EYE SPY

Beverage alcohol operations are using the latest technology to track and prevent an age-old problem — retail crime.
By Cheryl Ursin

Ever since, people first started trading and making deals with one another, there has been theft, robbery and fraud.

And stores — filled with products people want and the cash they used to pay for them — have always been a big, fat target.

According to the 2002 National Retail Security Survey from the University of Florida, the average shrinkage rate reported by retailers this year in the survey was 1.7% of their total annual sales. Nationwide, according to the survey’s report, this would amount to losses of approximately $31.3 billion for retailers.

Meanwhile, according to the FBI Uniform Crime Report for 2001, the crimes it tracks (murder, robbery, burglary and larceny/theft among them) showed a 2.1% increase over the previous year, the first such increase since 1991. And according to the National Institute of Occupational Safety & Health, beverage alcohol store workers continue to suffer the second highest rate of homicide on the job, after taxi drivers.

Retailers, however, are fighting back — and are using a spectrum of the latest high-tech equipment to do so.

Take Brightseat Liquors in Landover, MD, for example. For years, Brightseat would have liked to offer a paycheck cashing service because, if it weren’t for fraud, such check cashing can be a lucrative sideline. But, explained Benjamin Ilkovitch, co-owner, “We kept our check cashing business to a minimum because we consistently got burned on bad checks. But that’s all changed now.”

The change is like something out of a science-fiction movie. Brightseat now uses a system from a company called BioPay that allows them to identify someone from his or her fingerprint.

The BioPay 200 with DL color, which verifies identity through fingerprints, helps prevent check-cashing fraud.

Here’s how it works: when a customer first comes to Brightseat with a check to cash, Brightseat employees use their system to record the prints of the person’s index fingers, a digital picture of the customer and an image of the person’s ID, such as a driver’s license. Brightseat’s system also has a device that verifies that the MICR encoding on the bottom of the check — and therefore the check itself — is authentic and not a counterfeit produced on a laser printer.

After being enrolled, customers don’t have to present ID with their checks. They just place their fingers in the system’s reader to verify their identity.

Ilkovitch originally paid $5,000 to $6,000 for the BioPay system, including the computer used to run it, three years ago. While it does not eliminate all the problems with checks — it cannot, for instance, tell him if the business that issued the check has money in its account — Ilkovitch says he has noticed a dramatic decline in fraud in his store. “It’s been worth every penny,” said the retailer, who has increased his check-cashing business ten-fold since using BioPay.
Closed-Circuit Advances

There have been many such advances in the technology used to combat retail crime. “There have been advances in closed-circuit television (CCTV), electronic article surveillance (EAS) and exception-reporting software in the past 10 to 15 years,” said Robert Blackwood, a founder of Loss Prevention Solutions, a consulting firm based in Winter Park, FL. “And the real advance is in how retailers are applying those tools.”

According to the National Retail Security Survey, 73.3% of the retailers surveyed used live, hidden CCTV and 50.8% used digital video recording systems. Almost half, 49.2%, used POS data-mining software and 17.8% used POS-exception-based CCTV recording, when a camera aimed at the register is triggered to record when certain types of transactions, such as a return, are rung.

Many retailers use EAS systems, which include a product with a tag that causes an alarm to go off at the exit if the tag has not been deactivated by a store clerk.

Two months ago, Schaefer’s in Skokie, IL, invested in a 16-camera digital system. “We spent $10,000 to $11,000,” reported George Schaefer, co-owner. “A couple of years ago, it would have been at least twice that much, if not more.”

Basically, when it comes to surveillance or closed-camera systems, the term “digital” means computerized. The term for the old video-tape systems is “analog.” The computerized images produced by digital video recorders are stored on a computer’s hard-drive. How much can be stored at one time is a matter of how much computer memory is available.

One big advantage for digital recording is that no one has to remember to change the tape. Digital recording systems can be programmed to automatically continue recording, even if the storage space is full, and to erase the oldest stored images first. “And if you suspect something, you can always save or print out that image,” said Schaefer.

But cameras on these systems can be programmed to start recording only when something happens. By using a cursor at the computer on the image, retailers can block out areas that they do not want to trigger the camera.

The other advance in surveillance systems is the ability to be networked. “The trend toward networked video surveillance systems opens up a whole new realm of camera viewing and control possibilities,” said Frank Abram, vice president for Panasonic Security Systems. “Networking provides many different ways for retailers to monitor their facility or facilities from remote locations and allows them to interface their video equipment with related devices such as POS systems, more easily.”

