From Supermarket Business - August 1996

The Dawn of Deterrence Marketing

Retailers obsessed with cost control) and consumers tired of being victimized by crime) are coming to view even the toughest anti-shoplifting measures as politically correct.

BY RICHARD DE SANTA

With total retail industry shoplifting losses totaling about $28 billion a year, and increasing by an annual average of about five percent, a growing number of supermarket operators are less apologetic than they once were about implementing security measures. And they're not at all shy about getting the message out.

Moreover, recent studies show that consumers themselves-increasingly concerned about crime of all types now understand that they have been victimized by shoplifters over the years, in the form of the higher prices they've had to pay to help cover retailers' losses.

The result? A greater sense of acceptance, and even comfort, when it comes to both operating and shopping in stores whose security precautions and determination to prosecute violators are in evidence.

The phenomenon is described by one consultant in the Held as "Deterrence Marketing," and many believe that changing consumer attitudes, more accurate research to pinpoint ROI possibilities and rapidly improving technology will combine to drive its momentum over the next few years.

A telling indication of operators' burgeoning determination to finally plug the pilferage pipeline is the kind of money being spent in some quarters.

For chains fitting multiple units with leading edge prevention and detection tools-today, that usually involves a combination of closed circuit camera/videotape systems (CCTV) and electronic article surveillance programs (EAS)-the tab can be millions.

Just last month, Portland-based Fred Meyer signed an $8 million deal with Sensormatic Electronics Corp. (Boca Raton, Fla.) to roll out the company's Ultra Max EAS installations throughout its l05-store network. Another Sensormatic EAS system, MAX Checkout, has been purchased by Mars Super Markets, a 15-store operator based in Baltimore.

Those contracts followed a chain wide rollout agreement with Food Lion earlier in the year, and the installation of the company's Aisle Keeper system in more than 50 stores operated by Albuquerque based Furr's Supermarkets.

The leading North American supermarket supplier in terms of systems installed, Checkpoint Systems (Thorofare, N.J.), recently added Delchamps to its list of EAS system clients. The Mobile, Ala. retailer thus joined Kroger, Lucky Stores, Safeway, Vons, Pathmark, BiLo and Smith's Food & Drug on the growing roster of Checkpoint customers. Loss prevention consultants and operators say there are several reasons why even the ultra-conservative supermarket industry is beginning to mobilize in ways similar to such retailing counterparts as mass merchandisers, department stores and drug store chains.

One is the same realization that is driving interest in the ECR-related cost-cutting practices. Namely, the low inflation/low growth environment, coupled with intense competition, has made it more difficult to bury incremental, nonvalue-added costs in pricing.

Secondly, with dollar losses from shoplifting rising at a rate faster than sales for the typical operator-much faster for stores with worse-than-average problems-many operators who have traditionally budgeted for losses, or otherwise standardized "acceptable" levels of shrink, have had to rethink those parameters.

In addition, just as more specific cost models have emerged in other operating areas, improved research and tracking is providing managers with more accurate information-in a cost area in which both action and inaction have long been based on anecdote, fable, gut feelings or the personal skills (or lack of same) of equipment and systems salespeople.
Finally, more recent consumer research is beginning to dispel the once overriding belief that the clear presence of security and detection measures would offend, discourage or otherwise turn off shoppers.

Recently, the Atlanta-based research firm of Elrick and Lavidge surveyed 505 grocery shoppers in five geographical regions regarding their attitudes toward intensified loss prevention measures in food stores in which they shop. Their responses resulted in the following conclusions:

• Nearly all the shoppers surveyed (97 percent) said they would not stop shopping at the supermarkets they were using at the time if those stores were to install a security system.
• While the installation of EAS systems generally does not affect shopping habits, many people expressed a "pro-security" sentiment. Some shoppers even indicated that if a grocery operator made it known that an upgraded security system was to be installed, they might even switch to that store.
• The installation of a security system at a supermarket would have little to no effect on the amount of groceries that consumers would purchase.

Read Hayes, security consultant/ researcher for Loss Prevention Specialists (Winter Garden, Fla.)-who coined the term "deterrence marketing" lo describe his company's strategy of fortifying clients' stores and advertising the fact openly-says his firm's most recent research has unearthed similar attitudes.

