Supermarket operators know that the people most likely to steal from them are not their shoppers but their employees. As a result, many chains are turning to high-tech systems designed to keep a watchful eye on the doings of employees, especially those who work where the money is -- cashiers.
According to a report released by AMR Research, Boston, last December, 50% of shrink can be linked to employees: half of that at the checkout and nearly a third from employee shoplifting.
The two systems specifically created to curb front-end theft -- cashier-monitoring software and closed-circuit TV (CCTV) surveillance -- are now used increasingly in tandem. Indeed, together they pack a more powerful punch, tying the point-of-sale data suggesting a cashier is stealing with the visual evidence of such activity.
The AMR report said retailers using loss-prevention systems like these see 35% less shrink compared to those that don't implement these systems. The return on investment for cashier-monitoring software alone, said the report, is between six and 12 months.
The technology is apparently starting to have an impact. "There is a leveling off in employee-related shrink," said Mark R. Doyle, vice president, Jack L. Hayes International, Fruitland Park, Fla., which conducts retail-theft surveys. "The word is getting out as more retailers put point-of-sale systems with [cashier-monitoring] programs. But in competitive environments, any losses are an issue."
Big Y Foods, Springfield, Mass., announced last week that it had selected NaviStor cashier-monitoring software from Retail Expert, Woburn, Mass., for the chain's 47 stores. According to Retail Expert, NaviStor is an exception-reporting and performance management application that collects data from sources throughout an organization, analyzes it and distributes reports to designated managers for action. Information from Big Y stores will be sent to the chain's headquarters for processing, with alerts sent back to the store or district manager by e-mail.
Big Y and Retail Expert are collaborating on key performance indicators that could determine if cashiers are giving unauthorized discounts -- "sweethearting," in supermarket terms -- to favored customers. "As far as I know, there is not another program in the industry that allows you to look at the numbers to determine if a cashier is sweethearting," said Peter Pelc, Big Y's director of loss prevention, in a statement. Pelc added that Big Y expected the system to bring about a "significant reduction in our shrinkage percentage."
One supermarket that has reaped the benefits of a combined cashier-monitoring/video surveillance application is Brown's ShopRite, a six-store independent in Bellmawr, N.J., that belongs to Wakefern, Elizabeth, N.J.
"We have been very, very successful in using our system," said Bill Murray, director, loss prevention, Brown's ShopRite. "We have uncovered every type of discounting and theft system possible. The system allows you to look at every transaction, every register on any day. Tidbits, red flags and funny feelings along with simple searches can lead us to savings as we pinpoint what affects orders and reconstruct what's going on."
The independent has been vigilant in putting the software, interfaced with a video surveillance system, to work; both components are from CA Technology, Mount Laurel, N.J. Murray said the overall shrink at his units is now less than 1% in every store. Prior to the installation of the technology, shrink ranged from 1.8% to 1.9%.
"Any retailer that doesn't have one of these systems, and they are a competitor, I am happy," he said. "I can't imagine how I would compete without this tool."
Pathmark, Carteret, N.J., has also deployed a cashier-monitoring program linking video technology from CA Technology. Video-exception reporting, tied into POS systems, enables the operator to sort and filter through columns of data.
Recently, the chain has shifted away from analog-video recording of POS activity to digital recording, which allows quick searches by date and time. Such digital images can be archived on hard drives at the camera, control site, corporate headquarters or at a third-party security provider.
As a result of this shift, exception-reporting efficiency has improved dramatically at Pathmark. "There has been a 300% increase in our auditing productivity," said Scott Bohm, director, loss prevention, Southern Division, Pathmark. "It now takes 15 minutes to do what used to take hours."
Pathmark is also applying the technology to consumers, said Bohm. "If there is a return involving a receipt showing two filets mignons with the customer claiming to have purchased only one, we are able to view the transaction and inform the customer that indeed two items did go into the bags and tell them which bag to search for the missing item."
New digital-video systems allow retailers to engage in remote viewing from headquarters and central gathering of data associated with front-end activities, cutting loss-prevention labor costs at store level.