Retailers, for instance, can view their store’s live surveillance from a remote location, even from their PC at home. Schaefer thinks such remote viewing possibilities can help with customer service issues as well as security. “Right now, I’m watching a woman wandering around in an aisle and I’m wondering why someone isn’t helping her,” he said, from his office.

Another cutting-edge feature of Schaefer’s new system is a small wireless camera. “We can hide that in places we think we have a problem,” said Schaefer.

Intelli-Check’s ID-Check terminal, which analyzes and displays information encoded on driver’s licenses, military identification and other forms of state and government identification.

Rick Curtis, owner of the Curtis Liquor operation based in South Weymouth, MA, also has digital systems, each with 10 cameras, in his three stores. “It allows you, after the fact, to focus in on what’s been recorded, slow, stop, reverse the action, zoom in 500 to 600%,” he said. “The technology is amazing.”

Curtis paid $3,000 to $3,500 per recorder. “Believe me, it is money well-spent,” he said. “If you catch just one employee, it can pay for itself.”

Green’s, a chain with six stores in Georgia and South Carolina, uses a surveillance system from Sensormatic (a company recently taken over by ADT), which is connected to its POS system with software called POS/EM, short for POS Exception Monitoring. There is a camera trained on each register and what is being done on the register is superimposed on the image from the camera. “It’s fascinating to watch what a dishonest employee will do,” said Lock Reddic, managing partner. “They’ll scan something with the UPC code facing the ceiling. They’ll keep labels at the register and use those instead of scan what they are supposed to be selling.”

With exception-based reporting, a retailer can create a report of any unusual transactions. “If the retailer spots a transaction that in any way seems out there, there will be a camera icon next to it, which will show him a copy of the receipt and a video clip,” said Thomas Dinkel, chief operating officer for Mirasys Communications, a digital video recording company.

Perhaps the most interesting aspect of these retail-crime fighting technologies is that they are beginning to converge. Not only can surveillance cameras be connected to POS systems, but EAS tags, specifically the ones using radio-frequency technology, can be linked to other systems as well. For example, Mirasys and Checkpoint Systems recently demonstrated a “smart shelf” at the annual Food Marketing Institute (FMI) show. Products were tagged with RFID tags with a sensor located underneath the shelf. When a product was picked up, it sent a signal to the sensor which triggered a surveillance camera to begin recording. And the camera could automatically be set to send the image elsewhere, even to a personal digital assistant (PDA). So, if someone grabbed a high-priced bottle off the shelf, the store’s manager’s PDA could sound an alert and show what was happening, in real time.
Employee Theft

The National Retail Security Survey reports that retailers reported employee theft as the most significant cause of inventory shrinkage, the cause of 48% of their total inventory losses. The report estimates the total loss to employee theft in the U.S. last year to be a little over $15 billion. “This is a staggering amount of crime,” write Richard C. Hollinger and Jason L. Davis, the authors of the survey’s report. “In fact, there is no other form of larceny that annually costs American citizens more money than employee theft.”

And for all the flashiness of the new technology, much of the actual crime retailers face is decidedly low-tech. Take, for example, the smash ‘n’ grab, when robbers, after-hours, smash a window, grab what they can — which in some cases is a cash register — and flee. “All they get is an empty register, but they cause a lot of damage,” said John Harrington, owner of Harrington’s in Chelmsford, MA.

Just ask Bob Braune, owner of Drake Liquor in Des Moines, IA. His store was broken into by a smash ‘n’ grabber eight times in May and June. “When I see a brick laying on the sidewalk, I always pick it up. That stuff is just ammunition,” said Braune. “One of my neighbors put a load of rock, these cement boulders, around one of his trees. That was a whole pile of ammunition.”

The robber would always smash the same window and he would only take one thing — Hennessy Cognac — as much as he could carry. “My windows are laminated, two sheets of glass with plastic in between. They don’t break easily,” said Braune. “Well, this guy, standing right on the street, would take 12 whacks to break the window. We have a security camera — and you could count the whacks.”

The security camera also produced images of the man. One of them, when published in the newspaper and shown on the local news, caused people to recognize him. “Within 12 hours of the picture being published — and there was a $1,000 reward from the Des Moines Crime Stoppers — he was caught,” said Braune.
Preventing Retail Crime

While you can’t do that, as tempting as it might be, retailers find that there are many non-automated things you can do to prevent, or at least reduce, retail crime.

Many retailers swear by conducting regular, frequent physical inventories. Some, such as Green’s, do them, or have an outside company do them, as often as once a month. Curtis inventories his stores four times a year.

