Retailers face a potential tidal wave of theft and fraud as recession-hit consumers increasingly turn to crime. Now more than ever, says Alison Clements, stores need to invest in loss prevention IT.

“Don’t change your lifestyle, change your supermarket,” chirps Aldi’s recession-ready ads. But people are changing their lifestyles in this harsh downturn. Desperate times spell desperate measures – shoplifting, buying cheap stolen goods and pilfering at work, to name a few.

Tesco, Iceland and Marks & Spencer have all gone on the record saying they have suffered dramatic increases in shoplifting recently. Tesco reported a 36 per cent increase in store theft in the first half of 2008 compared with the year before. Meanwhile Iceland says that legs of lamb, cheese, bacon and coffee are prime targets for thieves in its shops at the moment.

John Lewis development manager for business protection Paul Newbury says retailers would be naﶥ to think people weren’t looking out for opportunities to steal from shops and their employers while times are tough. “Many people are struggling to make ends meet and it’s an unfortunate fact of life that we retailers are victims as a result.”

British Retail Consortium crime policy executive Catherine Bowen says retailers are noticing a shift from “greed to need” crime, with everyday staples being targeted alongside the usual favourites of alcohol, branded clothes and small electrical goods.

At the same time, career criminals know it’s boom time for selling hooky goods on the black market, and they’re getting increasingly blas頡bout grabbing what they know will sell.

“The indication from BRC members and from police recorded crimes is that there has been a significant increase in offences over the past six months,” says Bowen. “The model from the last recession of 1991 to 1992 is a pretty good indication of future crime trends, so retailers should be prepared for a rise in violence against staff, theft and burglary. The Home Office has certainly predicted this.”

Neil Matthews, vice-president of security systems provider Checkpoint Systems Europe, warns that this is just the start. “Unfortunately major names like Woolworths and Zavvi closing their doors means the stores left trading on our high streets will see even more shoplifting, as people who used to steal elsewhere move in,” he explains.

Technology such as CCTV surveillance and EAS security tagging systems can undoubtedly help deter and catch opportunists and amateur thieves tempted to steal for the first time.

“It’s imperative to protect stock rather than be hit by high levels of shrinkage at the same time as falling sales,” says Jon Marchese, director of business development at loss prevention firm TAG Company. “It’s hard to generate sales when the footfall just isn’t there, but you can cut shrinkage and preserve the bottom line that way.”

One entertainment retail operations director says installing security technology has helped cut shrinkage in problem stores from 1.4 to 0.8 per cent.

Indicative of the mood of the market, Marchese says the main grocers have been requesting the special meat tags that TAG Company supplies, which are made with adhesive that will stick to frozen and fresh meat products. “They are finding that if alcohol is well protected and not worth stealing, the second choice on thieves’ list is expensive cuts of meat,” he says.

Marks & Spencer is certainly reacting, with its first EAS tagging system going into 50 stores in the south of England, protecting high-value meat and fish items in the food halls, and expensive suits and coats in clothing (Retail Week, March 6). The project is significant given the retailer’s long-held belief that EAS tagging was not needed in its stores.

Playing tag

John Lewis too is spending on security technology, although this is part of a security investment programme planned long ago, rather than the result of the recession. “We’ve been working on an IP-CCTV programme for two years and began looking at tagging a year ago, so the timing has been very good, more by luck than judgement,” says Newbury. A digital IP-CCTV system from IndigoVision was chosen to go into three new stores and John Lewis saw this as the ideal time to install it at nine existing stores as well.

EAS tagging has also arrived at John Lewis stores for the first time. Tagging trials began in two branches last August, with a Sensormatic system from ADT in the Bluewater store and a Checkpoint system in Glasgow.

Newbury says that John Lewis had been reluctant to tag product in the past for fear of diminishing the customer experience, with the possibility of alarms going off accidentally and antennae at entrances visibly changing the look of stores.

But he says: “The trial has exceeded expectations and we are now looking at what possibilities we might have to further roll out. My aspiration would be to have EAS in the eight to 10 stores that will deliver the best return on investment in the next 12 to 15 months.”

Feeling the pinch

The problem for many retailers, though, is that the recession is squeezing security budgets, with stock-loss teams being laid off, spending on security technology suspended and even maintenance of existing systems being neglected.

Matthews believes this is foolhardy. “Cutting back on sales staff and security staff is giving shoplifters more freedom to steal and if theft goes up, sales are nearly always affected,” he says. His point is that stolen items aren’t quickly replenished for shoppers to purchase, because the EPoS system won’t have registered them leaving the store.

Matthews’ advice is for retailers to make sure they are at least getting the best out of existing systems, which means maintaining them and utilising them fully, and in high-risk instances also looking at the latest technologies to outwit determined criminals.

In that spirit, luxury brand Mulberry has opted to spend on new tags to protect highly desirable handbags and purses in its House of Fraser and Selfridges concessions. The Alpha 3 Alarm CableLok tag it has adopted is particularly robust because it has three alarms – one triggered when an item is tampered with, another at the point of exit and a third “self-screamer” that is activated the minute the item leaves the premises. Mulberry national security manager John Loughrey says: “Since installation, the results speak for themselves. In one incident where we apprehended a shoplifter, the merchandise was dropped when the final alarm was triggered outside the store. We were able to retrieve the item, which if stolen would have been a
significant loss.”

John Lewis has also been looking at iSentry software from ISDS that it hopes could be useful in the future. The artificial intelligence software learns behaviour patterns recorded on digital CCTV so that over time it can filter out expected video motion and only alert security staff to unusual behaviour. This would greatly reduce CCTV operator man hours.

“Previously the intelligent technology available had to be set up by your security team, who programmed the system to notice the incidents you wanted it to, and that takes time and resources. Systems like this remove the need for all that preparatory work. It self-learns over time and could be a cost effective way of spotting irregularities in stores and distribution centres in the future,” says Newbury.

Retailers are wary that it is employees, not members of the public, who probably pose the biggest threat as the economy sours. Job insecurity and financial problems at home might make stealing or committing fraud at work more tempting. “Our perception is that there’s a growth in sweetheart fraud at the point of sale in the current climate, including refund fraud, ringing up non-existent loyalty points and undercharging,” says Robin Adams, consulting director of security, risk and compliance at The Logic Group.

Loss prevention data mining tools can be the answer. Jaeger’s recent adoption of IDM’s LossManager data mining software has given a valuable insight into unwanted staff and customer activities, and within three months of implementation has delivered savings and profit improvement.

“The system has triggered many interesting and somewhat unexpected lines of enquiry that wouldn’t have been visible before,” says Jaeger head of safety and security Steve Hearn. “We’ve uncovered fraudulent activity, but also procedural issues that in the current economic climate make a significant impact on the bottom line.”

All these loss prevention measures create a valuable deterrent to would-be thieves as well as catching people in the act. So as the recession deepens, big decisions need to be made about whether cutting security spending is the wisest move.

Rise of the novice thief

  • 1.6 million adults in Britain would contemplate shoplifting if they lost their jobs

  • 1.3 million said the rising cost of food would make them consider retail theft

  • 2.6 million admitted to shoplifting over the past 12 months – up 30 per cent on the previous year

  • Residents in the Northwest were most likely to turn to theft, with 12 per cent admitting they have stolen in the past year. Wales and the West Country were least likely to steal, with 4 per cent admitting theft

Source: the fifth annual Retail Crime Survey compiled by G4S Security