"Retailers who've been following their instincts and looking to avoid worst case scenarios deserve access to the kind of information that gives them a better feel for the big picture, and lets them know how the majority of their shoppers feel about this now, as opposed to what the mood might have been five or 10 years ago."

Hayes said his firm recently surveyed guests at a number of theme amusement parks, which were only recently looking at both high and lowtech ways of curbing theft losses associated with the refreshment, gift and souvenir businesses on their premises.

"Now if there's any business that wants to avoid taking Draconian steps, it's a theme park. These are supposed to be the ultimate in 'happy' places. So their operators are going to be a lot more sensitive to any kind of mood-destroying measures than any meat department manager," he said.

Hayes said that there again, customers expressed no problem with the prospect of comprehensive, visible anti-shoplifting and other security equipment and/or personnel. "In fact, the majority of the customers were taken aback to hear about the lack of such safeguards. They would say 'How can that be? You guys know you're getting ripped off, and it's people like me who wind up paying for it. That's ridiculous.'''
Granted, retailers remain legitimately concerned about the embarrassing effects of "false alarms" and other front-end problems caused by EAS systems.

But they are also aware of the improvements in label and tagging technology, "source" tagging at the manufacturer level (developing rapidly in the OTC drug and HBC segments), and automatic deactivation devices integrated into scanner systems. Such advances are gradually improving performance, decreasing labor intensity and reducing instances in which innocent customers are "flagged" erroneously.

Gene Denison, senior vice president of Furr's, articulated his reasons for choosing the technology route (an EAS system) to make a dent in his chain's shoplifting problem.
"I wanted a deterrent system but not one that created an antagonistic atmosphere. Previously, we had hired security guards and relied on store management to watch for shoplifters. But store management had too many other responsibilities, and the use of guards created potential liability problems," he said.

For the same reason, Denison opted for checkout aisle detection rather than exit coverage, which he says allowed for a less confrontational approach. In addition, he did not want employees chasing people into parking lots and putting themselves in possibly dangerous situations.

In addition, he says, aisle coverage lets store personnel know exactly who is alarming the system. "Most stores usually have more than one person moving through exits at a given time, so there is always the possibility of approaching the wrong person outside."

When the checkout alarms beep, Furr's personnel "politely ask the customer if he or she may have forgotten to place something on the conveyor belt. You'd be surprised how often concealed merchandise is surrendered," said Denison.

Furr's has the system installed in more than 50 stores, guarding each checkout aisle as well as perimeter aisle entrances on either side of the checkouts. Furr's tags about 20 percent of its merchandise, including seafood, meat, health and beauty care items, videotapes, liquor, wine and even sheet cakes. The chain's rule of thumb is to tag products that retail for three dollars or more.

In some stores, the company augmented EAS coverage with CCTV and front-end exception monitoring systems, to bolster shoplifting protection and add employee theft detection synergy to the mix. Yet another benefit of the camera system has been the curtailment of fraudulent "slip and fall" lawsuits.

Without providing numbers, Denison says the combined measures have reduced shrink significantly. "Everybody in our industry would be envious of these results. Any store can reduce its shrink with EAS systems, and we have to protect ourselves against those few who couldn't care less about others."

Dave Shoemaker, vice president of business development for Checkpoint Systems agrees that consumer sensitivity-especially concern over false alarms-has been a concern of retailers. But he says it is more accurate to attribute their past hesitance to employ EAS technology to more general concerns about their impact on front-end operations.

"Supermarket retailers have always said' to us that if you can cut down on the false reading, and speed up throughput at the checkstands by integrating the deactivation process into the scanners, then we're ready to go. That's always been their fundamental requirement.

"The fact that our system is the only one with the capability to integrate deactivation automatically as items are scanned has essentially answered that demand, and because of that, the movement into these systems is growing rapidly," he says.

That was among the features that induced Delchamps to begin installation of the company's RF (radio frequency) EAS system in 42 of its 118 stores, according to loss prevention director Ed Van Fleet.

