Guarding the Shelves
Chuck Kibler, group vice president of loss prevention for Rite Aid, knows the ins and outs of managing security for a large retail operation. The fact that this large operation is also a major drugstore chain makes for some unique challenges.
Since March, Kibler has supervised the security operations for approximately 3,600 Rite Aid stores. He determines what's best for the safety and security of employees and customers, and secures an inventory that includes products ranging from over-the-counter aspirin to prescription medications.
To keep things running smoothly, Kibler relies on a combination of high-tech security systems and a solid sense of teamwork.
Technology at WorkLike most retail operations, Rite Aid relies on the latest and greatest security equipment to protect its stores. In addition to full functioning burglar and fire alarm systems in every store, Rite Aid also employs the use of internal and external CCT V cameras, EAS (electronic article surveillance) tags and remote monitoring, to name a few.
"We really run the gamut of systems," says Chuck Kibler, group vice president of loss prevention, Rite Aid, Camp Hill, Penn. "We have external CCTV cameras to monitor the safety of our customers and associates as they come and go. We couple that with a good external lighting system in our parking lots. Inside, we use intimidation cameras and monitors at the front of the store, and we also use dome cameras. Inside our stores, we also use EAS tags to track some of our merchandise. We do what we can to deter shoplifting and associate dishonesty whenever possible."
Remote monitoring is an up-and-coming technology that is making the life of the loss prevention manager a little easier. Rite Aid is currently testing the use of digital recorders to allow its loss prevention managers to remotely monitor store activity when they can not be there in person.
"All of our loss prevention managers (LPMs) have laptops," says Kibler. "Instead of having to go to the store to view a tape when an incident occurs, they can go in remotely via their computer and monitor activity or retrieve events that have occurred. They also communicate with the Camp Hill headquarters regularly via satellite. Not to mention the digital recorders eliminate the use of VCR tapes."
Striking BalanceTechnology isn't the only thing that goes into retail security. In many cases, the responsibility is a team effort. For Kibler, this philosophy holds true. Through the 29 years that he's been with the company, he has cultivated relationships that have helped him in his mission.
One relationship that is crucial is the one between the security director and the IT director. Kibler makes sure to consult the IT department before making any large security purchases.
"Along with their help, I am able to purchase products that will work in conjunction with our existing technologies," says Kibler.
Another person that Kibler maintains a good relationship with is the general or operations manager.
"Having these people on your side will only benefit you in doing your job," says Kibler. "Having worked in all aspects of the company, I know that maintaining positive relationships works to our company's advantage."
Retail ChallengesRetail security potentially faces a wide variety of challenges. For Kibler, managing a large retail drugstore is no exception. One of the unique challenges drugstore chains face is securing prescription medication.
"One of the more recent problems faced by all drugstores is the rash of OxyContin thefts," says Kibler. "OxyContin is a morphine-like drug that is often prescribed to cancer patients. It has also become a popular street drug, with one bottle selling for as much as $1,000. You can call anyone in the pharmacy business and ask them what the biggest growing problem is, and they will say OxyContin. We have not experienced a theft problem as of yet, and others may not have as well. But, we are doing everything we can to keep it that way. And typically, if there is a problem, it is on the inside."
Rite Aid follows this particular medication closely both before and after it arrives in the store.
"We work diligently with the pharmacy department to track the drug as it is being bought through our outside vendor. We then monitor the drug as it is delivered to our stores, as well as the storing and the dispensing of the drug," says Kibler. "To ensure the medication is delivered and/or picked up by the patient, the pharmacy now has an electronic will-call system to verify that the final step is completed."
Another problem the retail industry faces is employee theft. Rite Aid addresses this issue in a number of different ways. One way is through exception reporting, which is a method used to test patterns against a company's normal transactions. These reports can monitor multiple credit card refunds, manually keyed credit cards, cash refunds, price overrides, cancels, employees processing their own sales, and the like. These reports allow the LPMs to monitor activities such as voids, refunds and discounts. Managers are required to sign off on several of these procedures, and are also required to change their passwords on a weekly basis.
"Sometimes you run into a problem and it is simply a case of a manager not changing a password, which authorizes discounts and cash handling," says Kibler. "A cashier or someone obtains the password, and then they can perform illegal transactions. Having managers change their passwords has helped eliminate some of the problems."
Rite Aid has also worked with consultants to examine areas of concern. With the help of consultants, Rite Aid can determine what they can control, what they can prevent, and can gain a better understanding of where they are headed in the future.
Retail TodayAre retailers facing any new challenges today than they were just a few years ago?
"I don't think much has changed. Some issues pop up as a sign of the times. For example, some evidence concludes that when the country's economy is in a downturn, then retail theft/shrinkage is on the rise. So, recent events may lead to an increase in retail theft."
Looking for the most practical technology is also important.
"When you are at the top, you are looking at the bottom line-which technology is most meaningful to me?" says Kibler. "We need practical technology."
Kibler adds that money/budget problems always exist. Technology is not cheap, so Rite Aid looks for solutions that can work easily with their existing technologies.
"As our stores grow and layouts become less conventional, we have to really examine where we put our technology so that it will be the most effective," says Kibler. "We are always trying to work smarter."
