GHQ Cover Story: Booster Clubs
Through special arrangement with Grocery Headquarters, what follows is an excerpt of the current cover article, presented here for discussion.
Organized retail crime (ORC) is taking a bite out of merchants’ profits and supermarkets are no exception, according to the latest Grocery Headquarters‘ cover story, Booster
Clubs.
In fact, many security experts say grocery stores are at a greater risk for being hit by organized shoplifting gangs because of the large number of high-ticket and easily stolen items, such as razors and over-the-counter (OTC) remedies. Store layout issues — high shelves, overnight stocking and multiple entryways and exits — contribute to the relative ease with which organize shoplifting gangs go about their illegal business.
The internet has also played a role in emboldening ORC groups. According to Joseph LaRocca, vice president of loss prevention at the National Retail Federation (NRF), the sale of stolen goods online (AKA eFencing) has made illegal business easier and safer to conduct.
“With eFencing you have this low-risk, high-reward theft on the front end, and on the back end you have an electronic way of selling goods, so you now no longer need to have face-to-face contact with your buyer, and you have a national audience that you can sell to,” he said. “And the reality is that because you can remain faceless and in most cases nameless, the chances of getting caught are drastically reduced.”
Mr. Larocca said retailers need to understand, “this is an issue that is not going away. In fact, it’s worse now in what we’re seeing and hearing than it has ever been – in some cases we’re seeing that these groups are becoming more aggressive, both in their numbers and in their tactics.”
Despite the increasing number of thefts attributed to ORC, grocers and other retailers are not aggressively addressing the situation. The National Retail Security Survey found only 33 percent of retailers track ORC activity and just 10 percent have developed a task force to address the issue.
Retailers, say experts, need to develop a multi-prong approach to tackle ORC head-on.
“The No. 1 way to prevent losses from occurring is through good customer service,” said Mr. LaRocca. “When a store has vigilant employees that are watching the sales floor, and they’re interacting and communicating with their customers, we know for a fact that that has a deterrent value in stores.”
Employee theft has long been the number one source of shrink in retail. Increasingly, however, these inside thefts appear connected to ORC activity.
Catherine Aldrich, executive vice president of Accurate Background, said, “A decade ago store owners didn’t think they needed to perform background checks on entry-level employees or even minimum-wage employees, but what has been discovered over time is that these employees make up the biggest segment of potential loss and shrinkage.”
Technology such as closed circuit cameras and electronic article surveillance are among the weapons used by retailers to prevent shrink, but they no longer appear to be enough.
“Everybody uses EAS systems, which are fine, but if you’re looking at them as your primary driver of your product-protection initiatives, you’re really going to miss the boat,” said Ernie Deyle, vice president of loss prevention at CVS. “You’re not going to be able to get the full benefit of a true product-protection type of program.
CVS, said Mr. Deyle, has turned to video analytics to help it address the ORC issue. “When you start to look at how we’re structured, we have a great deal of technology in place to help us understand trends, behavior patterns and things of that nature that will help us understand where we’re being exposed before we actually become exposed.”
The system used by CVS is programmed to spot what is predetermined as suspicious activity and send a real time visual report to an employee’s hand-held device. The system can also be set to monitor areas within the store that are most at risk for theft.
Ed Jimenez, retail global marketing lead for Cisco Systems, said it’s important for retailers to look for best practices in loss prevention. “We would recommend that the grocery industry not only look at other retailers but the hospitality and casino industry in terms of truly understanding how this infrastructure can be used. The casino and hospitality industry is at the forefront of loss prevention and leveraging technology.”
Discussion Questions: How significant an issue is organized retail crime? What are your recommendations for retailers to deal with this problem?
Last week, The Associated Press reported that ORC bosses were paying junkies in Philadelphia between $800 and $2,000 a day to carry out shoplifting
activities.
How big a threat? Data will tell us that.
Absent data for this discussion, let me mention that I hope retailers will do careful root-cause analysis before they formulate any remedies. The common situation I hope they avoid is “solutions” that have little effect other than to make employees tasks and customers shopping more uncomfortable. Remember the early shrink-tag detectors that were only slightly wider than a shopping cart, and every single shopper had to carefully maneuver their cart in order to leave the store? This approach is sometimes called “managing for the exception,” and can be far more costly than the problem it is to solve.
Executive embezzlement, Robinson-Patman Act violations, casual theft by temps for personal use, and merchandise returns fraud: each of these probably dwarfs organized retail crime by great orders of magnitude. But organized retail crime makes more exciting newspaper headlines and isn’t likely to be covered up. Criminal behavior varies tremendously by retail channel. Customer-caused shrink in the costume jewelry business is ten times the customer theft in the grocery business. Music CD theft is a multiple of book theft.
One problem, at least in our area, is sentences that are too light. There was an article today about several cases where people stole over $100K from their employers over a period of time and were sentenced to PROBATION because they are paying the money back. One involved a Shoprite store and a conspiracy by two employees to steal co-payments. Not sure what retailers can do about it other than lobby for tougher sentences and work with law enforcemnt and prosecutors to see that these cases are followed through.
I personally think that pre recorded announcements like “security check in section 4 blue” played randomly over a store’s PA system do some good, especially with unorganized thieves. But the professionals are wise to the ruses and false cameras and warning signs. The only thing that will discourage organized theft is apprehension and prosecution. Education of store employees is the best defense. Employees can be trained to report suspicious groups to management and management can set up specific “watching stations” that employees are assigned to take if an alert condition is called by management. Locations can be color coded and each employee is assigned a location when they clock in. Maps with the watching stations and corresponding color codes should be posted by the clock. Management should ask employees what their color is today when they make their rounds. If any suspicious activity is detected then it should be reported to management and the police should be called to investigate.
If plans are not made and put in place to prevent theft then a retailer has only itself to blame for its losses.
This really begs the question of “what is retail shrink?” altogether. It’s simply not just theft in the obvious forms. Shrink of this nature is serious, but it’s really only scratching the surface.
Shrink reduction takes a unique mindset by the retailer. It must be a priority at all levels. Sadly, like training, it falls down on the list somewhere well below the surface. Unfortunately, both shrink reduction and training go hand in hand along with constant reinforcement. It’s a cultural thing that must start at the top and filter down through all levels, much the same way as real customer service is cultural; loss and shrink prevention should be talked about daily. It should be reinforced by example from the leadership on down to all levels of employees. When it becomes cultural, it becomes less offensive and accusatory and it works. It takes a fully multi-faceted approach and a willingness to allow it to be part of the daily work speak and culture.
Mark makes a good point about executive embezzlement. I think that is one reason why certain companies consistently have financial difficulties. But that is another problem for another discussion.
When I first started in retail, about the only time we had a theft problem was when the carnival came to town. Times have changed. Ed Dennis is correct that the pros are now wise to the fake cameras and prerecorded security announcements. If I were running an organized theft ring, the first thing I would do is hire a retail security specialist as a consultant.
The article makes a good point that minimum wage/entry level workers make up the largest segment of potential loss. Perhaps retailers need to evolve to where they have fewer workers, who are more productive, from whom more is expected, and are paid more.
Only one posting so far has the accurate understanding and explanation as to what must take place in order to stop this. It doesn’t matter what type of crime takes place, if one wants to reduce such activity, catch the people doing it and punish them severely.
It’s so simple, it’s ridiculous. The problem is, as it always is, with the left-wing, the ACLU, the special interest groups, the media etc., that would create this false sense of outrage over any necessary actions taken by retailers, thus, eventually causing retailers to curb their counter actions so as not to draw negative attention unto their entities.