"We were interested in this particular system because it allows the cashiers to deactivate the tags as a normal course of scanning, so it doesn't disrupt the normal flow unless an alarm is activated," says Van Fleet.

He said other systems Delchamps reviewed utilized a "pass-around" arrangement, in which the tags are never actually deactivated. In those systems, after the cashier scans a tagged item, he or she merely moves it around the surveillance field so that it does not set off the alarm. Still other systems require the cashier to physically deactivate the tag in a separate step.

Van Fleet said that taking human intervention out of the deactivation mode also provided an additional safeguard against employee theft. "Obviously, it's a lot harder to bypass the system or otherwise sneak something through when the failure to scan properly keeps the tag activated."

Prior to its purchase decision, Delchamps tested the system for 90 days in six stores. Then, over the next six months, the chain evaluated shrink in those stores as compared with their prior history, as well as current results in similar stores. "In that examination, we found the results to be beneficial, enough so to extend the system to additional stores," Vim Fleet said.

Asked how Delchamps' customers reacted to the system installations during the test periods, Van Fleet said "There's been a lot of curiosity and a lot of people asking questions, but most people were already familiar with the systems because they had already seen similar equipment in other stores. Some people confused the detection units with the metal detectors in airports, but very few."

He recalled an interesting and somewhat ironic incident that occurred during one of the installations, prior to the activation of the system. "A customer that we previously suspected as being a shoplifter-based on information reported to us-started complaining about the fact that we were putting the system in.

"With that, another customer on the checkout line who overheard the conversation stepped out of the line and interjected how much she appreciated the fact that the company was taking a proactive step to keep our costs down by discouraging shoplifting, and detecting it when it happens."

As with other high-tech expense reduction measures, the gradual increase in the presence of successful security systems creates a form of competitive disadvantage for competing operators who don't have them.

Said Van Fleet, "We chose the stores to be outfitted based on several factors. Certainly, their past shrink history was one of them. But we also want to place them in stores that were near competitors who have similar systems in place, not just supermarkets but also drug stores, many of which have them nowadays. Another factor was proximity to our own stores that were already outfitted. We didn't want to take a problem from one of our stores and drive it into another."

As Furr's did, Delchamps is adding CCTV/videotape systems to the stores in which the EAS system is being rolled out, for added protection and the capability to discourage and detect employee crime as well as shoplifting. However, the Mobile chain has not yet finalized its roster of items to be tagged.

"Obviously, the frequently-stolen items such as HBC, meat and cigarettes will be tagged, but we haven't decided which categories will be added to that list. One of the advantages of this type of system is the ability to insert the tags inside the packages, so that it's not obvious which items are tagged and which arc not," Van Fleet said.

Consultant Read Hayes commends the combination of tag systems and cameras, but continues to advocate "deterrence marketing" as a combination of measures that makes it apparent even to people who have never shopped a store that it is the wrong place to attempt to shoplift.

"Supermarkets are beginning to catch up with other retailers when it comes to using systems within the stores to deter and detect. But they’re still not doing as much as they might to establish a public image of toughness on shoplifting, or to communicate what will most definitely happen to people who try to do it in their stores," Hayes said.

For example, Hayes said "Department stores and specialty stores not only try to deter theft attempts, through the use of cameras and item surveillance, but they also employ store detectives or specific security personnel, who customers know will apprehend them if they are caught trying to steal."

Overall, Hayes recommends a "holistic" program of communications and operations tactics that hammer a "Don't Try it with Our Stores" message home in what he refers to as the five "zones of influence."
The first zone is at the asset level itself-the point where a product would actually be taken. Zone two is the interior of the store as a whole. Zone three is the exterior of the store. Zone four would be public places, such as movie theaters, the internet, schools, etc. and zone five would be, finally, the home.

Many of these steps and advertising campaigns are things individual companies can and are doing, and others are things that can be done jointly, in a kind of industry-wide way, he said.

"What we try to do is market certain messages in those zones that convince people not to even try to steal from us. So when we put in tag systems and cameras, or train employees to be alert or hire security people and make their presence conspicuous, we're saying 'if you steal from me, you are going to be caught and you are going to be punished.' "

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