Whitepaper - How to prevent high shrinkage levels when introducing mobile checkouts in retail stores

Leverage RFID for Loss Prevention

How to prevent high shrinkage levels when introducing mobile checkouts in fashion retail

July 26 2021

Today’s shoppers expect that the entire shopping experience is smooth and seamless. They want to be inspired. Shoppers want to find the exact item they are looking for. They do not want to wait for anything. A typical retail challenge is the payment step. This can easily negatively influence the overall shopping experience because customers’ patience for the checkout line is lessening.

Many retailers are optimizing their Point Of Sale (POS) processes to prevent queues. Especially new payment apps that turn mobile devices into mobile POS (mPOS) look like the holy grail, but it also increases the risk of theft. How can retailers implement mPOS technology, while ensuring that their shrinkage levels do not explode?

mPOS benefits

A significant number of retailers is already deploying or experimenting with mPOS solutions to provide more flexibility and quicker processing. A well-known example of a retailer that used a form of mPOS is Decathlon. Customers use their own mobile phones to pay for their items. And the best thing? They don't set off any alarms when they exit a store. See the video below:

While the convenience for the customer is the foremost reason retailers consider mPOS, there are some other interesting benefits:

Mirror online experience. When people shop in brick & mortar stores, they expect that the checkout step is as fast as online shopping. In fact, shoppers no longer understand major inconsistencies between online and offline shopping.

Flexibility. The number of point-of-sale desks is no longer fixed, but can be demand-driven. This also enables the store staff to spend more time helping customers. They do not have to staff the point-of-sale desks anymore and retailers gain additional selling space.

Information. Shoppers are well-informed when they enter retail stores and even research competitive offers while they are shopping. By equipping store associates with mobile devices, retailers can make sure that the staff has all vital information from the retail management systems at their fingertips.

Cross- & omnichannel selling. By having all data at hand, staff members can easily advice on available matching products, check the stock levels in other stores and assist customers with placing an online order on the spot before they leave to enter the next store.

Convenience vs. security

While the many advantages of mPOS solutions make it tempting to do away with traditional checkouts, there are also challenges that need to be mastered. One of the key topics here is loss prevention because there is a major conflict between mPOS solutions and any loss prevention measures a retailer has implemented to prevent shrinkage. A significant percentage of retailers use security tags to secure their products; either hard tags attached to the product, or soft labels embedded in the products.

This is an important limiting factor in the deployment of mobile check-out solutions due to the required detaching or deactivation step. Understandably, retailers increasingly choose to put customer service and experience higher on the priority list than security. As a consequence, those adopting mPOS solutions often do away with security measures. Typically, they find this acceptable in a few flagship stores, but for a chain-wide roll-out, serious security concerns usually block the broader adoption of mobile check-out solutions. You might even say that there is a real dilemma where retailers need to ask themselves if they want to put the customer service first or their security measures.

RFID enables secured mobile checkouts

The Electronic Product Code (EPC) and RFID introduce a 3rd way of doing it that enables retailers to combine convenience and security by connecting mPOS solutions with RFID-based loss prevention systems. For this, the EPC - which identifies a unique product a layer deeper than traditional barcodes, is the common identifier.

RFID label including DataMatrix and EAN + serial code

This EPC code provides both the EAN or UPC code for product identification, plus a unique serial number that defines the specific product. Retailers can print the required EPC code as a GS1 DataMatrix barcode (similar to a QR code) on an RFID label. An employee or shopper scans this barcode with a mobile device.

mPOS

How does it work?

  1. The retailer adds an RFID label on the products, equipped with GS1 DataMatrix barcodes.
  2. A store employee or shopper scans the GS1 DataMatrix code with a mobile payment app on a mobile device.
  3. The customer pays for the item and once the transaction is completed, the EPC code is sent to a database, marking this specific item as being sold.
  4. When the customer leaves the store, an RFID reader in the EAS system reads the RFID label on the item. The status of the EPC is retrieved from the database, and if the item was marked as sold, no alarm will sound. If the item was not sold, an alarm will sound.

RFID labels vs. RFID hard tags

As convenience is key in mPOS solutions, it makes sense to select RFID labels for this type of solution instead of RFID hard tags. If customers pay at a mPOS, it is complicated to build in a detaching step. The store staff cannot carry around a detaching magnet to remove hard tags, and it is quite cumbersome to assist customers on the spot while having them go to a fixed desk to remove the hard tags. A mobile device or 2D barcode scanner scans the GS1 DataMatrix with RFID labels.

Additional benefits of RFID-based EAS systems

The identification of products at the exit also makes it possible to indicate which product generated the alarm, and thus give better information to security guards and/or store employees. Security guards can do a more targeted investigation and missing items can be replenished faster. The insights enable retailers to note the theft of an item instantly and not weeks or months later during the next cycle count. As all transactions are based on item-level, it is also possible to store which unique item was bought by the customer. To prevent return fraud, a receipt isn't necessary anymore, the RFID label holds the proof.

In-store RFID processes

While the above might sound complicated to implement, it is easier than you think.  

The main building blocks to cover the relevant in-store processes are:

  1. Goods receiving. The RFID reader reads the new items and marks their status to 'unsold' in the article database. Both RFID handhelds or fixed readers can do this.
  2. Mobile Point-of-Sale. A 2D barcode scanner or mobile device reads the RFID label. When someone buys the item, the status updates in the database to ‘sold’.
  3. RFID-based EAS. When the item leaves the store, the RFID-based EAS checks the database to find out whether the item is sold or not, and potentially generates an alarm.

Conclusion

By adopting mPOS solutions, retailers can keep store staff connected to the entire retail ecosystem to create a consistent brand image, pleasing shopping experiences and, ultimately, customer loyalty.

However, mPOS traditionally poses a threat to a retailer’s security measures. Here, RFID offers a straightforward, easy-to-implement solution to combine the best of both worlds. Retailers can track which items are sold. Any item that has not been sold causes an alarm at the store exit, with the help of an RFID label with a GS1 Datamatrix attached to their items. This enables retailers to have a scalable and customer-friendly mPOS solution that does not conflict with chain-wide loss prevention policies.