Five-finger discount war
July 11 2002
Sydney Morning Herald
Shoplifting is easy, some say like taking candy from a baby. Fed up, retailers are using new technology to stop the rot. Tony Davis reports.
The technology which helped track down serial killer Ivan Milat is coming to a store near you - and could possibly nab you for shoplifting.
It's all part of a dramatic and expensive rethink about the way retailers, particularly department stores, are attempting to protect themselves from theft and fraud.
With each cash register now effectively functioning as a mini-bank and crooks getting increasingly technology-savvy, retailers are feeling more exposed than ever before.
There have been substantial upgrades to security tagging technology recently, with concealed mini-tags now attached during manufacture to protect even the tiniest items. Others are packaged with food, even though that food may go straight into a microwave with the mini-tag still included (apparently it's safe).
Soon new-generation RFID (Radio Frequency Identification) tags will make it possible to positively identify stolen items, even years after the theft.
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Retailers are also looking at linking their tagging systems with their security cameras (so cameras can follow a suspect) and incorporating facial recognition technology on digital security cameras. This could automatically alert security staff to the presence of known shoplifters when they enter a store.
Meanwhile the "Milat" software - an Australian-developed system from NetMap Analytics - is having a dramatic effect. In 1993 and early 1994 NSW police used Netmap software to look for connections between millions of pieces of information found in police records, state vehicle databases and gun licensing information.
The result was the narrowing of a huge field of potential suspects to just 32, including the man eventually found guilty of the so-called backpacker murders, Milat.
David Jones has reported a reduction in "shrinkage", the industry term for fraud and stock loss, of up to 60 per cent since installing Netmap in one of its CBD stores (either Sydney or Melbourne; the company will not say where or when). In another major metropolitan store, where Netmap has been used to sift through millions of financial transactions and highlight unusual patterns, the reported improvement is 42 per cent.
Carl Gunther, a director of Netmap, says the system is designed to reveal fraud at the point of sale, whether it be by a member of the public or a staff member. "Netmap is about finding relationships in the data in large databases. It is used to identify groups within the data - for example, cash register details - that have a pattern or share relationships more in common with each other than with the group."
He says Netmap can help identify a member of staff processing an unusually high number of refunds, even if all or some were completed under an authorisation code shared with other staff. It can also highlight, for example, when a particular credit card is being presented in suspicious patterns.
Don Grover, a director of David Jones stores, insists Netmap is not the only factor in the shrinkage improvement, but says it's a "significant part".
He says of the stores in which the software has been used, up to 2 per cent of staffers have been charged by police. And those who are "susceptible to temptation" are changing their behaviour. "We are finding few employees to be dishonest, but there are some who are significantly dishonest. We now have a tool that assists us in finding them."
There is some debate about comparative numbers and changing methods of measuring retail theft, but Grover, who entered the retail business 26 years ago, says the problem has been gradually worsening.
"All around the world every retail business is struggling with the increase in theft and fraud. They are all trying different things to deal with it, and they are all struggling to measure it," he says.
According to the Australian Retailers Association (ARA), the industry average for shrinkage is "between 1 and 3 per cent". An ARA spokeswoman said at the extremes some businesses suffer as little as half of 1 per cent, others as much as 6 per cent. Either way, ARA estimates that the cost to business is $2 billion in NSW alone.
Some organisations spoken to by the Herald estimated 40 per cent of the losses were employee theft and the rest split between poor administration (including stock loss and fraud in the supplier chain) and shoplifting. Others tend more towards the "one-third, one-third, one-third" model. The ARA believes, however, that internal theft is increasing and now accounts for nearly half of all theft.
A landmark study from 1983, still widely quoted in the industry, suggests 50 per cent of staff are basically honest, 5 per cent are dishonest and the rest are kept in check by policy and procedures.
Most retailers are not comfortable talking about the policy and procedures they have in place to deal with errant staff, nor the full armoury they can bring to bear against customers who like to award themselves a five-fingered discount.
