24 minute read
EVIDENCE-BASED LP
Deterring Determined Offenders
Okay, it’s not just complicated; it’s complex. At least that’s the opinion expressed by some tweeters recently. The “Twitterland” consensus seemed to suggest controlling crime is often more difficult than handling some medical pathologies such as broken bones. Here’s their reasoning: with some exceptions, setting a broken leg now and hundred years ago is pretty much the same thing, and this applies to whether the patient is in China, Iceland, or Iowa.
But trying to deter a determined offender is affected by what’s been described as “a rat’s nest of small effects.” These effects come from multifaceted people, places, times, malfunctions, and interactions. The fancy way to say it is crime is polygenic (multiple simultaneous and sequential causes). Crime events often arise when motivated offenders come across a desirable and seemingly vulnerable target. But they don’t always, or even usually, occur in those conditions. That’s because it’s complex. Other conditions, like an offender’s situational perceptions, mood, capabilities, and so forth, play a role in an offender deciding to initiate a crime attempt.
And because crime generates injuries, fear, loss, and disruption, we should take controlling it very seriously. Crime and loss control should be well thought out, focused, systematic, rigorously tested, and kept relevant and impactful. To this end, I’ve laid out some key concepts we might all consider.
Aware-Understand-Act
Sensors help and can be hotline-type reporting, transaction exceptions, audits, cycle counts, reporting, or electronic, for example. To plan and act, we need to detect or know of a problematic person, crew, pattern, or place, and the sooner the better.
But we also need to carefully define the issue—in other words who, what, when, where, why, and how—to properly prescribe precisely targeted responses. Our efforts should be designed to affect offender perception and response. They should increase crime effort and detection risk and reduce potential benefits. And testing should reveal how to shape our responses to local conditions as cost-effectively as is reasonable.
Crime and Place: Why Crime Emerges, Persists, and Desists in Specific Places
Very few things randomly occur. There’s a reason, and again, it’s usually complicated. Our sensors and risk ratings should help us find priority locations (physical or digitally connected), but why are some places riskier than others and some of those especially risky? We look at what the place routinely does and carries, who leads it, how the building, parking lot, or connections are laid out, what protective tools it deploys (and how), and what is right near it. We also look at who and how many reside near it and how easy it is to get to and from it compared to other desirable targets.
The more you know about problematic places, and how and why they differ from similar unproblematic places, the better you’re able to affect positive change. And always remember that threat level is what a place is exposed to; vulnerability level is how well the place can handle varying threat levels. Risk levels result from the interaction of these two dynamics. And vulnerability can actually change daily depending on who’s currently in charge.
It’s tough to affect threat levels (zone 5, beyond the parking lot), even though we’re working on that. So our primary actions are shaping zone 4 (the parking lot), and zones 3 to 1, the building interior, nearby the asset, and the assets themselves.
by Read Hayes, PhD, CPP
Dr. Hayes is director of the Loss Prevention Research Council and coordinator of the Loss Prevention Research Team at the University of Florida. He can be reached at 321-303-6193 or via email at rhayes@lpresearch.org. © 2018 Loss Prevention Research Council
SARA: Specific Issue Problem-Solving
It really is important to emphasize situational problem-solving. Problems are clustered for a reason as we’ve been discussing. SARA came from criminology and law enforcement’s problem-oriented policing and provides a simple framework to increase impact. Find your problem (S for scan), carefully define it (A for analyze), now devise and deploy targeted solution sets (R for response), and finally review your results and of course your program execution (A for assess). It’s not that difficult, and it’s only our laziness that precludes this simple process. Crime creates injuries, fear, loss, and disruption, so our preventive and responsive actions should rise to the occasion.
Supportive Therapies: Make Primary Treatments More Efficacious
A last premise here is when putting together treatment packages, think about how they work. How do they affect an offender before or after they initiate? How might they deter or at least disrupt an offender? How do I best dose or deploy this intervention? And what other interventions might make this one work better or longer?
