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Business Trends: Stop sticky fingers
Shrink control means being aware of customer and employee actions, both good and bad
By Joanne Friedrick
February 01, 2010
When the economy is in trouble, loss-prevention personnel get busier. The struggling economy is linked not only to lower sales of high-end items, but also to increased theft of these products.
In its 2008 Supermarket Security and Loss Prevention report, the Food Marketing Institute noted 18 percent of companies saw a "big increase in theft-related loss," while 56 percent claimed "somewhat of an increase in theft-related loss."
Companies participating in FMI's survey said they apprehend an average of 13 shoplifters per store annually, or about 250 per company. The average cost of the stolen items is $35 per incident.
Shrink rose to 2.3 percent of sales in 2007, after hitting a three-year low in 2006 of 1.52 percent.
Shoplifting of items such as seafood, meat and health and beauty-care items has always been an issue, says Cory Deily, director of security and loss prevention for Redner's Markets in Reading, Pa., "but it has gotten worse" with the faltering economy.
Deily says organized retail crime (ORC) is often responsible for theft within the 38-store Redner's warehouse grocery chain, which also operates 15 convenience stores. And, in the FMI survey, ORC was one of the top three concerns among food retailers, with 55.8 percent noting an increase in thefts.
Organized thieves target lobster tails, frozen shrimp, canned crabmeat and crab legs, which they then resell to bars and restaurants.
To combat the problem, Deily says, Redner's limits its display-case inventory and pulls all the seafood stock at 8 p.m. Anyone wanting to buy seafood after that time does so at the checkout counter.
While such measures can limit what is taken, Deily says, "The most powerful tool is employees being alert."
Here's looking at you, kid
The loss-prevention department trains associates to look for suspicious behavior, such as someone heading right to the seafood department and loading up a cart or hand basket with product without even examining it.
Recently, says Deily, an employee noticed a customer loading seafood into a trash bag in the aisle and alerted the store manager.
Chris McGoey, a security consultant in Los Angeles, says frozen seafood presents special problems because it can't be electronically tagged like some more-expensive grocery items. "You're limited to video or personnel, so you need adequate staff and good customer service" to prevent loss, he says.
He concurs with Deily that training is essential, and loss-prevention personnel and others can be taught to look for customers who are acting suspiciously. By knowing the customers by name or by sight, stores can more easily identify problems, says McGoey.
"Customer service is still the No. 1 way to prevent crime," he says.
When operations are too large or transient to know each customer, video cameras can be another means for tracking what occurs within the store. Deily says Redner's has cameras aimed at the seafood bunkers, and some stores are equipped with DVRs, similar to those that are used for home recording but with more high-tech features that allow for facial recognition, along with pan-tilt-zoom cameras that can track people as they move throughout the store.
Theft from within
While shoplifting is a major concern, so too is employee theft. Exception-based reporting at the front-end - a type of data analysis that compares current data against a base and looks for anomalies - can be used to flag all kinds of unusual transactions, says Deily, including excess voids and under-rings on high-priced items. Cameras are tied into the point-of-sale system so loss-prevention personnel can view video of suspicious employee transactions.
In its security-and-loss-prevention report, FMI notes nearly 41 percent of total shrink comes from employees stealing money or merchandise.
"On average, companies incur more than $18,000 in additional costs per year due to employee theft," said the report, "translating into $315 per store or $192 per incident."
Keeping a tight inventory on products such as seafood helps combat employee theft, says Deily, as does monitoring the front-end.
Restaurants also deal with issues of stolen inventory and missing cash, as well as theft from customers in the form of "dine and dash," in which customers eat and then leave without paying for their meal.
While some bars and restaurants have asked customers to provide a credit card or driver's license at the beginning of their meal, McGoey says the service model people are most comfortable with is to eat, then pay.
Therefore, he says, "Every restaurant takes a chance." As with retail stores, McGoey says foodservice personnel should be aware of how diners are acting and pay special attention to those who seem ready to eat and run. Suspicious behavior may include buying a lot more food than is typical or high-priced alcoholic beverages.
Most establishments, he says, "are afraid to put up barriers [such as asking for ID or credit cards in advance], "but if the losses were high enough, it would be a trade-off" to lose some customers who are offended by the new practice.
Video is another viable option, says McGoey, both as a deterrent and as a means to identify scofflaws.
In the end, loss prevention all comes down to training and customer awareness. Knowing what is going on, be it in the store or the restaurant, will go a long way toward preventing theft.
Contributing Editor Joanne Friedrick lives in South Portland, Maine