Scott Whiffen, of Coles-Myer, told the Herald, "We use a range of things to prevent loss", but was unwilling to go beyond that.
One of the areas of most rapid change concerns security tagging. There are millions of so-called hard tags around. These are the plastic discs or boxes attached to clothing, accessories and sporting and travel goods, which set off alarms when passed through a "pedestal".
But smaller, cheaper soft-tags or "labels" are becoming more common. These "one-use-only" devices use similar radio frequency or acoustic-magnetic technology but can be bought by retailers for as little as 8¢ each (compared with $1.50 or more for hard tags). They are inserted into CDs, DVDs, computer games and books and are now built into small high-value items such as batteries on the production line.
In the United States even more sophisticated RFID tags are being tried out by the Gap clothing chain. Built into clothes and footwear during manufacture, they allow a product to be tracked right through the distribution and delivery chain, and also protect it against theft on the shop floor (by triggering a buzzer system).
If stolen clothing turns up, it can be scanned to show where it came from, even years later. And because fake designer wear, pirated CDs and other forgeries won't have the built-in tags, they can be exposed with an RFID reader.
The world's largest security company, ADT, says these new tags will be tried out here with large retailers within a year. Nonetheless, ADT spokesman Brad Fox says the high cost (about $20 a tag) means it could be seven years before they are in wide use.
Popular attempts to beat current tags range from concealing goods in foil-lined bags, to the desperate, often drug-inspired, grab and run. The best methods, presumably, remain unknown.
Most retailers agree that good personal service is the best deterrent - it makes most shoplifters uncomfortable - and tagging and closed-circuit television systems are the next best. Many retailers are moving towards integrating their tagging and closed-circuit television systems so that, for example, a camera can swing around and start recording as soon as a pedestal is passed with a tag that has not been deactivated.
Facial recognition technology is on the way, too. It is already being used to highlight suspicious people at Melbourne's Crown Casino and has been tested at Star City in Sydney. NSW Police is in the process of using facial recognition software to manage its databases of criminal photos.
Although there are privacy concerns about "big brother" cameras which can pick out individuals, it is being done manually already with many larger stores monitoring faces on closed circuit televisions.
Grover says: "They know the bad people and ask them to move on."
A security consultant who saw the US-produced FaceIT recognition system in use in the control room at Crown Casino told the Herald it worked surprisingly well. If linked to a common database such technology could allow suspicious people to be tracked, but ADT's Brad Fox says the main use could be something quite different.
"I don't think it will be that effective as a shrinkage tool," he says. "Major retailers are probably thinking about using it more for customer service, to recognise high-value customers when they enter the stores. They could get the sales assistant to come down and direct you in the right areas - with some purchase- history knowledge."
Who lifts what, and where
"Shirts and shorts have consistently featured as the most targeted clothing items," according to the most recent report from the NSW Police Service. It added "video tapes, mobile phones, DVD players and compact discs have frequently claimed the highest share of offences among electronic and home entertainment equipment".
The report, "Retail Theft: A Strategic Assessment", was prepared last August but not released to the retail trade until this year (after confidential information was excised). It says jewellery has emerged as "a property of choice", breaking into the top 10 items for the first time last year.
Parramatta and The Rocks were the hottest hot spots, according to the report: "Both are shopping and/or tourist centres and attract very large transient populations."
Department stores are the most "hit", recording nearly twice as many incidences of theft as supermarkets and more than four times as many as service stations. And an Australian Institute of Criminology report on small business from March this year says: "For every 100 businesses surveyed, 62 incidents of burglary occurred - shoplifting stood out with about 674 incidents reported per 100 premises."
The Australian Retailers Association associates the theft of higher-priced items such as jewellery, designer clothing and accessories with professional thieves, many of whom are filling an order for a specific product.
"The merchandise more susceptible to theft is the merchandise most marketable outside the business," says Don Grover of David Jones, "such as branded products, good international and national brands, particularly apparel."
