July - August 2015

V14.4

LPPORTAL.COM | V14.4 JULY - AUGUST 2015

MAGAZINE

LOSS PREVENTION

MAGAZINE THE VOICE OF LOSS PREVENTION

FINISH LINE IS WINNING BIG WITH BIG DATA

FINISH LINE IS WINNING BIG

WITH BIG DATA

INTERVIEW WITH ANNE SULLIVAN OF CKE RESTAURANTS GUARDIANS OF THE GOLDEN ARCHES MCDONALD’S US SECURITY TEAM LPPORTAL.COM

WHERE NEXT FOR EAS? REFLECTIONS ON PRODUCT PROTECTION

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CONTENTS

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Finish Line Is Winning Big with Big Data

Combining return data with other data to improve operations

By Mike Smith, Finish Line, and David Speights, PhD, The Retail Equation

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Operational Standards Support

CKE Restaurants’ Anne Sullivan discusses LP and safety in the QSR segment

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PUBLISHER’S LETTER Well Done, Bob

By Jack Trlica

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ON THE WEB

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RETAIL SPONSORS

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INTERVIEWING It’s All about Context: Part 2

By David E. Zulawski, CFI, CFE and Shane G. Sturman, CFI, CPP

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ACADEMIC VIEWPOINT 2015 NRSS Executive Summary

By Richard C. Hollinger, PhD

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PARTNERING WITH RETAILERS Basic Training in Network Security

By Dave DiSilva

38

CERTIFICATION Expanding Our Knowledge With Karen VanBrunt, LPC, Agilence

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DIGITAL DIALOGUE Taking a Fresh Look

By Jacque Brittain, LPC

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EVIDENCE-BASED LP Walmart Moving More to an Evidence-Based Approach

By Read Hayes, PhD, CPP

64

ASK THE EXPERT Video Analytics: Crafting a System for Success

By Dan Cremins, March Networks

66

SOLUTIONS SHOWCASE - CEC - Axis Communications

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INDUSTRY NEWS Law Enforcement, Retail LP Professionals Honored at NRF PROTECT

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MY TURN Franchisees: Building an LP Program from Scratch?

By Jeff Levitt, LPC, CPP, Panera Bread

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PEOPLE ON THE MOVE

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CALENDAR

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ADVERTISER DIRECTORY

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VENDOR SPONSORS

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PARTING WORDS Sick and Tired and Pleased as Punch

By Jim Lee, LPC

By James Lee, LPC, Executive Editor

41

Guardians of the Golden Arches

A profile of McDonald’s US Security Team

By Adam Paul, Contributing Writer

53

Where Next for EAS?

Reflections on current and future developments in product protection

By Colin Peacock, ECR Europe

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1210 OF THE TOP 50 RETAILERS

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Leading retailers choose The Retail Equation to improve the customer experience at the return counter. Driven by predictive analytics, your return processes become more flexible and friendly while still managing risk and preventing abuse.

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PUBLISHER’S LETTER

MAGAZINE

Well Done, Bob

R

V13.1

in the industry, but also his insights and perspective on how the information and activities he reported fit into the grand scheme of the retail security industry.

He also submitted numerous feature articles to explain things like ROI, issues with self-checkout, and most recently a two-part LOSS PREVENTION retrospective of MAGAZINE source tagging (see “EAS Source Tagging: 20-Plus Years of EAS SOURCE TAGGING Innovation” in the 20-PLUS YEARS OF INNOVATION January-February and March-April 2014 issues).

When Bob told Jim and me about his plans to retire, he left the door open to possibly submitting future articles. If that happens, we all would no doubt benefit from his writing. In the meantime, from the entire LP Magazine team, we wish him the best for a long, happy retirement. Thanks for everything you’ve contributed to the magazine and the industry, Bob. Well done, enjoy yourself, and keep in touch.

LPPORTAL.COM | V13.1 JANUARY - FEBRUARY 2014

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Learn how at TycoIS.com/CVO

MAGAZINE

THE VOICE OF LOSS PREVENTION

EAS SOURCE TAGGING 20-PLUS YEARS OF INNOVATION

BUILDING A WORLD-CLASS LP TEAM AT THE KROGER CO.

LP TAKES ON A NEW MEANING WHEN YOUR INVENTORY IS ALIVE

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etirement is a wonderful thing. I’ve had several of my friends retire over the past several years including my wife, who retired from Bank of America this past spring. I hope to join them in the next three to five years, but for now I’m having too much fun.

One of the magazine’s long-time contributing writers, Bob DiLonardo, recently decided to put down his pen and enjoy some well-earned time with his family. From our premier issue in Robert L. September 2001 until our DiLonardo May-June 2015 issue, Bob submitted content for our Industry News section that appears in the back of every issue. He was always prompt, if not early, submitting his information, which from my perspective managing production was much appreciated.

For those few of you who don’t know Bob, he has been in the loss prevention industry for nearly forty years working for Sensormatic from 1980 to 1995. Since then he has been a successful consultant—which by the way says a lot about his knowledge and credibility—specializing in evaluating technology, understanding return on investment (ROI), and helping both retailers and solution providers implement products and services to meet corporate objectives.

What Bob provided our readers was not just news about what was going on

DEEP WEB AND MOBILE IMPACT ON RETAIL FRAUD CONTROL

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700 Matthews Mint Hill Rd, Ste C Matthews, NC 28105 704-365-5226 office, 704-365-1026 fax EDITOR AND PUBLISHER Jack Trlica JackT@LPportal.com EXECUTIVE EDITOR James Lee, LPC JimL@LPportal.com EDITORIAL DIRECTOR, DIGITAL Jacque Brittain, LPC JacB@LPportal.com CONTRIBUTORS Robert L. DiLonardo Dave DiSilva Read Hayes, PhD, CPP Richard C. Hollinger, PhD Walter Palmer, CFI, CPP, CFE Gene Smith, LPC Shane G. Sturman, CFI, CPP David E. Zulawski, CFI, CFE CHIEF OPERATING OFFICER Kevin McMenimen, LPC KevinM@LPportal.com DIRECTOR OF MARKETING Merek Bigelow MerekB@LPportal.com DIRECTOR OF DIGITAL OPERATIONS John Selevitch JohnS@LPportal.com SPECIAL PROJECTS MANAGERS Kat Houston, LPQ Justin Kemp, LPQ Karen Rondeau DESIGN & PRODUCTION SPARK Publications info@SPARKpublications.com 704-844-6080 CREATIVE DIRECTOR Larry Preslar ADVERTISING

Jack Trlica Editor and Publisher

ADVERTISING MANAGER Ben Skidmore 972-587-9064 office 972-692-8138 fax BenS@LPportal.com EAST COAST REP Kristie Thymes 972-782-9841 office 972-692-8138 fax KristieT@LPportal.com SUBSCRIPTION SERVICES

NEW OR CHANGE OF ADDRESS myLPmag.com POSTMASTER Send change of address forms to Loss Prevention Magazine P.O. Box 92558 Long Beach, CA 90809-2558

LossPrevention, LP Magazine, and LP Magazine EU are service marks owned by the publishers and their use is restricted. All editorial content is copyrighted. No article may be reproduced by any means without expressed, written permission from the publisher. Reprints or PDF versions of articles are available by contacting the publisher.

Statements of fact or opinion are the responsibility of the authors and do not necessarily represent the opinion of the publishers. Advertising in the publication does not imply endorsement by the publishers. The editor reserves the right to accept or reject any article or advertisement.

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LossPrevention aka LP Magazine (USPS 000-710) is published bimonthly by Loss Prevention Magazine, Inc., 700 Matthews Mint Hill Rd, Ste C, Matthews, NC 28105. Print subscriptions are available free to qualified loss prevention and associated professionals in the U.S. and Canada at www.myLPmag.com.

The publisher reserves the right to determine qualification standards. International print subscriptions are available for $99 per year payable in U.S. funds at www.LPportal.com. For questions about subscriptions, contact circulation@LPportal.com or call 888-881-5861. Periodicals postage paid at Matthews, NC, and additional mailing offices.

© 2015 Loss Prevention Magazine, Inc.

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• Healthcare Risk Management • Location Risk Information

Learn More!

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ON THE WEB Check out our growing archives of videos with LP executives talking about current topics and events.

EDITORIAL BOARD

EYEONLP Powered by LP Magazine

How Bitcoin Could Impact Retail

Adam Smith of Bi-Lo Holdings explains the cryptocurrency known as bitcoin and how it could affect retail LP.

Leo Anguiano, LPC Senior Director, Asset Protection, Rite Aid

Karl Langhorst, CPP, CFI Corporate Director, Loss Prevention, The Kroger Co.

Shawn Blankenship Vice President of Asset Protection, The Home Depot

Bob MacLea Senior Vice President, Loss Prevention, TJX

Jim Carr, CFI Senior Director, Global Loss Prevention, Rent-A-Center

John Matas Vice President, Asset Protection, Investigations & ORC, Macy’s

Francis D’Addario Emeritus Faculty Member, Strategic Influence and Innovation, Security Executive Council

Chris McDonald Senior Vice President, Loss Prevention, Compass Group NA

Charles Delgado, LPC Vice President, Asset Protection, Meijer Patti Felz Corporate Vice President, Internal Audit and Asset Protection, Polo Ralph Lauren Scott Glenn Chief Security Officer, Sears Holdings

The Importance of Diversity in Retail

Tim Gorman Divisional Vice President, Loss Prevention, Asset Protection, and Business Continuity, Walgreens

Hear an LP executive and HR professional discuss their views on why diversity is critical to the success of the retail organization.

Barry Grant Chief Operating Officer, Canadian Images Bill Heine Senior Director, Global Security, Brinker International

RLPSA Metro Houston Crime Workshop

Frank Johns, LPC Chairman, The Loss Prevention Foundation

Hear executives from the quick-service restaurant segment who attended the regional meeting discuss current topics affecting restaurants.

Gary Johnson Vice President, Loss Prevention, The Vitamin Shoppe Paul Jones, LPC Senior Director, Global Asset Protection, eBay

Paul Jones, LPC, executive director of Global AP for eBay, talks about their six-year journey to build partnerships between eBay, law enforcement, and retailers.