"This system keeps loss-prevention experts in the loop and minimizes labor in viewing," said Randy Dunn, director, strategic account development, ADT Security Services, Boca Raton, Fla. Some operators, including Pathmark, handle non-priority areas remotely while assigning specialists to stores for investigations.
Still, users said loss-prevention staff needs to use the technology in concert with store-level personnel. To ensure this across-the-board usage, Brown's ShopRite coaches every front-end supervisor on the system three times per week, using the equipment to observe 15 transactions. This assures loss-prevention staff that store-level personnel are comfortable in using the system. It also tends to cut back on the need for loss-prevention staff, said Murray, adding, "These systems are truly user-driven."
Users of the technology are also encouraged by a downward trend in the cost of the systems. "Cost-wise, it's a no-brainer," said Murray. "You only need a couple of apprehensions." Added Bohm: "Technology prices have lowered. It depends on what you want to record and how much recording capability you need."
The Internet is providing greater capability to in-store video systems, extending use to handheld devices, for example. "Loss-prevention staff will be able to view the store over the Internet [on handhelds]," said Frank Riso, director, retail food and drug, Symbol Technologies, Holtsville, N.Y. "Merchandising executives can also use the technology as a proof of performance. Personnel trainers will be able to view the store, live, while instructing a new class of employees."
Stanley Kirk, president, Netcam Viewing, Detroit, said Web-enabled systems will allow customers in the store to be connected to a dietitian, for example. In addition, retailers with self-service checkouts could use a Web-based, centralized, monitoring system to service multiple units. "When registers need to be reset or age identification checked, it could be handled remotely," he said. "That would contribute a better economy of scale."
PREVENTING HONEST MISTAKES
Loss-prevention experts suggest that retailers take a positive approach to implementing cashier-monitoring programs, using them to encourage better performance as well as deter theft. "Retailers are integrating awareness programs with automated processes along with disciplined implementations to drive [shrink] figures down," said Larry Miller, president of Trax Software, Scottsdale, Ariz.
"It is not necessary just to catch people stealing," said Kathie Bulson, senior vice president, sales and marketing, CA Technology. "These systems help make sure retailers are operating correctly. Not every cashier is dishonest, but they do make mistakes. The systems also help identify cashiers who are having a difficult time scanning and suggest what to do to make them more efficient."
"These systems actually have more of an impact as a training tool," said Scott Bohm, director, loss prevention, Southern Division, Pathmark, Carteret, N.J. "We are able to do so much more in so much less time, plus we can use it as an awareness tool. That has the best impact."
For example, Bohm said Pathmark systems were used to explore how and why cashiers select the "clear" key. "The first thing cashiers do when an alarm sounds is hit the clear key," he said. "It's simple instinct. But this can be a problem when the alarm sounds because alcohol or tobacco products are included in an order."
Brown's ShopRite, Bellmawr, N.J., recently uncovered a procedural error through its cashier-monitoring systems after opening a new store and offering customers a 10% discount on net orders. Suspicions were raised when, after the first week, the redemption rate looked high.
"We went into the system to take a look and evaluated specific orders," said Bill Murray, director, loss prevention. "We discovered that cashiers were taking the discount off the gross sale. The errors were made because the cashiers did not fully understand the procedure. Luckily, we caught it in the second week of the program."
Another Northeastern chain reported a similar cashier error. The retailer's intention was to reward frequent shopper cardholders with a 10% discount on net orders. As with Brown's ShopRite, a training error led cashiers to take that reduction on the gross sale.
One Upper Midwest operator claims a 50% return on investment on its cashier-monitoring/video systems from simply identifying such procedural errors.
Another chain in the Southeast discovered a deficiency in cashier training that cost it $70 on one order alone. Cashiers thought that if a scan could not be completed on an item, then the customer would get that item free. In actuality, the procedure is that if the checkout price does not match the shelf price, then the customer receives that item free.
Another Eastern retailer spied front-end personnel double-bagging every order. By realigning training in this one unit alone, the company cut paper costs and bagging time.