“Once, about 15 to 20 years ago, I decided I could skip an inventory,” he remembered. “Well, since it takes 30 to 60 days to get the information back, that means that, if someone is stealing from you, you’re not going to know about it for two-and-a-half or three quarters.”

Checkpoint Systems sensors stand guard at store’s exit, protecting items with anti-theft tags attached.

Sure enough, when Curtis did the next scheduled inventory, the numbers didn’t jive. “In fact, the numbers of what was missing were so big, I thought stuff had to be going out the back door,” he said After a long investigation, involving the use of pinhole cameras in the ceilings above the check-outs, a long-time employee admitted to stealing $25,000 to $30,000.

Curtis is a big believer in establishing policies and procedures. Employees are given a printed copy of these rules and regulations and are required to sign that they have read them. One example: employees are not allowed to buy lottery tickets from the store while on duty. “We had one guy — worked for me for 17 years — who admitted stealing $15,000 worth of lottery tickets,” explained Curtis. Employees who break the rules can be fired. Sometimes, if the shopping service Curtis uses notes that an employee broke a security rule, that employee is put under heavy surveillance; if that person is stealing, the surveillance is used to start building a case against him or her.
Deterring Armed Robbery

One kind of store policy — about handling the money collected at the check-out — is important in deterring the most frightening type of crime, armed robbery. “Convenience stores do a very good job with this,” said consultant Blackwood. “They might have a time-delay safe underneath the register where they put excess cash. They leave as little as possible — in convenience stores that may be as little as $25 or $35 — to make change. They have signs up making robbers aware of their policy, saying that clerks don’t have access to the safe.” Blackwood said would-be robbers do read this signage. “They do think, ‘What’s the upside of this robbery? Am I going to get $30 or $3,000?'” he said.

The Mirasys Communications DINA DVMS (Digital Video Management System).

Studies have shown, Blackwood said, that robbers also look to see how easily they will be able to escape. They look at whether the storefront is very open and visible to the street or if there is a way for them to escape into a nearby apartment complex or place where they can easily blend in or hide. “Most armed robbers are not so concerned about CCTV cameras but are about armed guards,” he explained, speaking generally. “Right or wrong, the bad guys think about how they might immediately be caught but not so much about how, with a camera system, say, they might be caught a few days from now.”

Jack Stoakes, president of Liquor Mart in Boulder, CO, has instituted a bounty system. If a store employee spots a shoplifter who is caught, Liquor Mart pays that employee $50. “And — I hate this policy, but it works — if they report a crime by a fellow employee, we double the bounty to $100,” Stoakes said.

Like many retailers, Stoakes believes in the deterrent value of always prosecuting. “We call the police in every instance that we can,” he said. “We try to have the reputation ­ and we do — that we are tough about this.”

These retailers have accepted that combating crime is part of the business. “And you learn quickly that you can’t take it personally,” said Curtis.

And, they say, you also have to keep it in perspective. While retailers can try to minimize their exposure to crime, they will never completely control it. “You certainly can devote a lot of time to it, but you come to a point when you have to say to yourself, ‘Am I here to devote myself to preventing shrinkage or am I here to be a retailer?'” said Reddic.

Curtis agreed. “To sleep at night, I put realistic controls in place,” he said. “I don’t want to be constantly worried and fearful.”

Not A Minor Issue

The problem of minors trying to buy alcohol is not a matter retailers can afford to ignore. “You can be closed down, you can be fined a tremendous amount, you can be embarrassed in your community,” said John Harrington, a former police officer and owner of Harrington Wine & Liquor, a store in Chelmsford, MA.

Harrington does not fool around. He uses a system — bought 17 years ago for $25,000 — that records pictures of the actual customer, his or her ID and palm print. He and his staff use it on any customer who looks under 25.

When he remodels his store, he plans to upgrade the system. “Now, it will probably cost $3,000 to $4,000,” he said, “and the technology will be better.”

The real value of the system is its deterrent effect. “I hear about it all the time,” said Harrington. “Kids, now much older and with children of their own, will meet me at a party and say, ‘Boy, when I was a teenager, did your store have a reputation.’ And then they’ll say, as parents now, they’re glad we do what we do.”

For several years now, there have been machines on the market that can read the information now encoded on many driver’s licenses and verify that a license is authentic and has not been tampered with. These machines have also been keeping up with technological advances. For example, Intelli-Check has recently partnered up with two biometric companies, Ultra-Scan and Bioscrypt, to prepare for the possibility of people’s fingerprints being encoded onto their driver’s licenses.

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