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Melissa Mitchell Director of Loss Prevention, LifeWay Christian Stores Dan Provost, LPC Vice President, Global Loss Prevention, Staples Tina Sellers Director of Loss Prevention, Delhaize America Mark Stinde Vice President, Asset Protection, 7-Eleven Paul Stone, LPC Vice President, Loss Prevention and Risk Management, Best Buy Claude Verville, LPC Vice President, Loss Prevention, Safety & Hazmat, Lowe’s Stanley Welch, LPC Vice President, Director of Loss Prevention, JCPenney Keith White, LPC Senior Vice President, Loss Prevention and Corporate Administration, Gap Inc.

Mike Lamb, LPC Vice President, Asset Protection & Safety, Walmart Stores US

From Adversary to Trusted Partner

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Randy Meadows Senior Vice President, Loss Prevention, Kohl’s

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RETAIL SPONSORS

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Join these great companies as an LP Magazine corporate sponsor. Email JackT@LPportal.com for more information.

LP MAGAZINE | JULY - AUGUST 2015

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INTERVIEWING

It’s All about Context: Part 2 I

by David E. Zulawski, CFI, CFE and Shane G. Sturman, CFI, CPP

n our last column we began the discussion of how context affects the conversation and the questions that can be asked during it. It’s important to understand that context changes as a conversation evolves. What might begin as a discussion about fast-food restaurants evolves into a discussion about the different restaurants and finally focuses on a single restaurant chain. Because the context has evolved into a discussion about a single chain, it might be appropriate to ask the other party, “How many times have you eaten at McDonald’s in the last month?” There is a tacit admission from the second party that he has eaten at McDonald’s even though he has not verbalized it. So asking the question assumptively is clearly appropriate.

Lacking a context for the conversation about restaurants, it would be better to ask, “Have you ever eaten at McDonald’s?”

© 2015 Wicklander-Zulawski & Associates, Inc.

was unusual, he was at first suspicious and extremely defensive.

However, it wouldn’t necessarily be unusual for the individual who is innocent to be somewhat nervous until he discovers the context of the meeting. But in this situation, the individual was concerned that his fraud had been uncovered, and instead of mere nervousness, he exhibited suspicion and defensiveness in his questions and answers.

As the interview developed the conversation moved from biographical information to background information relating to his promotions and business-development practices. His overall attitude changed from suspicious and defensive to boastful as he talked about how he had brought about the significant increase in business over the last several years.

As the conversation wound its way closer to the topics relating to the fraud, his attitude changed from boastful to fearful with his answers becoming shorter and more evasive as the conversation moved closer to the fraudulent activity. So an interviewer must manage the changes in emotional and psychological mindset of the subject as he progresses through the conversation and its contextual change.

The non-confrontational interview we advocate does several things extremely well. First, it provides a context for the conversation relating to the investigation of company matters.

Second, it affords the interviewer an opportunity to assess the subject’s behavior during the presentation of a monologue describing what the investigator’s job is. During this monologue the same words are viewed very differently by innocent or deceptive individuals. The innocent person has done nothing wrong and perceives the investigator’s monologue as a simple description of what he does for a living. The innocent person views the conversation with interest, and this is supported by his open posture and non-threatened demeanor. However, the dishonest individual experiences the conversation in an entirely different fashion. For him the conversation is a disquieting and fearful experience as he comes to the realization his dishonesty may have been discovered.

Context is not only about providing the subject matter of the discussion, but also revolves around the individual’s mindset as the conversation evolves. For example, an individual with something to hide will be threatened by a conversation where a truthful person views the topics and questions with nothing more than interest.

The Individual’s Mindset

Context is not only about providing the subject matter of the discussion, but also revolves around the individual’s mindset as the conversation evolves. For example, an individual with something to hide will be threatened by a conversation where a truthful person views the topics and questions with nothing more than interest.

In a recent case relating to a large fraud, a manager was asked to have a conversation with one of the authors of this column.

Since being asked to come to the corporate part of the facility

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Zulawski and Sturman are executives in the investigative and training firm of Wicklander-Zulawski & Associates (w-z.com). Zulawski is a senior partner, and Sturman is president. Sturman is also a member of ASIS International’s Retail Loss Prevention Council.

They can be reached at 800-222-7789 or via email at dzulawski@w-z.com and ssturman@w-z.com.

Biographical Information

Although the admission-seeking interview can take many paths, the process almost always begins with confirming biographical information and establishing a behavioral norm for the individual.

Confirming the biographical information is essentially a neutral context that is collaborative in nature. The interviewer and the continued on page 14

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Second, it provides the interviewer a context relating to the individual’s personal life and what is important to him or her.

Third, it may also suggest rationalizations that minimize the seriousness of what the person has done, thus protecting the subject’s self-image.

Creating a context of trust and safety occurs over time and is generally not something that happens in a few short moments.

Rather it is like putting building blocks in place. True rapport occurs in the moments just before the subject makes his first admission and is the result of making sure all the building blocks are in place. At that point the individual finally feels comfortable enough with the interviewer to share derogatory information about himself. An example of this would be how we might tell a story that is embarrassing about ourselves, but we only do so when we are comfortable with the people around us.

continued from page 12

subject are simply working to confirm information that is already known. For the interviewer there are several other purposes that are in play.

First, the interviewer is looking to establish the behavioral norm of the individual under this given set of circumstances.

Essentially, the interviewer is looking to confirm how the subject answers truthful biographical inquiries. Here the interviewer develops a behavioral context that he will use to compare against later topics, questions, and words.

Second, the interviewer is looking to identify how the person looks, talks, and acts when retrieving short- and long-term memory information.

Finally, these inquiries allow the interviewer to overcome any initial nervousness and to establish control over the direction of the conversation.

For the subject this portion of the conversation is collaborative in that he is simply working with the interviewer to confirm what in most cases is already known. This might not be true during a field interview where an officer has approached an unknown individual with little or no background information available to him about the person. In that case it is possible that the subject is not providing accurate information because he has something to hide. With the exception of the field interview, other investigative interviews will already have accurately identified the subject and developed some biographical information about him or her.

It is possible that the subject may exhibit some level of nervousness whether he is truthful or untruthful at this point in the conversation. Often because the full context of what is going to be discussed has not been laid out, there is a level of uncertainty that manifests itself as nervousness. One might equate this to going to the dentist. Very few people enjoy their visits to the dentist because of the possibility of potential unpleasantness in the form of filling a cavity. However, the initial nervousness and uncertainty diminishes almost immediately after the dentist informs his patient that he has no cavities. Just a few minutes of discomfort while cleaning the teeth, and the visit is over until the next scheduled appointment.

Your favorite person in the world is yourself, and to have another be interested enough to inquire about your life experience can be quite flattering. At the end of the rapport building, the interviewer hopes to achieve a context where he is viewed by the subject as either neutral or in a somewhat favorable light.

At the beginning of rapport, the context is one of sharing information that is not embarrassing or threatening to the individual’s self-image. The interviewer is simply expressing interest in some portion of the person’s life experiences that may in some way match his own. This could be as simple as a discussion of the inclement weather the subject had to travel through to get to the interview. A shared experience, which could be a person, place, or thing, creates a linkage between the subject and the interviewer providing the foundation for full rapport to develop.

Your favorite person in the world is yourself, and to have another be interested enough to inquire about your life experience can be quite flattering. At the end of the rapport building, the interviewer hopes to achieve a context where he is viewed by the subject as either neutral or in a somewhat favorable light.

As we have seen, the context between two individuals will vary as the conversation precedes and different topics are covered. It will also vary based on the perception of the individual and the threat the topic being discussed poses to their self-image. In part three of our discussion, we will focus on the transition of context that occurs during the admission-seeking interview and how it is viewed by both the interviewer and subject.

Rapport Building

The context now shifts from a neutral collaborative discussion of biographical information to eliciting more personal data.

Depending on how this shift is done, it may elicit rapport, suspicion, defensiveness, or even aggression in the subject.

The purpose of this conversation is to begin the process of rapport building.

Rapport involves establishing trust between two parties and begins by identifying common experiences between the individual and the interviewer. The time spent here can be valuable for the interviewer in several ways.

First, it establishes reciprocity between the subject and the interviewer. Reciprocity is essentially an obligation that requires a repayment. For example, if you are invited to dinner by a friend, there is an unspoken obligation to repay that debt at some point.

Here the debt is allowing the interviewer an opportunity to speak about himself after the subject has had his opportunity; the introductory statement is introduced.

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COVER FEATURE

FINISH LINE IS WINNING BIG WITH BIG DATA

By Mike Smith and David Speights, PhD

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FINISH LINE IS WINNING BIG WITH BIG DATA

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eturn fraud and abuse continues to cost retailers billions of dollars every year—$16 billion to be exact. But some retailers like Finish Line, a $16 billion premium retailer of athletic shoes, apparel, and accessories, are fighting back and combatting return fraud head on with winning results.

Headquartered in Indianapolis, Finish Line operates approximately 1,400 branded locations primarily in US malls and shops inside Macy’s department stores and has a strong online retail presence. With a mission to connect to young, fashion-conscious individuals through a premium-brand experience, Finish Line’s retail stores play an important role in delivering this premium experience. More than 14,000 “sneakerologists” are employed across the country, so maintaining a consistent loss prevention strategy and process is paramount to preserving that premium customer experience.

Seeking to protect the company from return fraud while continuing to provide an inviting customer experience, in 2005 Finish Line

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turned to a real-time, consumer-based return authorization solution called Verify from The Retail Equation. It helps prevent fraudulent and abusive transactions from occurring by using predictive analytics to identify and stop high-risk returners, increasing net sales, and reducing return rates, while ensuring all legitimate returns can be made.

Creating an effective returns policy that protects the company from loss without negatively impacting sales or customer loyalty requires a careful balance; it’s both an art and a science.

This solution quickly became a valuable tool to streamline the return processes at the point of sale, help enforce the return policy, and provide management discretion to evaluate suspect returns as needed.

A Powerful Resource for the Whole Team

Understanding that the return authorization solution could bring far more benefit to the company than just within the loss prevention department, we collaborated with Finish Line’s IT and operations JULY - AUGUST 2015

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departments through the selection and implementation processes. Our LP team had the foresight to know that a technology spending decision should not be made solely through the scope of loss prevention because the success of this implementation would depend on—and benefit— virtually every department.

Several years after we implemented the returns management technology, our foresight has proved to be true. By understanding return patterns through the data captured in the system, we have learned about merchandise categories, product groups, and specific items that can help loss prevention, merchandising, operations, and even our vendors. We have a tool that can truly curb return fraud without alienating loyal customers and deterring future sales. And we were able to integrate the system with our existing exception-based reporting application to provide a clear picture of what’s happening in the business.

