HAUPPAUGE, N.Y. -- Loss-prevention systems won early acceptance in Europe and are now finding new life on U.S. shores as changing business approaches, advances in technology and case studies from abroad open the door for enhanced emphasis on security.
"France and Holland have embraced electronic article surveillance systems," said Thomas Nicolette, president and chief executive officer of Knogo Corp., a manufacturer of such EAS and other loss-prevention systems here, in an interview with SN Global.
"The good news for U.S. supermarkets is that we can take these case studies and prove these systems get results" in reducing shrink and maximizing return on investment, he said. "All the growing pains have been completed, the lessons learned and the bad experiences turned into good ones."
Case studies from Holland, for instance, which boasts the most EAS systems per capita of anywhere in the world, have not only proved EAS's return-on-investment potential, but also have allayed fears about customer acceptance of visible security systems, Nicolette said.
At the same time, industry initiatives such as Efficient Consumer Response have prompted executives to scrutinize their operations at all levels to maximize efficiency and reduce unnecessary losses -- including those attributed to shoplifting and employee theft.
"Many supermarket retailers don't know what their shrinkage is," but could be suffering losses as high as 10% of annual sales, Nicolette said. "Most retailers operate on a cost inventory. They don't budget shrinkage or markdown; they don't have a line they monitor."
However, that costly pattern appears to be changing, Nicolette said, pointing to recent waves of loss-prevention pilot tests.
"In the last 12 months there have been more inquiries, more activity, more testing of equipment in supermarkets than we've had in our entire history combined," said Nicolette, whose company was founded nearly 30 years ago. Citing a recent six-month pilot program in the Southeast, Nicolette said retailers often are surprised by how effective loss-prevention systems can be. Retailers in the program "found that their shrinkage reduction ranged anywhere from 40% to 85%, depending on store location. Their return on investment was 6.7 months," Nicolette said.
With profit margins as slim as 1%, supermarkets should be quick to embrace programs with that kind of return, he said, but that's easier said than done.
"No retailer, in any segment, likes to spend money on anything that doesn't enhance sales directly," he observed. Concern about customer acceptance is another obstacle preventing some retailers from installing a security system such as EAS, he said. Today, only 5% of U.S. supermarkets have EAS systems in place; some chains also have closed-circuit video cameras to record store activity.
With EAS technology, high-theft items like cigarettes and batteries are tagged with devices that can trigger an alarm at the exit if not paid for at the checkout. Some retailers are concerned that customers don't like the idea of passing through a security gate or being subjected to the camera's watchful eye.
"You still have some objections," Nicolette said. "Retailers often wonder, 'How are my customers going to look at this? Are they going to think I don't trust them? Is it going to seem like a more dangerous place to go shopping?' " Nicolette said.
But comprehensive studies in Holland asked just those questions of customers exiting stores that had visible security devices, and the results were positive, he explained. Shoppers felt more secure in such environments, not less.
The opportunity for supermarkets to offer a "safe haven" is not one to be taken lightly, according to a study of consumer attitudes sponsored by the Food Marketing Institute, Washington.
The survey asked consumers what they considered the single most important issue in shopping supermarkets. It found that the No. 1 issue was crime.
Security systems increasingly will become even more important in supermarkets as retailers expand their involvement in electronic payment and in-store banking.
By implementing advanced loss-prevention systems, Nicolette said, retailers also are now able to take greater advantage of new merchandising opportunities that open up when high-pilferage items, such as cigarettes, film and health and beauty care, can be tagged and brought out from behind the counter.
Security systems allow such items to be displayed openly for impulse buying. "But if you don't give these type of items protection, impulse buying leads to impulse stealing."
Nicolette also cited the growing importance of installing systems to prevent employee theft.
The combination of closed circuit video systems that interface with the front end to record visual and point-of-sale information serves as a deterrent to employee theft. That observation window also enables management to monitor cashier performance.
"CCVS and data display [systems] are geared toward internal and employee theft," said Nicolette. "That's a big item for us and it's going to be growing rapidly in the future."
Such systems can be programmed to flag and record suspicious patterns of "no sales" and voids, and the video documentation can be used if a supermarket wants to prosecute or just monitor the employee.
Knogo, which maintains sales and service facilities across North America, also manufacturers equipment in Puerto Rico and Belgium. The company has subsidiaries in more than 39 countries.