STORES MOVE TO CUT SHRINKAGE

LISA A. TIBBITTS

Supermarkets are fighting to cut the high cost of shrinkage by implementing various security measures.

In video terms, shrinkage may mean stolen rentals or sell-throughs or even employee theft of videos or cash. Although retailers downplay the degree of shrinkage they see in both sell-through and rental videos, they still expect it to occur to some degree and therefore seek out every means possible to slow or stop it.

Kathy Domingo, a video buyer with Hannaford Bros., Scarborough, Maine, said, "It's a factor, but no more a factor in video than it is in cigarettes or soda or beer or ice cream or any other item in the store."

Indeed, estimates vary, but some industry observers say shrinkage in video departments may take as much as 20% off a section's bottom line, depending on its size and merchandise.

Mike Estep, president and owner of Shannon Data, in Norcross, Ga., said, "We've tracked as much as 20% of gross revenue being stolen from Kroger's stores and some other independents also."

The biggest video shrinkage problem retailers have to deal with is employee theft, Estep said. Shannon Data's point-of-sale system flags questionable transactions. Store managers can spot abnormalities in a transaction that could be the result of employee theft.

"Kroger is one of our larger accounts and they are constantly catching people," Estep said.

Mary Kuhny, customer support manager with Selectrak, Hillside, Ill., agreed that employee theft is one of the biggest problems retailers face, and it is not solely cash theft.

"Employee rental theft is my hot button -- namely the employee that takes your new releases home and doesn't pay for the rental or the late fees," she said.

As an alternative to inventory management systems, some distribution companies now fit videotapes with radio tracking devices or magnetized tracking strips.

Greg Davies, director of video operations for Dierbergs Markets, Chesterfield, Mo., uses such a system.

"We have Sensormatic security systems. We've always had in-store security, so I think we've always had a good handle on it," he said.

Ingram Entertainment, a nationwide video distributor, installs Sensormatic or Checkpoint strips on videos if customers request it. Such systems can dramatically reduce shrinkage.

Leslie Baker, national key account manager for Ingram, Kansas City, Mo., said, "With our system, shrinkage drops down to about 2%. It really helps. We like to use it as a deterrent."

Some stores have tried using special fixtures or other inventive strategies to handle the problem of shrinkage in both sell-through and rental.

Sharon Stagner, merchandising coordinator with Seaway Food Town, Maumee, Ohio, said her stores usually bring in fewer copies of each title to deal with their shrinkage problem. "It's a perception that there is some shrink in sell-through. Perhaps a little bit of caution [is required] on the stores' part when bringing in shippers of sell-through product," she said.

In placing floor displays of shippers, Stagner said, "We usually try to place them near the front end or near the service counter, so they are visible to clerks." Hannaford's Domingo said 95% of her stores also display major sell-through titles on the floor but, she said, "I have some select stores that have problems and we had to get creative with the merchandising."

One "creative" strategy involves keeping titles in a locked case with signs saying they are available, she said, "because it is such a high ticket item."

Kerry Smith, district manager of the Boogaart Retail division of Scrivner, Concordia, Kan., said his stores still use open floors to display sell-through but they have considered going to security gates. "We have tried some different display fixtures that lend more security -- glass fronts that you have to lock. But at this point, we are just testing."

At least two chains -- Bel Air Markets in Sacramento, Calif., and Kash n' Karry Food Stores in Tampa, Fla. -- are reportedly displaying dummy videotape boxes on the floors and keeping the tapes behind a customer service counter. Executives from Kash n' Karry would neither comment nor confirm that this is their practice. But Rick Ang, director of video operations for Bel Air Markets, said his company is using this measure in at least one store.

"We did that because we were experiencing a lot of theft at that one particular location. Some of our other stores have security gates. For the rest, we have a really big problem," Ang said.

Studios have protested this practice, saying the boxes could be stolen and used to market bootleg tapes. However, some retailers believe the studios have an obligation to help secure the products in-store.

"The boxes could be appropriately marked to say it is just for display. They could even send a solid piece where nothing could be put inside. I don't see why they shouldn't be able to cooperate," Ang continued.

Some stores find problems in rental video, as well. Gary Schloss, vice president of general merchandise with Carr Gottstein Foods in Anchorage, Alaska, said his stores do not experience a great deal of sell-through shrink because they usually sell only secondary titles after they have been out at low price points. "The shrink that we experience is more on the video rental. We're constantly calling. 'Where's the video? Please bring it back,' " Schloss said.

He stressed the importance of sensitively handling a customer who is delinquent returning a tape or who claims to have lost it. "The worst thing you could do is upset a customer who didn't bring back a tape. Every customer is worth many thousands of dollars to us, with all the products that they buy. If the benefit of the doubt comes down to whether they brought it back or not, we always go with the customer," he said.

"If somebody keeps a tape out and they are a good customer of ours -- OK, fine. But if that same person keeps losing them, day after day, week after week, and all of a sudden they've lost $200 to $300 worth of tapes, then that's a track record and that's usually a problem for us," he continued.

Jim Key, nonfood direct store buyer with Community Cash, Spartanburg, S.C., said the best way to prevent rental shrink is to have a good tracking system in place. "You always have somebody who never brings a movie back. You face that sometimes, but we have a lot of safeguards built into our system and hopefully we can weed those people out in time," he said.

One special area that sees a lot of shrinkage is the video game niche. Seaway Food Town's Stagner said, "We have found that shrink is a major problem with games, especially for the games that are brought out just through the distributors and are only available through video venues. They seem to be an item that, whether it is kids or adults, they seem to like it and pick it up."

After attempting to do everything possible to handle video department shrinkage, some retailers have called for studios to install some kind of security system within their games. Stagner suggested embedding some type of device inside game cartridges that would disable the games.

Larry Lai, president of Bonafide Management Systems, Woodland Hills, Calif., agreed that such a device would help reduce shrinkage but he said that the gadget would have to be compatible with all other tracking systems used by retailers and with the security devices of other studios.