Furthermore, for operations executives and in-store teams, the solution has helped tighten POS processes and controls. In effect, we

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FINISH LINE IS WINNING BIG WITH BIG DATA have helped improve the consumer’s return experience and engender their loyalty through a quick, efficient, and easy-to-manage return process that eliminates all guess work from our store employees.

A Historically Strong Offense against Return Fraud

The solution helps quickly determine whether a return is accepted or declined—guiding the salesperson and removing the guesswork. While each retailer can choose the best way to identify consumers, previously with every return at Finish Line, the customer was required to present a valid government-issued identification, which was then swiped at the point of sale (POS). Pertinent data was captured in the system, encrypted for security, and instantly run through a series of predictive algorithms and statistical models. Almost immediately, the system generated one of three recommendations for the return—accept, warn, or decline.

The automated returns tool improved the consistency in Finish Line’s return procedures.

The solution’s analytics backbone consistently uses the same parameters to apply the return policy guidelines, as opposed to a cashier having to make a subjective decision with each return—a situation that can escalate emotions and lead to customer dissatisfaction or accepting fraudulent returns in a panic, both of which are very damaging to a retail company.

Taking a proactive, analytics-driven approach to return authorization helped deter fraudsters and shoplifters who often attempt to return stolen merchandise for cash.

Any attempt to return merchandise with frequency is detected, and immediately the transaction is flagged, and the store associate is notified to deny the transaction.

Prior to this system, we were unable to capture that data, much less make it available in real-time.

By understanding return patterns through the data captured in the system, we have learned about merchandise categories, product groups, and specific items that can help loss prevention, merchandising, operations, and even our vendors. We have a tool that can truly curb return fraud without alienating loyal customers and deterring future sales.

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Feature 1 FINISH LINE IS WINNING BIG WITH BIG DATA

Customer Linking Mechanics

Information gathered from a single return can be tied to more data that becomes useful across the organization.

ID COLLECTED ON RETURN

CARD HOLDER DATA

ASSOCIATE DATA

LOYALTY NUMBER

eCOMMERCE ORDER

CUSTOMER RETURN TRANSACTION INFO

INVENTORY VARIANCE MERCHANDISE INFO

ORIGINAL SALE

SHIPPING DATA

It’s important to increase awareness about overall return activity now and as policies and procedures change. Store operations can reinforce policies with all store associates and be actively engaged in the shaping of new, profitable customer behaviors. Marketing is enhanced with a better loyalty program.

Merchandising can be more creative. E-commerce is streamlined.

With this increased insight and intelligent decision making come cost savings. We recognized a return on investment through an improved rate of return within one year of implementation, and we expect to again see a decrease in return rate year-over-year when we re-deploy the solution with our new POS system. Shrink was also down markedly over the same time period. Additionally, there were improvements in customer experience, greater POS efficiency,

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and greater profitability thanks to reduced loss.

Leveraging the Future to Create More Loyal Fans

The most exciting part of Finish Line’s new solution deployment is our ability to directly enhance the return experience for our loyalty customers. Very soon, members in our Winners Circle program will need to present a government ID at return only once, and then every time afterward they will be identified JULY - AUGUST 2015

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by their loyalty info. This provides multiple benefits: ■ It makes the return process easier and more streamlined for Winners Circle members, ■ It creates an “easier returns” selling benefit to attract and sign up new loyalty members, ■ It gives Finish Line associates an additional reason to ask a customer for their Winners Circle number at time of purchase, which gives us even better overall purchase history, and

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FINISH LINE IS WINNING BIG WITH BIG DATA

Customer Linking Details

The data type in each column has key variables that allow it to be connected with other data types.

The collection provides more big-data transaction information tied to specific consumers to help my business partners in store operations, marketing, e-commerce, and merchandising.

By capturing this data in real-time at POS, we will provide greater insight into shopping trends and patterns and even better strategies to best reach customers and maintain loyalty.

Additionally, an intelligent return ■

authorization solution can help treat different consumer segments uniquely.

We could add even more value to our loyalty program when these best shoppers can be quickly recognized and given a more lenient return policy.

Ultimately, it creates a more premium return experience for Winners Circle customers.

We are also creating an omnichannel environment by building a seamless return process between

all business channels, as well as an expedited return/exchange process at the POS for both the customer and associate. Imagine implementing a “buy online, return in-store” policy with an easy way to validate that the purchase was actually made from your e-commerce site. This is very important for Finish Line since a majority of returns made from e-commerce sales are performed at stores and not sent back to

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FINISH LINE IS WINNING BIG WITH BIG DATA the distribution center. The risk of these returns is greatly diminished, and the store can now focus on the shopper experience as opposed to fraud mitigation.

These features are just scratching the surface. Knowing shoppers and their behavior in real-time, in-store is a huge advantage that adds value to the business.

The Power of Connected Big Data

When it comes to gaining insight into shopping habits and trends, there is no question that knowledge is power. Finish Line and other retailers are embracing data tools like exception-based reporting, predictive modeling, digital video, and ROI analysis to help identify previously hidden relationships to take decisive action to improve customer service and reduce the specters of fraud and shrink.

Here’s how it works. Using analytics on top of linked data, we can build connections that reveal more about the customer. The better informed a retailer is about its shoppers, the better it can create strategies to market to them to generate future sales that meet the buyers’ needs and expectations, and therefore minimize returns. In Finish Line’s case, detailed data captured during a return transaction can ultimately reveal trends and preference that can help us provide better incentives, greater customization in the shopping experience, or additional merchandising flexibility.

For example, let’s say a new shoe is hitting the market that is flashier and more colorful than shoes in the past.

We decide to merchandise the shoe prominently on a display at the front of the store. As a result, the new shoe flies off the shelves, but then gets a lot of returns. The return data—what sizes, colors, styles were returned more—can be analyzed to separate potential fraud from other consumer issues, and ultimately provide insight to other departments to help determine, for instance, whether certain colors are less popular and should no longer be continued on page 22

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Big Data Is Reshaping Retail LP Operations

by David Speights, PhD

Businesses, including retailers, are losing 5 percent of revenues to fraud every year according to the Association of Certified Fraud Examiners’ 2014 Global Fraud Study. This is a staggering number, especially when applied to the 2013 estimated gross world product, which translates to nearly $3.7 trillion in potential projected global fraud loss.

Many retailers are taking action to combat fraud by employing new technologies to monitor high-risk retail transactions. This is helping reshape retail loss prevention operations to deliver a better customer shopping experience, while effectively protecting company bottom lines.

Technology Enhances the Collection and Monitoring of Data

Retailers collect data from many sources, including store sales transactions, store video, traffic counters, alarms, merchandise movement, loyalty programs, e-commerce click paths, and much more. A large retailer collects millions of transactions and hundreds of millions of line items per day. To that, they add 30 to 60 gigabytes of video per store, per day. For a 1,000-store retailer, this could total 22 petabytes per year, or the equivalent of 23,068,672 gigabytes.

Conventional systems like exception-based reporting and data-mining systems uncover direct relationships that occurred in the past on a single identifier.

But big-data analytical tools take analysis to a new level by detecting the connections among seemingly unrelated identifiers to reveal underlying larger groups of transactions and individuals. For example, a return authorization technology like The Retail Equation’s Verify-3 solution helps prevent fraud and abuse in real-time during the return process, not the day after, while simultaneously linking in all related information JULY - AUGUST 2015

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to an individual. This type of response is not possible with conventional systems because they simply cannot process the complex analytics and deliver accurate answers fast enough to authorize a transaction in process.

Many companies and solution providers have approached the data size or analytics problems by investing in a small number of bigger, faster hardware machines. This works up to a point. However, the massive amounts of data building up in the system and the complex analytical methods required to unearth the information is more than most traditional computing architectures can handle.

Big data-oriented companies achieve high-processing speeds by using special tools like the Hadoop platform to split data into thousands of chunks and distribute the load across a very large number of machines. We have developed custom software to operate in this environment to tackle very tough analytical challenges. Additionally, tools like IBM’s PureData (formerly Netezza) data-warehouse appliances are also used for added throughput and operate on a similar parallelprocessing architecture. This architecture decreases processing time by more than 90 percent versus more traditional hardware/ software deployments. A query that may take five hours to process using SAS on a conventional single-server system takes only minutes on a Hadoop or PureData parallel-processing architecture.

In the field a return authorization completes in milliseconds.

Knowing Precisely What to Look For

Predictive algorithms and machine learning techniques rely on big-data tools to quickly improve the shopping experience and reduce return fraud and shrink simultaneously. Companies can process the data from all the

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FINISH LINE IS WINNING BIG WITH BIG DATA

No. IDs = 72 No. Credit Cards = 122 No. Loyalty Cards = 84 transactions in the chain and identify suspicious behavior indicative of any form of return fraud or abuse, including wardrobing, returning stolen merchandise, receipt fraud, price arbitrage, price switching, double dipping, check fraud, and tender fraud. When an individual attempts to make a return, systems perform calculations and in a fraction of a second predict the likelihood of whether the return is fraudulent.

While the vast majority of consumers (about 99 percent) are approved, those whose actions are highly suspicious are warned or denied. This is an important point to notice. The system allows and supports generous return policies, so profitable consumers enjoy a fast and pleasant return process, including those who make numerous returns. In fact, the most valuable consumers tend to have a very high number of returns, which is why it is best to not rely solely on simple returnvelocity calculations, but rather

use big data to identify fraudulent patterns of behavior in real-time.

Complex queries can also be used to identify organized retail crime rings and fraudulent returners by linking seemingly independent events. The diagram above shows a cluster of suspicious purchase and return events.

At the center of each dandelion-like cluster is one person (or one ID). The thin lines connecting the clusters show a “hidden” connection, such as a gift card being passed among conspirators. On their own the clusters may appear to be legitimate (high-volume buyers often return many items), but the value of the returns exceed the value of purchases, and the connections indicate probable fraud by a group or an individual using multiple identities. Software-as-a-Service applications can halt the group’s returns immediately, and special reports can provide investigators with the information necessary LP MAGAZINE | JULY - AUGUST 2015

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to pursue a case. The bigdata tools allow companies to maintain and update the linked identities on more than a billion linkages each day.

The amount of return-related fraud is a staggering $9 to $16 billion problem according to the 2013 Consumer Returns in the Retail Industry report released in January 2014 by the National Retail Federation. Many of these losses are preventable using the technology available today. Fraudsters depend on system delays and lapses in judgment by the cashiers and associates on the front lines.

