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Retailers brace for more crime as economy worsens

Hard times tend to bring out more crime, particularly in the retail sector.


January 6, 2009
By Rosie Lombardi

About 84 per cent of the 52 largest and fastest-growing U.S. retailers
are reporting increases in theft and amateur shoplifting, according to
a December 2008 study conducted by the Arlington, Va.-based Retail
Industry Leaders Association.

Many people who would not normally engage in theft are driven to it
during economic downturns. British studies conducted in previous
recessions revealed the underlying psychology, says Bob Davies, program
facilitator for the fraud examination and forensic studies program at
Toronto’s Seneca College.

“As their sense of helplessness grows, some people strain to close the
gap between their resources and their aspirations. This removes moral
boundaries and rationalizations set in: ‘I’m not taking much – Wal-Mart
can afford it.’”

While the recession hasn’t hit Canada as hard as the U.S. yet, some
retailers say they’re already seeing its effects. “We’re starting to
see an increase in the numbers of incidents,” says Bill Cowper, loss
prevention manager at the Nova Scotia Liquor Corp., adding this uptick
began in September.

New customer issues
While high-end luxury items such as jewelery are always popular
targets for theft, downscale categories become more prevalent during
downturns. “What we see is an increased focus on essentials such as
food, children’s clothing and other items associated with basic needs,”
says Peter Martin, president of AFI International, a crisis management
and security investigations firm based in Milton, Ont.

Another key feature of downturns is reductions in staff, which can
create a double whammy for retailers: more people than usual are driven
to commit thefts but there are fewer employees on the sales floor to
deter them. “We’re seeing opportunists taking advantage of our staffing
levels in our stores,” says Cowper. “And we’re seeing a lot of people
we haven’t seen before involved in incidents.”

To cope with these scenarios, loss prevention (LP) professionals need
to expand their criminal profiles during downturns beyond the usual
suspects, says Martin. “I can’t tell you the number of times I’ve gone
into an organization, and it was the 50-year-old lady stealing, not the
17-year-old kid with his pants hanging down his butt. Don’t just look
at kids, look at the guy in the suit – he may be putting it on every
morning but he lost his job and hasn’t told his family.”

Some simple psychological gambits can go a long way to deterring theft,
says Tim Dimoff, president of Cleveland-based SACS Consulting and
Investigative Services Inc. “Retailers need to train their staff to
make eye contact and conversation with anyone who comes in. That
personal contact alone has been proven to be a strong deterrent,
because the person isn’t a faceless nobody anymore.”


For retailers who can afford it, advanced technology can help counter
theft. A surveillance video system coupled with content analysis can
alert staff when an attempted theft is in progress, says Norm Hoefler,
country manager for Canada at Bosch Security Systems Inc. For example,
using a feature called “tripwire,” video content analysis software will
alert staff if a customer attempts to cross an invisible, pre-defined
line, such as reaching over a jewelery counter. Once the software
detects this event has occurred, it will alert staff monitoring the
system and display the video on the operator’s screen.

Surveillance video can also be reviewed for evidence of false customer
claims that may impact revenue, he says. “One retailer uses video
surveillance at the return desk to determine if customers have actually
purchased high-priced items from the store when receipts aren’t
presented. Another reviews video to determine how much change a
customer was given when claims are made that a cash register operator
gave an incorrect amount.”

But technology is limited, as there are areas such as washrooms and
change rooms where surveillance video can’t be placed, says Davies.
“Senior management tend to look at LP as a cost centre instead of a
profit centre. But if you reduce the number of capable guardians over
stores, it increases the opportunities for people to get away with
things. Often the fact that security people are visible is a deterrent
in itself.”

Managing more security with less
Martin says demand for AFI’s high-risk termination services is
exploding now in Canada. “That’s not due to an increase in incidents,
but there’s a lot of concern when large numbers of people are laid off
simultaneously and plants close, particularly in manufacturing.”

But he says there’s less concern in the retail sector, as many
employees tend to be young and transient. “If they’re laid off, chances
are they’re living at home, so it’s not as devastating. And there’s a
lot of churn in the industry already.”


Nevertheless, handling layoffs with honesty and dignity is critical –
not just to avoid creating embittered ex-employees, but also because
badly-managed layoffs can have an equally negative effect on surviving
employees. “It can cause a decrease in morale and customer service, and
an increase in internal thefts. It can also contribute to customer
theft, as employees observing a crime in progress may think, ‘The
company doesn’t care, so why should I?’” says Dimoff.

Most LP professionals recognize the insider threat is more significant
than thefts by customers. “What’s more troubling for me is when we
start to see some of the issues in the downturn reflected in our staff,
and we’re certainly seeing an increase in internal theft,” says Cowper.

He says the NSLC is getting better at identifying internal crime
through the use of technology. “We’re starting to put more controls in
place, as I’d rather prevent incidents.” The company recently
implemented new ERP and POS systems with their associated exception
reporting tools. “We’re re-examining those tools and coupling them with
video surveillance to see if we can leverage those two pieces. We’re
fine-tuning them to help us mitigate the internal problem.”

Smaller retailers who can’t afford technology can tackle internal theft
in a different way. “Start to mix up the habits of management – don’t
be on a set routine,” says Dimoff. “Employees who steal study store
management’s habits and look for gaps, so avoid repeated patterns. For
example, if you can’t afford more managers, change the hours of the
ones you have so they’re around at different times.”

Be they large or small, retailers should beef up inventory tracking
processes to avoid wasting scarce security resources, says Martin.
“What many retailers don’t understand is that the biggest problem we
have in investigations is proving an item existed in the first place.”

If poor processes are in place, determining the source of thefts can be
a major headache. Were items stolen at the store, the distribution
warehouse, or off the truck? “Are you going to line up all your
employees and polygraph them, only to find out someone didn’t audit
products off the truck like they were supposed to?”

During hard times, the best thing retailers can do is to harden their targets, says Martin.

“It doesn’t matter how you do it. What you want to do is make your
target harder than the next retailer’s, because the best you can do is
move criminal elements to another place. Make sure all your security
processes are highly visible – these elements will see you have systems
in place and will move on to easier targets.”