Security measures: how to arrest shrink in your store

Would-be shoplifters hoping for easy pickings at Longo's supermarket in Mississauga, Ont., are in for a most unpleasant surprise. A half-dozen orb-encased security cameras--all of which have the ability to pan, tilt and zoom so that they can read the serial numbers on a twenty-dollar bill should the need arise--keep a vigilant watch over the store's shelves and 14 checkout stations. Keen-eyed plainclothes floor-walkers blend in with the store's real customers, cruising up and down the aisles, pretending to shop but actually paying close attention to any signs of suspicious behavior. And last, but not least, all of Longo's checkouts (as well as the store's entrance) are equipped with state-of-the-art, acoustic-magnetic electronic article surveillance technology by Sensormatic. Should someone attempt to leave this particular Longo's without paying for a product that's been tagged, there's a better than 95% chance an alarm will be triggered. We call this active deterrence," says Terrence Jones, Sensormatic's food market specialist, pointing to the grey-colored pedestals guarding the Longo's entranceway and cashier stations. "When the bad guys see this (anti-theft technology) a lot of them just turn right around and go somewhere else." Welcome to grocery store security, '90s-style. It's not that supermarkets want to embrace security methods and technology that wouldn't be out of place behind the walls of Fort Knox. It's just that they have to. According to the Washington, D.C.-based Food Marketing Institute, theft--be it dishonest members of the general public or crooked employees--remains one of the most common and costly bottom line demons plaguing supermarkets today. A report published last year by FMI, Security & Loss Prevention Issues Survey, outlines just a few of the sobering shrinkage statistics: U.S. supermarket companies apprehended approximately 276,766 shoplifters in 1995; an average of 53 per store. The average value of recovered merchandise per apprehension was US$21.46. The top three items most frequently shoplifted were cigarettes (47%), health and beauty care items (28%) and meat (9%). The total estimated value of the recovered merchandise exceeded US$8 million. Employee theft remains a major challenge for the industry. Respondents to the FMI survey reported an average of 3.2 incidents of detected employee theft per store in 1995, resulting in a total of 14,678 incidents discovered. The average value of the cash/merchandise recovered in each instance was US$193.49. Forty five percent of the detected incidents of employee theft occurred at the checkout, while approximately 22% occurred in the sales and service areas. In April, the Toronto-based Retail Council of Canada unveiled some shrinkage stats of its own. According to RCC's 1997 Canadian Retail Security Report, the good news for grocers is that in 1996, the supermarket/grocery segment lost just 1.16% of total sales due to inventory shrinkage. Liquor/wine/ beer stores (.28%) and shoe retailers (1.02%) were the only segments that could boast lower shrinkage rates. But the bad news, notes, Max Roytenberg, vice-president, member services, for the Canadian Council of Grocery Distributors, is that in relative terms, that 1.16% shrinkage rate is quite a hefty number. "While we (supermarkets) tend to have lower rates of shrink than what's found in general merchandise, shrink rates are proportionally more important to our margins because our margins are so low," Roytenberg says. "The bottom line profit in the food business before earnings, depreciation and taxes can be less than 1%. So if the shrink rate is 1.16%, that's enormous--if a grocer can get rid of that, he basically doubles his overall profit overnight." Eradicating shrinkage is no simple task to be sure, given that supermarkets are designed to be customer-friendly (and, by extension, thief-friendly.) "We're in the business of providing convenience to customers, so it's important to have a store that offers easy access," notes Roytenberg. "You can't have a consumer-friendly environment if you're going to hang over customers, afraid that a small fringe is going to steal from you." Given that shrinkage will never be completely eliminated, what strategies should grocers embrace to reduce theft, both by employees and customers? Security experts warn that the worst thing to do when confronted with a shrinkage problem is to simply accept the situation as a cost of doing business--and therefore do nothing at all. "There's a pat little saying I like to use: 'Thieves are like good customers--if they get what they want, they'll always be back for more,'" says Gerry Davenport, an officer with the crime prevention services department of Brampton, Ont.-based Peel Regional Police. Based on his own experience, Davenport says "the absolute best defense" in reducing theft is nothing more complicated than management ensuring employees provide superb customer service. Do staff look up and acknowledge customers when they come in?" asks Davenport. "Or do they just ignore customers and thieves alike? People who have the intent to steal something really don't want to be noticed." Ivan Baker, director of security for Stellarton, N.S.-based Sobeys Inc., agrees. "One of the big areas for theft prevention for us is employee involvement," he says. "I think you can prevent a lot of shoplifting if employees are aware of shoplifting techniques. A lot of shoplifting is discouraged by offering good customer service--most shoplifters don't even want to be acknowledged when they walk into a store." As well, Baker says staff are told to keep an eye out for the tell-tale signs of a shoplifter. "They [shoplifters] tend to be nervous," he says. "They look more at you [staff] than the products they're shopping for. And they tend to wander around the store for a long period of time without actually doing much shopping." Another reason for grocers to be proactive about security, Davenport says, is that it's essential that management is looked upon as leading by example. "If management isn't reacting at all to the external theft, staff may 'feed' on this," he says. "And that's when you end up with a big internal [theft] problem as well." Still, plainclothes floor-walkers and an alert, responsive staff can only do so much in reducing shrinkage. That's when technology comes into play. Indeed, an increasing number of supermarket chains are buying into the merits of high-tech security. According to FMI's Security & Loss Prevention Issues Survey, when respondents were asked to name the top three cost-saving security recommendations, more than half (53%) recommended electronic article surveillance (EAS) technology coupled with closed-circuit television (CCTV). Baker says Sobeys uses CCTV in its stores as well as floor-walkers and is currently testing an EAS systems. A drawback to EAS, he says, is in addition to the cost of the system itself, "there's the cost of the tags plus the labor costs involved in applying those tags." Yet, for Etobicoke, Ont.