On both sides of the Atlantic retail crime has been blamed for billion-dollar losses every year. An array of impressive technology ranging from self-locking grocery trolleys, sophisticated cameras to electronic article surveillance (EAS) are available to retailers who are struggling to minimise retail shrinkage. But is technology sufficient to push back the rise in the latest wave of retail crime?
Elsevier Food International, Vol. 9, Number 1, February2006
Joel Vega

LaneHawk Evolution Robotic uses advanced object recognition technology. A smart camera is flush-mounted in the check-out lane using a patented object recognition technology to match items under the cart to each store's list.

Annual reports on inventory shrinkage provide proof that retail theft and fraud are not only costing retailers billions of dollars every year, but remains a chronic issue that continues to frustrate many retailers. In its latest Supermarket Security and Loss Prevention 2005 report, figures collated by the Food Marketing Institute (FMI) and Checkpoint Systems showed that US retailers are losing around US$10.7 billion annually to shoplifting. Moreover, supermarkets in the US reported the highest percentages of vendor fraud and vendor theft for two consecutive years. Retailers also attribute 11.6 per cent of all shrinkage to vendor theft. But what is alarming is that employee theft is costing retailers US$15.8billion annually.
“Employee theft accounted for 43.3 per cent ofshrink. Cash was the number one type of employee theft, finishing ahead of last year’s leader, merchandise theft, which came in a strong second. The cash is most frequently stolen directly from the cash register,” said the FMI report.  Aside from the FMI report, the 17th Annual Retail Theft Survey, released by Jack L. Hayes International, a loss prevention and inventory shrinkage control consulting firm based in Florida, showed that more than 750,000 shoplifters and dishonest employees were apprehended in 2004 by just 27 US retail companies. “Both the number of shoplifters apprehended and the dollars recovered from those apprehensions increased for the fourth straight year. Reversing a three-year trend, the number of dishonest employees apprehended and the dollars recovered from those apprehensions also increased in 2004,” says Jack Hayes president Mark Doyle. According to the survey, the total number of apprehensions went up in 2004 by 4.78 percent from 2003, and for every US$1 recovered, US$36.47 was lost toretail theft.

Impulse stealing
Unlike in the US and Canada, where the biggest loss is attributed to internal or employee theft, customer theft is perceived as the main cause of retail shrinkage or crime in Europe. More than 3.5 million people in the UK have admitted to shop lifting in the past five years, according to new research commissioned by Group 4 Securicor.

Giesecke & Devrient’s flexible tabletop system Numeron securely process small to medium volumes of banknotes in back offices, while its Castella model was specially developed for the retail market to automate the interface from the back office to the cash-in-transit company.

The report said close to 700,000 people admit to shoplifting every year and take UK£13million worth of goods. While for some petty offenders shoplifting is an addiction, thousands of Britons shoplift for others or do it as a spur of-the-moment thing. On the other hand, the latest report from the European Retail Theft Barometer in 17 western European countries and seven central European countries showed that average shrinkage recorded by stores in western Europe fell from 1.35 per cent to 1.24 per cent of turnover. Even so the loss was equal to around €28,938 million or €76.55 per person in western Europe and €70.26 for all 25 countries surveyed. Increasing concern is being shown in all countries regarding employee theft, which continues to rise. Countries with the largest proportion of staff theft are Iceland, Poland, the UK and Slovakia.
The UK reports the highest shrinkage rate in western Europe. The Securicor survey said every retail offender in the UK stole an average of UK£105 worth of goods, with supermarkets regarded as the easiest place for shoplifting by 21 per cent of people, followed by garden and do it-yourself centres. Among the most popular items to steal in the UK survey are razor blades, followed by cosmetics, alcohol, toiletries, lingerie, CDs and DVDs. Kevin Hawkins, the director general of the British Retail onsortium, says shoplifting remained a serious problem for retailers.
“Retail crime has significant demoralising effects on shop owners and their staff, especially as theft is increasingly accompanied by violence, threats and verbal abuse. Shop theft is frequently a ‘gateway’ to more serious offences,” said Hawkins. To combat chronic incidents of retail crime, retailers have turned to an array of gadgetry available in the market, with the latest technology relying on more sophisticated detection and surveillance equipment than earlier models.