However, when big-data analytics replace subjective decisions, fraud and shrink diminish substantially, reducing return rates by an average of 8.2 percent and shrink by 12.95 percent. A $2 billion retailer would see about $15 million in savings per year, and retailers see a steep decline in return rates beginning immediately after the system is live.

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FINISH LINE IS WINNING BIG WITH BIG DATA continued from page 20

carried, or how merchandising displays might be designed differently to entice and help the shopper make a lasting purchase.

Our primary objective with implementing this technology was to create a better consumer experience in our stores, while at the same time to get a handle on fraudulent returns, which are expensive for retailers. We then started to see other opportunities emerge by looking at the data captured in the system to help modify other processes by adjusting to meet customers’ interests and expectations.

Collecting data and impacting business on a greater scale creates significant benefit. At Finish Line, the visibility all starts with the customer’s return. Over time you learn enough to link all of the data and have a holistic view of the customer. The customer linking mechanics illustration on page 18 shows the many different ways to build the connections from the original consumer return transaction. It is then

With infinite ways to use this data to improve business and gain intelligence, we have a tremendous cross knowledge of returns with inventory and employee behavior. To fully realize the benefits, it’s important to educate your business partners in store operations, marketing, e-commerce, and merchandising about customer behavior. possible to drill down even further through common threads of data to link disparate points.

Each data type has variables allowing it to be linked with other data types. As shown in the customer linking details chart on page 19, beneath each high-level data type listed as a column heading are keys that you can link from one type

of data to another. For example, employee number can be easily linked to customer name and then to other disparate data. The ability to take this additional information and tie it into existing and future analytics tools is very important.

For Finish Line these links add significant value to the analysis effort already in place with our

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Produced by

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FINISH LINE IS WINNING BIG WITH BIG DATA exception-based reporting tool. In one case we started with a SKU that was missing in a physical inventory.

We linked that SKU to a refund transaction during that inventory period and then connected it to the employee performing that refund.

With infinite ways to use this data to improve business and gain intelligence, we have a tremendous cross knowledge of returns with inventory and employee behavior. To fully realize the benefits, it’s important to educate your business partners in store operations, marketing, e-commerce, and merchandising about customer behavior. With everyone on the same page, the real benefits are achieved, including an improved customer experience while shaping customer behavior.

The Benefits to the Bottom Line

The more you know about a customer, the more you can affect your bottom line. Authorizing

returns may have started as both a customer service improvement and fraud prevention initiative, but it has proven to be so much more.

Everyone in the organization will benefit from this scientific, analytics-based understanding of overall customer behavior. It’s important to increase awareness about our overall return activity now and as our policies and procedures change. Store operations can reinforce policies with all store

MIKE SMITH is the senior vice president of loss prevention for Finish Line.

With more than thirty-seven years of experience in retail loss prevention, Smith has held various LP positions with Montgomery Ward, Maison Blanche Department Stores, and Mercantile Department Stores. He holds a bachelor’s degree in English from the University of South Alabama. He can be reached at msmith@finishline.com.

DAVID SPEIGHTS, PhD, is the chief data scientist at The Retail Equation.

He has more than fifteen years of experience applying advanced analytical methods to solve business problems in multiple industries. Speights holds a PhD in biostatistics from the University of California, Los Angeles and holds several patents. He can be reached at dspeights@thereturnexchange.com.

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associates and be actively engaged in the shaping of new, profitable customer behaviors. Marketing is enhanced with a better loyalty program. Merchandising can be more creative. E-commerce is streamlined.

At Finish Line this is much more than a loss prevention initiative; it involves the entire company. And the entire company has and will continue to benefit greatly from big data.

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ACADEMIC VIEWPOINT

2015 NRSS Executive Summary

by Richard C. Hollinger, PhD Dr. Hollinger is professor and chair of the Department of Sociology and Criminology & Law at the University of Florida, Gainesville. He is also director of the Security Research Project, which annually conducts the National Retail Security Survey.

Dr. Hollinger can be reached at rhollin@ufl.edu or 352-294-7175. © 2015 Richard C. Hollinger

F

or over twenty years the industry has recognized and used the National Retail Security Survey (NRSS) as a key benchmark for retail loss prevention. This retail security research project studies numerous elements of workplace-related criminality, along with identifying successful security counter-measures to protect people, assets, and brands in the retail industry.

Now in its twenty-fourth year, the NRSS is a nationwide annual study comprising the most recent empirical data on retail loss prevention. The University of Florida and National Retail Federation have partnered for over a decade to conduct this industry-standard research, which covers retail protection issues across inventory shrinkage, employee integrity screening, awareness programs, external retail crime, and more.

■ Toys—2% ■ Warehouse ■ Other

Key Findings

Retailers surveyed reported an average shrinkage of 1.38 percent at retail in 2014. This is the lowest shrinkage percentage level observed in the history of the NRSS. This continues the declining trend in shrinkage percentages observed over the past few studies.

Out of total retail sales of $3.19 trillion in 2014, inventory shrink represented $44.02 billion in lost sales. There is no other property crime that costs the American economy more than these non-violent offenses occurring in the retail store.

Grocery stores and supermarkets surveyed reported the highest average shrinkage calculated at retail across the four categories for which we were able to segment results—3.23 percent (median of 2.71%). By contrast, men’s and women’s specialty apparel retailers and department stores surveyed experienced shrinkage of 1.22 percent, while sporting goods and recreational products retailers reported somewhat lower shrinkage at 1.17 percent.

Retailers who operate between 1,001 and 2,000 stores reported an average 1.72 percent (median of 1.22%) shrinkage, whereas for retailers surveyed at the far end of the spectrum (2,000 stores or more) the average shrinkage was 1.23 percent.

Average shrinkage rates decreased or remained flat for more than six out of ten retailers. Overall, almost two-thirds of retailers surveyed noted that their shrinkage rates in 2014 either decreased (42.2%) or remained flat (20.5%), reflecting success in implementing anti-theft measures, training, and internal processes to reduce shrinkage and its impact to the bottom line.

Men’s and women’s specialty apparel retailers and department store results were largely in line with retailers overall. However, five out of the seven sporting goods retailers who reported on shrink trends—as well as four out of six grocery stores and supermarkets—noted more of an increase in shrinkage. Among companies operating over 2,000 stores, six out of nine saw a decrease in their shrinkage rate in 2014.

In the past retail LP departments have been expected to “do more with less” as budgets decline. In this study loss prevention budgets for 2014 averaged less than 1 percent of total 2014 sales. The good news is that over one-third (39.4%) of retailers surveyed reported that their loss prevention budget in 2015 is increasing over 2014 levels.

Finally, the budget decline is being reversed. We also asked about the size of the LP team. Company-wide loss prevention programs in

Methodology

The 2015 NRSS was conducted online from March 24 to April 30, 2015. Retail loss prevention executives were sent an email invitation with a link to the survey, so they could participate anonymously. A total of 100 retail chains participated in the 2015 survey, although not all companies answered all questions. In our analysis of the data for each question, we removed select instances of extreme outliers that might have distorted the overall results.

Here is the profile of retailers that participated in the study: ■ Auto parts, tires, and accessories—1% ■ Books, magazines, and music—1% ■ Cards, gifts, floral, and novelties—1% ■ Consumer electronics, computers, and appliances—2% ■ Convenience store or truck stop—1% ■ Crafts and hobbies—2% ■ Department store—11% ■ Discount, mass merchandise, or supercenter—7% ■ Drug store or pharmacy—3% ■ Furniture—3% ■ Grocery and supermarkets—9% ■ Home improvement, building, hardware, lumber, and garden supply—4% ■ Household furnishings and housewares—2% ■ Jewelry and watches—3% ■ Liquor, wine, beer, or tobacco products—2% ■ Optical goods and services—1% ■ Pets and animal supplies—1% ■ Shoes and footwear—4% ■ Specialty children’s apparel—3% ■ Specialty women’s apparel—4% ■ Specialty men’s and women’s apparel—13% ■ Sporting goods and recreational products—9%

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club—1% (including music, restaurant, garden, theme park)—10%

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2014 averaged 246 team members, with a median size of twenty-two.

Grocery stores and supermarkets surveyed averaged 162 team members, whereas department stores averaged 632 staff members.

Loss prevention management staff is continuing to diversify by gender and ethnicity. Across retailers surveyed, an average of 23.1 percent of LP manager-level or higher staff are women. Moreover, almost one in ten LP management level staff is Latino, 7.7 percent is African-American, and 2.6 percent is of Asian-Pacific ethnicity.

The survey examined the means by which retailers screen employee applicants. Criminal conviction checks, multiple interviews,

Retailers surveyed reported an average shrinkage of 1.38 percent at retail in 2014. This is the lowest shrinkage percentage level observed in the history of the NRSS. This continues the declining trend in shrinkage percentages observed over the past few studies. Out of total retail sales of $3.19 trillion in 2014, inventory shrink represented $44.02 billion in lost sales. There is no other property crime that costs the American economy more than these non-violent offenses occurring in the retail store. and verification of past employment history are the three most common screening techniques reported. After hiring their sales associates, retailers use numerous means to develop employee awareness about loss prevention. The most prevalent across retailers surveyed are anonymous telephone hotlines, discussing the topic during new hire orientation, codes of conduct, posted notices, and training videos were reported in use by at least 70 percent of retailers.

Questions were also asked about the security techniques to protect merchandise and apprehend shoplifters and employee thieves.

Burglar alarms, digital video recorders, and armored car deposit pickups are loss prevention systems used almost universally by the retailers surveyed. The most commonly used other techniques were CCTV interfaced technologies wherein camera images are being used to detect theft, often in real time due to IP linkages to sophisticated software.

Three-quarters (75.3%) also used live customer-visible closed circuit TV (CCTV), and almost as many used point-of-sale (POS) data mining (69.9%). Not surprisingly, retailers in different categories are more likely to use some systems than others, such as acousto-magnetic, electronic security tags. All of the retailers surveyed

in the men’s and women’s specialty apparel and sporting goods categories use this system, while just one-third (two out of six) of department stores surveyed have implemented them.

POS data mining was reported to be quite commonly used. All grocery stores and supermarkets surveyed use this tactic (six out of six), as do all sporting goods stores surveyed (five out of five).

By contrast, just two-thirds (four out of six) of department stores surveyed and half of men’s and women’s specialty apparel retailers use POS data mining.