LPRC: A Research and Results Community
Our Loss Prevention Research Council (LPRC) team has absolutely enjoyed engaging with so many loss prevention/asset protection (LP) professionals, including solution developers at the Retail Industry Leaders Association (RILA) and National Retail Federation (NRF) conferences—fantastic people working together to reduce so much crime and loss.
We’re also planning our 2018 LPRC Impact Conference to be held October 1–3 on the University of Florida (UF) campus. It looks like we’ll have a whopping ten interactive Learning Labs this year.
Learning Labs are twenty-five-minute dives into brand new anti-theft, fraud, violence, and error LP research. The groups go through the project, then discuss how they might use the results in their businesses.
Also look for a brand new “Mad Scientist” gamification to bring together new concepts and fun. We’re also featuring a new UF STRATEGY@Impact breakout led by Mike Scicchitano, PhD, for the most senior LP executives where they’ll interact with three UF faculty and each other to brainstorm more strategic concepts for rapidly evolving retail enterprises. This program is made possible by UF, LP Magazine, the Loss Prevention Foundation, and LPRC.
We hope to see you in Gainesville this fall to learn and build together with LP executives from sixty retail chains, seventy solution tech companies, and research scientists.
Research in Action
We’re always working to make protective efforts work or work better. Evidence indicates offenders aren’t deterred unless they notice, recognize, and respect countermeasures (See, Get, Fear). To further practical, persuasion science, the LPRC conducted a series of in-person offender interviews in a big-box store lab to understand the impact of deterrent signage. The signage in this small-scale exploratory study featured specific technological claims to measure offender perceptions and actions. The LPRC collected data from eight active shoplifting offenders while in a shopping setting.
LPRC Senior Research Scientist Mike Giblin and team collected all data in September 2016 for offender interviews. In past research, offenders often cited a lack of a specific and credible threat as their reason for not being deterred. All stores have cameras, so a sign alerting them that they’re being recorded doesn’t present a new, specific, and credible threat to them. They know they’ve been successful with currently deployed technology in place, leading our research to focus on seemingly new advances in loss prevention technology and ways to prime or reinforce the presence and credibility of the treatments.
Furthermore, we sought to study specific and commonly understood technological claims. In the current study, the team exposed offenders to signage marketing the presence of a DNA technology (stimuli) to preliminarily measure if this tactic might provide a new and more credible threat to would-be victimizers.
Summary of Key Findings
ALL ITEMS OF PROPERTY ON THIS SITE ARE MARKED
■ A majority (75%) of offenders noticed the WITH A DNA FORENSIC CHEMICAL
DNA claim before being prompted, citing it as the first aspect of the sign that drew their attention. ■ A larger majority (88%) understood that the claim was referring to DNA forensics for the purposes of solving crime. ■ All offenders (100%) who recognized the concept of DNA believed the claim to be related to human DNA, when in fact this technology works by adhering a traceable plant DNA to a suspect. ■ Most offenders (70%) believed the DNA claim to be true. ■ Finally, 75 percent of offenders were strongly deterred by the
DNA claim signage, while the remaining 25 percent were somewhat deterred.
This research brief is just part of one of several studies measuring how differing marketing methods and options affect offender perceptions, and it ties into larger randomized controlled trials conducted across test and control retail locations.
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LPM Online is an all-new magazine experience. LPM Online publishes every other month on even-numbered months in between our print editions. The inaugural edition went live in August. You can view it and our current edition on the LPM Online tab on our website, LossPreventionMedia. com, or by entering LPM-online.com in your browser.
