PUTTING A LOCK ON LOSSES

MINA WILLIAMS

Monitors, scanning devices, sensors and other high-tech appliances are being put to work as retailers continue to reduce losses due to shoplifting and employee fraud.

While these tools are reaping some rewards, operators report that good old-fashioned one-to-one communication remains most effective when raising the consciousness of employees to be on the alert for suspicious activity.

At a time when operational inefficiencies are continually put under the microscope, it's theft-related losses that have caught the attention of supermarket operators across the country. Inventory shrinkage across all types of retail averages 1.77% of sales or $26 billion annually, according to the University of Florida's National Retail Security Survey. The supermarket industry ranked slightly below the average, with shrink estimated at 1.47% of total sales, according to that report.

Other research estimates the average loss at supermarkets to be slightly higher, at 2.32% of sales, with superstore shrink at 2.24%. Meat, produce, deli and bakery departments account for more than half of the shrink losses, according to a survey published by the National Supermarket Research Group, Scottsdale, Ariz.

"What aggravates me is that these theft issues have nothing to do with selling groceries," said Mike Martin, owner of Red Apple, Kennewick, Wash. Martin recently bolstered his security by installing additional security cameras. The cameras are linked up to a single monitor to keep watch over a store with a history of theft. The meat aisle, the cigarette display, the front end, the beer aisle and the back room are each targeted for monitoring.

Dorothy Lane Market, Dayton, Ohio, has employed mirrors, cameras and plainclothes security staff in its efforts to reduce losses. The front line of defense, said Matt Heib, director of human resources, is the operator's associates. Every Saturday, new associates are trained. Shoplifting and internal theft are topics addressed during these sessions. Associates are shown how to prevent shoplifting and, should they initiate a shoplifter's apprehension, they are told, they will be given a cash reward. Those helping to catch a meat thief are given $100; other-product thief catchers are rewarded with $25.

"We strive to create awareness with our associates," said Heib. "And to create a whole team effort in our stores. This seems to help in reducing losses."

As the battle is waged to stem shrink due to theft, retailers grapple with identifying the root of the problem. It is employee theft that continuously comes up in research studies and retailer surveys as the No. 1 profit killer.

"Employee theft was at the highest levels that we have seen in the eight years we have conducted this survey," said Richard C. Hollinger, director of the University of Florida's retail-shrink research project. "While the average shoplifting incident costs the retailer $212.68, an employee theft averages $1,058 per incident. A tight labor market and increased consumer spending will compound this escalating problem."

"The losses are staggering," said Mark R. Doyle, vice president at Hayes International, a loss-prevention and inventory-shrink control consulting firm based in Fruitland Park, Fla. "This is the fifth consecutive year the number of dishonest employees apprehended and the dollars recovered from those apprehensions increased over the previous year." Hayes International has published its Annual Retail Theft Survey for the past 11 years.

As a result, supermarket operators have turned their attention to creating an environment where employees understand the importance and consequences of dishonesty while they remove opportunities for the internal threat.

"I explain that they will be caught," said Heib of Dorothy Lane Market. "I tell them we will call the police and they will be handcuffed and taken to the police station. Setting this stage lets our associates know that we will arrest and prosecute. This eliminates the mind-set that, if caught, they can simply go to another job. "

The widespread use of electronic article surveillance and closed-circuit TV, along with the new generation of radio frequency identification technology, have each brought another salvo to loss-prevention efforts. However, operators are finding that technology is only a supplemental weapon to training methods that have proved to be both efficient and cost-effective in the war on theft.

"The shrink issue is a huge problem, particularly in classes of trade where the profit margin is low," said John Case, Del Mar, Calif.-based security consultant. "Because of the low profit margins, most supermarkets have established a clear, well thought-out training program on theft. In the training program, employees are told in a variety of ways that theft will not be tolerated."

"There is a lot of good that can come out of the human-resources department," said Les Couch, a loss- and crime-prevention specialist based in Medford, Ore. "Everything starts with how people are educated and come to understand the consequences of theft. Besides losing a job, the incident goes on your record and getting a job reference is all but impossible."

At Bashas' Markets, training is key in setting the tone. "Theft is wrong, and we don't tolerate dishonesty. Bashas' takes employee theft seriously," said Becca Anderson, a Bashas' spokeswoman. "We have a zero tolerance on theft. If someone is disciplined for theft, he or she is gone. Our success in training is notable in that the company has many long, long time employees."

The Chandler, Ariz., chain includes theft prevention as a component of every new-hire training program. Each new employee receives a take-home packet. Within this packet is a message from the chain's chairman titled "The Price of Honesty." Within that message, Eddie Basha discusses how important honesty is and what the new employee's integrity is worth.

Also included in the packet is a hotline phone number for employees to use to report a theft incident. A tear-off section allows employees to keep the number handy in their pockets.

"While we do have an open-door policy for employees wanting to report theft, we also understand that anonymous tips are another method employees wish to use," said Anderson. As a result the chain has instituted a "Take It to the Top" program, which includes an anonymous voice-mail system for employees to use when reporting theft.

In addition to theft of merchandise or cash, supermarket operators are homing in on fraudulent point-of-sale transactions, theft of time and losses attributed to administrative errors.

"It is critical to create employee support and involve them in loss prevention rather than set up an employee-vs.-management approach," said Case, the California security consultant. "You need to show employees what is in it for them. Basically, theft comes off the bottom line and puts the business in jeopardy. It puts [employee pay] raises into question and makes the business unstable. Train employees to report, not ignore, theft."

"We lay a lot of guilt on them," said Martin of Red Apple. "We tell them over and over what theft, even seemingly innocent sweethearting, does to them and to the community." Sweethearting occurs when cashiers deliberately undercharge -- or fail to ring up purchases -- made by friends and relatives.

Loss-prevention training needs top-level commitment, as Bashas' has discovered. When an employee knows that an operator will prosecute or take action on a reported crime, he or she is more likely not to steal and to report those who do.

"Fear is a powerful motivator," said one New England operator. "Once employees and customers understand that when caught, they will be prosecuted and it will go on their permanent record, they think twice."

Even before the first day of work, industry experts caution retailers to perform due diligence when it comes to new hires. Integrity-screening measures, such as checking employment history, personal references, criminal conviction records and administering a drug test have become the first measure in loss prevention.

Case suggests including loss-prevention responsibilities in job descriptions. "Write that they are responsible to report existing theft and to alert management should they see opportunities for theft. In theft crimes, retailers need all the eyes and ears they can get. Everybody needs to be mobilized."

Industry experts report that the drug-test aspect is the most crucial since the largest percentage of employee theft is linked to drug activity. "There is a correlation between employee theft and drug abuse," said Case. "Where, but the place you work, would be the best place to get extra cash?" He estimates that more than half of the cases of employee theft today are related to drug activity.

On the other side of loss prevention -- shoplifting -- supermarket operators report that again employee training is a powerful tool.