MINNEAPOLIS – A pharmacy technician repeatedly stole small amounts of Viagra, Valium and other prescription drugs over an 11-month period before being caught by her employer, retailer CVS. Inventory and purchasing anomalies alerted loss-prevention staff to the thefts, and the technician admitted to stealing $28,000 worth of drugs. But the thefts weren’t detected as quickly as Larry Foster would have liked.
“It’s hard to admit that we let that go for that long,” said Foster, who is director of loss prevention and forensic analysis at CVS. “Now we’re catching people a lot faster.”
To speed up theft detection, CVS for three years has been deploying various modules of a transaction monitoring system from software maker Retail Expert. The suite integrates point-of-sale, inventory control and case management data for trending and analysis purposes.
As shoplifting tallies mount, retailers are turning to IT products that let them home in on suspicious transactions and tune their anti-theft measures.
Babies “R” Us, in Wayne, N.J., uses video analysis software from IntelliVid that sends an alert to mobile devices when certain merchandise is removed from shelves. The alerting capability lets loss-prevention personnel be out on the store floor rather than stuck in a room monitoring in-store video systems.
Inventory losses, or shrinkage, cost the average retailer 1.6% of sales last year, up slightly from 1.5% in 2004, according to the University of Florida’s latest National Retail Security Survey. Collectively retailers lost $37.4 billion in 2005 to shrinkage, which includes employee theft, supply chain pilferage and shoplifting.
CVS’ Foster spoke about his company’s transaction monitoring system, which it calls Viper, at the National Retail Federation’s (NRF) loss-prevention conference held last week in Minneapolis.
Viper tracks trends and alerts loss-prevention staff when a store might have a problem with theft. CVS identified nine major “sales reducing activities” – such as refunds, voided transactions and price modifications – and focused on benchmarking normal store performance so Viper could zero in on the exceptions.
CVS realized a return on its investment in 12 weeks, Foster said. Since implementing the first modules, the Woonsocket, R.I., company has lowered the percentage of sales-reducing activities in its 6,000 stores from 5% of sales in 2003 to 3.5% today.
Adding to the need for greater automation in fighting shrinkage is the burden on retailers to supply law enforcement with succinct, accessible evidence, such as digital video and transaction logs.
Law enforcement resources are scarce, and retailers should to prepared to do a lot of the investigative legwork if they want cases pursued, said Chris Frazier, a special agent for the FBI.
Frazier drew a standing ovation when he accepted an award from the NRF for his role in a four-year investigation that shut down a retail crime ring and recovered $7.8 million in stolen merchandise and cash.
Frazier credits Rick Whidden, director of loss prevention at Safeway in Pleasanton, Calif., with supplying the documentation the FBI needed to pursue the case, including profiles of suspected shoplifters and fencing operators, and patterns of their activities.
The case Frazier and Whidden pursued revolved around organized retail crime, which involves professional shoplifters who work in groups to pilfer huge volumes of merchandise and sell it through storefront and online channels.
Another retailer aggressively fighting organized retail crime is Limited Brands, which has developed an internal group of investigators who specialize in detecting, thwarting and pursuing prosecution of those crimes. The team includes specialists in tracking stolen merchandise through online sales channels, said Paul Kay, Limited’s national director of organized retail crime.
Limited also relies on external sources such as NRF’s Retail Loss Prevention Intelligence Network (RLPIN). Launched late last year, RLPIN is a national database of burglaries, robberies and organized retail crime incidents. Retailers and law enforcement can access the database, which lets authorized users search reported incidents and look for patterns.
Many retailers are reluctant to share information about theft, however, because of legal and public relations concerns, said Joseph LaRocca, NRF’s vice president of loss prevention. Only about two dozen are signed on to RLPIN.
“We have to get to a place where we can share information,” LaRocca said.
