Exposing Loss Prevention

Technological advances in security equipment are aiding convenience retailers’ push-back on shrinkage threats as they tackle loss prevention.

By Jeffrey Steele, Contributing Editor

When it comes to loss prevention, monitoring your convenience store operations via new-age security systems can pay off in ways that are both cost-effective and eye opening. Just ask Eric Huppert, co-owner of Team Oil Travel Center, a convenience company based in Spring Valley, Wis.

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Exactly 120 day-and-night cameras are positioned around the store’s interior and exterior. Multiple cameras are situated around the registers; others zoom straight down on drawers.

“With different angles, we can see the faces of customers, the faces of the cashiers, the items in the transaction and the denomination of bills in hand and in drawers,” Huppert said. “The cameras record audio and we very specifically train cashiers to verbalize the amount of the item, the amount presented by the customer and the amount of change given back.

The devices have helped eradicate customer complaints, also.

“I’ve had customers call me and say they didn’t receive the change they were due from a transaction. I look it up on the camera [feed] and tell them. ‘Check your back left pocket,’ There’s a pause on the other end of the line, and then they say, ‘Oh my [gosh].’”

The anecdote helps point up why convenience store owners and operators are increasingly exploring advances in technology that can help stem shoplifting by customers and employees, not to mention it can help ensure vendor pricing errors don’t translate into margin erosion over time.

SECURITY SAFEGUARDS
In planning security steps to prevent losses, convenience retailers can access the CAP Index, the leader in crime risk reports at www.capindex.com, said Robert Moraca, vice president, loss prevention with the Washington, D.C.-based National Retail Federation.

CAP Index allows you to enter your store addresses and tap into crime statistics, traffic data and other insights in a massive data base, Moraca said. The average CAP Index score is 100. Where your store falls above or below that mid-point should determine the extent of security provisions. “It also acts as an affirmative defense,” said Moraca, who spent more than two decades of his career with a major retailer and its 850 company-operated convenience stores.

“If you have an ugly crime at your location, you can go to court and say that you’ve matched the level of security in your store with the level of crime risk at that location.“

Moraca recommends every retailer have a digital closed-circuit TV system with multiple cameras and multiple views of what’s going on in the parking lot and the store, “because the parking lot is where your liability begins,” he added. “The other key is to have a really good old-fashioned drop safe, where you’ll drop envelopes with, for instance, $100 counted out, or a technically advanced drop safe that counts money for you as you drop it in. The key is you’ve got to control your cash. Inside the stores, it’s still a high-cash business. You’ve got to drop that money in to keep your cash register inventory of cash low.”

Moreover, Moraca urges retailers to deter crime by ensuring a camera system is visible in the store. “If the criminal sees there’s no system, that will entice them,” Moraca said “The next thing you could add is a public view monitor.”

A final recommendation is to develop a great relationship with local law enforcement. Let police in your area know they’re welcome to free coffee and soft drinks. Get to know each officer’s name.

“When you have an emergency, that’s not the time to be meeting the police in your area for the first time,” Moraca said. “This doesn’t cost anything, it’s just networking.”

He suggests those intrigued by the future of security to read up on facial recognition built into closed-circuit TV systems. Facial recognition will enable stores to immediately identify people arrested in the area for shoplifting and other crimes when they enter retail premises. “A text can be sent to the store manager and associates,” he said. “Facial recognition is not being used yet, it’s still in beta testing, but I believe it’s the next big thing.”

CAMERAS ADD CONFIDENCE
Like Huppert, Diane Thompson, director of stores for Oxford, N.Y.-based Blueox Neighborhood Market, believes in cameras.

“Actually all our locations have always had security cameras,” said Thompson. “Now everything is all digital. Right now, there are nine cameras in each of the locations, inside and out, and that’s been the case for the 20 years I’ve been with the company.”

The company’s security efforts go beyond relying on camera-based monitoring, added Thompson.

Blueox has a corporate policy of monthly auditing, in which an outside firm undertakes counts of sales at both the stores’ retail and food service operations. From month to month, managers can see exactly where the company stands.

“This is something we’ve done as long as I’ve been at Blueox,” Thompson said. “Our district managers can assist our store managers if there is an issue with theft in our locations. They look at store reporting [systems] we built to pinpoint areas, and they can come in and look at the security system, come in on different shifts and do a mini-audit. Sometimes they can move the cameras to get a better view of the issue, or review with the staff what [customer behavior] they should look for.”

