How Exception-Based Reporting and AI Camera Systems Reduce Retail Loss

Integrating exception-based reporting systems and POS systems with AI security camera systems is an innovative way to help reduce shrink for retailers. Learn how to combine these powerful systems and how Spot AI helps retailers.


Sherri Bohman



In 2021, retailers worldwide lost $94.5 billion due to shrinkage, a metric that primarily encompasses losses due to internal and external theft/fraud. 

As shrink rates continue to rise for retailers across industries, many retail stores are now using innovative tools for detecting internal loss. One of the best examples of this is exception-based reporting systems, and POS systems that are integrated with AI security camera systems to identify and mitigate loss. 

Below, we'll show exactly how these systems work to prevent retail theft and protect a business's bottom line.

Understanding Exception-Based Reporting

Exception-based reporting (EBR) entails a type of data analysis called outlier analysis. By analyzing data such as point-of-sale (POS) data, retailers can identify outliers and exceptions in the set of data that could indicate misconduct.

Voids (or zero-dollar transactions), overuse of coupons, undue refunds, and large numbers of gift cards sold to the same customer are examples of exceptions in retail POS data and are common red flags for employee misconduct. 

Given that 58.6% of organizations reported an increase in internal loss since 2020, these exceptions are important for retail stores to pinpoint, but finding exceptions by analyzing POS data manually is a time-consuming process and requires retailers to hire large loss prevention teams. 

That’s why more and more retailers are choosing to use exception-based reporting systems to analyze transaction data automatically.


What To Look For in an Exception-Based Reporting System

There are several important features and functionalities to look for in a high-quality EBR system. 

Here are the features you’ll want to prioritize to choose a system that will be both effective and easy to use:

Integrates With POS System

Choosing an EBR system that is capable of integrating with your POS system will enable you to leverage all of the data that your business has available. Connecting your POS system to your security cameras will provide an additional layer of data for your EBR requirements.

 Integrating with your POS system enables an EBR system to automatically identify POS exceptions. Integrating your POS and security cameras, meanwhile, means that the system will also be able to pull up video footage of the time and location that the exception occurred for easy investigation.

Allows Searching all Available Data Sources

POS data and video footage are two key data sources in your loss prevention and asset protection processes, but your EBR system should also allow you to search and analyze other data sources as well. This includes data sources such as supply chain management (SCM) systems, enterprise resource planning (ERP) systems, event logs, and sensor data.

Provides Automated Reports for Different Events

Detecting anomalous events is just the beginning of exception-based reporting, and a good EBR system should be capable of generating automated reports on these events as well. 

Choosing a system that provides automated reports for different events will make the process of investigating exceptions more efficient and reliable.

Uses Existing Equipment

Your EBR, POS devices, security cameras, and other equipment, should all talk to each other to streamline loss prevention processes.

IP security cameras are a vital component of any loss prevention toolkit. They can be expensive, choosing a security camera platform that integrates with existing systems like POS that won't require you to purchase all new hardware can easily save your business a lot of money. It can also save you the hassle of procuring, installing, and training your employees on how to use new equipment.

AI Camera Capabilities in Exception-Based Reporting

Exception-based reporting should go beyond transaction data alone. Advanced security systems such as Spot AI play a powerful role in verifying exception-based reporting and surfacing other types of anomalous events outside of transaction data. Here are some of the top AI camera capabilities that empower improved insights and transparency in exception-based reporting:

Find and Surface Anomalous Events

In an AI-enabled video security system, AI algorithms are like a finely-tuned set of eyes that never blink. They are able to spot anomalous events in real time and generate automated notifications. This allows retail stores to prevent loss by responding to exceptions as they happen.

Along with real-time reporting, AI algorithms are also able to find and surface anomalous events in historical footage, making it easy for retail stores to find the footage they're looking for when investigating a case.

Find Insights Beyond POS Data With Enhanced Event Recognition Capabilities

Analyzing POS data is a great way to detect exceptions that could be an indicator of internal loss, but it isn't the only source of insights that loss prevention teams can use. The enhanced event recognition capabilities afforded by AI-powered camera systems allow retail stores to spot exceptions that go beyond POS data.

For example, security systems like Spot AI allows retail stores to create people detection alerts in sensitive areas such as cash rooms. Thanks to powerful facial recognition features, Spot AI is even capable of detecting the exact employees who access these areas.

Offer Intuitive POS Integrations

By integrating with your POS system, AI camera systems can provide an extra layer of transparency and data to your exception-based reporting. 

For example, when you spot an exception in your POS data, having AI cameras integrated with your POS system means you can quickly pull up video footage of the incident. This allows you to verify the results of your EBR system and learn more about what took place.

Spot AI features seamless integrations with POS systems that directly connect security footage with receipts and transaction numbers. This enables retail stores to instantly find the right video footage when investigating incidents detected by their EBR system.

Generate Automated Alerts

AI cameras don't just assist with investigating incidents after the fact - they can also be configured to generate automated alerts that allow retail stores to respond to incidents in real time. 

With AI cameras that automatically detect events such as people's presence in sensitive areas, sweethearting, no-sale drawer openings, and more, retail stores can act on incidents in seconds to stop internal loss as it happens.

Offer Enhanced Data Analytics and Insights

Video security footage can be a bountiful source of data for retail loss prevention teams. But spotting exceptions and important insights within countless hours of historical footage is a lot like searching for a needle in a haystack.

Thanks to advanced video intelligence features, camera systems such as Spot AI are able to analyze video footage for insights automatically. These data analytics capabilities enable retail stores to glean insights from their security footage in a way that doesn't require manually reviewing each minute of video footage.

Include Case Management

Spot AI's video security system comes with built-in case management features. These features enable retail stores to automatically organize the video footage, POS data, case documents, and EBR results regarding an incident and make building a case much more time-efficient.

What happens after an incident is detected is just as important as your ability to detect it. With Spot AI's case management features, retail stores are able to easily organize all the evidence they collect for streamlined and accurate investigation.

The All-in-One Loss Prevention, POS, Video, and Case Management Tool

Exception-based reporting is an effective way for retail stores to identify employee misconduct and reduce internal loss. But connecting transaction data with AI security cameras are even more powerful 

With Spot AI's video security system, you can create a system where your POS, security cameras, EBR system, and case management tools all talk to each other and integrate on a single platform built to prevent loss.

From integrating with POS systems for advanced exception-based reporting to identifying shoplifters' vehicles with license plate recognition, Spot AI comes equipped with all the advanced features retail stores need to boost security and limit loss.

Learn more about Spot AI's industry-leading security system and how it’s revolutionizing loss prevention in the retail industry. Sign up for a demo today!

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