Wednesday, September 06, 2006

Tech Strategies: Security Lags As Shoplifting Soars

Shoplifting has gone professional. Retailers report recent growth in organized retail crime, where professional theft rings steal merchandise in large quantities. These thieves target pricey items with high resale value such as designer apparel, newly released DVDs, and popular cosmetics. And they're stealing more than you'd guess: The average dollar loss per shoplifting incident has risen from $622 in 2004 to $855 in 2005. Image Credit: BusinessWeek

"Gross-Inflation" is hitting the shoplifting industry by as much as 37% in average dollar loss per theft over this last measurable year. With rings of professional shoplifters, some with ties to funding Islamo-Fascist terror networks, the retail establishment (and, thereby, the consumer) is under assualt.

Security system designers, value-added resellers and Information Technology integrators respond to retailers requests for heightened security with an array of high-technology tools to thwart this major threat to their (and our) shopping environment.

Excerpts from BusinessWeek -

Attention, Shoplifters
With $30 billion in theft, there's a revolution in surveillance systems
By Elizabeth Woyke - BusinessWeek - Issued for 9-11-2006

There are 6 million video cameras mounted in stores across the U.S., according to market researcher J.P. Freeman Co. Their unblinking eyes are everywhere, watching exits and peering down aisles. You already knew that. But you probably had no idea how smart some of these cameras are getting.

Some Macy's (
FD ), CVS (CVS ), and Babies 'R' Us stores have installed a system called the Video Investigator, whose advanced surveillance software can compare a shopper's movements between video images and recognize unusual activity. Remove 10 items from a shelf at once, for instance, or open a case that's normally kept closed and locked, and the system alerts guards sitting in a back room -- or pacing the sales floor -- with a chime or flashing screen. The system can predict where a shoplifter is likely to hide (at the ends of aisles, behind floor displays). A search function spots sudden movement that might indicate a large spill, prompting workers to clean up before it leads to a slip-and-fall accident and a costly lawsuit. And if someone opens a back door at 2 a.m., the system will record who sneaked in and link it with snapshots of the previous and next persons to use the door. Alerts, complete with images, can be sent to handheld devices, keeping retailers informed 24/7, says Jumbi Edulbehram, vice-president for strategic marketing at IntelliVid Corp., a Cambridge (Mass.) firm that makes the Video Investigator system.

Store managers these days need all the high-tech help they can get. Increasingly, they're under assault from organized gangs of professional shoplifters. These skilled thieves walk off with huge amounts of selected items and resell them at discounts. The pros are driving up losses dramatically, to $855 per shoplifting incident last year, from $265 in 2003, according to a survey by the University of Florida's Center for Studies in Criminology and Law. All told, stores lost $30 billion to shoplifting and employee theft in 2005.

To fight back, store chains are embedding smarter devices everywhere, from checkout stands to shelves to places you wouldn't even think of (and can't see). At the same time, more of these systems are talking to each other, sharing data about shoppers and employees alike.


Even the lowly shopping cart has been recruited in the war on retail crime. A surprisingly common -- and simple -- scam is the "push out," in which thieves load up carts and just dash out of the store. The solution: Gatekeeper Systems Inc. (
GKR ), in Irvine, Calif., invented an electric-fence technology for carts. The system, called GS2, uses radio frequency identification (RFID) chips, which are embedded in cart wheels, and antennas around the periphery of the store that broadcast signals to the chips. When a cart approaches the store boundary, its wheels lock up. They can be unlocked only by an employee who activates a remote-control device. "[Thieves] can't push the cart," says Brett Osterfeld, Gatekeeper's vice-president for sales and marketing. "They'd have to pick it up and walk with it." Target Corp. (TGT ) and several smaller chains have signed on.