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LPM Online—A Dynamic Magazine for LP Professionals
USA $42.49
BILLION
LATIN AMERICA $3.99
BILLION
EUROPE $29.05
BILLION
ASIA PACIFIC $24.04
BILLION
THE WORLDWIDE IMPACT OF SHRINK
GLOBAL RETAIL SURVEY COMPARES THE DRIVERS OF SHRINK IN THE US VERSUS THE REST OF THE WORLD
By Meg Costa
THE WORLDWIDE IMPACT OF SHRINK Global Retail Shrink Distribution, USD Losses by Region
USA $42.49
BILLION
36% 21% 18%
25% EUROPE $29.05
BILLION
38% 23%
22% 17%
ASIA PACIFIC $24.04
BILLION
29% 24%
29% 18%
LATIN AMERICA $3.99
BILLION
27%
29% 21% 23%
GLOBAL SHRINK $99.56
BILLION
Dishonest Employee Theft Admin/Noncrime Loss Supplier Fraud Shoplifting
In the United States and around the globe, shrink continues to be a challenge for retailers, especially as competition grows, profit margins constrict, and the availability of quality employees becomes increasingly limited. Retail companies in the US have been hit especially hard by shrink in the last five years, but technology is helping brands combat both internal and external theft.
Shrink cost US retailers an incredible $42.49 billion last year, according to the latest Sensormatic© Global Shrink Index study. US losses account for almost half of the total $100 billion in losses across all nations surveyed—a reality that has a significant impact on retail companies, employees, and shoppers alike.
The study found that US retailers are more likely to be plagued by external theft and shoplifting than internal theft. When comparing verticals, fashion and accessory retailers had the highest rate of shrink.
While the US is in the top five countries in terms of investment in LP technology, the survey suggests there is room for improvement—even for those that already account for shrink in their business models.
“Controlling shrink is critical to the profitability of any retailer,” said Mike Keenan, CPP, CFI, LPC, managing director of retail loss prevention at TAL Global, an international security-consulting and risk management firm. “If you are able to reduce shrink, you’re bringing back real dollars to the bottom line.”
Tyco Retail Solutions commissioned the global shrink study, which was conducted in October 2017 by PlanetRetail RNG, a global retail intelligence and advisory firm. The online survey included more than 1,100 retail decision makers across four regions, fourteen countries, and thirteen retail segments. The retailers surveyed operate more than 229,000 stores and generated an estimated $1.56 trillion from 2017 into 2018, accounting for 80 percent of total retail sales worldwide.
Mike Keenan
The Global Leader
The impact of shrink on the US retail industry is substantial, in part because of the sheer size and value of the market in this country. The rate of retail shrink in the United States—1.85 percent—is only slightly above the global rate of 1.82 percent. However, since the United States is the largest global consumer market, its total losses are much higher than any other nation. In fact, America’s retail losses of $42.49 billion dwarf those of the countries with the next highest shrinkage values—China at $13.52 billion and the United Kingdom at $7.45 billion.
In the United States and globally, fashion and accessories stores experienced the highest rate of shrink. US fashion and accessory retailers reported losing 2.43 percent of sales to shrink, which was higher than the global average for that vertical at 1.98 percent. Experts indicate that stores selling clothing, shoes, and accessories likely are more attractive to thieves, since those products are generally worth more than other verticals, such as office equipment stores, which had the lowest shrink rate.
Key Insights into US Shrink Performance
1
rank in losses wordwide $42.49
BILLION
LARGEST CONSUMER MARKET IN THE WORLD
9th
largest shrink rate globally 1.85%
Kim Warne, vice president and chief marketing officer for Tyco Retail Solutions, explained that fashion merchandise is always in high demand, which is part of the reason why loss due to shrink in this vertical totaled more than $4 billion in 2017.
“By definition, fashion changes with the season, and these products are relatively higher Kim Warne priced and are highly brand specific,” Warne said. “The latest hot fashion items such as athletic shoes or purses being promoted are also the most likely to be stolen as the relative higher unit value makes them more attractive to thieves.”
