ETOBICOKE, Ontario -- Oshawa Foods here expects to complete this week the rollout of electronic article surveillance technology to 65 corporately owned stores in this province.
The systems, which consist of security gates that activate alarms when items tagged with radio frequency devices are not paid for, have proven to reduce shrink as well as improve gross margins in certain product categories, said Bill Argue, vice president of loss prevention.
Packaged meat and health and beauty care items, in particular, experienced better sales margins when protected by the labels, he noted, but declined to provide specific figures. Batteries, photographic film and video tapes also fared better, he said, because "We are more comfortable displaying those items out in the open."
Argue said the key to maximizing gross profit margins through the use of EAS technology is for the loss prevention department to work closely with operations and merchandising personnel.
"Loss prevention has to be part of the operations team if the margins are to be achieved. Loss prevention has to be proactive, seen as an aid, not a hindrance," he said. "There is absolutely no reason that loss prevention should be a cost center."
The EAS technology from Checkpoint Systems, Thorofare, N.J., was chosen following three years of testing, which included pilots of two other EAS systems, Argue noted. In addition to the 65-store rollout in Ontario, about six Oshawa corporate stores in the maritimes area have installed the system as well as about 30 franchised stores.
Having reduced shrink and improved margins with the use of electronic article surveillance technology, Oshawa is looking next to cut labor costs through source tagging, Argue said. With source tagging, the protective tags are applied to product at the point of manufacture -- rather than at the store level -- and are usually concealed within the packaging.
"We are very interested in source tagging here in Canada," said Argue, indicating that Oshawa may launch a test in 1997. "There certainly have to be some logistical questions addressed, however."
For example, a manufacturer that applies tags during the production phase would have to be vigilant in managing shipments en route to EAS stores, which would require "live" tags, and those deliveries destined for nonEAS retailers, whose tags must be dormant.
"We don't want live tags on the street," he said.
"I'm not sure if a manufacturer can activate tags at once while they are on the skids on the way to [an EAS] store, or if they can deactivate those tags that are going to a nonEAS store," he said.
Live tags have the potential to embarrass shoppers who pay for an item at one store, which does not have the ability to deactivate it, and bring it into another store with the security systems that trigger alarms.
False alarms were an issue early on in Oshawa's EAS testing, Argue added. Shoppers carrying library books, library cards and security cards encoded with RF technology accidentally triggered alarms but the problem was quickly rectified by changing the radio frequency on which the EAS system operated.
Going forward, Oshawa hopes to shore up its loss prevention technology with cashier monitoring software.
The system currently installed in two stores, Shrinktrax from Trax Software, Centerville, Ohio, collects and analyzes point-of-sale activity and flags suspicious behavior that may signal employee theft. Argue told SN that Oshawa is committed to rolling out the software, but is working out integration issues with its existing point-of-sale hardware.
Rounding out Oshawa's loss prevention programs are closed circuit televisions that record front end and back room activity 24 hours a day, plainclothes floorwalkers and store shrink committees.