Safeguarding your business
against underage sales
While the most overt example of employee is a set of sticky fingers dipping into a till, simple carelessness by the clerk can also result in lost profits for the retailer, especially when it comes to the selling of age-restricted products like cigarettes and liquor. Many a retailer has fallen victim to a police sting and loss of tobacco or liquor license when an underage person has been able to buy age-restricted products simply because the clerk was too busy or didn't take the time to check an ID.
Protection against underage tobacco sales requires focus on the part of retailers. Electronic age-verification technology has become the primary method of protection, and though it is not foolproof, it does serve as an important deterrent, according to Lew Hoff, president of Bartizan Data Systems, Yonkers, N.Y.
Electronic age-verification technology reads and displays the contents of encoded data on a driver's license. Depending upon the state, that license may display all or some of the data. Only a handful of states issue licenses that are not machine-readable, according to Hoff. Those two states, Georgia and North Carolina, encrypt the data, making it unreadable, he said.
Products like Bartizan's ID Detective are not a bulletproof age-verification system, as employees and their assessment of the customers also play a role. But this type of technology is effective in eliminating the use of licenses that are blatantly fraudulent, said Hoff.
"It does not authenticate a license and license-holder," he said. "If the bearer proffers a legitimate license not his own, ID Detective will be none the wiser. However, it will produce proof that a merchant did check a license and record that the license was legitimate or met the standards of a legitimate license."
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[ COVER STORY]
Big Brother is watching
Digital surveillance is the next line of defense in the battle against employee theft
by Tracy Cox
Employee theft is sinister by nature; retailers are paying a wage to dishonest staff members who are stealing company merchandise. Retailers may find that trusted store employees armed with insider knowledge of store security are much more dangerous than thieves brandishing a weapon.
Employee theft accounted for 48 percent of store inventory shrinkage in 2002, according to the University of Florida's National Retail Security Survey. At a price tag of approximately $15 billion per year, this issue should be a top priority for retailers. CTS retailers, in particular, are plagued by check fraud and employee theft that remain a significant source of annual losses. At this cost, retailers need to equip themselves with the tools and techniques to fight off these potential losses of inventory and profit.
Controlling shrink
Internal theft, or "shrink," comes with the territory of business ownership, according to Larry Broadstone, facilities manager for Minit Stop, a chain of 12 Maui and Hawaii-based convenience stores and gasoline stations.
"Gas and cigarettes are the biggest high-dollar items in our stores," said Broadstone. "We were forced to take measures to prevent or deter employee theft."
Retailers like Broadstone don't underestimate the importance of controlling shrink. Although there is some annual variability on employee theft data, CTS retailers can expect that shrink will always be an issue. There is a correlation between turnover and shrink, according to the one NRSS study. The study stated that shrinkage rates in retail outlets where less than half of store managers leave the business annually averaged 1.63 percent (calculated as the percentage of sales revenue that the missing inventory represents). By comparison, retailers with a store-manager turnover rate of more than 50 percent per year experienced significantly higher shrinkage rates, at 2.1 percent.
"There has definitely been a recent increase in employee theft," said Steve Aronson, director of marketing, FKI Security Group, New Albany, Ind. "Rising living costs make it challenging for lower-wage earners, such as retail clerks, to support a lifestyle to which they've become accustomed. These people may steal from their employer to bridge the gap."
Aronson added that the employer-employee relationship offers many opportunities for taking advantage of a business. A business with non-existent policies and prevention measures puts itself directly in the line of fire, he said, and theft-deterrent devices are an important prevention measure.
DVR systems
Manufacturers and retailers point to digital-surveillance technology integrated with the point-of-sale as one effective means to prevention of internal theft. The technology is integrated with the POS to allow for comprehensive transaction review. The digital video recorder, working with the POS, drops data into a cross-indexed database, which can be programmed to recognize specific types of transactions. Loss prevention staff and store managers can then do searches that review video associated with the precise date and time a suspicious transaction occurs. For example, staff might do a close review of a register void or "no sale." This transaction can be reviewed and any evidence of theft that is captured by the digital video may be used to fire a dishonest employee.
