Self-Checkout and Theft
Is self-checkout an invitation to steal?
08-06-2004 --
At first blush, the answer seems obvious. Let customers check themselves out, and you might expect that at least some of them will see it as an invitation to apply a five-finger discount. But retailers say that�s not what happens. Most report that shrink figures are either unchanged or have declined slightly.
�It all comes down to control, control, control,� says Pedro Ramos, director of loss prevention for Pathmark, a large regional supermarket chain based in Carteret, N.J. The grocer has self-checkouts in 40 percent of its 142 stores and is rolling them out as new stores open and as older stores are remodeled
�There are procedures that you must put in place to make a self-checkout program work. If you don�t have good procedures in place, dishonest people will steal you blind.�
Robert DiLonardo, a principal at Retail Consulting, a St. Petersburg, Fla.-based retail consultancy specializing in security issues, agrees. �There are no new issues for security created by self-checkout,� he says. �It is, as always, honesty vs. dishonesty.�
It could be a big problem. According to one count, there were about 20,000 self-checkout systems, not including mobile wireless hand-held POS devices, deployed in retail stores at the end of 2002. Most were in supermarkets, but they also were in mass merchandise stores like Kmart and home improvement stores like Home Depot.
The technology received a major vote of confidence in April when Fujitsu Transaction Solutions acquired one of the leading self-checkout brands, U-Scan, formerly owned by Optimal Robotics.
Fujitsu�s acquisition came just six months after IBM acquired Productivity Solutions Inc. (PSI), the third-largest manufacturer of self-checkouts. NCR is reported to have the largest share of self-checkout units.
Why it works
Those following the evolution of self-checkout report that when retailers do a self-checkout program �right,� their overall average store shrink rates either stay the same or actually go down.
Five of 15 international retailers that participated in a recent survey conducted by NCR reported that shrink declined in stores where self-checkouts had been installed. Ten reported no change. Mike Webster, vice president and general manager of NCR Self Service Solutions, says, �Not a single retailer said shrink went up as a result of self-checkout.�
It may be because consumers are very meticulous in checking themselves out, actually avoiding some of the mistakes that busy cashiers may make in the normal course of a day.
Others suggest that lower shrink may also be due to a reduction in �sweetheart� and �sliding� transactions, where cashiers either scan lower price bar codes or don�t scan all of the items for friends.
�At least 47 percent of shrink is internal theft which includes sweethearting or giving deals or freebies to friends and family,� says Paula Rosenblum, director of retail research at Boston-based Aberdeen Group, a market research firm. �There is an unconventional wisdom, well documented by Home Depot, that self-checkout has a positive effect on shrink.�
A dishonest cashier can still discount her friends at a self-checkout by hitting the clear button when the system sounds an alert that something is askew. But Pathmark�s Ramos notes that if the POS software is linked to the retailer�s exception reporting software, �they�ll be able to spot when and where that�s happening. It took us a year to integrate our POS with our exception reporting, but it�s vital.�
In some instances of sliding, cashiers will de-activate electronic article surveillance tags without ringing up a sale. To combat this problem, some retailers are using a tool developed by Thorofare, N.J.-based Checkpoint, that will not de-activate an EAS until the system gets a valid bar-code scan, thwarting any sliding attempt.
Supervision is key
When retailers have loss prevention problems with self-checkout, it is usually because of human error and not because of the technology. In most instances, it�s because retailers didn�t put stringent monitoring processes in place.
�If your front end looks like a giant flea market,� says Ramos, �if there are gaping holes in your checkout aisles, and if your cashiers are distracted and trying to do too many things at once, you�ve already got problems. Adding self-checkout to the mix in that instance is just providing another opportunity for internal and external theft.
�Still,� Ramos says, �that�s not the fault of self-checkout. It�s a management and supervision issue. Supervision is the key to reducing shoplifting, sweethearting, robbery and cash theft and that�s true whether your front ends are manned or self-checkout.�
New threats
Experts say the potential for shoplifting could go up as self-checking becomes more mobile, and as customers begin using hand-held scanners to ring up purchases as they shop the store. Several chains including Albertsons and Stop & Shop in the United States and Metro in Germany are testing that technology now.
Given that the people with access to hand-held scanners are typically loyalty card customers, the possibility that they will try to cheat the store is much lower.
�Loyalty cards help retailers get to know their customers much better,� says David Shoemaker, group vice president, strategic marketing for Checkpoint. �The information in the card databases can also trigger audits on their purchase if an unusual transaction occurs while the shopper is connected to the store�s network. And you can also have store workers spot-check the receipts.�
�Security components have been built into self-checkouts since the technology was invented back in the mid-�80s,� says DiLonardo of Retail Consulting. �So aside from the fact that you have lanes that are unmanned, I don�t think there are any new issues of security relevance that have been created by self-checkout.�
�If you understand the thought process of a thief,� says Lee Holman, vice president of product development for Franklin, Tenn.-based IHL Consulting Group, �you can see that it would not really make sense for them to commit fraud at a location covered by TV cameras, with store employees there over-seeing the lane.
�It seems that if you�re going to steal from a retailer, you are going to do it in a less visible area.�
Source: STORES Magazine
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Posted by Craig at August 9, 2004 09:40 PM