When dishonest employees are detected they were most likely to result in apprehensions, terminations, prosecutions, and civil demands.

Prosecutions did not match the number the apprehensions. As such the most common responses to employee theft were terminations and use of civil demand. Retailers surveyed reported that dishonest employee incidents cost retailers on average $1,547.

In 2014 shoplifting incidents were most likely to result in apprehension and—to somewhat lesser degree—prosecution.

As expected, just one-third of retailers surveyed allow non-loss prevention staff to make shoplifting apprehensions, but several noted that only trained LP staff were authorized to do so. Across all retailers surveyed, the average dollar loss per shoplifting incident in 2014 was $318.

Both internal and external theft are leading sources of inventory shrinkage, each accounting for approximately one-third of inventory shrinkage among retailers surveyed in 2014. This year also marks the first time in this study that retailers estimate that shoplifting accounts for more inventory shrink than employee theft. The averages vary somewhat between categories.

Traditional crimes were also tabulated. For example, the number of robberies that retailers experienced in 2014 per $1 billion sales was 3.2. Across all retailers surveyed, companies reported an average loss of $2,465 per robbery in 2014. This figure was slightly higher among specialty men’s and women’s apparel retailers, who noted an average loss of $2,651 per robbery.

The Full Report

These findings are just a sampling of the results contained in the 2015 National Retail Security Survey. I encourage all to read the full report. We have streamlined the study to produce a more user-friendly survey results report that includes updated charts and a summary of key findings. If you are interested in reading the full report, please log onto the NRF.com website, and after signing in, you can download a copy.

The 2015 NRSS is the result of a new strategic alliance jointly conducted by me, the University of Florida, and the National Retail Federation. I want to thank all the companies who participated in this research. I also wish to express my personal thanks to our study sponsor, The Retail Equation, for underwriting the 2015 NRSS and to LP Magazine for their ongoing support.

Your participation as a retailer is vital and directly builds the value for both you and the retail industry to understand the current landscape of retail loss prevention. The NRSS study is an invaluable tool for the retail and solution provider communities, our law enforcement partners, as well as for legislative efforts that impact retail crime and media awareness campaigns.

Please feel free to contact Bob Moraca at moracar@nrf.com or me at rhollin@ufl.edu if you have any questions or feedback about this study

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PARTNERING WITH RETAILERS

Basic Training in Network Security

By Dave DiSilva DiSilva is senior manager of global asset protection for eBay where he oversees eBay’s tools and PROACT teams. Prior to joining eBay in 2010, he held retail leadership roles in analytics, investigations, corporate LP, shortage control, e-commerce, and supply chain. DiSilva is an active member of the Loss Prevention Research Council, serving as co-chair of the predictive analytics group. Since 2011 he has been an LP Magazine contributor. DiSilva can be reached at 408-332-8666 or dadislva@ebay.com.

I

recently participated in a network security training program in order to better understand how criminals gain access to network systems. The trainer and network security consultant agreed to provide tips, but wanted to remain anonymous.

Overview

Best Practices

Human Error

Social Engineering

While the playbook for network penetrations varies from attacker to attacker, there are some consistent patterns that emerge from each enterprise-level incident. Network penetrations can be broken down into three steps, each with distinct signatures.

1. On-Ramp to the Network. Attackers have to get a foothold in the network, and this is most often done by social engineering targets to download malware or submit credentials to a phishing site. Additional on-ramps include watering holes, compromised logins, third-party hacks, and exploiting vulnerable third-party apps, particularly content management systems.

2. Navigating the Network. Once inside, attackers will use internal documentation to further their attack, pivoting from corporate user to corporate user via compromises to eventually gain access to documents and databases.

3. Exfiltration. Data exits the system in surprisingly simple fashions. Sometimes it is hidden in traffic, but more often than not, it is zipped or encrypted and moved off the network to a drop site before detection systems can alert users and leakage can be stopped.

Nearly all of the network attacks involve the following failures, oversights, or policy breakdowns: ■ Human error is almost always involved. Whether attackers enter through the front door or move laterally through the network, the attackers need employees to take some sort of action, whether it is entering credentials into a phishing site or opening a malicious attachment.

■ Employees use corporate emails to register for third-party sites that have been hacked and, even worse, reused passwords.

■ Lack of two-factor authentication for access to VPN networks, databases, and shares contribute to many of the breaches and magnify password reuse problems.

■ WordPress plugins are exploited for credentials to access servers or to create phishing pages. In general, servers running CMS applications are hackers’ on-ramp of choice.

■ Once inside networks, reconnaissance is performed through corporate directories, wikis, and share sites. Attackers find targets with desired accesses and move laterally using malware or phishing sites sent from internal email.

■ Network traffic monitors fail or are evaded during exfiltration.

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■ Monitor

access to corporate directories and create algorithms that set off alerts if there are a large number of searches coming from an employee. Pay particular attention to searches for sys admins and help desk employees in rules, as well as search strings for customer databases and network credentials.

■ Run ad-blocking applications on corporate machines.

■ Evangelize security to everyone in the company, from InfoSec to HR to sales. Follow up with red team events, like setting up phishing pages and targeting employees with spoofed emails to ensure that people are taking security seriously. Pay special attention to help desk and sys admins.

■ Document all third-party dependencies, how they are integrated, and evaluate their need while understanding how they are vulnerable.

■ Ensure that two-factor authentication is enabled for all key accesses.

■ Monitor Pastebin and other typical “dump” sites for employee Twitter credentials and continue to react accordingly when stolen credentials are recovered by vendors.

■ Map publicly available VPN services and proxy services, both underground and commercial, to add to firewall rules.

The most vulnerable components of any corporate network are humans. Most breaches start with an employee electing to open the door for an attacker after being socially engineered.

The most basic social engineering attacks still take place by spoofing email addresses of known colleagues or contacts found during initial reconnaissance on sites like LinkedIn or Facebook and sending malicious content. The Syrian Electronic Army has used this method with surprisingly effective results to access web-based work email accounts that can then be used to subsequently cause more damage, like changing DNS and accessing social media accounts or document theft. Hacktivist groups like Anonymous will often use similar reconnaissance to take advantage of call centers and customer support to reset passwords in order to gain access to corporate servers and inboxes.

Unsurprisingly, other social engineering campaigns have leveraged the global connectedness that social media offers. A China-linked campaign in late 2014 targeted employees of male-dominated sectors like technology and nuclear engineering.

Attractive women “friended” engineers using Facebook and then passed along links to malicious files in chat messages. |

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INTERVIEW

OPERATIONAL STANDARDS SUPPORT A HOLISTIC APPROACH TO LP AND SAFETY IN THE QUICK-SERVICE RESTAURANT SEGMENT

By James Lee, LPC, Executive Editor

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OPERATIONAL STANDARDS SUPPORT EDITOR’S NOTE: Anne Sullivan is vice president of asset protection and safety at CKE Restaurants Holdings, Inc. She has twenty-five-plus years of experience in multiple roles in loss prevention, safety, and retail operations with Kmart, Charlotte Russe, and Pacific Sunwear. Sullivan is a board member of the Restaurant Loss Prevention and Safety Association.

EDITOR: How did you get started in your loss prevention career?

SULLIVAN: My first experience with loss

prevention was when I was fourteen, when I started working for my uncle’s Hallmark store. That was where I had my first experience in customer service and actually caught my first shoplifter. I joined Kmart in the early ‘90s when Ben Guffey was in charge and Kmart truly was seen as a leader in LP. Their policies and procedures, their standards, how everybody conducted themselves, were very buttoned down. This really was an era when a lot of companies looked at LP as a cops-and-robbers game. A lot of LP folks were seen as the people who wanted to be cops, but maybe didn’t get on the force. The focus was on catching thieves, and that’s how a lot of people were reviewed, but Ben really tried to drive LP focus toward being business professionals.

One thing that Ben left me with is he was always so driven on making sure that his people could relate to all levels in the company, that they could manage up, down, and across. He taught us that the only way we as a team were going to be successful was if we understood what senior management was looking at and what their goals were. And also being able to make sure that we connect with the folks we’re working for, so if you’re in the store, you need to connect with that operator, that general manager, and understand their vision and align your vision with it. That was probably the real eye opener for me, and I carried that throughout my career.

This was also when I was first introduced to organized retail crime, which nobody called ORC back then.

It was just people who stole endless amounts of your videos and DVDs and refunded from location to location. These were the days before refund management and tracking systems.

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By leveraging our video platform and in-house proprietary reporting, tracking, and trending software, Operational Standards Support delivers focus around areas of opportunity as well as positive behaviors in the areas of customer service, speed of service, productivity, deployment, QA, safety, and security. While the ability to identify behaviors is important, more important is our ability to provide tangible video training examples that allow for more effective coaching and praise.

EDITOR: Were there any career moves that stand out between Kmart and Charlotte Russe?

SULLIVAN: Pacific Sunwear. That was

where I coauthored the company’s C-TPAT program. I was senior manager of distribution and corporate loss prevention at the time handling e-commerce, supply chain, and security.

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I was offered two options—to become the director of loss prevention or to start working on the C-TPAT program and focusing on supply-chain security.

Customs and Border Protection were just coming out with the C-TPAT tiered structure, which looked exciting. I very much wanted to travel internationally, and it was an area of security I had not focused on, so I ended up taking on that challenge.

EDITOR: Remind us what C-TPAT is.

SULLIVAN: C-TPAT is the

Customs-Trade Partnership Against Terrorism program. It was implemented after 9/11. The idea behind it was to minimize security risks by requiring importers, both small and large, to meet certain standards to protect freight that was coming into the United States. While that sounds great, it’s expensive and incredibly time consuming to launch a company C-TPAT program.

What would the company get from it? You got expedited clearance through customs, but the big incentive behind it was that if there was another terrorist attack in the US, your containers would be the first out of customs. Of course, an attack could hold up customs for weeks or even months. So to be able to get your merchandise and freight moving, especially in the retail world, is absolutely crucial. If you have a container of holiday freight sitting in port that you can’t get to market, you’re pretty much out those sales for the season.

It took nine-and-a-half months to write the program, because you have to identify your vulnerabilities, write a plan for each of those vulnerabilities, and then identify what you will do to mitigate each risk should a breach occur. Then you have to document it and make sure any of your people who will have any access to shipping or inbound freight are trained in the right protocols. Then you get tested on it. Not only do you get interviewed, but customs will actually send people to try to breach your security. So let’s say you tell them you have 24-hour alarms and a 10-minute response to our distribution center if there is a breach, they will come activate an alarm and be sitting there when you show up.