The Statistics: Wrapping ShrinkIn an uncertain economy, the current downturn could, and will according to some industry reports, increase inventory shrinkage from shoplifting by nearly $2 billion in 2002. Contributing factors of shoplifting are determined by unemployment, the savings rate and retail prices. Also, it is believed that employee theft and shoplifting combined account for the largest source of property crime committed annually in the United States. According to the 2001 National Retail Security Survey, conceived by SECURITY magazine and spearheaded by University of Florida criminologist Dr. Richard C. Hollinger, Ph.D, employee theft has reached record levels. And, total inventory shrinkage cost U.S. retailers $32.3 billion, up from $29 billion from 1999. Internal theft costs retailers $14.9 billion annually, compared to shoplifting costs of $10 billion. Security managers reported more than 46 percent-$14.9 billion-of their losses due to dishonest employees, up 2 percent from the previous year. And, 31 percent-$10 billion-of losses reported were the result of shoplifters. The reported average loss per shoplifter theft was $198 in 2001 compared to $128 in 2000. Conversely, employee theft averaged $1,587 in 2001 compared to $1,022 in 2000. In total, in 2000, retailers lost 1.75 percent of annual sales to shrink, up from 1.69 percent from the previous year.
Reed Hayes, president of the Loss Prevention Solutions, research director at the Loss Prevention Research Council and co-founder and member of the National Retail Security Survey is tackling retail shrinkage head-on, "Our focus at the Council is maximizing availability of key products and raising the safeness perception. We might conclude that technology is helping us hold our own rather than technology is helping us make huge gains. We know that their perceived safeness drives their [employees and customers] behavior; avoidance behavior."
Loss Prevention Solutions' expertise is focusing prevention efforts on the most prevalent and costly risks, choosing and refining them effective loss prevention actions (people, programs, systems) and addressing crime and loss control problems holistically. "In our qualitative interviews with offenders, we're finding that we need to combine at least three or more technologies, used in an interactive way, says Hayes."
Clean-up in Aisle 9In a similar survey that targets the supermarket industry, The National Supermarket Research Group shows even more shrinkage reported from the 102 companies representing 8,263 chain and independent stores.
The survey finds the overall shrink reported in 2000 at 2.26 percent of retail sales, but actually down from 1998. Conventional supermarkets (average sq. ft. up to 40,000) reported average shrink at 2.17 percent. With average per store annual sales of $9.62 million, this group's reported loss from shrink in 2000 was $208,754 per store. And superstores (average sq. ft. 40,000 or larger), reported average per store sales of $19.50 million, this group's reported loss from shrink was $464,100 per store. For 12 consecutive years, the largest component of employee caused shrink was cashier dishonesty (26 percent), which superseded shoplifting (23 percent). The survey reports the positive impact of certain programs and policies on overall shrink was significant.
Larry Miller, director of the National Supermarket Research Group and president of Trax Software, Scottsdale, Ariz., a manufacturer and distributor of retail data mining solutions that cover the retail enterprise, is adamant about the security in loss prevention. Miller preaches that truly successful retail managers are those who have intolerance to shrink and are willing to transform and practice transformational leadership in the area of profit optimization from shrink reduction.
"Top-tiered companies have three things in mind when protecting their assets. They have prevention, practices and people. Shrink is only really controlled when you empower the people to prevent it. Great leaders understand that shrink prevention lies in the behavior modification process. Store managers understand that it is not a function of conflict when you counsel a cashier to improve performance as it relates to shrink-causing effects. And technology enables that. We can educate our managers, but technology continues to be a massively important enabling factor," says Miller. Store managers are quite adept at masking their shrink because the culture is set up to have lower shrink, not to expose shrink. "We need a culture that will willingly and openly expose shrink; because only if you see it can you control it. The function of peeling back the onion: unmasking your shrink and being bold enough to really want to see it all so you can make a strategic plan."
The Technologies: Shopping Bag Full of Special TechSharing much with their colleagues in the security profession, retail loss prevention executives at the same time have unique threats and solutions. One technology developed for store security is electronic article surveillance or EAS. Systems based on EAS continue to advance, with tags sizing down, read ranges expanding and the concept of source tagging catching on. More recently, security video developments specific to retail operations center on linking video with electronic cash register transactions and remote video monitoring over phone and Web.
Anti-shoplifting MissionOriginally EAS systems aimed at reducing shoplifting while allowing stores to increase what retail calls "open merchandising opportunities." Typically, there are two components of an EAS system: there are tags and labels put on items and packaging and there are detection systems are checkouts and store exits for detection and alarm.
There are a number of technologies employed in EAS systems.
One approach is acousto-magnetic technology. Sensormatic Electronics of Boca Raton, Fla., markets this technology, for example, under the Ultra-Max name. Another major EAS source, Checkpoint Systems of Thorofare, N.J., offers radio frequency-based systems. Each source boasts a full line of tags and labels of various sizes to match different types of goods and merchandise as well as deactivation solutions, wands, pedestals, portals and mats.
While EAS is a mature loss prevention strategy, more recently stores have employed video surveillance systems to monitor customers, employees, backrooms and loading docks.
There are some retail twists to implementing security video, however.
One example: systems that tie video into cash register transactions. Here sales associate, customer and transaction data layer onto the video captured by the local camera. These systems aim at reducing employee fraud, theft and "sweethearting" in which the clerk conspires with a customer.
With retail chain operations, a security video design that depends on remote video transmission over telephone lines or more recently through the Internet allows monitoring of various store locations from a central station or by an outside monitoring service.
"Anti-shoplifting systems, digital video surveillance and point-of-sale monitoring solutions, tied together with remote and central station monitoring, will help retailers contain some of the losses without sacrificing good customer service," says Mike Snyder, president of ADT Security Services.