To thieves, infant formula is "gold in a can;" relatively expensive and easy to resell on the street. Other "hot" items at supermarkets include batteries, film, and disposable cameras. Image Credit: Nestlé USA

Those handy rungs underneath the cart are great for hauling bulky items like diapers, pet food, and beer. The problem for retailers is that shoppers often "forget" to pay for the goods. The answer? Seven grocery chains, including Pathmark Stores (PTMK ) and Giant Eagle, recently began testing LaneHawk, a system by Evolution Robotics Retail Inc. that uses visual pattern recognition to spot hidden packages. Cameras mounted in cashier stands about six inches off the ground scrutinize the bottom racks of passing carts. If an item matches an image in a database, the system computes the price of the product and adds it to the customer's bill. "It's like biometrics for packages," says Alec Hudnut, CEO of Evolution Robotics Retail.
Still, a few chains, including Best Buy Co. and (
BBY ) Tesco Corp. (TESOF ), are testing RFID's ability to monitor oft-stolen items like DVDs, jewelry, and apparel. Those chains have experimented with TrueVUE, a system by VUE Technology Inc. that uses antennas placed under a shelf's laminated surface to communicate with RFID tags on merchandise. Store employees could also wave RFID-reading wands over racks of clothes to see which items have moved. "The program wakes up the tags, which send back their serial numbers, in effect saying, 'I'm here,"' explains VUE CEO Robert Locke. EAS tags only activate when they approach a store exit, but RFID-equipped smart shelves can notify security the minute a large number of items move.

No part of a store churns out more data than cash registers. This is also where employee theft is most likely to pop up. New types of transaction-monitoring software pull information from registers into a central database and look for unusual patterns. An excess of manually entered credit-card numbers could be a sign that employees are stealing customers' information. Returns of the same type of sweater 10 times in a row at one register, for instance, could indicate that an employee is processing fake returns for a friend or being conned into making fraudulent returns. Retailers decide what to track and how often, and set parameters for alerts. Often the feedback points to problems other than dishonesty. "It might be a hardware issue or a sign that an employee needs more training," says Cheryl Blake, a vice-president at Aspect Loss Prevention, which works with Children's Place Retail Stores Inc. (
PLCE ) and Ross Stores Inc. (ROST ) "Whatever it is, the transactions will stick out and tip off management to investigate."
"Retailers can pull data from all these systems, look at them together and connect the dots," says Rob Garf, a research director at AMR Research.

The newest retail data-mining programs also sync up with video to permit a more comprehensive look at activity at cash registers. With the press of a button, managers can highlight irregular register transactions on their computers and pull up corresponding video. This could enable them to catch cashiers who cut deals for their friends or pocket cash refunds themselves. It could also curtail fraudulent returns by tracking the route customers take to the customer service desk -- do they head straight there or meander through the store, picking up their "return" merchandise along the way?


Despite this revolution in retail tech, you won't find many stores bragging about their new security tools. No one wants to tip off shoplifters or advertise that they suspect their customers. That's why so much of the technology is hidden in the first place. But another reason stores don't talk much about surveillance is that they know it sparks concerns about privacy. Consumer groups and legislators have opposed the spread of RFID and video surveillance for just that reason. "Item-level RFID creates privacy and security problems that are unacceptable, even for antitheft purposes," says Dr. Katherine Albrecht, founder and director of Consumers Against Supermarket Privacy Invasion and Numbering.
If every retail chain is not yet sold on the benefits of relying so much on chips and software to patrol store aisles, experts still believe the industry will keep moving toward ever-smarter, ever-more-networked tracking systems. The number of video cameras installed in stores is expected to grow by 20% over the next year, according to J.P. Freeman. "It won't be long before retailers link their store data to crime reports and statistical analysis to predict losses... and deploy the right technology and people to stop them," says LaRocca of the National Retail Federation. Already, tech startups are working on even more promising -- or intimidating -- systems to track customers through the entire shopping process. There's even talk of stores installing facial recognition programs and license plate readers to catch repeat offenders.

You're not likely to notice much of a difference at your favorite shopping haunts. But make no mistake -- they're noticing you.

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... And thank GOD they are.

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