Sponsored by NAVCO
Discussions of changes in retail security technology typically revolve around enhanced functionality and the latest bells and whistles. But there is another way in which loss prevention technology is evolving—the manner by which retailers pay for it.
In recent years, technology providers have increasingly been working with retailers who choose to rent versus buy. “It’s about sixty-forty, buying to leasing, but the lease side is a lot bigger today than it was five years ago,” said Scott Emery, national account manager for NAVCO, an electronic security system integrator.
Emery predicts that it will continue to grow in the years ahead, as retailers become more comfortable with treating technology as an ongoing expense in the same way they’ve become accustomed to paying monthly for the latest office software. Partnering with leading security technology innovators, NAVCO offers a range of flexible rental services that allow customers to upgrade to new equipment—including next-generation IP systems, HD cameras, and video analytics—on a rotating schedule.
One obvious beneficiary of leasing—retailers who desire a current security system but don’t have the cash on hand to make a substantial capital investment. Because leasing doesn’t require a large capital investment outlay, it allows companies with smaller cash reserves to acquire the most appropriate systems solution, rather than the one the budget can support. This is especially helpful for cash-strapped retailers suffering significant loss, for which a high-end security solution is expected to provide a significant return on investment.
Emery thinks the leasing option offers benefits to other retailers as well. “A lot of it depends on how the company wants to run its business, and if it likes the idea of a security system being a known monthly expense,” he said. “Especially when you combine equipment leasing with a maintenance agreement, it becomes a known fixed cost every period [month, quarter, annual]. That’s probably the nicest thing about lease agreements—there are no surprises,” he said.
Another way to consider the possible advantage to leasing security equipment is to consider the capabilities of loss prevention systems five years ago against those available today. Had you leased a solution back then, you would have the opportunity today to upgrade to one of today’s superior solutions for the same money outlay. If you purchased the system outright, you might now be thinking you’re stuck with technology that seems obsolete.
And as impressive as systems are today, it’s smart to assume there will be compelling reasons to take advantage of capabilities that systems will possess two, three, or five years down the road. In fact, there is every indication that the rate of improvement in security technology will increase rather than slow down. Leasing removes the worry that you’ll be saddled with outdated technology.
Although taking advantage of the turnover in technology is the primary reason, the leasing of access control, CCTV, alarms, and other security equipment can yield other advantages:
- Budget Benefits. Leasing programs for security equipment allow organizations to spread out systems, installation, and maintenance costs, which can ease long-range budget planning and defer payments—helpful for retailers trying to find the right balance between this and next year’s budget.
- Tax Breaks. Although an organization can’t take advantage of accelerated depreciation tax breaks, it might be able to realize tax benefits from deducting monthly payments as an expense. And because leased equipment isn’t on a company’s balance sheet, it offers flexibility to take on additional debt.
- Flexibility. When leasing security equipment, an organization can choose the lease period that suits it best from several available options. “We typically suggest a five-year agreement, because at the end of the five years you’re usually ready for new equipment, or the technology has changed,” said Emery. Additionally, under leasing agreements, organizations may be able to upgrade and change equipment during the course of the agreement, which lets retailers take advantage of new technology when it makes important leaps forward or to respond when its level of risk changes.
- Mobility. Leasing may be a better fit for organizations that plan to relocate or that manage a diverse and volatile real estate portfolio.
- Ongoing Performance Issues. When leasing security equipment, an organization transfers this risk to the lessor. Rental agreements should include remote monitoring and diagnosis, operational status reports, and onsite maintenance to get the greatest return on your investment.
Leasing has its challenges, of course. Loss prevention teams new to leasing equipment may find it challenging to compare prices, to feel comfortable knowing whether the “per month” price represents a good value, and to understand leasing options. As such, satisfaction in lease arrangements is highly dependent on finding the right dealer.
So is it right for you? When an organization leases security equipment, it derives value from it as it makes payments. In this way, retailers pay for security equipment the same way that it pays for crime and fraud—month to month. “And you have a lot less to worry about. If the system has issues or something goes wrong, it gets replaced,” said Emery. “The bottom line is that if you want a known monthly or quarterly expense, it’s a great option.”