TO WIN AGAINST LOSSES

DENISE ZIMMERMAN

As retail losses due to employee theft continue to outpace shoplifting, retailers are looking more closely at cashier-monitoring technology.

Homegrown and off-the-shelf software that sifts through point-of-sale data transaction by transaction has proven to be an effective tool in identifying suspicious trends in cashier behavior. However, as the systems become more sophisticated, it becomes more critical that the data in exception reports are interpreted correctly.

"As we get more and more automated, we feel we have to be careful. We don't want to make mistakes," said Michael Priest, director of loss prevention at Bashas' Markets, Chandler, Ariz. "There still is trench work you have to do."

Automated cashier-monitoring systems require some monitoring of their own if the investigations they prompt are to be based on good solid information, retailers told SN.

"Cashier-monitoring systems are just part of the puzzle. They are one more tool to be used to give us an edge. They take what loss prevention has done and automate it," said Marene Allison, vice president of loss prevention and safety at A&P, Montvale, N.J.

One such system pitched to the retailer fell short of expectations. "All it did was give my loss prevention people more things to do with less time -- and you still didn't have the proof" that a deliberate theft occurred, she said. "You still have to do some verification."

Other retailers agree there's no such thing as a totally automated cashier-monitoring solution. With selective manual checking, however, the systems can reduce internal theft that once again outpaced shoplifting this year.

Employee theft accounted for 38.4% of total shrink at retail stores this year, according to a comprehensive report released last week. Shoplifting, by comparison, represented 35.8% of losses with the balance attributed to administrative error and vendor theft, according to the 1996 National Retail Security Survey conducted each year at the University of Florida, Gainsville, Fla.

Cashier-monitoring systems examine point-of-sale data to identify activity falling outside the norm established for that particular store and time of day, for example. Excessive no-sales, couponing and voids are highlighted in exception reports to call attention to a serious potential theft exposure, or a minor training issue.

A knee-jerk response to the data -- confronting a cashier with false accusations -- can land a retailer in hot water.

"We had a system in place that was not user-friendly to our [POS] system and created some distortion that resulted in us doing some things we shouldn't have done, such as go after a cashier and find out later that the system was giving us false information," said a loss prevention executive at a major chain who requested anonymity.

"It was a technical issue where the software misinterpreted the data that is fed to our system," he added. "It caused some embarrassment, but it didn't cause any permanent problems. We had to back off."

Another retailer's system sent up red flares on a cashier whose remarkably high rate of "no sale" rings suggested she might be stealing when in fact, the irregularity was due to a training matter.

"There was a checker who, for whatever reason, did not have a wristwatch, so she'd hit 'no sale' to print a receipt that would show the time," said Dan Kozak, director of safety and security at Hy-Vee Food Stores, West Des Moines, Iowa. "The only reason she was ringing a 'no sale' was to see what time it was.

"With exception reporting, that could look like something really major and terrible when all it was was a young person playing around," he said. Such cases underscore the importance of scrutinizing the data in exception reports.

In this regard, cashier-monitoring systems, Kozak said, go beyond loss prevention and provide insight into training issues and productivity levels.

"Some people may look at it as a tool to find dishonesty but it's also a tool for finding out that people are not as well-trained as you thought they were," Kozak added.

Interpreted with accuracy, the data generated by cashier exception reports can help retailers stop theft and correct training issues.

A cashier-monitoring program developed in house at Homeland Stores, Oklahoma City, enables corporate loss prevention staff to extract point-of-sale data from stores and reformat it into various spreadsheet applications to uncover questionable patterns.

"We've cut our refunds by two-thirds and decreased our [invalid] coupon exposure by 0.05%," said Ernie Deyle, director of loss prevention and training, Homeland. Cashiers had excessive refunds because they did not understand how to process voids properly, he noted.

Deyle said the system allows the chain to examine various areas of front-end activity. "We now look at a cashier's average dollar per item, dollar per customer, scanning rate, average value per order, how many items are in an order," he said.

He stressed the importance of interpreting the data carefully and setting parameters on a store-by-store basis. "You have to know what you are looking at, know how to interpret the data and understand the trends.

"You can't go to one store and say, 'This [POS activity] is outside the norm.' It may be outside the norm from a national standpoint, but at this particular location it may be the standard," he said. Some Homeland stores have higher refunds and less voids because of the specific customer base and other variables.

Bashas' Priest agreed: "We're finding that each individual store is setting their own trends and their own averages. If refunds are high in a particular store, maybe that's the average and it needs to be that way."

Hannaford Bros., Scarborough, Maine, has been using cashier monitoring for about 10 years, but is looking ahead for ways to leverage that technology.

"We wrote our own [program] and it's pretty good," said Mike Harris, vice president of internal auditing and loss prevention.

"There's some other technologies out there that will help us down the road. One will be to integrate cashier monitoring and performance monitoring with camera systems," said Hannaford's Harris.

"There are a few companies out there making stabs at it, but nobody's got it perfected yet," he added.

Ultimately, Harris would like to see the videotapes recorded by camera systems reviewed on a centralized basis, rather than in each individual store.

Another East Coast retail chain hopes to do the same. "It is somewhat time-consuming in that we have to pull it from the stores. What we're looking for in the future is to dial directly into the stores and pull the video and data from the PCs directly through the telephone line to a central location and monitor from here," said a loss prevention vice president who requested anonymity.

The chain is now testing a new cashier-monitoring system that generates electronic exception reports highlighting potential trouble spots in red. Those areas can be clicked on with a computer mouse and the system brings up the specific register receipt for review. If the transaction in question still looks suspicious, the actual video recording of the activity can be brought up for a visual review.

"It's still raw" he said of the vendor-developed program. "But we see it as a full-blown combination security system, front-end system and customer slip-and-fall system all rolled into one."