JOHNSON CITY, Tenn. -- White's Discount Foods here has increased profit margins by 0.5% and tripled the sales of at least one category after launching an aggressive electronic article surveillance program.
The chain, which plans to install EAS systems in all 15 stores by the end of the year, is using more elaborate tagging procedures and detection systems to enhance the system's performance.
As a result, the 12 stores currently using the system have improved their profits. "What we see is an extra half-percent of sales added to the bottom line for each store," said C.E. Pugh, director of operations.
"So if a store has 2% pretax net [profit], it's going to go to 2.5%," he added.
The improved margins come mostly from reduced shrink, Pugh said, though the chain's use of EAS has also enabled it to move to more open product displays, further spurring category sales.
Tagging items like cigarettes and film with EAS has enabled White's to move the high-margin categories out from behind locked cases. Displaying the items openly on the store floor has caused sales to skyrocket, Pugh said. For example, film sales have tripled since White's began using EAS.
The retailer has also been able to offer other profitable merchandise, such as sell-through video cassettes, which White's previously didn't carry for fear of a high theft rate.
"EAS has permitted us to get into the sell-through video business," Pugh said. "I used to avoid sell-through video like the plague because while it would go through, it wouldn't sell."
White's credits much of its success to a thorough use of EAS involving employee monitoring, a sophisticated detection system and more labor-intensive tagging
procedures. The system is provided by Checkpoint Systems, Thorofare, N.J.
The retailer targets only a small amount of high-risk merchandise for tagging. "It's a pretty select group of items," he said. "We're probably tagging 200 to 300 items per store, looking for the stuff that's most [theft-prone]."
The presence of many flea markets in White's northeastern Tennessee market area is often a motivation behind product theft, prompting the retailer to tag merchandise that can be easily resold.
Succeeding with EAS requires constant vigilance, which means monitoring employees to make sure tags are affixed to all newly stocked merchandise. "From our standpoint we constantly have to beat the drum and crack the whip on employees because they may forget to tag," Pugh said.
White's uses a more sophisticated tagging method to counter thieves who strip the merchandise of its package. "It's real easy to do what we call sneaky-tagging: we open the box, tag the item, and glue the box back up," he said.
Manufacturer source-tagging would be an even more efficient method, Pugh added. "I'd love to see source tagging. We're paying for the tag one way or the other; I'd just as soon pay for it in the cost of goods."
White's also believes its system of deactivating an EAS tag as the product is scanned at the point-of-sale is more effective than having "pass-around" detectors at each register and no protection at the door.
In stores with pass-around systems, thieves "have the opportunity to walk out the way they came in where pass-around can't get them," he said. "Our detection system has antennas at the front doors and if you didn't get deactivated, the alarm goes off when you go through any door."
White's believes the use of EAS may not be a permanent solution to reducing losses due to theft, however. "As soon as we close one loophole, another one will develop," he said. "But it's effective today. It may not deter professional thieves, but it is going to deter the occasional thrillseeker."