-based Oshawa Foods, such costs are justified thanks to reduced shrinkage. Last year, Oshawa Foods rolled out EAS technology from Checkpoint Systems to all of its corporately-owned stores. (The systems consist of security gates that activate alarms when items tagged with radio frequency devices are not paid for.) Bill Argue, Oshawa Foods vice-president of loss prevention, notes that the EAS systems "have been positive to our growth margins--there's no question about that. They tend to work as a good deterrent--why would someone go and steal from one of our protected stores when there are other (stores) which aren't protected?" Argue says an additional benefit of using EAS is that the system allows Oshawa Foods "to merchandise products the way we want to merchandise them." For example, since embracing EAS, Argue says Oshawa Foods more openly displays such high-theft items as sell-through videotapes, film and batteries. This, in turn, has led to a "noticeable increase" in impulse-buying. EAS has also helped reduce "sweet-hearting" scams, wherein a cashier purposely neglects to scan an item for a friend posing as a customer. Says Argue: "Because a cashier doesn't know what is and isn't tagged, she's taking a big risk of setting an alarm off if she tries to sneak something past the scanner to a friend or relative." Argue is hopeful that the additional labor costs associated with EAS will plummet in the years ahead as more and more manufacturers look at applying tags to their product lines. "Some companies are already tagging their merchandise on the manufacturing lines so that the product's tag is concealed but it still deactivates at the point of sale," he says. "This is definitely the way of the future." While Argue wouldn't say how much Oshawa Foods has invested in its EAS systems, he points out that much like other forms of electronic and computerized technology, the price of EAS equipment has continued to spiral downward. "Five years ago, this (EAS) would have been cost-prohibitive for us," he says. In the final analysis, there are a variety of ways a grocer can combat shrinkage: floor-walkers, EAS, CCTV or--as is the case with several supermarket chains--implementing a combination of all three. Doing nothing, however, is simply asking for trouble. "If a supermarket makes it easy for people to steal," notes Davenport of Peel Regional Police, "then believe me, people are going to come back to steal and steal and steal again." Indeed. As the CCGD's Roytenberg notes: "When something is stolen, there are really two people at fault: the person who stole the item, and the operator who wasn't using systems that are available to discourage theft." EMPLOYEE THEFT Having less-than-honest members of the general public stealing from you is bad enough, but the ultimate betrayal of trust surely occurs when a store's rank and file employees engage in internal larceny. Still, according to security experts, one way to reduce the likelihood of excessive internal theft is to simply avoid hiring dishonest employees to begin with. While no system is 100% effective in weeding-out the bad apples, there are some ways employers can better screen applicants. Including: Scrutinize job application forms. Watch for such key factors as lack of references, skipped portions of the application; conflicting dates of employment; unexplained reasons for leaving old jobs and long gaps between jobs (which may indicate that the applicant was in prison.) Conduct an attitude survey. Check references thoroughly or have a security service check references for you. After the initial interview, have a colleague conduct a second interview. Compare notes: determine whether both interviewers share the same concern about a particular applicant. Thorough screening may take more effort, but it's better than the alternative: being stuck with light-fingered staff. "Some [grocers] say they can't afford to take the time to do a proper and thorough job in screening people and doing reference checks," says Ivan Baker, director of security for Sobeys Inc. "But the line I use is that they can't afford not to." CUSTOMER THEFT Compared to other retail segments, the supermarket industry has been Slow off the mark in embracing electronic article surveillance (EAS) technology. A concern of grocers in the past is that the very presence of an EAS system would be seen as a major negative by their existing (and honest) customers. However, a study by Atlanta-based research firm Elrick and Lavidge indicate that such fears are unfounded. For example: Almost all of the 505 grocery shoppers surveyed in the Elrick and Lavidge study said they would not stop shopping at the supermarkets they were using at the time if those stores were to install a security system. While the installation of EAS systems generally does not affect shopping habits, many people expressed a "pro-security" sentiment. Some shoppers even indicated that if a grocery operator made it known that an upgraded security system was to be installed, they might even switch to that store. The installation of a security system at a supermarket has little to no effect on the amount of groceries consumers purchase. Bill Argue, Oshawa Foods' vice-president of loss prevention, concurs with the study's findings. "We've had no negative comments from our customers," since Oshawa installed EAS systems in its stores last year. "In fact," says Argue, "we've had just the opposite. Our customers are pleased to see we're taking action against shoplifters so that their grocery prices don't reflect the cost of theft."