Retail ‘robotics’
Evolution Robotics, a provider of next-generation robotics technologies and component solutions, has supplied the LaneHawk system to two major US food retailers such as Pathmark and the Pittsburg-based Giant Eagle chain. With LaneHawk Evolution Robotics uses advanced object recognition technology. A smart camera is flush-mounted in the check-out lane using Evolution Robotics’ patented object recognition technology to match items under the cart to each store’s list. LaneHawk’s makers said the technology is extremely accurate; distinguishing unique features from each product to ensure nothing is overlooked, including multiple or partially-blocked items.  “We believe that LaneHawk will have a tremendous impact in reducing retail fraud,” said Alec Hudnut, CEO of Evolution Robotics.
“Retailers implementing this solution can be confident that items passing through their check-out lanes will be accounted for, which translates to positive bottom line results. For example, we’re seeing losses of about US$12 per lane with easily missed items placed on the bottom of the cart in the check-out process. The LaneHawk system captures about 70 to 90 percent of those losses. And the system pays for itself in about 12 to 18 months. Savings on net income could be around five per cent to 15 percent annually, which is a huge amount,” says Hudnut. Evolution Robotics is currently focused on the US market, although in Europe the company is working with IBM distribution agreements. In Asia the company sees good potential, except in Japan where in most stores supermarket trolleys do not carry the under-cart placement features.

Cash handling But with nearly half of retail shrinkage attributed to employee theft, particularly cash directly stolen from cash registers, electronic article surveillance (EAS) coupled with automated cash handling are becoming vital components in the war against retail shrinkage. Giesecke & Devrient (G&D), a leading maker of automated cash handling systems, sees sustained and increasing demand for automated cash register systems. “In the US and Europe, where the density of supermarkets and shopping malls is highest at present, there is an intensifying market acceptance of automated cash register systems. However, the highest growth rates in the next five to ten years will probably be in Asia,” said Ralf Wintergerst, executive VP for G&D’s Currency Automation & Services.
Wintergerst believes that automating the whole payment cycle is crucial in delivering an effective anti-theft system. “The future clearly belongs to process safety regarding all interfaces of the entire cash cycle, from payment procedures at the POS, the back office and cash-in-transit companies to the credit entry at the bank. This means that we have to automate all the different interfaces, avoid manual interventions as far as possible and provide the data in a quality that is appropriate depending on each case,” he said. Wintergerst said process safety is the major advantage of cash automation. “Every cashier takes responsibility for the accuracy of his accounting process. As a result, it is desirable not only for him but for the entire company that there be as few factors of uncertainty as possible during the entire process.”
With razor-thin margins in the food retail industry, G&D provides potential clients with profitability estimates to explain how cost savings can be generated through automation in cash handling. Wintergerst mentioned as an example G&D’s flexible tabletop system Numeron. “With Numeron it is possible to economically and securely process even small to medium volumes of banknotes in back offices, as a preparation for the transfer to the cash-in-transit company or for the equipment of one’s own cash registers,” Wintergerst said.
And based on G&D’s experience with the banking sector and large cash centres, the company has developed Castella for the retail market to automate the interface from the backoffice to the cash-in-transit company.