Minit Stop's loss-prevention system is based on a reliable and complete DVR security system to monitor store activities. The company uses a DVR system by FKI Security called Image Vault, with cameras situated where items are displayed or used. With the POS interface, Broadstone said staff is able to view all transactions that involve the sale of cigarettes and liquor, not only to determine that the transaction was legitimate, but also to verify that IDs were being asked for, checked and verified. This is done by calling up the alarms Minit Stop staff members have set for "Age 18 and 21 Verified" in the Image Vault System. (See sidebar)
"This same method of alarm notification alerts our managers when 'refunds' or 'voids' are entered at the POS," said Broadstone. "And we are left with a video record of the transactions for verification."
Looking ahead, DVRs will move to even more complex systems with an expanded scope of capabilities.
"The product will evolve as the needs of the retail customer evolve," said Aronson. "The industry will have to change as rapidly as the retailers demand. Those companies and vendors that can't innovate or are inflexible will be left behind in the dust."
Operational audit services
Operational audit services are a store security measure with remote viewing of live and recorded video, audio and analysis of POS transaction data. The
technology allows industry-trained professionals to monitor audits and identify uncommon behavior by employees. Remote searches through POS data is another benefit, with searches possible for items such as high/low dollar transactions, no sales, discounts and voids.
Irvine, Calif.-based Westec InterActive's operational audits are taking interactive remote video monitoring beyond reactive response by proactively performing operational audits, according to Michael J. Upp, Westec's vice president, business development.
"This system can help customers discover losses due to employee theft and also reveal non-compliance with age verification," he said. "Once the data is gathered, our customers are armed with video and audio evidence which can be used for corrective action and/or prosecution."
Westec's customers are seeing a decrease in employee theft, according to Upp. And the audits are multi-purpose; they serve as evidentiary tools, but they also go a long way toward behavior modification of employees.
"When employees see that a company is taking a proactive approach to stop internal theft, they straighten up," said Upp. "More and more companies are
prosecuting offenders to the fullest extent of the law."
There are other benefits to the operational audit technology. In addition to reducing theft, Westec's Operational Audit Services also help ensure corporate compliance with company policies, from employee behavior and appearance, to age-restricted sales, store appearance and shelf-stocking. Management of
inventory and stock levels, including POS transactions, also can help contribute to smooth operations at any retail location. The technology can be used to validate marketing programs, such as the consistent and accurate set-up of promotional displays across even hundreds of retail locations nationwide, without the need to actually visit any of the stores.
Working with employees
Although monitoring technology is key, it is not the only business solution to reducing employee theft. Good management and training are equally important to the loss-prevention process. Hiring good employees who care about the business includes screening with testing and background checks. Honesty tests are standardized, commercially available written examinations that provide psychological evaluations of a candidate's ethical dispositions and attitudes. While some critics believe the testing challenges rights to privacy, supporters of these exams say they have helped eliminate pilfering and reduced turnover.
Store inspections and audits of inventory and bookkeeping also help prevent fraud and theft. An outside auditor or high-level manager might perform the inspections periodically. Records should be organized and up to date at all times.
Employee training and awareness of security programs can help workers feel invested in protecting store business at all costs. Employers might distribute clear policies to reinforce a no-tolerance policy on employee theft. Employees will be less likely to steal if management creates an environment where thieves will be caught and punished.
Retailers say loss-prevention efforts are a worthy investment for both employers and employees. Broadstone said internal shrink monitoring at Minit Stop has been effective and losses have declined. And, surprisingly, staff members have been supportive of Minit Stop's use of the DVR security system. Minit Stop managers, in particular, appreciate that the system allows them more time to manage day-to-day business.
"The Image Vault reduces managers' daily reviewing time by two-thirds and gives them more time to manage their stores," he said.
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