Stopping Sticky Fingers with Tech

Retailers aren't waiting for RFID's kinks get to get worked out. They're employing all sorts of effective antitheft systems now

Some day, these will seem like the Dark Ages of shoplifting prevention: Bulky plastic devices affixed to clothes that set off alarms, wire lanyards used to tie merchandise down, ink tags that destroy garments if removed improperly. And don't forget the ever-watchful uniformed security personnel, who often mistakenly harass good customers while trying to catch the bad guys.

According to retail shopping consultants, each of these practices can discourage shoppers while still allowing a great deal of shoplifting to go on. They also cost retailers lots of money. The University of Florida's 2003 National Retail Security Survey found that they spend about 0.5% of sales on security each year. Nonetheless, the average loss due to "shrinkage" (the industry term for combined losses due to shoplifting, employee theft, administrative errors, or vendor problems) was 1.65% of sales, or an estimated $33.6 billion annually. Nearly half is from employee theft and one-third from shoplifting ($15.8 and $10.7 billion, respectively) the study found.


  Now, new technologies are being deployed that increase effectiveness of shoplifting-prevention efforts while limiting some of their downsides. But the key development that promises to transform the loss-prevention industry is still years in the future: RFID, which stands for radio-frequency identification (see BW Online, 8/31/04, "Inching Toward the RFID Revolution").

Essentially, it means tagging merchandise with computer chips so goods can be tracked throughout the retail supply chain. It offers retailers a host of benefits, including security features that are harder to foil and easier to disarm when appropriate. "Eventually you'll know where everything is in the stock room and on the sales floor -- and even outside the store," says Judah Phillips, a senior analyst at Yankee Group.

Although it has been much hyped, RFID presents a host of problems that need to be worked out before it can be implemented throughout stores. First is its cost. Second are privacy concerns, since the tags could theoretically stay active as goods head home with shoppers. Phillips can envision a day when a thief could drive down a suburban street with an RFID reader in hand, learning the details of every expensive item inside. "There are a lot of privacy issues that have to be overcome," he says.


  In the meantime, a host of other technologies already are improving retail security. For starters, manufacturers are being pressed into putting security tags on merchandise themselves, saving the store the time and expense of doing so. These tags are getting smaller and may even look like a care label on clothing (with the advice to remove before washing), says Lee Pernice, manager of retail marketing for ADT Security Services, which makes the Sensormatic brand of electronic article surveillance (EAS) systems. So-called source tagging started off in the home-furnishings industry and this year has been implemented at office-supply retailers and sporting-goods stores, says Pernice.

Security antennas (which interact with the tags to set off alarms), are still frequently seen housed on ugly exit gates at stores. But they can now be put in the floor so they're invisible to shoppers. Video surveillance has also vastly improved, delivering higher-quality images with smaller and cheaper hidden cameras. Now stores can install unseen cameras that are programmed to take more pictures when a shopper approaches a display of expensive merchandise and then follow the shopper once he or she walks away.

Best of all, retailers are integrating all these security systems and putting them online with the help of wireless communications and software that sends all that data to a central location. New programs interact with digital video-surveillance systems. So, for example, someone monitoring an alarm overnight can click on a video button and see exactly what triggered the alarm.


  That allows security personnel at headquarters to better analyze what's going on at problem stores and take action. They may be able to pinpoint a single cashier at one location who's not performing the tag-deactivation function properly and offer that person some extra training, says Pernice. Total costs for a high-end EAS system run roughly $100,000 for a department store or $10,000 to $15,000 for a small specialty shop, she says.

In some ways, the RFID systems of the future aren't really so different from current EAS systems in stores now. Each item would be tagged, and an alarm would sound when an item leaves the store without being paid for. But while tags in use now are simply either live or disabled, the new tags would be able to store all kinds of information about the product -- where it was made, how much it cost, what other items it should be displayed with -- all information that can help stores better manage inventory.

Best of all, for security purposes, no line of sight is required to disarm the tags so there would be much less chance of false alarm.


  "It's not just about loss prevention," says Dave Shoemaker, group vice-president for strategic marketing at security firm Checkpoint Systems (CKP ). He says RFID will allow for speedy self-checkout and additional product information. "These are technologies that will have a customer benefit to them," he says. While many analysts think RFID won't be implemented significantly for up to a decade, he expects to see major deployments in as soon as three years: "It's closer than you think."

Already Checkpoint is in trials with several retailers that are putting RFID chips in hard plastic tags. That solves two problems, says Shoemaker: The cost (since the tags are reused) and privacy concerns (since they're removed at the point of sale). And Checkpoint has a new line of EAS systems that are designed to be RFID-compatible. "It's kind of like buying a computer with expansion slots," says Shoemaker, who adds that customers want to be ready to implement RFID when it's ready for prime time.

For now, retailers must make do with improvements that can result in less obtrusive security features and can help stores walk the fine line between treating customers like potential thieves or letting crooks stroll off with unpaid goodies. "It's still very easy to shoplift and not get caught," says Marcus Felson, a professor and Rutgers University's School of Criminal Justice and author of the Web site "But it's not as easy as it once was."

Until the promise of RFID is realized, that kind of progress is at least better than none.

By Amey Stone in New York

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