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Loss prevention
By Kathleen Dayton
Staff Writer
Sitting behind closed doors at the Dillard’s department store in Northwoods Mall, Michael Aiken has his eyes on a secret world that pocketed $37.4 billion from the retail industry in 2005.
Aiken is a surveillance camera operator who watches shoplifters in action. With the help of 20 cameras, Aiken catches an average of eight thieves in the store per month.
Most recently, surveillance cameras in the store spotted a woman trying to slip an evening gown into her purse and a trio of juveniles trying to make off with a skirt.
Aiken said shoplifters do not appear to be stealing out of need.
“A majority of the people we catch have money on them,” Aiken said. “You still have those that get a thrill out of it. If they knew we had this many cameras and could see what we see, I don’t think they would steal.”
Every year, retailers combat staggering revenue losses due to a variety of issues including check fraud, burglary and credit card chargebacks. But the two biggest problems last year were employee theft, valued at $17.6 billion, and shoplifting, at $12.3 billion.
Inventory shrinkage, also known as shortage, rose slightly last year according to the University of Florida’s annual National Retail Security Survey Final Report. The 156 retail companies that responded to the survey reported an annual shrinkage rate of 1.59% of total sales, which is higher than the 2004 rate of 1.54% but lower than the 2003 rate of 1.65%.
Experts think retailers could see an upturn in shrinkage because of the growing problem of organized retail theft and the added sales arena of the Internet.
“Criminals are using online auction houses to fence merchandise, whether it’s stolen goods or counterfeit gift cards, you name it. Organized crime is certainly within retail,” said Scott Krugman, spokesman for the National Retail Federation.
Ed Camp, general manager of Tanger Outlet Center in North Charleston, said he is aware that more professional crime rings are targeting retailers.
“It used to be that people were just stealing for their own personal welfare, but now it’s more planned, and they have definite goals,” Camp said. “The Internet has revolutionized that.”
Joe LaRocca, the NRF’s vice president of loss prevention, said organized theft rings make about 70 cents on the dollar selling stolen merchandise online; the same goods could be sold for only 10 to 30 cents on the dollar on the street. LaRocca said organized retail theft is also branching out from major metropolitan areas such as New York and Los Angeles.
“Frankly, cities like Charleston don’t deal with these issues on a daily basis, and the crooks have an environment where they can operate a little more freely,” LaRocca said. “People think of shoplifting as little Johnnie coming in and stealing a pack of bubble gum or Aunt Betty stealing a shirt, but these organized gangs of criminals—we call them boosters—will target stores, stealing thousands of dollars and hitting multiple stores in a single day.”
Such losses eventually cost the consumer, LaRocca said.
“Consumers eventually pay about 1.6 cents on every retail dollar spent to cover the cost of crime and theft,” LaRocca said.
Of the respondents to the 2005 NRSS survey, 81% indicated their companies have been victims of organized retail crime, and 48% had seen an increase during the past 12 months.
The topic of loss prevention is one that individual retailers are usually reluctant to talk about.
“We would rather the thieves not know how they can get away with things,” said Marisa Bluestone, a spokeswoman for Wal-Mart.
Karen Cobb, a spokeswoman for Lowe’s, also declined to discuss the home improvement chain’s security measures.
“We can’t speak on a lot of specifics because criminals read the newspaper too,” Cobb said.
Rita Postell, a spokeswoman for Piggly Wiggly, said loss prevention is an ongoing problem for retail businesses.
“We’re just doing our best to control it and prevent it, and a lot of that has to do with deterrents such as cameras and security guards and training in how to handle a possible situation,” Postell said. “We want to look out for safety first.”
According to the 2005 NRSS report, the most commonly reported security system is a burglar alarm (93.7%), followed by closed-circuit TV cameras (83.5%) and digital video recording systems (82.3%).
One of the newer security systems on the horizon is known as intelligent video, which is programmed to look for security violations in multiple streams of video from multiple surveillance cameras and to alert the camera operator, LaRocca said.
“You’re getting these visualizations of a crime in progress rather than watching it later,” he said.
Retailers are also using a number of pre-employment integrity screening measures and loss prevention awareness programs.
The 2005 NRSS survey revealed that 73.4% of retailers used past employment verification to screen non-manager job candidates and 63.9% used criminal conviction checks.
Retailers also expect to see increased use of other select awareness programs, including interactive computer training for new hires. The 2005 NRSS survey found that 28.8% of retailers surveyed would increase use of interactive computer training during the coming year.
While new technologies have been added to the retail industry’s arsenal of crime deterrents, local shopping mall officials said the best loss prevention weapons are still the basics.
“The thing that we really stress that really seems to work is that stores
prosecute,” said Leslie Riley, marketing director at Northwoods Mall. “A lot of stores don’t want to do it. They just want to retrieve their merchandise. You have to be very careful, because you can get sued in a heartbeat. But we stressed last year that they need to prosecute because it’s going to help everybody.”
Leigh Burnett, marketing director at Citadel Mall, said retailers there have told her their first line of defense is customer service.
Both Burnett and Riley said store employees at the front of the store that greet customers and make eye contact could help stores cut down on losses.
“If a shopper feels like nobody’s paying attention, they’re likely to be more bold in the store,” Burnett said. “You can have all the bells and whistles you want, but if you’re not paying attention, the bad guys will find a way around your technology eventually.”
Kathleen Dayton is a staff writer for the Business Journal. E-mail her at kdayton@charlestonbusiness.com.
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