SINKING SHRINK

PATRICK SCIACCA

Traditionally tight margins in the supermarket industry make even small reductions in shrink important, but they also raise the pressure on loss prevention professionals to make their programs cost-effective.

The right combination of technologies, training and in some cases employee incentive programs are needed to keep programs working well, retailers told SN.

Closed circuit television, one of the most commonly used loss prevention technologies, is also being used to help monitor cashier performance and productivity by focusing more closely on the store's front end.

Moving cashier monitoring one step further, some retailers are opting for an application integrated at the front end that monitors and analyzes cashier performance based on data compiled at the point-of-sale.

In addition, several retailers are seeing significant shrink reduction with their use of electronic article surveillance, especially when high-ticket products such as health and beauty care are tagged.

EAS has been a winning loss prevention technique for Hannaford Bros., Scarborough, Maine. The retailer was able to reduce shrink levels by 10% when EAS was tested in stores prone to shoplifting, according to Mike Harris, vice president of internal audit and loss prevention technology for Hannaford Bros.

The technology is most useful for "classic high-theft items," such as batteries, pain relievers and film. These products are regularly tagged for EAS, said Harris, with other products tagged on a rotating basis.

Another retailer that has taken an aggressive approach to reducing shrink levels through EAS is Price Chopper Supermarkets, Schenectady, N.Y. The retailer currently uses EAS in 22 of its 110 stores.

"The system's implementation started in 10 high-pilfered stores about two years ago, and 12 more stores added EAS about seven months ago," said David Proper, vice president of loss prevention and internal audit for Price Chopper.

While the retailer had originally predicted a 20% reduction in shrink with the technology, to date, EAS has helped the retailer reduce shoplifting-caused shrink by about 25%, he told SN.

Some of the items that Price Chopper has tagged for EAS include health and beauty care products, video tapes and high-ticket meats. "Week to week, we rotate what is going to be tagged," Proper told SN, noting that some items, such as batteries and film, are always tagged.

CCTV systems are also being used to greater effect than before by a number of retailers. Lower costs, smaller cameras and remote monitoring capabilities are extending this technology's usefulness to new areas.

"CCTV helps in reducing pilferage," said Price Chopper's Proper. He added that with the improvements in technology that have shrunk camera and lens sizes, cameras can be put almost anywhere, including sprinkler heads or soda machines.

CCTV is most useful for armed robbery prevention, as well as safety and training."A lot of people missed the boat on that and think cameras are just for security," he said.

In an attempt to see what loss prevention technology works best, Price Chopper recently tested a remote camera system in its Newburgh, N.Y., store. The camera looked over the store's parking lot and was monitored from 150 miles away.

"It worked well but we didn't see the purpose past the test," Proper said.

Approximately 100 Hannaford stores have comprehensive CCTV systems. Lower prices for the technology have allowed the retailer to use the systems on a larger scale, Harris said.

Many CCTV setups at Hannaford stores are extensive enough to record store activity rather than simply monitoring it. This type of video record can be used to document shrink and potentially build a case against an employee or a shoplifter.

Many retailers, including Winn-Dixie Stores, Jacksonville, Fla., are integrating CCTV into their POS systems. In addition to reducing shrink levels in this crucial area, such systems can monitor cashier performance and productivity.

Price Chopper also recently tested a CCTV system for the front end that allowed the retailer to zoom in closely enough to watch the register and the tape ringing up at the same time, in an effort to help reduce cashier sweethearting, according to Proper.

"The test was very successful," he told SN, adding that the retailer had not yet made a decision on whether to expand the use of this technology.

Hannaford's Harris noted the CCTV systems have also been effective in measuring the retailer's cashiers' performance. In addition, the retailer has developed its own cashier monitoring system through a proprietary software package; several off-the-shelf cashier monitoring programs are available in the industry.

All sources agreed that technology, no matter how effective, is not sufficient to combat shrink unless employees are motivated to reduce losses. One retailer has formalized this concept with an incentive program that provides cash bonuses to employees based on keeping shrink levels to a minimum.

At Redner's Markets, a 36-store chain based in Reading, Pa., the retailer's Inventory Improvement Bonus Award Program has been very effective at reducing shrink, according to Kevin Snyder, senior vice president of store operations and director of sales.

The retailer budgets for a certain amount of shrink at each store, measured as a percentage of sales. If a store comes in under that number, the balance is given back to the employees in the form of a cash bonus.

The retailer was able to reduce shrink significantly in 1997, said Snyder, noting that the average bonus for full and part-time employees was $900. This was $200 more than the previous year's average bonus.

In addition to the bonus program, Redner's uses a number of other loss prevention techniques, such as in-store detectives to spot shoplifters and keep an eye on employee theft.

Employees are also encouraged to call a hotline to confidentially report incidents of theft to the loss prevention director. In addition, employees can alert Redner's management to internal problems through the Internet.

Harris and Proper both said that no one method is the best for loss prevention, and in fact, they should all be used together to battle against shrink.