« December 2006 Table of Contents 
Case Study: Grocers' battle against theft waged in-house
Video cameras, locks, electronic tags and POS software are common safeguards
By Lisa Duchene
December 01, 2006
An employee of a Southeast grocery chain used to pack fresh
meat and seafood from the supermarket into a plastic tote and
toss the whole thing in the dumpster. After work, he'd retrieve
the merchandise and sell it to nearby restaurants.
When he was finally prosecuted, the stolen goods totaled
well over $5,000, says Bill Alford, then the chain's loss
prevention manager. Alford, now a Food Marketing Institute
consultant and president of International Lighthouse Group in
Charlotte, N.C., advises retailers on how to minimize loss from
theft.
No one knows exactly how much seafood is lost to theft in
the retail channel. But it could add up to hundreds of millions
of dollars.
Grocers in 2005 lost an average of 1.69 percent of their
company's overall sales to shoplifting, vendor theft, employee
theft of money and merchandise and worthless checks or
credit/debit card fraud, compared to 2 percent the prior year,
according to an FMI report, "Supermarket Security and Loss
Prevention 2006." The report focused on loss from theft or
fraud and did not include data on loss due to spoilage.
Retailers measure loss in one of two ways, either by measuring
the retail value of lost merchandise or the supermarket's cost
of lost merchandise. Overall, grocers reported that their
theft-related losses, typically caught by inventory tracking,
are the same as or lower than in 2004.
However, the grocery-loss-prevention managers surveyed for
the report estimate loss from their meat and seafood
departments at 3.7 percent of department sales. With annual
retail seafood sales, totaling about $16 billion, indeed
disappears, the annual loss tallies around $592 million.
Grocers are becoming increasingly sophisticated in theft
prevention. About one-quarter now use some type of biometric
system that scans and matches a shopper's fingerprint to the
bank, driver's license and fingerprint information on file,
providing more secure check-cashing and payment for
groceries.
Seafood retailers use a variety of safeguards to combat
theft: surveillance cameras, electronic tags on product
packages, employee-tip hotlines, POS software and employee
screening. Some lock their freezers and coolers or lock their
most expensive seafood products like lobster tails and crab
legs in cages inside the coolers.
Meat and seafood are susceptible to theft, says Alford,
because of their relatively high value. Dry grocery items in
2005 had a shrink rate of 0.7 percent of department sales, the
lowest rate among the grocery departments, while bakery
departments had the highest rate at 8.3 percent of department
sales. For the typical grocery store, the total value of stolen
dry grocery items is far higher than stolen bakery items, but
the percentage is lower because dry grocery sales are so much
higher than bakery sales, often the store department with the
lowest sales, says Alford. Meat and over-the-counter medicines
are the most frequently stolen products, followed by health and
beauty care items, baby formula and razor blades, according to
the FMI report.
Theft of seafood products in the retail channel is a big
problem, says Jim Wallace, VP of perishables procurement for
C&S Wholesale Grocers in South Hatfield, Mass. "Shrimp and
things like that disappear all the time. [Theft] is a
significant problem."
Distributors like C&S have safeguards in place to
prevent loss, but retailers and suppliers can never prevent it
completely, says Wallace.
At retail, shoplifters and dishonest employees steal
product. Shoplifters may grab a bag of frozen shrimp on impulse
and sneak it into a pocketbook or down their pants (yes, it
happens). Or, they may be part of an organized operation,
shoplifting with specific customers in mind. The latter likely
arrive at the store knowing exactly what they want - perhaps
frozen salmon, mahimahi or shrimp. They stow it in a cooler in
the car and take it to a bar or restaurant where they sell it
for pennies on the dollar, says Alford.
Fresh product is somewhat protected from shoplifters because
it's typically behind glass and must be requested.
"People are less likely to conceal and steal the product
because they have to make a face-to-face contact," says
Alford.
For fresh seafood, the greatest loss threat is dishonest
employees who take product. Or, they may generate an incorrect,
lower-cost price tag by under-weighing product or punching in
the code for a lesser-value product, says Alford. They also may
collude with a cashier to ring up an item of lesser value than
the product they actually take.
That's why the most important measures retailers can take
are to stay on top of their seafood sales figures, make sure
cashiers are ringing accurately and compare front-end figures
with department numbers to verify accuracy, Alford says. POS
exception monitoring software is one tool that allows the store
to analyze POS data in various ways to find patterns that may
be due to theft. It can be used, for example, to flag all
seafood purchases for $1 to $2. Since very little seafood costs
$1 to $2, repeated transactions for those amounts are
automatically suspicious, says Alford.
It's also wise to lock coolers and freezers, he adds.
At the Potash Bros. Supermart in Chicago, Seafood
Buyer/Manager Donnell Yancey runs the seafood department solo.
The store went through about five fish guys in two years, all
of whom were caught stealing product, says Yancey. In some
cases, video cameras caught employees eating product they
didn't pay for.
In addition to the cameras, Potash Bros. affixes Metro
Systems' square electronic tags to packaged products like
shrimp. Unless the tags are deactivated when they pass through
the checkout, an alarm will sound as they are carried out of
the store.
But even with the cameras and tags, "you can't catch it
all," says Yancey.
All 27 Haggen's and Tops stores in Washington and Oregon are
equipped with surveillance cameras in back rooms, on the sales
floor and at entrances and exits, says Russ Casteel, the
chain's seafood merchandiser. There are virtually no private
employee areas, he says.
When it comes to preventing theft, smaller stores may have a
bit of an advantage over large chains. At Casey's Market in
Western Springs, Ill., all employees must pass by the desk of
store Manager Joe Lane in order to leave. In 17 years, he's
caught only one employee stealing.
To prevent the company from being a victim of theft in the
delivery link of the supply chain, a designated receiver at the
store verifies the counts, packs and weights of shipments
before signing for them.
Retailers must make sure they have procedures in place for
direct-store deliveries, says Alford.
"When those controls are in place, the loss in the supply
chain is very, very minimal."
SFlb Contributing Editor Lisa Duchene lives in Bellefonte,
Pa.