‘Pushout problem’ In the US another shoplifting technique is so-called pushout shoplifting where shoplifters use grocery carts to steal large quantities of high-value merchandise by simply rolling out the carts from the store without paying. The California- based Gatekeeper Systems has devised the Purchek system which equips grocery trolleys with Gatekeeper’s patented self locking GS2Wheel.
Trolleys are prevented from exiting the store without first passing through an attended checkout. Gatekeeper says Purchek leverages the GS Technology Platform to provide the only in-store anti-theft solution with an integrated locking wheel. Purchek also stops pushout shoplifter regardless of whether or not the stolen merchandise is equipped with security tags. Gatekeeper said that since Purchek uses the GS2 Wheel, the system seamlessly integrates with the GS2 trolley security system, which allows retailers to add multiple levels of loss prevention while driving down implementation costs.
A more integrated approach to preventing retail crime is ADT’s Sensormatic SmartEAS Solutions, which rely on electronic article surveillance (EAS) technology and a range of tagging and alarm systems. More suited to hard goods and apparel retailers, ADT offers a range of tags, pins, tag accessories, labels, deactivators and detachers. ADT also combines various systems such as EAS, POSEM (point of sale exception monitoring), CCTV, people counting, datamining, intruder alarms and access control to achieve a comprehensive solution.

“Food retailers are increasingly looking to a total customised solution. CCTV cameras are used not only to secure people but also assets. Monitors are installed in employee entrances and in cash receptions,” said Patrick

ADT’s Sensormatic SmartEAS Solutions rely on an integrated security system including electronic article surveillance(EAS) technology and a range of tagging and alarmnetworks.

Hemery, ADT’s vice president for marketing in Europe. Hemery said it is possible to design and build security systems that have the minimum impact on décor, and can actually be integrated with signage and other store features. ADT said EAS-based solutions are effective deterrents to professional thieves, but conceded that although a security system is vital it is also important not to spoil the shopping experience. ADT’s SmartEAS can alert staff of an incident via electronic communication and record all of the details via digital CCTV links.
Information recorded by Smart EAS readers can be downloaded, e-mailed or sent by SMS to any nominated party as an incident occurs. In 2005, ADT installed Sensormatic SmartEAS in Virgin Megastores in the UK and ADT said the initial trials have been successful.

Aside from employing EAS, ADT has also recognised the importance of radio frequency identification (RFID). Hemery, however, said that he doesn’t expect RFID to replace current security technology as RFID is more oriented to information management. Hemery said that although RFID is fast becoming an essential link in the prevention chain with a key role to play in keeping a closer eye on stock between manufacture and store, barcodes will remain in use. ADT has also been involved in pioneering the development of RFID technology and is a partner in the RFID rollout of the Metro Group Future Store Initiative.

Complacency
A report published by the Australian Institute of Criminology, however, warned that too much reliance on security technology is a double-edge sword as retailers become complacent in their attitude towards retail crime. “There is, of course, the danger that reliance on security devices may generate a sense of complacency, which may leave businesses more vulnerable to the more professional offenders who work out ways of overcoming whatever obstacles are placed before them,” said authors Diana Nelson and Santina Perrone in their report titled ‘Understanding and Controlling Retail Theft.’
The report pointed out that retailers would benefit more from a broader anti-theft approach that includes the importance of welltrained staff. The report said “[...] technology works best when reinforced by motivated people and supported by community standards.”
“Retail theft cannot be stopped simply by increasing security and enhancing stock protection on the shop floor. We must also develop a self-sanctioning community conscience, by disseminating facts about the extent of business victimisation, and publicising both direct and indirect costs of this activity. There is a need to shape community perceptions and attitudes by circulating an “anti retail-theft” message that alters the socialisation process which makes this type of theft an acceptable activity to some,” the report said.
The irony is, according to industry observers, that there is a prevailing attitude among retailers not  to make retail shrinkage out to be as bad as it really is. Nelson and Perrone also noted that while retailers do not look more closely at the losses resulting from goods being readily displayed, the same retailers will continue to have to incorporate the cost of shop theft in their pricing structure.  Technology, although it promises benefits and provides assurance to retailers that they have addressed the issue of retail crime, would only be as effective if the retailers themselves are seen to be actively involved in combating it. In the end, perhaps it would boost the campaign against retail fraud and crime if retailers themselves can build a reputation for effectiveness (against shop theft) which makes them less likely to become targets.