The leading source of shrink will likely come as no surprise to US retailers. Nearly 36 percent of losses were reported to have come from external shrink, a figure that is slightly above the global average. Shoplifting was the main source of external losses at 51.5 percent. Return fraud was reported for 26 percent of external shrink cases, and organized retail crime (ORC) ranked third at 20 percent.
Internal shrinkage, including employee theft, was rated the second-highest source of shrink in the United States, at about 25 percent. Vendor and supplier losses totaled just over 21 percent of shrink, while administrative losses accounted for less than 19 percent.
Interestingly, the rates of shrink in certain US verticals ran contrary to those in the rest of the world. A prime example is the shrink rate for consumer electronics stores in the US (1.84%) versus the global rate (1.93%). This is a strong indication that US retailers have fully recognized the threat of shrink at high-value electronics stores and responded by installing effective loss prevention tools.
Factors Driving Retail Shrink
For many brands, effectively combatting shrink means first understanding the factors that drive it. The survey authors point to four factors driving increased shrinkage rates worldwide—growing urban population densities, difficult economic conditions, limited workforce pools, and the growth of online shopping.
In many countries and in areas throughout the US, expanding city populations and difficult economic conditions are conspiring to give employees and shoppers alike the motives for theft. Meanwhile, a shortage of retail workers and the proliferation of the Internet are creating greater opportunities for stealing products.
Keenan says the Internet has dramatically changed the landscape for external and internal thieves in the US. Perhaps that’s why employee theft of merchandise was the largest overall contributor of internal shrinkage losses at 41.6 percent, much greater than vendor and supplier losses and administrative losses. Meanwhile, shoplifting was by far the biggest source of external shrink in the US, accounting for more than 50 percent of such losses.
“When you think about what really drives external theft, it’s actually the capability to offload the product,” he said. “Prior to the Internet, the primary way you were able to sell large amounts of stolen merchandise was through a fence. The
US Shrink Rates by Vertical, 2017–2018
Sources of Shrink
Fashion and Accessories Stores 2.43% 2.03%
Drugstores. Pharmacies, and Perfumeries
Convenience and Forecourt Stores 2.05% 1.95%
Variety Stores
Home, Garden, and Auto Stores 2.05% 1.90%
Supermarket and Neighborhood Stores
24.54%
Internal/ Employee
PERCENT OF REVENUE
35.55%
21.47%
External/ Shoplifting
Vendor/ Supplier Loss
AVERAGE MONETARY VALUE IN USD
$1,401.68
18.44%
Administrative Loss
$71.75
Internal/ Employee Other Than Organized Retail Crime
$89.80
External/ Shoplifting
Organized Retail Crime
product would be sold in illegal stores, flea markets, and even out of personal homes. But now, all those products can be sold directly online. People can do it themselves. They don’t need a fence.”
Warne points out that the Internet has also created more of a market for ORC syndicates. “There’s increased pressure from organized retail crime because online channels are making it more profitable for these groups to sell stolen goods,” she said.
To make matters worse, ORC pays better in America. Survey respondents in the US reported that the average value of each ORC incident was more than $1,400, significantly higher than the value of ORC thefts globally.
The Role of Employees
The survey indicates that the tight labor pools that are challenging US retailers could be partially responsible for the uptick in shrink over the last five years.
Warne says limited access to high-quality employees and high turnover are making it more difficult to combat shrink. “Staffing in stores is declining, making it easier for potential thieves to take merchandise,” she said. “Plus, the US has more stores per capita than most other countries, and store footprints are larger.”
Keenan believes customer service is one key to combating external theft. “The number one deterrent to external theft is good customer service right now,” he said. “If you build a culture of good customer service, you deter people who are thinking about stealing. And you really have to integrate loss prevention into virtually everything you do.”
Keenan recommends that brands incorporate loss prevention training into their customer service training. He said a bit of situational awareness training—meaning learning those behaviors that indicate a customer may be thinking about shoplifting—can go a long way toward amplifying a store’s loss prevention capabilities. Meanwhile, he says, stores should educate employees on how shrink affects them directly in order to get their buy-in on loss prevention.
