loss prevention

A number of retail-related security surveys have been finding their way into my inbox during this busy shopping season, and some overlap. The Retail Equation recently came out with a report on fraudulent loss at the returns counter——and what to be on the lookout for—and the National Retail Federation has just released a similar survey. 

The Retail Equation, in fact, was a partner with the NRF on the survey, said Rich Mellor, NRF’s executive vice president for loss prevention. The consistency of the  findings, he said, reinforces the studies’ numbers and information.

The NRF says the industry will lose an estimated $8.9 billion to return fraud this year, and $2.88 billion during the holiday season alone. Overall, retailers estimate 4.6 percent of holiday returns are fraudulent. The survey found that 96.5 percent of retailers polled say they’ve had stolen merchandise returned in the past year, and 84.2 percent said they’ve experienced the return of merchandise purchased on fraudulent or stolen tender.

Still, Mellor told me, as retailers get more tech-savvy in the area of return fraud, the outlook is looking better, Mellor said.

“There is evidence that some of the different, sophisticated systems and checks and balances they have put in, both to track employees in collusion with outsiders and with customers, has gotten much better over the years,” he said. “It’s not an exact science, but information received from technology is so powerful.”

E-receipts that, through coding, allow only one return to be made per receipt to helps in the counterfeit receipt area, he said, and are the wave of the future.

In 2012, as in years past, loss through shrink has continued to plague retailers. While investments in security technologies have contributed to a slight dip in the numbers over 2011, shoplifting and employee theft remain considerable threats and key areas of focus for retail security professionals. Looking ahead, mobility offers opportunities and challenges in equal measure as the industry awaits standardization on a mobile payment platform and the explosive growth—and security concerns—that are bound to follow. 

In 2013, traditional threats and new technologies will continue to converge, creating an environment rich in prospects for advancement in retail loss prevention tools and the professionals who wield them. Additionally, as the lines between IT and loss prevention bend and blur, it is incumbent upon security professionals to both ensure a basic understanding of underlying retail technologies and partner fully with the IT professionals tasked with supporting emerging systems such as mobile point-of-sale.

To Know the Future, Look Back

The FBI has estimated that, nationally, organized retail crime costs the industry around $30 billion a year. In response, the National Anti-Organized Retail Crime Association was created “to bring the law enforcement community and the private sectors together to fight the worldwide epidemic of organized retail crime.” The Safe Doses Act was passed in October of this year “to fight theft of prescription painkillers from points of the supply chain, from the drug warehouse to the delivery truck to the pharmacy, by increasing penalties and giving law enforcement wiretaps access, among other tools to combat drug rings.” Last year, employee theft was at the top of the list of sources of shrink according to the Nation Retail Security Survey, and shoplifting was a close second.

Traditional threats to retailers continue not only to exist but to thrive. Clearly, offering a safe and secure environment for customers and employees continues to be a top priority for retail security teams. With technological advances, however, the concept of “safe and secure” has grown to include new threats beyond personal safety and asset security to include the securing of personal information, data and even personal identity. For security and loss prevention professionals, this has led to a flurry of new information and standards that accompany the move toward digital, mobile and a vast array of tech-enabled security measures.

Maintaining a safe and secure environment increasingly requires a working knowledge of and cooperation with IT. In fact, as we move into 2013, the lines between IT and security will continue to blur as security professionals work to gain a better understanding of the technology associated with advancements such as mobility—as well as the implications for security—and IT professionals’ responsibilities continue to overlap into the realm once belonging solely to security and loss prevention.

Tech-Savvy Security

At 1.42 percent, the average retail shrinkage in 2011, according to the NRSS, was the lowest ever recorded in the 22 years the survey has been conducted. Many in the field, including Dr. Richard Hollinger, director of the Security Research Project, which conducts the annual NRSS, credit retail technologies for the reduction of shrink numbers.

In addition to enabling a wide range of solutions to assist in the protection of employees, customers and assets, technology serves another, equally important and perhaps more visible, purpose: meeting the needs and desires of customers who want the convenience of mobility. Where IP video surveillance serves security teams by providing broader capabilities in identifying and addressing theft and loss, mobile POS gives customers what they want. With both, however, come the challenges of understanding the technologies well enough to serve as a valuable partner to IT and ensure optimal adoption and deployment.

