Formula for Success: Retailers Focus on Theft Prevention

Just like new moms contemplate breast versus bottle, retailers have an important choice to make about infant feeding. Should they merchandise infant formula on the shelf, or, as part of a growing loss-prevention trend, behind the customer service desk or even in locked displays? Or, as one major retailer has done, affix security tags to product packaging?

The merchandising dilemma comes at a time when infant formula is one of the top five supermarket products linked to organized retail crime, according to the National Retail Federation’s 2012 ORC survey. At $15 to more than $30 per can, formula has a strong black market demand from parents looking for a deal.

See Related Blog Post: A Suspicious Mind

“Infant formula is, unfortunately, one of the biggest targets for organized retail theft,” said Suzi Robinson, spokeswoman for Stop & Shop, Quincy, Mass.

ORC is much different than shoplifting, which is typically a theft by an individual of items for personal use. In comparison, ORC involves large-scale thefts from a number of stores and an operation to sell the illegally obtained goods for financial gain.

What’s more, ORC groups have been linked to other crimes, including drug and weapons sales, money laundering — even terrorist-financing activities, according to the NRF.

Not only do the retailer and manufacturer lose, but also the consumer, NRF states. That’s because ORC thieves often improperly store infant formula in hot warehouses, or manipulate the product’s expiration date.

While formula theft is not new, the way retailers are  addressing it is. More companies (52.8% in 2012 vs. 46.5% the previous year) are allocating additional

resources to address the problem. Take Ahold USA’s Stop & Shop banner. Moms won’t find a single can of formula in the baby aisle. Instead, there’s a display holding vouchers for Similac, Enfamil and other brands. Shoppers hand the ticket to the cashier, who retrieves the brand from a locked cabinet.

“Our associates deliver infant formula to them at checkout,” said Robinson.

Along with Stop & Shop, two other Ahold USA banners — Giant-Carlisle and Martin’s — implemented the new formula strategy last year. A fourth banner — Giant-Landover — will roll it out this year.

Prevention Tactics

The tactic is a way for Stop & Shop to deter theft, as well as prevent baby  formula from ending up on the black market where its integrity can’t be  guaranteed, Robinson said.

“We believe that we are acting in the best interest of our customers, especially the youngest ones,” she said.

The strategy also means fewer out-of-stocks, as thieves have been known to remove dozens of cans, according to Tracy Pawelski, spokeswoman for Ahold USA, Carlisle, Pa.

“The new merchandising procedure not only  allows us to reduce our losses, but ensures that the product is available for purchase,” said Pawelski.

Stop

But other retailers want formula to remain on the shelves. To keep it there, they’re employing new and unique strategies. Cincinnati-based Kroger Co. has started installing security cameras in the baby aisles of some stores. The new cameras have in-aisle monitors, so formula shoppers see they’re being watched.

Kroger has gone a step further by affixing  Electronic Article Surveillance tags to each tub of its Comforts-brand infant formula, according to Perrigo Nutritionals, which supplies store-brand formula to Kroger, Wal-Mart, Sam’s Club, Target and others. The magnetic-stripe devices are placed in a small indentation on the package.

When the product is purchased, the cashier swipes the EAS label across a deactivation device.  If someone attempts to steal, the tags will activate detection devices at the store’s exit.

Perrigo has made the EAS tags available to all of its retail clients. Kroger is the first to use them.

EAS devices are not new to food retail, where they have been used to deter theft of high-value items like meat. And while some manufacturers are using EAS devices on certain high-theft products, Perrigo is said to be the first in the infant formula category.

“Keeping the product on the shelf makes it a better experience for the customer,” said Steve Sell, director of marketing, Tyco Integrated Security, provider of the EAS devices Kroger uses.

The International Formula Council, an association of marketers of formulated nutrition products, agrees. Its position is to leave formula on the shelf but it supports the measures retailers are taking to prevent theft.

“IFC members support increased anti-theft efforts and the industry works to develop solutions and share best practices across the retail community,” said Mardi Mountford, executive vice president of IFC.

Sidebar: Watch Out for Booster Bags

WASHINGTON — Organized retail crime ring operators use sophisticated methods to steal merchandise from supermarkets.

In addition to walking out of the store with stolen merchandise, there are other forms of theft. Some switch UPC bar codes so that the products they purchase cost less. Others use stolen or cloned credit cards to obtain merchandise; tamper with pin-pads and other retail equipment; and produce fictitious receipts to return stolen products back to retail stores.

ORC operations are highly organized. Members are commonly assigned designated roles, such as driver, lookout, picker, packer and supervisor.

These criminals use hand signals, cell phones and GPS devices to communicate with each other.

They also have “tools of the trade,” which include foil-lined shopping bags to defeat inventory control tags. On average, retailers say nearly 9% of shoplifters that are apprehended are found with foil-lined bags, commonly called “booster bags,” according to the National Retail Federation’s 2012 ORC survey.

In some cases, store employees are recruited to look the other way or provide details about camera or security systems.

ORC members can be dangerous. Retailers report that more than one in 10 ORC apprehensions lead to some level of violence, such as physical assault.