Argos Tracks Data To Cut Losses

By Miya Knights
VNUNet.com
02/09/05 10:45 AM PT

Argos did not know how much it was losing each year from shrinkage -- the unexplained disappearance of stock -- so decided to invest in data mining software from vendor IntelliQ to provide its loss prevention department with more accurate data for targeting failing stores.

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British retailer Argos has installed data mining Latest News about data mining software to reduce losses from internal fraud and "shrinkage."

The company is due to complete an initial rollout of the project at the end of March. Three of the 15-strong loss prevention team have been testing the system since it was introduced in November last year.

Argos security Get a Free E-Commerce Start-up Kit from Verisign solutions manager Adrian Sherry says the company needed more accurate measures for tracking cash and stock through its operations, to reduce losses. He says the new strategy will tackle such losses by analyzing electronic point-of-sale data.
Avoiding Shrinkage

"When I first joined the loss prevention department of Argos 15 years ago there were very few tools to help us with our investigations," he told Computing at the annual Retail Fraud conference in London last week.

Argos did not know how much it was losing each year from shrinkage -- the unexplained disappearance of stock -- so decided to invest in data mining software from vendor IntelliQ to provide its loss prevention department with more accurate data for targeting failing stores.

"We wanted to provide more value to the business," he said. "Before, more often than not, the high-risk stores we prioritized were dependent on stock and cash audit resolution from six-monthly figures."

The new software looks for abnormal behavior at the till, such as fraudulent double-discounting, granting unnecessary refunds, or administrative errors such as not scanning the second product in a "buy-one-get-one-free" offer.
Pays for Itself

Daily reports are sent direct to the loss prevention officer via e-mail, allowing better planning of which stores to target for investigation each day.

"The software can pay for itself with the losses we discover or prevent, while other departments like marketing and finance also gain benefits from its findings," said Sherry.

Internal fraud and shrinkage is a growing problem for many retailers. Losses can account for between one and two percent of turnover every year, according to the most recent figures published in 2003 by the British Retail Consortium.

Precise measures of the problem vary between analysts, but a 2002 Ernst & Young loss prevention survey cited employee theft as 46.6 percent of the shrinkage problem, followed by shoplifting at 31.8 percent. Errors and other issues made up the remainder.

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