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OPERATIONAL STANDARDS SUPPORT EDITOR: Did you ever experience any breaches or violations that you had to react to?

SULLIVAN: We did not. The only

attempted breach that they tried was on the morning of our interview. They showed up at the corporate office two hours early with the intent of walking in and saying that they were there to meet somebody and seeing if they could get past the receptionist. But they didn’t even get out of their car before they were approached by security.

To get this all to work I had to have the buy-in of not only executives and distribution employees, but also the 15,000 employees who were responsible for receiving freight through direct shipments. It was a very intricate plan, and the bringing people together aspect was the biggest lesson I took away—truly understanding how to gain buy-in from large groups and helping them to understand why you do things and what’s in it for them. The reward was I gained a vast amount of knowledge, and we did achieve tier-3 status.

EDITOR: Then you moved to Charlotte Russe and back into more traditional retailing?

SULLIVAN: I was laid off from Pacific

Sunwear and hired by Charlotte Russe as a consultant to handle a major distribution investigation. I resolved that, identified the problem, and was then offered the position of director of supply-chain security for

Charlotte Russe. During that time, crazy as this sounds, I actually had the opportunity to be the interim director of distribution; the actual operator of a distribution center.

And this was during the holiday season, because the previous director had quit just before the holidays. I remember the VP of distribution showing up and telling me, “We need you to get out 350,000 units a

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LP MAGAZINE | JULY - AUGUST 2015

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OPERATIONAL STANDARDS SUPPORT day.” I thought how hard can that be? But it was really an eye opener, both in terms of truly learning the operations piece of the business, how each area supports the other, and also learning how to motivate the employees.

When I took over, I had a meeting with all the employees. I asked them to share with me any concerns that they had; whatever they did not like. I told them my door was always open. I told the managers we were going to walk the floor twice a day to thank the employees for working so hard and then I started buying them ice cream. Distribution centers are consistently hot or cold. Ice cream, hot chocolate, and simple thank you go along way for motivating employees. Twice a week I would spend $50 to $70 on treats and share with them what our numbers were and our goals. We never missed a goal.

EDITOR: Later you became the director of LP for Charlotte Russe?

SULLIVAN: I did. I became the senior

director of asset protection. I took on the field loss prevention for the company, in addition to safety and supply-chain security. And with the role, I inherited the companies ten-year high in shrink. That was my first 100 percent role having field loss prevention reporting to me. I was reporting to the SVP of operations, Sandra Tillett, who was a mentor and had a major influence on my career. During our first meeting, she and I realized that we shared a holistic approach for loss prevention and operations partnership.

My approach to loss prevention is you should never have to discuss theft in the store. We hire store associates at all levels, and then we try to throw fifty different messages at them. “You need to sell like this.” “You need to up sell like this.” “You need to cut loss like this.” “You need to set your store like this.” We send too many messages to people, and sometimes the message is just the next flavor of the day.

Sandra and I came up with a holistic approach such that loss prevention would be 100 percent threaded through the operations message. And the message was, basically, that we’re going to drive sales and reduce shrinkage through conversion.

When a customer enters the store, we want you to greet them immediately,

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service them out of the store. We’re not here to sneak around and peek around racks to catch shoplifters. We’re here to provide great service to our customers and also to our shoplifters. And this attitude really made a big change in sales and in reducing shrink.

Our holistic approach to LP at Charlotte Russe was 100 percent threaded through the operations message.

We were going to drive sales and reduce shrinkage through conversion. When a customer enters the store, we wanted to greet them immediately, because customers love to be greeted while shoplifters don’t.

If they were a customer looking for an outfit, we obviously wanted to convert them to the biggest possible sale. If they were identified as a potential shoplifter, we wanted to service them out of the store. because customers love to be greeted while shoplifters don’t. We want to determine the reason for the visit. If they’re a customer looking for an outfit, we obviously want to convert them to the biggest possible sale and add on to that sale. If you identify they’re a potential shoplifter, we want to JULY - AUGUST 2015

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EDITOR: How did you drive the message home to store-level employees?

SULLIVAN: I think it’s very important to

make connections with employees. I, for one, will travel constantly. To me being in the field and talking to every level of employee makes all the difference. Reality is they are the true subject-matter experts on what’s going on in their stores.

So many times I would talk with a district manager or a regional loss prevention manager, and they’ll say, “Well, I visited the store and talked to the GM.” So you touched one person. If you had talked to the shift leaders, you would have touched three of our leaders that run the store. And if you talk to the crew, you’re touching everybody. So at Charlotte Russe we started implementing this three-to-five-minute rule. Every regional loss prevention manager was required to spend three to five minutes with every single employee in that store listening, coaching, and sharing with them. It made them feel connected to our department, and we gained their partnership in driving our goals.

Another big impact to our success in loss reduction at Charlotte Russe was our focus on the inventory numbers. In retail loss prevention so many times we focus on the fifty or seventy-five worst stores. The problem is we spend so much time on these “target” stores, we forget about those stores that are doing the right thing and those stores that are on the verge of becoming a target store. So what we did was flip the focus around. We designed a new category, the VIP stores, which were the best of the best—the stores that got below the shrink target of the company, which at that time was 2 percent, which would have been over a 50-percent reduction in overall shrink.

EDITOR: How did that program work?

SULLIVAN: We put stores into three

categories. Stores that were 2 percent and below became VIPs. The worst fifty stores

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were target stores. Then we had WIPs or work-in-progress stores, which were in the middle. While we did focus on our target stores, we mainly focused on the majority of the stores that were sitting in the middle. We wanted to push them toward the VIP stores by giving them the tools they needed. It was about checking your inventory, getting it out to the floor fast, servicing your customers, controlling the fitting rooms, greeting and servicing your customers when they walked in, converting them to a sale, and converting the shoplifters out of the store. The “who wants to be a VIP” came about as a result of the excitement around the program. It became a badge of honor to be a VIP, a who’s who.

traveling stores with me and the SVP of operations learning about operations and loss prevention through our eyes as executives. They were truly able to see stores from a customer’s point of view and understand the why behind various processes. When they went back to their stores, we launched a newsletter talking about what their experience was like and what they learned, and shared that with their peers throughout the company. It became such a success that everyone wanted to be a VIP and have this opportunity. The cool thing is that all those GMs that ended up traveling with Sandra and me went on to become district managers, and the company exceeded their shrink goals and improved sales.

EDITOR: What was the biggest incentive for being a VIP? SULLIVAN: Any store that became a

EDITOR: That’s terrific, Anne. So that was the background that eventually led you to CKE. How did you become director of LP at CKE? SULLIVAN: Carl’s had always been one of

VIP was put into a drawing every shrink cycle. We would choose two or three store managers as winners and send them to New York City or Chicago or San Francisco. They would spend two days

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my favorite brands. It’s basically the only fast food I’ve eaten over the years. The reason for that is my mother worked in

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OPERATIONAL STANDARDS SUPPORT a Hallmark store when I was a kid, and during the summer she would pretty much use the mall as a babysitter for my brother and me. We’d run around the mall all day, and every day we would get a dollar for lunch, and every day we would go to Carl’s Jr. One day I actually got to meet Carl Karcher, the man who started the whole company. He ended up giving my brother and me two small fries to go with our lunch along with a little Carl’s Jr. pin.

After Charlotte Russe, I started looking for new opportunities and happened to see a director of loss prevention opening at Carl Karcher Enterprises. And like I said, I’ve always loved Carl’s Jr. While I had never been in the quick-service restaurant segment before, I applied, went in, did a couple of interviews, and landed the role in May of 2012.

EDITOR: Give our readers some background into how Carl’s Jr. originated.

SULLIVAN: It originated back in 1941,

when Carl Karcher purchased a hot dog stand at Florence and Central in California. His wife, Margaret, and he took out a $311 loan on their Plymouth automobile and had $15 in their savings to make this purchase. We still have a hot dog stand in the corporate office.

They sold hot dogs, chili dogs, and tamales for a dime and soda for a nickel.

Within a couple of years they ended up buying and operating four hot dog stands in Los Angeles. In 1945 they moved to Anaheim and opened the first full-service restaurant. It was a Carl’s drive-in barbeque restaurant. Later they added hamburgers to the menu for the first time. Carl believed in his customers coming in, ordering their food, paying, and receiving their orders by the time they put away their wallet.

EDITOR: When did Hardee’s come into the picture?

SULLIVAN: They acquired the Hardee’s

brand in the early 1990s when CKE began its next series of acquisitions.

At the time Hardee’s was the nation’s fourth-largest quick-service restaurant chain with 2,500 locations. Now owned

by Roark capital, CKE operates over 3,400 stores in forty-two states and thirty-five countries.

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EDITOR: Are your field LP managers aligned by brand, or do they manage all the brands?

SULLIVAN: We’re aligned by brand. There

Probably the biggest differences between traditional retail and quick-service restaurant are how loss is audited and controlled and how the company views the return on investment for loss prevention. In the retail world you have quarterly, twice-yearly, or yearly inventories.

You get hard numbers back and are held accountable to that. But when I switched over to QSR, there wasn’t a true metric or standard in place that I could see to really know what the starting point of loss was and what the tier percentage of loss was.

EDITOR: How many of those are company owned and how many are franchises?

SULLIVAN: Approximately 600 are

company owned with about 2,800 operator owned.

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is the Hardee’s loss prevention team and a Carl’s Jr. team. They are divided up by region within each team.

EDITOR: Are the Hardee’s locations mostly east of the Mississippi and the Carl’s Jr. mostly west of the Mississippi River?

SULLIVAN: Correct.

EDITOR: Upon your arrival at CKE, what did you find that required immediate attention?

SULLIVAN: With all three of the

companies I worked for, when I arrived I found what I would call a basically poor perception of what LP was about. I have seen where LP is considered a cost to the company. I have seen where LP is viewed as the people who come in to fire someone. When I joined CKE, what I heard from all levels of the company was, “She’s the leader of the camera people. If your camera breaks, you should call LP to fix it.”

My first thirty days I spent in the stores, just talking to employees, asking basic questions. Who would you call for a loss prevention issue? Who is your loss prevention manager? What would you do if such-and-such happened? I came to realize that there was a very minimal LP understanding or presence in the stores.

EDITOR: What differences did you find in the quick-service restaurant [QSR] segment compared to your days in more traditional retail?