“In my mind, you need to teach the employee about why loss affects them,” he said. “If there is high loss, they won’t get as many hours because the company is less profitable. They may not get pay increases or bonuses either. People want to know, ‘What’s in it for me?’ Once they understand, you’ll have them as part of your LP team.”
However, for some retailers, it may not be enough to train employees on how to
spot a potential shoplifter. Warne said that in the United States, omni-channel fulfillment is providing new opportunities for items to go missing. This means retailers also have to keep a closer eye on their own associates.
Impact of Shrink
As the sources of shrink evolve, how are retail losses impacting the industry and its customers?
Of course, when shrink gets out of control, it can hurt a retailer’s bottom line, particularly for smaller retailers that might not have the budget to “absorb” shrink. This can affect the company at large, as well as its employees who might see their hours cut or their bonuses and raises eliminated.
Theft can also impact customers, many of whom are gradually growing accustomed to being inconvenienced due to shrink, Keenan says.
“High shrink does cause inconvenience to the customer— having to remove security tags to try something on, not being able to access products without an associate’s help, or waiting in line longer as protective devices are removed or deactivated,” Keenan explained. “In the past, there was always this concern about how you were coming across to the customer. Too much security meant that maybe a store wasn’t safe. But I think our world is changing. Today, people understand. They see a security guard out front, and they appreciate it. I think today the need for security is understood by the customer, but it’s still an inconvenience.”
Meanwhile, as many brands work to cut costs to remain competitive with online retailers, some are hiring fewer employees. This can also be an inconvenience to the customer when they are looking for help or waiting in long lines to check out.
For those retailers being hit hardest by growing competition, Keenan emphasizes that shrink should be a priority for senior leadership—precisely because of the industry’s tight margins.
“When you think about low margins and the competitive landscape, if you do have high shrink, there is a profit opportunity if you can reduce it,” he said. “All retailers accrue for shrink based on past results. If you accrue at, say, 2 percent, and you come in at 1.5 percent, all those dollars go back to the
continued from page 43
bottom line. And so when you’re looking for dollars to save, shrink is a good place to find them.”
Keenan tells retailers to think of shrink as two-fold: If product is lost or stolen, it is not available to sell. You lose the cost of the product in shrink, but you also lose the margin. By protecting the merchandise, you can both reduce shrink and increase margin. “Controlling shrink impacts the business—and in so many ways,” he said. “If you don’t control shrink, it could be a pathway to going out of business.”
Technology as a Force Multiplier
As retailers grapple with these and other challenges, Warne and Keenan agree that technology is key for closing the gaps that exist around both internal and external shrink. Although the survey indicates that US retailers are doing a good job of protecting many high-value verticals, such as consumer electronics, there is always room for improvement.
When it comes to shoplifting, one of the top overall sources of shrink for US retailers, electronic article surveillance (EAS) is the leading tool and has been adopted by more than 92 percent of US respondents to the survey. After EAS, the next most popular is alarm monitoring, followed by access-control systems, exception-based reporting, and CCTV.
Facial recognition was listed as the least popular loss prevention tool among US retailers, followed by RFID and public-view monitors.
The fact that US retailers struggle more than their counterparts in other countries with external shrink suggests that they may be able to close the gap by embracing some loss prevention tools, such as RFID, that are still being underutilized.
In the US, the RFID adoption rate of 76.5 percent is lower than in any other country surveyed. Part of the reason might be the fact that US retailers tend to use RFID more for loss prevention and asset protection, while for the rest of the world’s retailers, inventory tracking and visibility are the dominant use case.
Keenan believes that RFID simply hasn’t reached the cost-effective “breaking point” that other tools have. “I believe eventually all retailers will have RFID,” he said. “But you have to consider the cost of the tags and readers. Adding a cost to every item is not something that any company takes lightly. There must be an ROI.”