Back at Team Oil Travel Center, Huppert maintains three 17-inch monitors and three 32-inch monitors atop a desk; each features 16 distinct shots. The store’s Subway fast-food operation is featured on another screen. The audio feed is dialed up just loud enough for Huppert to hear, but not so loud as to be intrusive as he attends to other business.

“You’re not listening to everything, but it helps you monitor if, for instance, a customer is having trouble with a check-verifying machine, or if a customer is acting inappropriately with cashiers. The ‘me-too’ stuff going on right now is relevant for all of us. I’ve heard customers say things that were inappropriate, and if I can get there soon enough, I’ll run down there and say, ‘I’d appreciate it if you didn’t act that way in my store.’”

UNDER REVIEW
Even retailers with advanced loss prevention technology maintain wish lists of cutting-edge equipment they’d like to add were the budget to justify the expenditures.

Thompson said she is considering adding one major enhancement. From the Blueox corporate offices, she would like to be able at any time to peek into any one of the chain’s locations and view what’s taking place.

“That would give us the capability to look into our sites to see customer flow,” she said. “And we hope to utilize that not just for theft prevention but for better ways to staff our locations.”

Huppert says there are many kinds of camera systems that offer a big upgrade over Team Oil’s current system.

The store uses analog cameras that go to 16-channel DVRs. By contrast, newer systems use Internet Protocol (IP) cameras. IP cameras, which can transmit and receive data through computer networks and the internet, are growing more affordable.

But for Team Oil with 120-camera systems, switching can consume time, effort and money. “Cable that runs an analog camera doesn’t run an IP camera,” Huppert said. “You would have to re-run cable to all your cameras, and the data storage is also totally different technology . . . [In addition] I haven’t seen any IP cameras that could hold up outside, because I don’t know how you could make that CAT-5 connection weather resistant. To get cameras to hold up even in our car wash is a challenge. That’s because of the acidic and always-wet conditions.”

Recently, instead of buying cameras that do not withstand those conditions, Huppert bought a $20 camera like those rear-mounted cameras near rear license plates that deploy when vehicles are shifted into reverse, he said. “It has held up great so far,” he added.

SOFTWARE SOLUTIONS
Both Thompson and Huppert also view back-office software upgrades as instrumental in improving security. Thompson reports Blueox is planning to enhance security at some of its locations next year.

“We’re undergoing some software upgrades that can help” with that effort, he added. “I’m hoping some of the reporting we get out of our new software upgrades taking place in the next month will help us identify areas to focus upon.”

Team Oil has back-office software that tracks every single item that comes into and later goes out of the store with customers.
Huppert recalls that when it was purchased a decade ago, it was cutting-edge software for which Team Oil paid about $8,000.

“We figured we got that back in the first year,” he added. “You get an order in, it’s electronically sent to you, you print new tags for any items changed in price on the shelves, so you’re not losing any margin from week to week . . . You’re not just looking to protect yourself from the thief, you’re looking to protect yourself form vendors’ errors. My back-office software catches those errors.”

That same software also tracks inventory, he said. He can carry a remote handheld to any item in the store, scan that item and the system reports how many should be on the shelf. Huppert once used the tool to scan an expensive bottle of tequila the software indicated should have been accompanied on the shelf by seven other bottles of the same brand. “We had two on the shelf,” he recalled. “I went back on the camera and saw a customer hanging around in that aisle, and every time he came in he went out with a bottle under his coat.”

Huppert printed a photo of the thief, and placed it behind the counter so his cashiers would recognize him. A couple weeks later, a cashier called him and said, “He’s here; the tequila guy!” Huppert instructed her to keep him busy and called the police. When they arrived, the man was just leaving—with a bottle under his coat. He was arrested.

“We do one thing I haven’t seen others do,” Huppert said. “When you walk into the store, you see 32-inch monitors scanning the store. (It) seems that helps people with their consciences.”

BENEFITS, TRADE-OFFS
The right security systems can generate benefits that quickly more than return initial investment. But every retailer’s approach to return on investment and cost-benefit tradeoffs is likely to be different, Thompson said.

“I think it has to go by each individual company as to their needs and what they currently have in place,” said Thompson. “I don’t think I would go out and get a whole new system. But rather, I’d simply add to what we already have in place. As store volume increases, it’s a necessary procedure to have in place. We have much more traffic in our locations, more vendors and more theft, so we have to grow with that.”

Huppert believes tech-based security benefits outweigh the costs.

“There’s the direct savings as far as theft prevention. And there’s something to be said for being able to sleep at night as an owner.”