SULLIVAN: Probably the biggest

differences are how shrink or loss is audited and controlled and how the company views the return on investment for loss prevention. In the retail world you have quarterly, twice-yearly, or yearly inventories. You get hard numbers back, and you are held accountable to that.

But when I switched over to QSR, there wasn’t a true metric or standard in place that I could see to really know what the starting point of loss was and what continued on page 34

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OPERATIONAL STANDARDS SUPPORT One other thing we focus on in the field is not only delivering training and prevention, but also training them on how to handle a situation if it occurs. We never want them to engage the robber. We want them to give the robber the money.

We want to ensure that people don’t get hurt, but we also want to ensure that we’re there for our employees if it does happen. You will always—100 percent of the time at CKE—have a loss prevention person following up personally within minutes of a robbery. Finally, we want to make sure that person never robs our store again, and the way we do that is we want arrests. We want people to pay for robbing our stores. Last year we had twenty-one robberies and succeeded by assisting with eighteen arrests.

EDITOR: Are those investigations helped by the CCTVs in your restaurant?

SULLIVAN: Absolutely, 100 percent. As

continued from page 32

the tier percentage of loss was. That was probably one of the biggest differences.

The other thing was since I came from mall-based retail, I didn’t really have much exposure to robberies. I believe I only had four in my career prior to CKE. Now, with QSR it is a big focus based on the fact that the stores are open 24/7, there is easy freeway access, as well as other factors.

The safety issues in QSR are far different than in retail, because we deal every day with being open 24 hours a day and the activity that attracts. There are just so many opportunities that the QSR industry is vulnerable to.

EDITOR: What are those things that you do as an LP organization to respond to robberies?

SULLIVAN: When you review the video

after a robbery, probably 70 percent of robberies are triggered by opportunity. The robber comes in, they take a look around and assess the opportunity, they look in the cash drawer when it’s opened, and then

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they rob the store. So taking away as many opportunities as possible is key.

We train our employees to control the cash levels in drawers. We have to be careful about how we transfer our money.

We implemented smart safes, which absolutely had a significant impact on robberies and cash control. Another big thing that we implemented is eliminating back-door openings during night time hours. We took our back-door alarms and set them to activate silent alarms between dusk and dawn, so if the back door is opened at night, my security center gets an alarm. They can check to see why it was opened, and we can then coach in the moment. The store will be called immediately and told to shut the back door. An email will go out to leadership noting the violation. Since we implemented this last year, we only had one back-door robbery, which was a significant decrease.

We have also decreased our internal involvement robberies, and we created a safer environment for our employees by training and holding them to a standard.

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soon as a robbery occurs, we get the still shots and the photos into the hands of the police immediately. Additionally, our LP team will start conducting their investigation. They don’t just interview our employees. They go to every business in the general area that has CCTVs or the possibility to trace cars. The assistance they get is almost endless. We take robbery very personal because of the impact it has on our employees and customers.

EDITOR: What other changes have you made in your time at CKE? SULLIVAN: We’ve experienced a

significant amount of change. My RLPMs have various backgrounds in areas outside of QSR, including specialty retail, big-box retail, grocery, distribution, and supply chain. That diversity provides us an out-of-the-box approach to the various LP- and QSR-specific challenges.

Our success in blending the five various functions under our department into a unified approach to asset protection and safety has allowed us to achieve our goal of strong, focused support for our operations partners. This diversity has really allowed us to drive change, rebrand our asset protection and safety department, and drive some incredible initiatives with great accomplishments in continued on page 36

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only a few years. I believe this stems from three core drivers.

First, as a team we all share an incredible passion and excitement for the jobs we do. Second, we understand that every dollar our company spends on asset protection and safety needs to deliver a significant return on the investment. Many buy a product, open the box, set it up, and that’s it. To us, that new product is an investment, and we are going to work with our vendors to make that investment exceed our expectations in every possible way.

Most importantly, we have been successful because of the amazing field partners we work with. Our field partners are the folks who make it all happen, and without them, we would not be able to accomplish our initiatives.

As a department, our most recent initiative has been the launch of our Operational Standards Support (OSS) Division. A typical secret shop can tell us the basic opportunities a store has in the front of house. By leveraging our video platform and in-house proprietary reporting, tracking, and trending software, OSS provides clear visual examples to our store teams and field leadership. OSS delivers focus around areas of opportunity as well as positive behaviors in the areas of customer service, speed of service, productivity, deployment, QA, safety, and security. While the ability to identify behaviors is important, more important is our ability to provide tangible video training examples that allow for more effective coaching and praise.

I have been very lucky to work in an industry I have a passion for, with some great companies, and have met and grown throughout my career because of the amazing mentors I have had. From retail to now QSR, I continue to enjoy the partnerships I am building. Today, I am fortunate to work for a company I love, have a boss who challenges me to grow, and a team that works daily to exceed expectations.

EDITOR: How did you come up with the OSS concept?

SULLIVAN: It was actually two fold.

quantifiable results with training tools for our field leaders to use.

Operational Standards Support was created when our CFO had a poor experience in a store, which I paired with some additional video observations. In partnership with my operations support partners, I sat down and shared the videos and concept of OSS with the SVP of operations.

Of course he was interested in being able to identify opportunities in loss, customer service, service times, order accuracy, cleanliness, and safety. But the true value is the ability to provide

EDITOR: How does OSS work?

SULLIVAN: Most companies conduct

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secret shops in their stores. The shopper comes in and can tell us if the parking lot is dirty. They can tell us if the dining room is dirty. They can tell us if the person smiles and is scripted when they walked up to the counter. They can tell us if their food is hot and fresh. But if one of those things has failed, they can’t tell us why. That’s what makes OSS a true asset; it does give the why and the ability to follow up and reinforce positive behaviors and coach to JULY - AUGUST 2015

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our opportunities. Some examples of “why” could be training, deployment, staffing levels, or even a random issue that occurred and just happened to impact that specific timeframe. A very exciting piece of OSS is our opportunity to identify and call out positive behaviors. It allows us to recognize those employees who go the extra mile, who provide great service, or who do the right thing. That is so important.

EDITOR: Tell us about your association with RLPSA. SULLIVAN: I have had the opportunity

to be part of RLPSA [Restaurant Loss Prevention and Safety Association] for three years and collaborate with professionals from all areas of the restaurant industry who have responsibilities for loss prevention, security, risk, asset protection, and safety. I had the privilege to serve as the planning committee chairperson for last year’s conference and continue to serve as a member of our board of directors.

If I could share one thing with a person coming into the QSR loss prevention industry for the first time—join RLPSA. It offers a unique opportunity to its members and a forum to share, discuss, and gain insight into issues impacting our industry today. The annual August conference gives us the chance to network with industry leaders, share knowledge and resources, and meet solution providers who can help to address those unique vulnerabilities we find in the restaurant environment. It’s an organization that drives networking and partnership. Incidently, this year’s conference is August 2–5 in Las Vegas.

EDITOR: By the way, the magazine and our EyeOnLP team will be at the conference. Last question. Looking back over your career, do you have any regrets?

SULLIVAN: No, I have been very lucky to

work in an industry I have a passion for, with some great companies, and have met and grown throughout my career because of the amazing mentors I have had. From retail to now QSR, I continue to enjoy the partnerships I am building. Today, I am fortunate to work for a company I love, have a boss who challenges me to grow, and a team that works daily to exceed expectations.

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CERTIFICATION

Expanding Our Knowledge T

Interview with Karen VanBrunt, LPC Karen VanBrunt, LPC, has over thirty-six years of experience in loss prevention. Her first six years were spent in the specialty sector before moving over to grocery where she spent the next twenty-four years holding various positions at Pathmark. Following an acquisition, she was provided an opportunity to transition to the solution provider side with Agilence, where she uses her LP skills to provide retailers with valuable auditing and consulting services.

his is another in a series of interviews with working LP professionals who have earned their LPQ or LPC certifications from the Loss Prevention Foundation (LPF) to hear in their own words why they pursued certification and how it has benefited their careers.

How has going through the certification process influenced the way that you approach your job?

Just prior to starting the LPC, I transitioned from the retail sector over to the vendor side due to an acquisition. It was a pretty scary thing at first having lived and breathed LP in retail for thirty years and now finding myself in a completely different sector. The more I thought about it, the more I realized that this was an opportunity for me to continue using what I learned from my certification.

My current position still involves working daily with clients in the retail sector. In every aspect of my position, I can apply what I have learned through the certification process to my job.

From demonstration to kickoff, training, auditing, enterprise-wide analysis, and leading regular meetings, the LPC serves to show my clients that I know and understand all aspects of their business. I always get excited and acknowledge when I notice the LPC next to a customer’s name during email exchanges. I’m proud to have that designation next to my name as well.

Why did you decide to pursue certification?

I was seventeen when I started out as a store detective. I worked for a great company and wanted to grow within the organization, but I always hit a road block because I lacked the experience and education. I needed something that would make my resume stand out from the others. Having the certification was that one credential I thought would push me to the top of the list. It shows my desire to learn and grow, it was industry specific, and it gave me the ability to speak the language of the business beyond LP. I was fortunate that the company I worked for provided continuing education benefits to associates. With or without company support though, I was determined to achieve the LPC certification.

The certification process was created by LP professionals for the LP community. It is true that some of the course content can be found elsewhere, but these other courses don’t teach the meat and potatoes of the retail business the way the LPF certification does.

Do you think certification offers a professional advantage over those that have not been certified?

Absolutely. The certification process was created by LP professionals for the LP community. It is true that some of the course content can be found elsewhere, but these other courses don’t teach the meat and potatoes of the retail business the way the LPF certification does. Every person that played a part in helping the LPF to grow lived and breathed the retail or LP business, and the value they provided cannot be created by folks that have not walked in their shoes.

Newly Certified

Was there something specific that influenced your decision?

Around the time when the LPF was building their foundation for certification, I had the opportunity to be part of a committee that was tasked with helping to develop some of the course content and exam questions. The onsite work sessions gave me the opportunity to network and build new relationships with other LP professionals.

What I learned from those conversations with my peers is that our stories were very similar even though our job paths and employers were different. The common issue we faced was that we had no resource for professional courses that were focused on the business as a whole and not just loss prevention. Most importantly, I felt an obligation to myself—how could I sit on a committee and encourage others to go for the certification if I wasn’t certified myself?

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Following are individuals who recently earned their certifications.

