Greater Risk, Less Reward
Loss prevention executives have long sought sophisticated packaging approaches to stem the tide of retail theft. Now, new technologies are giving retailers and brand merchandisers the opportunity to forgo some of the more inhibiting solutions they have deployed over the years to curtail theft — alarms, visual surveillance, plastic boxes, pull cards or locked cabinets. These methods, while effective, can stymie sales because they can remove the “grab-and-go” impulsive nature of shopping for consumers.
Global packaging company MeadWestvaco and ProTeqt Technologies, a provider of retail security technology tools, are pushing solutions that encompass wireless-based, item-level identification of goods at the point of sale in a broader array of product categories.
The objective of solutions coming to market is to “make the risk greater than the reward” for thieves throughout the retail supply chain, says David Miller, MeadWestvaco global director for security packaging systems. That includes keeping high-cost products secure from both internal and external theft by removing the motivation to steal.
“We want the thief to say, ‘Why would I steal something that is useless or has no value,’” Miller says. “So instead of just deterring people and making it hard for them to get the product out of the store, let’s move closer to the Holy Grail. If they do get it out of the store, it won’t be worthwhile because they cannot use it and they cannot sell it.”
Maintaining shopper access
The 2011 National Retail Security Survey found that that retail shrinkage — loss of inventory from employee theft, shoplifting, paperwork errors or supplier fraud — amounted to a $35.28 billion loss for U.S. retail operations that year, the most recent for which statistics are available. Globally, shrinkage rose 6.6 percent to $119 billion, according to the Global Retail Theft Barometer from Britain’s Centre for Retail Research.
One solution MeadWestvaco is testing with ProTeqt is a security packaging system called Intercept, designed to secure open “high loss” merchandise from electronics and videogames to infant formula, clothing and razor blades. MeadWestvaco introduced the solution at the 2013 Consumer Electronics Show in January.
“The retailer doesn’t need to apply any alarms [to the product] or wrap anything around it or lock it into a cabinet,” Miller says. “The consumer has free access to it. They pick it up. They can examine it. They can read the instructions and marketing materials ... and walk to the point of sale and buy it.”
John LaMalva, ProTeqt executive vice president of client and market development, says Intercept has three unique components utilizing RFID technology: an unobtrusive, wireless-enabled locking system to disable the product against attempted theft throughout the supply chain; a deactivation protocol at POS that opens the lock when a legal purchase is made; and an authentication platform that controls access to the deactivator.
LaMalva says such a wireless solution is analogous to “a door with no handles,” noting that unlike current technology, Intercept’s deactivator won’t make a screeching noise at the exit. “The only way you can unlock [the product] is within,” via a distinct message that is unique to the item, he says.
Similar wireless technologies have been introduced in retail loss prevention, but the Intercept solution is different in that it permits item-level identification at POS, LaMalva says. With earlier deactivation technologies, a dishonest cashier working in concert with a retail thief could allow the thief to “pay for one item and walk out with five.”
“We’re using that point of sale to drive our authentication process,” he says. “Once it is clear to the retailer’s point of sale system that it is a product that has been legally purchased, the deactivator will release the lock associated with that purchase.”
LaMalva also says the authentication platform that controls deactivation could potentially deter organized crime because it prevents electronic protocols from being reused.
The Intercept system offers value in loss prevention, Miller says, because it presents an opportunity for retailers to deter theft throughout the entire retail supply chain, where much of employee theft is concentrated. Some 44 percent of theft was attributed to employees within the supply chain, according to the 2011 National Retail Security Survey, compared with 25.8 percent from shoplifting and organized retail crime.
“These locks are applied at the point of manufacturing,” he says. “That protects the product throughout the whole supply chain and ... from employee theft, which is bigger than external theft.”
Key to the system is delivering a theft-proof product to store aisles that is retail-ready, LaMalva says.
“While we are there trying to solve theft issues, we’re really trying to” give merchandisers more “flexibility in how they display product, and ultimately drive significant sales increases,” he says.
In addition to boosting brand awareness with retail-ready products, Miller says retailers will achieve efficiencies by saving time and efforts associated with more cumbersome LP methods.
Another important aspect of a full supply chain theft prevention solution is the ability to track inventory from the factory to the store while achieving efficiencies like capturing sales information or activating warranty coverage.
LaMalva credits a “clamor” among retailers and merchandisers for more sophisticated technological solutions to deter theft. The Entertainment Merchants Association, representing videogame and other retailers and manufacturers, has been particularly vocal in pressing solutions. That has spread outward to other product categories, he says.
“This is absolutely seen in the industry as very revolutionary,” LaMalva says. “It’s an opportunity to drive improvements in sales and shrink. RFID technology gives us a path to take an existing value proposition and expand it.”