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The ‘Not-So-Sweet’ Side of Retail Loss


A perfect storm of loss has settled its vicious clouds over the retail industry. The sluggish economy has made some consumers, as well as some store associates, desperate, and more individuals are resorting to stealing. At the same time, retail organized crime incidents are at an all-time high. Feeling the effect of all factors, Big Y has added controls to protect itself from excessive losses.

The supermarket chain has been mindful to protect itself from both external and internal threats. However, the chain found one area where it wasn’t doing its best, controlling losses at the point of sale—known throughout the industry as “sweethearting.”

Similar to many retailers, Big Y has various technology deployed “to prevent bad folks from stealing,” according to Mark Gaudette, director of loss prevention for the Springfield, Mass.-based grocer. Between remote monitoring, closed-circuit television systems and exception reporting of POS transactions, the chain has learned to use technology to protect itself, efficiently accumulate loss-prevention data and even reduce the number of people onsite to manage loss-prevention operations.

Even with all of these safeguards, the one area that still confounded the 56-store chain was sweethearting, that is, when a cashier deliberately mis-scans or fails to scan a product, or does not scan a product left in the shopping cart. Sweethearting accounts for 35% of loss across the supermarket industry, according to the National Retail Federation, Washington, D.C.

The Big Y discovered it had a sweethearting problem the same way many retailers do: “We stumbled across it by accident,” Gaudette explained.

By coupling exception reports with key performance indicators, the chain discovered voids and the thousands of dollars it was losing due to these incidents. Whether these mis-scans were intentional or not, the chain quickly learned it was happening among 30% of its cashiers.

Some might argue that since the chain is committed to analyzing exception reporting statistics and averages, it should have noticed a problem. Gaudette disagrees. “If merchandise is not being scanned, and therefore movement data not being captured, there are no good measures to fall back on, let alone to detect a problem,” he said.

The chain’s existing CCTV cameras and exception-reporting technology monitored transactions at each store’s 16 POS stations and tracked voids, merchandise returns, even cash losses. But the solutions never managed to keep the instances from happening. “We were experiencing significant dollar losses, and that was taking a toll on thin profit margins that average 1.5%,” Gaudette explained. “We needed a way to plug the holes and prevent loss.”

Part of the problem was that the chain didn’t have enough staff to watch all of the digital video being captured. Big Y found the help it needed through a video recognition system, from StopLift Checkout Vision Systems, Cambridge, Mass.

StopLift uses behavior-recognition algorithms programmed to detect how a cashier handles merchandise at POS, and flags when merchandise was not scanned correctly or at all. Besides analyzing video of cashier activity, the solution electronically simultaneously compares the information with the transaction data. Results confirm which items were scanned—and those that were not.

Getting sweet on fighting front-end loss

The chain began piloting the solution in three stores in December, a project that included adding a StopLift server box into its data center and integrating it with its digital video recorder. All video captured by the DVR is also looped into StopLift, and this is electronically compared to POS and transaction data logs. Finally, the system presents all incidents for investigators to review.

“Positive results and a strong return on investment calculation pushed us to begin a chainwide rollout,” he said.

The first phase of the rollout, which included 35 stores, began in February. Big Y completed outfitting the remaining stores last month.

At presstime, the final stores were coming online, and the chain was already learning from reports. One unexpected trend the solution revealed was a high rate of middle-of-the-basket losses as well as bottom-of-the-basket losses. Reports also allow Big Y to pinpoint individual stores or clusters of locations that are having issues and address how to solve the problem.

Early successes have encouraged the chain to consider expanding the solution beyond the front end. Big Y is exploring how to use the technology in store aisles to prevent slip-and-falls or injuries; at the meat counter to prevent accidents caused by mishandling equipment, and at the back door where direct-store deliveries arrive.

“The idea is to use as much technology as possible to get the job done and run the company better, as well as improve customer service,” said Gaudette. “I wish we had this a long time ago.”

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