clearly an appetite to introduce this technology, but the impact on retailer profitability, could be profound. For example, retail sales figures for GB for 2010 (including sales of petrol) were £326 billion (Office for National Statistics, 2013). Of that it is estimated that shrinkage (excluding waste and damage) accounted for 1.37% (Bamfield, 2011), which equates to £4.47 billion of loss. Every tenth of one per cent increase in shrinkage will cost British retailing £326 million per year. Thus, if mobile self scanning increased average shrinkage by just three tenths of a percentage point, then the annual cost would be close to £1 billion of additional loss. This potential negative financial impact underlines the significant benefit of this project to the UK retail community. The project will produce a clear set of recommendations and guidelines for retailers on how the potential shrinkage risks associated with mobile scanning technologies can best be managed across a range of retail environments and settings.

In addition, there are three other practitioner groups that will benefit from this work: the mobile technology developers, the manufacturers of loss prevention technologies and those responsible for delivering security in-store. For the mobile technology developers, the project will provide greater clarity and insights into how mobile scanning technologies may be manipulated by miscreants, and also how such activities can be minimised through programme design, altering the user interface and perhaps system operations. The project will provide them with a criminogenic context within which to stress test their technology - in effect future scanning to identify potential risks and opportunities.
For the manufacturers of loss prevention technologies, the project will also be of considerable value - the introduction of mobile scanning represents a major challenge to the way in which current product protection technologies operate. If customers are to be encouraged to shop and buy with little or no interaction with store staff, then the current generation of loss prevention technologies such as EAS tags and Safer Cases will be found wanting as they are currently premised upon a member of staff deactivating/removing them. What may well be required is a new generation of product protection technologies/approaches which take account of how mobile scanning operates in the retail space - the generation of deterrence and the validation of payment will be key and the current project intends to explore these issues in detail. It is envisaged, therefore, that the outputs from this research will be of considerable benefit to loss prevention technology providers and developers as they begin to design the next generation of loss prevention interventions for retailers.

Finally, the project will be of great interest to those tasked with delivering security and loss prevention within retail stores. Typically their role has been one of watching and responding - offering a visible and electronic presence to deter would-be offenders and reacting to those caught stealing. The introduction of mobile scanning will make their role considerably more challenging particularly in terms of identifying potentially deviant behaviour (such as putting products into pockets and bags before going to the checkout). They will need to develop new skills in order to manage this role. For instance, it could be that developments in smart(er) CCTV will be required to enable the monitoring of products that have been selected but not scanned, or tagging systems that recognise the current status of a product (such as: not purchased, scanned but not purchased and purchased). The current project intends to address these issues and seek to understand how the day-to-day risks of mobile scanning can be managed.
Description 1. The Development and Perceived Benefits of Mobile Scan and Pay (MSP)

• Mobile scan and payment is at an early stage of development across most retailers. At present, the focus is mainly on developing a mobile scan option only rather than one that also enables payments to be made via an App (a mobile wallet option).
• There is some evidence that customer appetite for MSP is limited. Indeed, there was a suggestion that in some locations and for some demographics the move to MSP might represent a cultural shift that could be slow to be adopted.
• The potential benefits for customers are thought to be numerous. Not only could MSP make shopping easier and quicker - through the elimination of the need to use traditional checkouts - it can also offer ways to 'personalise' the shopping experience. This can be done by offering consumers the opportunity to create shopping lists, view their purchase history, receive information on real time store offers, have access to store maps and product searching functionality, and receive and use electronic vouchers, all through an App on their mobile device.
• Respondents also identified numerous potential benefits for retailers. MSP could enable more staff to be utilised away from checkouts and on to more customer-focussed services such as in-aisle assistance. It also offers the potential for a reduction in the overall staff hours allocated to stores and the costs associated with using and maintaining traditional checkout technologies. MSP was also thought to offer greater opportunities to provide customers with forms of loyalty bonuses and exclusive product offers, and to collect valuable data on shopper behaviour to better inform future business planning.
• The research found that there are a number of technological and process challenges that need to be overcome before MSP can be rolled out across most forms of retailing. At present MSP systems are normally limited to Apple devices, Apps can run slowly and scanning barcodes with a mobile device can be difficult. The shopping process is slowed down when age restricted products, or security protected products are purchased (as a member of staff has to intervene). At present, the lack of a payment wallet option means in most retailers that MSP users still have to find and use a fixed payment terminal, undermining the perceived benefits of speed and ease of use.