Take the Payment Card Industry Data Security Standard, for example. The standard has been put in place to ensure that all companies processing, storing or transmitting credit card information maintain a secure environment. The standard applies no matter how the data is collected (by phone, online, in person, etc.). However, with mobile technologies advancing so quickly, and consumers demanding mobile options “now,” ensuring compliance to the PCI DSS will pose yet another challenge for many security professionals. Those well acquainted with mobile technologies, and working closely with their technical counterparts, stand a much better chance of ensuring compliance and reducing issues regarding consumer data and company information.

In 2013, we will see the lines between the security and IT functions continue to thin and blur as technology and security depend more heavily on one another. The demand for mobility leaves retailers no choice but to offer what consumers desire most or lose out to the competition. In the age-old battle against pervasive loss as a result of theft, we’ll see more retailers adopting IP video surveillance and IP analytics, remote monitoring, shelf-mounted cameras and, according to the NRSS’s Hollinger, POS exception-based CCTV interfaced systems. To be effective, these technologies, like mobile payments, must be carefully selected, deployed and secured. This will require IT and security professionals to come together in an unprecedented way, creating a new standard in retail security.

Andrew Wren serves as chief executive officer of Wren Solutions, a loss prevention technology provider helping leading retailers reduce loss and increase profits. Wren is responsible for corporate and product strategy, leveraging his more than two decades of security technology expertise. To learn more about Wren Solutions, visit www.wrensolutions.com.  

Loss prevention specialists have their hands full at this time of year, when retailers see an influx of holiday shoppers. But it’s not just shoplifters, organized retail crime and criminal flash mobs they need to be concerned about. The “returns” counter can be fraught with fraud as well.

Savvy fraudsters know how to prey on holiday cheer, costing retailers thousands of dollars in fraudulent returns and exchanges, says Tom Rittman, vice president of marketing for The Retail Equation, which works with more than 17,000 stores to optimize transactions at point-of-return and point-of-sale.

Sixty-two percent of retailers require an ID to return merchandise with a receipt, according to the National Retail Federation. But even a printed receipt doesn’t eliminate fraud. “Even the best POS systems with centralized receipt databases are vulnerable to improper use of receipts that appear legitimate,” he says.

What to look out for? Here’s Rittman’s list of the nine ways consumers cheat with a seemingly valid receipt:

1.     Renting/Wardrobing: Buying merchandise for short-term use with intent to return, such as video cameras for weddings, big-screen TVs for a Super Bowl game, or a dress for a special occasion is a form of fraud. Return abuse—excessive violation of a retailer’s return policies—is often viewed subjectively. No one wants to deter a good shopper, but at some point a person’s returns overwhelm the value of his/her purchases and send that customer into a negative margin situation.

2.     Shoplifting with a receipt: Many thieves will shoplift with intent to return for full retail price. The classic example is when the fraudster makes a purchase, takes the item to his/her car, returns to the store immediately with receipt in hand, selects another of the same item from the shelf and proceeds to the return counter claiming he/she “changed his/her mind.” The receipt is valid and the return looks legitimate, but you’ve essentially paid this person for keeping your merchandise.

3.     Returning old/damaged merchandise: The process for consumers is simple: buy to replace old/broken item, keep new, return old. This system uses the retailer to keep personal items “up-to-date” at the retailer’s cost.

4.     Shoplisting: Also known as “shoplifting using found receipts,” fraudsters shoplist by using a discarded or stolen valid receipt as a shopping list to find items in a retail store and return them for a refund.

5.     Employee theft: Associates can usually find a valid receipt in the POS system to return items.

6.     Reselling: Another simple process for fraudsters: purchase, sell elsewhere, return unsold. In this case, the retailer is being used for free inventory.

7.     Tender liquidation: Consumers may buy on one form of tender (maybe even a stolen credit card) and exchange once or several times to switch to merchandise credit, which becomes saleable in an online marketplace. They also may return with small additional cash outlay to finally return products for cash.