And in spite of the cliche of the little old lady shoplifter, police figures suggest 58 per cent of all offenders are male
July 11 2002
Sydney Morning Herald
Shoplifting is easy, some say like taking candy from a baby. Fed up, retailers are using new technology to stop the rot. Tony Davis reports.
The technology which helped track down serial killer Ivan Milat is coming to a store near you - and could possibly nab you for shoplifting.
It's all part of a dramatic and expensive rethink about the way retailers, particularly department stores, are attempting to protect themselves from theft and fraud.
With each cash register now effectively functioning as a mini-bank and crooks getting increasingly technology-savvy, retailers are feeling more exposed than ever before.
There have been substantial upgrades to security tagging technology recently, with concealed mini-tags now attached during manufacture to protect even the tiniest items. Others are packaged with food, even though that food may go straight into a microwave with the mini-tag still included (apparently it's safe).
Soon new-generation RFID (Radio Frequency Identification) tags will make it possible to positively identify stolen items, even years after the theft.
advertisement
advertisement
Retailers are also looking at linking their tagging systems with their security cameras (so cameras can follow a suspect) and incorporating facial recognition technology on digital security cameras. This could automatically alert security staff to the presence of known shoplifters when they enter a store.
Meanwhile the "Milat" software - an Australian-developed system from NetMap Analytics - is having a dramatic effect. In 1993 and early 1994 NSW police used Netmap software to look for connections between millions of pieces of information found in police records, state vehicle databases and gun licensing information.
The result was the narrowing of a huge field of potential suspects to just 32, including the man eventually found guilty of the so-called backpacker murders, Milat.
David Jones has reported a reduction in "shrinkage", the industry term for fraud and stock loss, of up to 60 per cent since installing Netmap in one of its CBD stores (either Sydney or Melbourne; the company will not say where or when). In another major metropolitan store, where Netmap has been used to sift through millions of financial transactions and highlight unusual patterns, the reported improvement is 42 per cent.
Carl Gunther, a director of Netmap, says the system is designed to reveal fraud at the point of sale, whether it be by a member of the public or a staff member. "Netmap is about finding relationships in the data in large databases. It is used to identify groups within the data - for example, cash register details - that have a pattern or share relationships more in common with each other than with the group."
He says Netmap can help identify a member of staff processing an unusually high number of refunds, even if all or some were completed under an authorisation code shared with other staff. It can also highlight, for example, when a particular credit card is being presented in suspicious patterns.
Don Grover, a director of David Jones stores, insists Netmap is not the only factor in the shrinkage improvement, but says it's a "significant part".
He says of the stores in which the software has been used, up to 2 per cent of staffers have been charged by police. And those who are "susceptible to temptation" are changing their behaviour. "We are finding few employees to be dishonest, but there are some who are significantly dishonest. We now have a tool that assists us in finding them."
There is some debate about comparative numbers and changing methods of measuring retail theft, but Grover, who entered the retail business 26 years ago, says the problem has been gradually worsening.
"All around the world every retail business is struggling with the increase in theft and fraud. They are all trying different things to deal with it, and they are all struggling to measure it," he says.
According to the Australian Retailers Association (ARA), the industry average for shrinkage is "between 1 and 3 per cent". An ARA spokeswoman said at the extremes some businesses suffer as little as half of 1 per cent, others as much as 6 per cent. Either way, ARA estimates that the cost to business is $2 billion in NSW alone.
Some organisations spoken to by the Herald estimated 40 per cent of the losses were employee theft and the rest split between poor administration (including stock loss and fraud in the supplier chain) and shoplifting. Others tend more towards the "one-third, one-third, one-third" model. The ARA believes, however, that internal theft is increasing and now accounts for nearly half of all theft.
A landmark study from 1983, still widely quoted in the industry, suggests 50 per cent of staff are basically honest, 5 per cent are dishonest and the rest are kept in check by policy and procedures.
Most retailers are not comfortable talking about the policy and procedures they have in place to deal with errant staff, nor the full armoury they can bring to bear against customers who like to award themselves a five-fingered discount.