2. The Potential of MSP to Generate Retail Losses

The research found that MSP might generate retail losses/problems in four ways - theft through malicious non-scanning of goods; non-malicious loss through non-scan/scanning errors; physical and verbal abuse against staff generated via audit checks or system errors; or transaction frauds/fraudulent use of payment wallets. In summary:

• MSP potentially promotes ease of effort for theft by removing any human contact throughout the shopping process and removing (possibly most importantly) human contact at the final payment stage of the shopping journey (when a payment wallet option is provided). In the MSP environment, the sense of risk perception or control is reduced as all elements of the customer journey can be completed without human interaction. Some respondents thought that offenders might be attracted to stores in the knowledge that they can chose to not scan certain products with relatively little risk of being caught.
• MSP gives offenders 'ready-made excuses' for non-scanning behaviour - the self-scan defence. Giving customers the freedom to self-scan gives them the opportunity to blame faulty technology, problems with the product barcodes or claim that they are not technically proficient as reasons for non-scanning.
• Proving intent is difficult where customer non-scanning is identified and deciding whether prosecutions can be made or not is potentially a legal and customer relations minefield. It is proving difficult for retailers to identify whether customers intended to non-scan items or if they were simply absent minded and or poor at scanning items consistently. This could be further compounded when the point of payment becomes blurred by consumers having the option to pay at any location within and potentially around the store.
• MSP could also generate provocations for aggressive behaviours. At present, there are a number of frustration points in the MSP shopper journey that could trigger disputes with staff - when products will not scan correctly, when staff have to intervene to remove EAS devices/do age verifications, when payment wallets will not work and when a check audit is requested.
• There were some concerns around the potential for fraudulent activities, including the production of self-scan labels that might be stuck on products and the potential for fraudulent payments. It was thought that the payment wallet could generate fraud such as being used with stolen credit card details or the use of fraudulent electronic vouchers or coupons via this type of technology.
• Concerns were expressed that non- and misscanning of items could have a detrimental 'knock on' effect in relation to inventory accuracy and on-shelf availability of stock. Thieves are notoriously unreliable when it comes to updating stock levels when they take products and customers may not readily appreciate the impact of scanning the same item multiple times when a range of similar varieties are actually being purchased.
• Available data indicates that mobile scanning technologies, including MSP, generate significantly high rates of loss (3.97% as a percentage of turnover), more than 122% higher than the average rate of shrinkage - greater than the typical profit margin (approximately 3%) of the European Grocery sector. The data suggests that if these rates of loss are typical then this type of 'service' is not likely to generate a high profit margin unless other areas of cost can be reduced to compensate for the inflated rate of loss generated, or users can be encouraged to scan a higher proportion of selected items.

3. Risk Amplification

A key aim of the study was to consider what crime prevention mechanisms were already in place to prevent MSP-generated losses and what future mechanisms might need to be considered. Our main observations were that:

• Very little developmental work had been put into fully understanding how the risks associated with MSP would be addressed beyond utilising the existing approaches. Without fully understanding what the risks might be, it was hard for retailers to consider what additional crime prevention solutions might be considered and what costs could justifiably be attributed to them.
• Current measures being used by the retailers taking part in this study focussed almost exclusively on the extremes of the shopping journey: store entry and the payment/checkout process.
• It was observed that, for the most part, the registration processes currently being used were open to easy manipulation through inputting false information, including the potential to use stolen credit card details.
• The only other risk amplifier currently available was the 'random' audit check. The process for doing this varied significantly between the retailers taking part in this study but all thought it was their most powerful weapon in generating risk in the MSP shopping journey.
• Integrating existing product protection devices into the MSP process is problematic as deactivating tagged products require staff interventions - which goes against the ethos of MSP.
• In future, risk could be amplified throughout the MSP shopping journey in a number of ways. For example, a series of retailer/customer messages (via the App) at arrival and entry to the store could reduce customer anonymity at the start of the shopping process. During the shopping trip non-scan alerts could notify shoppers and security personal if products have not been scanned. Visual recognition CCTV could be used to conduct age restricted checks. Geo secure areas could be used to monitor payment compliance.
• Current technologies can already deliver some of the requirements required to increase risk in the steps outlined in this report. CCTV systems can communicate with information databases and micro location monitoring can already be seen in some retail spaces. The challenge is developing a tag that can enable the majority of consumer products to communicate with their environment - RFID tags have been found to offer this potential but on only a relatively small range of products. No other tag technologies seem to be able to offer this type of capability at this moment in time.
Exploitation Route The findings have clear implications for retailers and help to set an agenda for future research in this area. For the retail audience there are three key messages:

1. MSP appears to increase shrinkage for retailers.
2. Throughout the MSP shopping journey there are a number of opportunities for crime - not only theft - but for aggression and violence from customers generated at 'provocation points'.
3. Retailers have yet to fully engage in developing proactive crime prevention solutions that will amplify risk for the MSP shopper.

These findings not only encourage retailers to consider the crime risks/ design in crime prevention when developing MSP systems, but the work has generated a series of new questions that require exploration by both retailers an researchers, including:

• Will the consumer of the future adopt MSP as their preferred mode of in-store shopping?
• Can a more robust Return on Investment model be developed which takes full account of all the costs and benefits of MSP systems?
• How might the applicability of MSP systems be affected by store type and socio-economic factors, such as local crime rates?
• Can a more reliable picture be developed of whether non-scan events are malicious or non-malicious - can the motivation of the non-scanner be better understood?
• Are there particular types of products that are more likely to be non-scanned either maliciously (highly desirable or easily resold items) or non maliciously (such as poor product and bar code design)?
• How tolerant will customers be of various types of crime prevention mechanisms focussed on MSP and will this vary depending upon the prevailing consumer culture?
• How can existing product protection technologies be adapted to make them more compliant with MSP systems?
• What evidence is there of consumer concern about retailer tracking and surveillance generated by MSP systems?
• How can end of shop audit algorithms be developed to create the right 'amount' of risk amplification for any given consumer?
• How might new tagging technologies be developed to create risk amplification throughout the MSP shopping journey?
Sectors Retail,Security and Diplomacy

Description Given the technology that was the focus of this research is still developing, it is difficult at this stage to gauge the extent to which retailers are making use of the findings from this research. There has certainly been considerable interest from the retail loss prevention community about the work and at a recent presentation in the US, over 80 retailers requested copies of the report. It would be prudent to follow up this research in the next 18 months to ascertain how retailers are developing their loss prevention strategies to manage mobile scan technologies in light of this research.
First Year Of Impact 2015
Sector Retail
Impact Types Economic

Description Developments in Mobile Scanning Technologies 
Form Of Engagement Activity A talk or presentation
Part Of Official Scheme? Yes
Geographic Reach International
Primary Audience Professional Practitioners
Results and Impact The presentation stimulated a significant amount of debate and interest in the research. In particular, the biggest retailer in the World, Walmart, which is planning to role out this technology in her near future, has requested multiple copies of the report.

Difficult to say at this stage, but certainly a number of retailers thinking about using this technology have requested copies of the report.
Year(s) Of Engagement Activity 2015
Description One Day Conference 
Form Of Engagement Activity Participation in an activity, workshop or similar
Part Of Official Scheme? No
Type Of Presentation keynote/invited speaker
Geographic Reach International
Primary Audience Professional Practitioners
Results and Impact This was a one day conference organised to disseminate the findings from the research. As well as presentations by the researchers, retailers that took part in the research also presented, including Asda and Carrefour.

Approximately 50 people attended, many of them senior members of retail loss prevention functions within UK and European retailer companies. Many expressed their interest in this technology and how useful the result of the research had been in helping them to formulate their approach to managing it in the future.
Year(s) Of Engagement Activity 2015
Description Understanding Developments in Mobile Scanning - Prospects, Problems and Practicalities 
Form Of Engagement Activity A talk or presentation
Part Of Official Scheme? Yes
Geographic Reach International
Primary Audience Professional Practitioners
Results and Impact The presentation provided participants with a detailed understanding of the research and the outcomes, focusing particularly upon how those planning to use this technology might want to think about managing issues relating to loss.

A number of participants requested copies of the final report
Year(s) Of Engagement Activity 2015