8.     Price arbitrage: This process consists of buying differently priced, similar-looking items and returning the cheaper one as the expensive item.

9.     Fake receipts: There are fake receipt web sites that thieves can use to duplicate or forge receipts, costing retailers thousands of dollars.

Black Friday is a unique day for retailers. While the “black” in Black Friday represents profitability, for retail security professionals, the “black” could just as easily represent the sense of foreboding brought on by the promise of long lines, anxious shoppers, crowded stores, an abundance of merchandise on display and all of the safety and security risks that come with all of this. How will you know if you are ready?

According to the National Retail Federation, a record 226 million consumers shopped in stores and online between the Thursday and Sunday surrounding Black Friday last year. And that is likely to increase in 2012. As recently as October, NRF pointed to an increase in spending in September of this year and expressed guarded optimism regarding consumer spending through the end of the year. There are many uncertainties this year surrounding the fiscal cliff, gas prices and the economy in general. However, there is good reason to believe Black Friday will once again bring crowds of shoppers, all looking for a deal.

As this day approaches, security professionals must take the lead in preparing for crowds and addressing the need to protect assets, limit losses and ensure a safe environment for employees as well as shoppers. This requires careful planning, monitoring of plans to ensure they are deployed effectively and precise execution. Taking it one step further, all of this must take place with the overarching goal of providing an enjoyable customer experience that encourages shoppers to spend time—and money—in the store.

Safety and security
In 2008, a worker was trampled to death during the opening of a Black Friday sale. In response to an increase in crowd-related injuries, including the 2008 tragedy, the Occupational Safety and Health Administration created Crowd Management Safety Guidelines for Retailers, a road map for offering a safe environment during a large customer event such as Black Friday.

Many of OSHA’s recommendations for safety cross over into security. For example, ensuring employees are trained to manage crowds and are stationed appropriately in addition to placement of trained security or police officers. These precautions simultaneously ensure the kind of visible presence—of employees and security personnel—that can serve as a deterrent to theft.

OSHA’s recommendations are key, but implementing them is just the beginning. To ensure safety, security of assets and uncompromised implementation of business best practices on Black Friday, begin now by conducting a pre-event audit, including the following elements:

•    A store-opening checklist is beneficial at any time, but on Black Friday, it can help ensure that every employee knows exactly what is expected of them and every process is documented and optimized when the doors open to eager, impatient crowds. This limits confusion and increases the probability of a safe and successful event.

•    A test of all alarm systems and video surveillance cameras will facilitate identification of any equipment that is not functioning properly and confirm that cameras are capturing images in critical areas, allowing for adjustment or repairs as needed before the big day arrives.

•    Confirmation that OSHA Crowd Management Safety Guidelines are being followed will also help ensure that employees have been assigned duties that are specific to the event—for example, additional greeters to accommodate the crowd or security personnel at front doors or emergency exits.

•    A review of the inventory receiving process will minimize the opportunity for loss due to mislabeled, damaged or incorrectly processed items. Limiting the probability of a breakdown in process is key to avoiding shrink on even the most ordinary of days—its importance during an event like Black Friday cannot be overstated.

When exceptions arise during this pre-event audit, ensure immediate resolution by sharing photographic evidence, attached to audit questions, with those responsible. Retrain where necessary. Black Friday can act as a magnifying glass, bringing otherwise “minor” issues to the forefront and multiplying their effect simply due to the nature and scope of the event. Don’t wait for Black Friday to shine the light on threats to safety and security.

About the author
Andrew Wren serves as chief executive officer of Wren Solutions, a loss prevention technology provider helping leading retailers reduce loss and increase profits. Wren is responsible for corporate and product strategy, leveraging his more than two decades of security technology expertise. To learn more about Wren Solutions, visit www.wrensolutions.com. 

A mob of 300 or so teenagers recently took over a Walmart in Jacksonville, Fla., according to a local TV report.

The flash mob allegedly destroyed an anti-theft scanner that cost $1,500, according to a police report cited by the TV station. No arrests have been made apparently, but hopefully there will be some repercussions for the teenagers who took part in the stunt.

One of the mob participants posted this video on YouTube. What's a loss prevention officer to do in this situation except feel helpless?