Scott Whiffen, of Coles-Myer, told the Herald, "We use a range of things to prevent loss", but was unwilling to go beyond that.
One of the areas of most rapid change concerns security tagging. There are millions of so-called hard tags around. These are the plastic discs or boxes attached to clothing, accessories and sporting and travel goods, which set off alarms when passed through a "pedestal".
But smaller, cheaper soft-tags or "labels" are becoming more common. These "one-use-only" devices use similar radio frequency or acoustic-magnetic technology but can be bought by retailers for as little as 8¢ each (compared with $1.50 or more for hard tags). They are inserted into CDs, DVDs, computer games and books and are now built into small high-value items such as batteries on the production line.
In the United States even more sophisticated RFID tags are being tried out by the Gap clothing chain. Built into clothes and footwear during manufacture, they allow a product to be tracked right through the distribution and delivery chain, and also protect it against theft on the shop floor (by triggering a buzzer system).
If stolen clothing turns up, it can be scanned to show where it came from, even years later. And because fake designer wear, pirated CDs and other forgeries won't have the built-in tags, they can be exposed with an RFID reader.
The world's largest security company, ADT, says these new tags will be tried out here with large retailers within a year. Nonetheless, ADT spokesman Brad Fox says the high cost (about $20 a tag) means it could be seven years before they are in wide use.
Popular attempts to beat current tags range from concealing goods in foil-lined bags, to the desperate, often drug-inspired, grab and run. The best methods, presumably, remain unknown.
Most retailers agree that good personal service is the best deterrent - it makes most shoplifters uncomfortable - and tagging and closed-circuit television systems are the next best. Many retailers are moving towards integrating their tagging and closed-circuit television systems so that, for example, a camera can swing around and start recording as soon as a pedestal is passed with a tag that has not been deactivated.
Facial recognition technology is on the way, too. It is already being used to highlight suspicious people at Melbourne's Crown Casino and has been tested at Star City in Sydney. NSW Police is in the process of using facial recognition software to manage its databases of criminal photos.
Although there are privacy concerns about "big brother" cameras which can pick out individuals, it is being done manually already with many larger stores monitoring faces on closed circuit televisions.
Grover says: "They know the bad people and ask them to move on."
A security consultant who saw the US-produced FaceIT recognition system in use in the control room at Crown Casino told the Herald it worked surprisingly well. If linked to a common database such technology could allow suspicious people to be tracked, but ADT's Brad Fox says the main use could be something quite different.
"I don't think it will be that effective as a shrinkage tool," he says. "Major retailers are probably thinking about using it more for customer service, to recognise high-value customers when they enter the stores. They could get the sales assistant to come down and direct you in the right areas - with some purchase- history knowledge."
Who lifts what, and where
"Shirts and shorts have consistently featured as the most targeted clothing items," according to the most recent report from the NSW Police Service. It added "video tapes, mobile phones, DVD players and compact discs have frequently claimed the highest share of offences among electronic and home entertainment equipment".
The report, "Retail Theft: A Strategic Assessment", was prepared last August but not released to the retail trade until this year (after confidential information was excised). It says jewellery has emerged as "a property of choice", breaking into the top 10 items for the first time last year.
Parramatta and The Rocks were the hottest hot spots, according to the report: "Both are shopping and/or tourist centres and attract very large transient populations."
Department stores are the most "hit", recording nearly twice as many incidences of theft as supermarkets and more than four times as many as service stations. And an Australian Institute of Criminology report on small business from March this year says: "For every 100 businesses surveyed, 62 incidents of burglary occurred - shoplifting stood out with about 674 incidents reported per 100 premises."
The Australian Retailers Association associates the theft of higher-priced items such as jewellery, designer clothing and accessories with professional thieves, many of whom are filling an order for a specific product.
"The merchandise more susceptible to theft is the merchandise most marketable outside the business," says Don Grover of David Jones, "such as branded products, good international and national brands, particularly apparel."
And in spite of the cliche of the little old lady shoplifter, police figures suggest 58 per cent of all offenders are male
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