Retailers are rallying behind a host of innovative technologies and concrete solutions to win the battle against theft.
In a bid to combat the problem, which is escalating at an alarming rate, retailers are taking increasingly aggressive measures, ranging from building observation decks to installing computerized cashier monitoring systems.
"We see it as a serious problem, a problem that's not
going away," said Michael Watt, director of loss prevention and security at Dominick's Finer Foods, Northlake, Ill. As an industry, "we've starting to develop internal controls and identify theft in specific areas."
Among the steps retailers are taking:
Dominick's is combating employee theft by video-recording cashier activity while instantly analyzing point-of-sale scan information. The computerized system, which is already in place at three stores and soon may be rolled out to a large number of the chain's 101 stores, is programmed to alert store management to any transaction "outside the norm."
Price Chopper Supermarkets, Schenectady, N.Y., is responding to the threat of "organized retail theft rings" that are plaguing many suburban locations by installing catwalks running the full length of some stores and concealed by one-way, mirrored glass.
Basics/Metro Food Markets, Randallstown, Md., is testing a high-tech system in which headquarters staff will rely on video signals transmitted over telephone lines to visually monitor a new store opening this month 100 miles away.
"Our central office will be able to dial up the store's camera system and over the telephone check on the store," said Mike Mays, assistant vice president of loss prevention. Tolerance for shrinkage, which is approaching 2% of annual sales, according to recent reports, is clearly waning in the food industry, which already is accustomed to operating on razor-thin margins.
"In corporate America [including supermarkets], with the amount of downsizing going on, we're increasing loss-prevention manpower and technology," said Tim Sutphen, Price Chopper's loss-prevention corporate specialist.
In 20 new stores, ranging from 65,000 to 85,000 square feet, Price Chopper is installing catwalks situated at the front end. "We're spending a lot of time and effort on the architecture to design observation decks where we're able to see the entire length of a store," Sutphen said. In addition, color cameras to monitor employees and customers have been installed to cover the entire surface of Price Chopper Super Centers.
"We could have anywhere from 18 to 24 cameras simultaneously recording activity in one store. They can be programmed to run patterns or to key in on cashier exceptions" that may point to dishonest practices.
Another chain focusing on the front end is Dominick's, which is testing a system that flags suspicious cashier activity. The program collects data from the on-site point-of-sale system and analyzes it store by store, lane by lane, based upon parameters set by Dominick's. Whether charting new waters or merely playing catch-up, supermarket retailers are increasingly turning to technology to reduce shrink. Supermarkets are giving more serious consideration to electronic article surveillance, or EAS. Though only about 5% to 8% of U.S. supermarkets use EAS in their stores today, interest is on the rise. Among the companies offering these security systems are Sensormatic, Deerfield Beach, Fla.; Knogo Corp., Hauppauge, N.Y.; Checkpoint, Thorofare, N.J.; and 3M Corp., St. Paul, Minn.
Some EAS systems require the deactivation of a security tag attached to high-theft items such as batteries, cigarettes and health and beauty items. Other EAS setups call for the tagged product to be "passed around" a detector while the customer walks through the security field.
Regardless of design, proponents of EAS say the systems can deliver a major shot in the arm to the bottom line: shrink reduction of up to 50% and return-on-investment timetables as short as eight months.
Ralphs Grocery Co., Compton, Calif., for example, is now using pass-around EAS at about half its 167 stores. "After we installed the system, we compared the before and after shrink rate," said Jim Hardin, Ralphs' director of security.
The results were dramatic enough, he said, to pay off the system in seven months' time.
The chain also is testing scan/deactivation EAS systems in two locations. A test of a scan/deactivation EAS system is also under way at two Price Chopper stores. The test documented a striking 50% reduction in losses at the stores in 90 days, which could more than cover the $60,000 price tag if the chain went on line with the system, Sutphen said.
"It brought the stores back to 'corporate tolerance,' which is 0.50% in grocery and 1.5% in general merchandise. That's the blend we're looking for," he said.
Whether technology plays a starring or supporting role in loss prevention, most retailers agree that employee cooperation is paramount.
Red Food Stores, Chattanooga, Tenn., uses closed-circuit television at four stores, some in combination with EAS, said Tom Farello, executive vice president and chief operating officer. But Farello was quick to point out that each tactic is a "tool," one piece of a multifaceted approach to loss prevention at the chain, whose 55 stores range from 20,000 to 60,000 square feet.
"We have a comprehensive, in-store audit program called STOP, for Shrink Takes Our Profits, that's really about the awareness issue," he added. "We train associates from day one of their orientation what shrink is and what they can do to avoid it."
In the STOP program, Farello explained, store managers travel to other store locations and perform audits on "everything from back-door receiving paperwork to cash control and sanitation issues, security, asset protection, sales, markdowns and price changes."
