REDUCING SHRINK, EXPANDING SALES

KIM ANN ZIMMERMANN

While many time-tested loss-prevention technologies are helping in the war against crime, they are also providing opportunities for increased sales and enhanced customer service.

Electronic article surveillance tags, for example, enable retailers to display high-priced items such as liquor on shelves instead of behind locked cabinets, thus improving sales. Retailers are also using EAS tags to protect not only products, but the children who are in play centers as their parents shop. In the future, retailers hope to use more intelligent EAS tags to collect data about customer buying habits by sending information to a database about the items the customer chooses, opening up opportunities for in-store marketing.

Retailers continue to use closed-circuit television to catch thieves, but use of the technology is also allowing managers to check on the quality of produce or the execution of a planogram from a remote location.

Although loss-prevention technologies have long been used at the front end, many retailers are looking to employ these systems throughout the entire organization, using cameras to monitor deliveries at the back door and global-positioning systems to keep tabs on delivery trucks along their routes.

Computer crime is another concern of retailers. Since the number of home PCs is rapidly increasing, there are more opportunities for fraud, such as the creation of fake receipts. On-line selling presents another avenue for computer crime. In addition, the proliferation of frequent-shopper programs and the need to integrate loyalty programs with other systems, such as item and price databases, has resulted in the development of more open systems. This openness has made systems more vulnerable, according to experts.

"Particularly as retailers become more reliant on data, loss prevention is becoming a key issue and many are looking for loss-prevention systems to be integrated with other systems in their organization and they're looking for staff in their loss-prevention departments who are more computer savvy than ever before," said Read Hayes, senior consultant at Loss Prevention Specialists, Winter Park, Fla.

"What we're seeing is retailers using all these weapons, but they are using them in new and creative ways," he said.

Nash Finch Co., a Minneapolis-based retailer that operates 100 stores, is searching for ways to make the most of its loss-prevention efforts. The company is piloting a program that will enable managers to view live images from CCTV cameras on laptop computers. "We have 32 to 37 cameras throughout the store that can be monitored from a desktop computer or laptop," said Dan Smith, director of loss prevention for Nash Finch. While this technology provides loss-prevention professionals with the tools needed to investigate cash shortages or suspicious slip-and-fall incidents in a store, Smith notes the technology has the potential to streamline operations and improve customer service.

"We've got 99% of the store covered with the cameras, so there are a number of things we can do with the video in addition to things like investigating any kind of incident in the store. A district manager can take a look at the quality of the produce or see whether it is being displayed according to company policy," he said. "A manager in the Southeastern district could take a look at a new store in Fargo," he said. "While this is experimental in a few stores, it is going very well," he said.

Nash Finch is also testing the use of EAS tags in its child-care centers. The child and parent are both equipped with a bracelet with an EAS tag. If the child leaves the center, an alarm is sounded. The EAS tag would also activate an alarm at the front door if the parent left without the child or the child somehow passed the first alarm placed at the door of the center. Both tags are disabled when the parent picks up the child at the center.

There are also video monitors placed throughout the store for parents to view the child-care center.

"We're using this in several locations with day-care centers and plan to expand the program," Smith said. "We felt that if we were going to take responsibility for people's children, we had to provide the best security possible."

Other loss-prevention technologies being used to catch criminals involve monitoring of unusual activities at the point of sale. This is requiring more sophisticated tools as employees learn to circumvent the system. "Someone can quickly learn that a certain number of refunds over $30 will result in scrutiny, so they do a whole bunch of phony $27 refunds," said Ernie Deyle, national director of shrink improvement at Arthur Andersen's Senn-Delaney division in Chicago. "You have to take a number of factors into account in terms of cashier performance and incorporate that into a wide area network to look at things on a district and regional level," he said.

Another problem area is the processing of voided transactions. A cashier can memorize the number that is entered to void a transaction and then use that number to void valid transactions and take the extra cash. "Some retailers are moving toward having a bar code that needs to be scanned to void a transaction and having that bar code be unique to each manager, providing an audit trail."

These same tools used to monitor front-end irregularities are being used to monitor transactions at the back door as well, Deyle said. "These can definitely be used to identify collusion between the vendor and the receiver. If a retailer normally processes $10,000 worth of credits in a certain period with a vendor and then suddenly a new driver comes in and the credits are $1,800, those credits are likely going somewhere. They didn't just drop off that dramatically."

Deyle also noted that retailers are employing other methods of monitoring theft in the receiving area. "For example, the loading dock doors are open from two until four in the morning, yet the store isn't open and no deliveries are expected. The camera can be triggered to begin operating if the loading dock door is open," he said.

Shopping-cart theft is another area where retailers have been aggressively pursuing loss-prevention technology. Michael Griffith, vice president of store development for Farm Fresh, Norfolk, Va., said the retailer has been testing a system that locks the wheels of the shopping cart if it is taken beyond the store's parking lot. "We've gone from losing 10 or 15 carts a month to one or two," he said. The retailer will make a decision in the next several months as to whether to expand the program.