Keenan says the price of RFID tagging needs to fall before it reaches widespread adoption in the US. Advances in technology may spur that process, he says, if RFID readers can, for example, be developed to provide more accurate, consistent tracking of product.
Keenan and Warne both agree that public-view monitors can be a powerful loss prevention tool for retailers of
In many countries and in areas throughout the US, expanding city populations and difficult economic conditions are conspiring to give employees and shoppers alike the motives for theft. Meanwhile, a shortage of retail workers and the proliferation of the Internet are creating greater opportunities for stealing products.
all sizes. Smaller retailers in particular are challenged to prevent shrink with relatively few associates on the store floor, which creates greater opportunities for shoplifting, associate theft, and sweethearting.
“Technology becomes critical for these [smaller] merchants,” Warne said. “Electronic public-view monitors act as a visual deterrent, keeping an eye on stores when an associate isn’t immediately on hand. At the same time, retailers are turning to lower-cost, cloud-based, remote video monitoring and analytics tools for 24/7 coverage to efficiently augment their current security strategy.”
Keenan says “reverse” public-view monitors—where the screen displays the point of view of a loss prevention professional—can be even more impactful. This is especially true for experienced thieves who may doubt that a store’s cameras are working or being monitored.
Meanwhile, US retailers also fall below the global average of merchandise tagged with EAS tags, both by the manufacturer or supplier and in-store. For retailers that are struggling to keep shrink manageable, upping their EAS tagging might be an easy, cost-effective way to minimize both internal and external theft.
Warne points out that EAS will only become more high tech in the coming years in response to more sophisticated techniques being used by shoplifters and ORC groups. For example, EAS source tagging will mean goods arrive tagged and ready for merchandising, and smarter EAS will only alarm when tagged items exit the store. In addition, EAS systems are now being integrated with video to provide real-time loss-event validation, alerts, and responses—rather than simply showing footage of an event that is already occurred.
As thieves become savvier, retailers are deploying advanced tools and features beyond EAS that help detect and investigate theft. For example, as described in a feature article in the January–February 2018 edition of LP Magazine, Rite Aid is using the power of social media and crowdsourcing to get the public to help track down robbery and shoplifting suspects.
And Warne says more retailers are starting to leverage LP analytics through tools such as cloud-based shrink management as a service (SMaaS) platforms. These systems show retailers where spikes in organized crime are happening, so they can proactively prepare and even prevent ORC crime from flourishing.
Looking Ahead
While the sheer cost of US retail shrink may seem daunting, Warne points out that it’s simply part of the business. “As long as there are retailers, we will have retail loss,” she said. The trick for retailers is minimizing the losses.
As thieves become more sophisticated in their tactics, retailers have an opportunity to respond in kind. For both nationwide brands and local mom-and-pop stores, loss prevention technology can serve as a force multiplier, deterring and detecting theft in both new and tried-and-true ways. In today’s challenging retail landscape, these tools might be the difference between failure and success.
“The Sensormatic© Global Shrink Index benchmarks retailer performance globally and sheds light on other factors affecting loss prevention. Knowing the state of shrink helps retailers better assess the challenges and solutions to make merchandise secure yet accessible for a better customer experience,” said Catherine Walsh, senior vice president and general manager of Tyco Retail Solutions.
The statistics contained in this report highlight the magnitude of shrink’s impact on retail and affords the opportunity to dive deeper into the sources of shrink, particularly in the US, as well as the loss prevention tools to help combat loss. To view the full report’s findings, visit shrinkindex.sensormatic.com.
MEG COSTA is a freelance writer who frequently covers the physical security industry. Over the last eleven years, she has written for industry trade publications, done corporate communications for a leading residential monitoring company, and worked in public relations for a variety of security companies. She has a master’s in journalism from the University of North Texas. Costa can be reached at meg@mightypenmedia.com.