Recent LPC Recipients

Ignazio Amato, LPC, Shopper Drug Mart Garrett Atkins, LPC, Ahold USA Nicholas Bader, LPC, Ahold USA James Ballard, LPC, Ahold USA Darin Barton, LPC, Lowe’s Silvana Baxter, LPC, Ahold USA Anthony Bickley, LPC, Lowe’s Jeffrey Bucher, LPC, Lowe’s Jonathon Burris, LPC, Walmart Stores |

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PROFILE

GUARDIANS OF THE GOLDEN ARCHES MCDONALD’S US SECURITY TEAM

By Adam Paul, Contributing Writer

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GUARDIANS OF THE GOLDEN ARCHES

M

At the end of the day, it is truly remarkable that such a small team is so effective in protecting what just might be the most identifiable brand across the globe. It ultimately comes down to the attitude of retail security pervasiveness throughout the organization, as Senior Director Rob Holm puts it, “from the boardroom to the crew room.”

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cDonald’sTM. The name is instantly recognizable, conjuring up images of Big MacTM sandwiches, Chicken McNuggetsTM, and World Famous FriesTM. No matter where your travels take you across the globe, chances are you will find a McDonald’s, and chances are the hamburger you purchase in Doha, Qatar, will taste and look identical to the one you purchase in Peoria, Illinois.

McDonald’s is the juggernaut of quick service, the restaurant chain that eclipses its competition by an order of magnitude.

Think your retail chain is pretty big?

McDonald’s gets 27 million visitors per day, and that’s in the United States alone.

From a retail security perspective, one can imagine not only the types of incidents that can occur at your average McDonald’s location, but the sheer number of them as well. To understand why this might be, just consider what goes on at the nearly 15,000 McDonald’s restaurants scattered throughout the US through the dual mechanisms of lobby dining and drive-through service.

The local McDonald’s is often much more than a spot to buy food; it’s a well-known landmark in whatever city it happens to be in. The Golden Arches™ are often occupied by people seeking a place for morning meetings or parents enjoying time with their children over a Happy Meal™ in the Playplace restaurants.

For a demographics comparison, this author also visited several Southern California McDonald’s restaurants during the writing of this article. The drive-through lanes are occupied with everything from Bentleys to barely running jalopies. Translation—when asked who their demographic is, McDonald’s can confidently and with a straight face answer, “Everyone.”

When considering all of the circumstances that can and do occur at your average McDonald’s, one starts to form a picture of the lay of the land when it comes to loss prevention and security protection nationwide. To that end, McDonald’s possesses one of the most unconventional, yet effective, loss prevention teams in the business. They call themselves US Security, which sounds as if it is some flavor of Special Forces

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GUARDIANS OF THE GOLDEN ARCHES

McDonald’s US Security Team

Robert “Rob” Holm Senior Director

Kevin Trimble Director

As of July 2015 one regional manager position was open.

Osama “Sam” Ayache Regional Security Manager

William “Bill” Ball Don Carman Regional Security Manager Regional Security Manager

Hugo Cortez Ruben Martinez Regional Security Manager Regional Security Manager

Jesse Perez Jennifer Schaefer Regional Security Manager Regional Security Manager

Daniel Thomas Johnny Webb Regional Security Manager Regional Security Manager

SWAT team or other such covert group.

And yes, they really are everywhere.

although physical security is only a small part of what they actually do. And guess what—they do a stellar job with far fewer people than one might think possible.

US Security boasts a fairly simple organizational chart considering the behemoth size of McDonald’s. It is headed up by Senior Director Robert “Rob” Holm, who is the executive in charge of all US safety and security efforts. From there and specific to the security function, the country is split into four zones—South and Northeast headed by Director Kevin Trimble; Central and West headed by Director Octavio Jara. The zones are broken down into regions with ten regional security managers (RSM) assigned to one or more regions. If you’ve been keeping count thus far, you’ve arrived at a grand total of thirteen individuals. Really? Certainly there must be some sort of accounting error.

Before wrapping your head around these statistics, it’s important to understand the business model that McDonald’s uses to operate. McDonald’s restaurants are comprised of two distinct types of restaurant. First, there are the company-owned restaurants, internally

referred to as McOpCo restaurants, which is short for “McDonald’s-operated company” restaurants. Of the approximate 15,000 US restaurants, roughly 10 percent are McOpCo restaurants, and they are the rudder of the ship, as it were.

According to Holm, “There are three reasons why McOpCo restaurants exist. First, to provide revenue for the corporation. Second, they are a petri dish, a place to vet new technologies and try things. And third, which is the most important reason they exist, they are a people pump. They train and develop future leaders for both inside and outside the restaurants.”

This takes us to the bulk of McDonald’s restaurants—the restaurants run by independent franchisees (“owner operators”). Owner-operator restaurants comprise the vast majority of the McDonald’s empire, and while the owner operators themselves must adhere to the terms and conditions of a franchise agreement, the individual restaurants are run in such a manner that the owner operators make their own financial decisions and run their

McDonald’s US Security Team

McDonald’s may be mainstream today, and its modus operandi might seem fairly conventional, but when the company founder Ray Kroc stumbled upon the McDonald brothers in the 1950s, he knew he had something special. It wasn’t so much the food (barbeque) or the location (sleepy San Bernardino, California), it was the whole package. Implementing a Ford-style food assembly line that produced burgers ultra-fast, McDonald’s became an instant hit, expanding like no other business before it, and to be honest, probably any business that comes after it.

US Security takes the uniqueness of principle that is McDonald’s and forges its own path in the loss prevention space.

The result is a retail security organization that resembles exactly no other LP outfit in the business. To be clear, US Security seldom uses the term “loss prevention” nor do they embrace the other industry alternative “asset protection” either. Instead, they prefer to use the “security” moniker,

Octavio Jara Director

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GUARDIANS OF THE GOLDEN ARCHES

To the thousands of franchisees across the nation, US Security can take on a number of roles when supporting an owner operator. Depending on the situation, that role could include a security professional resource, a trusted advisor, or a strategic business consultant, with the goal of helping them address all manner of loss prevention issues. businesses as they see fit. Of course, this sometimes presents a challenge to the US Security staff, but more on that later.

Boots on the Ground

Where the rubber meets the road at US Security, you’ll find ten high-speed regional security managers, each responsible for providing expert security advice to hundreds of restaurants in their respective geographical regions. Most of them come from conventional retail loss prevention sources, while others do not.

Take Jennifer Schaefer for example, a RSM in the Midwest and Heartland region of the country comprising approximately 1,200 restaurants. Schaefer boasts a master’s degree in criminal justice leadership. Prior to coming to McDonald’s, Schaefer worked for such retail and gourmet coffee and food establishments as Target and Caribou Coffee Company.

She also has significant experience as a judicial law clerk, correctional officer, and college professor, which gives her a wide plethora of experience to apply in the multi-faceted LP industry and QSR system.

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William “Bill” Ball is another RSM in the Midwest territory (Ohio and Indiana) and serves as the go-to security professional for approximately 1,300 restaurants.

“I started my loss prevention career chasing shoplifters at Sears for $5.45 per hour,” stated Ball, who later worked for Kohl’s, The Gap, and then Lowe’s, before beginning his career at McDonald’s.

Daniel Thomas, however, holds a somewhat different background. He currently serves as RSM for the Michigan and Chicago area regions, comprised of nearly 1,400 restaurants. Thomas came to McDonald’s eighteen years ago after serving as a police officer. “I spent ten years as a patrolman and detective with the St. Louis Police Department,” he stated.

The regional security managers hold an eclectic mix of talents and former avocations to be sure, but this diversity is what makes US Security so effective.

Octavio Jara, director of US security for the Western US, was also a former police officer in his past life in Southern California before working as a member of the loss prevention department at AutoZone.

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Senior Director Holm is a career security executive, having held similar positions at Honeywell, 3M, Imation, and the Tribune Company among others. With such a small staff compared to similarly sized retail establishments, there are no novices, no trainees, and no second-rate people within US Security. Each position is filled by a seasoned pro. What is interesting about US Security as a whole is the corporate mantra that pervades the organization, which was summed up best by Holm when he said, “I’m not a loss prevention professional.

I am a business professional who has expertise in the security field.” Thomas echoed that sentiment with a slight twist.

“I see myself as a strategic business partner.

If the restaurants only use me for security issues, they are missing out,” stated Thomas.

What Could Possibly Go Wrong

Before delving into US Security’s methodology, consider the range of incidents that can take place at your average McDonald’s. Some of these are germane to other retail establishments,

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GUARDIANS OF THE GOLDEN ARCHES while others are particular to McDonald’s, mainly because of the massive foot traffic within the restaurants on a daily basis.

“Over the course of a single week,” began Schaefer, “I was asked to consult on two missing deposit investigations, a credit card skimming incident, a multi-restaurant demonstration, and one private plane that crash landed in the parking lot.” Other, unique events are common as well, due to the sheer ubiquity of the chain.

“I recently had someone call a restaurant claiming there was an explosive device under one of the chairs, and it turned out to be a high-profile media event,” said Thomas. “Thankfully, no explosive device was found.”

Holm has perhaps the best explanation for the wide diversity of potential issues that may arise nationwide. “27 million people per day visit McDonald’s restaurants. If you tell me there is a one-in-a-million chance that something will happen in

our restaurants, then it will happen 27 times per day,” explained Holm.

Accordingly, the regional security managers are no strangers to calls at all hours of the day and night. “When I get a call in the middle of the night, my first question…is everyone okay? It is all about our number one priority—our people,” emphasized Schaefer.

With each regional security manager in charge of the loss prevention needs of several hundred restaurants each, how does US Security manage to execute their responsibilities at such a high level? “We are a one-man or one-woman show in the regions we support,” said Bill Ball.

“Our primary responsibility is brand protection, which includes protecting our employees and customers, our corporate assets, and our strategic partners, all with the goal of providing the best restaurant experience for our customers.”

Spend enough time with the regional security managers, and you will hear the term “brand protection” mentioned a lot. It is not just a catchy buzzword

that McDonald’s has adopted. It is in fact an actual detailed strategy with dozens of implications. To US Security, brand protection is a multi-faceted strategy. “We have to protect the brand from different things—robberies, homicides, and burglaries,” said Ball.

Jara wholeheartedly agrees, yet adds further items to the laundry list. “Protecting the brand includes protection of confidential information, our reputation, our most valuable resources, our employees, and of course, our customers,” he stated.

A Two-Pronged Approach

Each RSM has to deal with the two distinct retail environments—McOpCo locations and franchisee restaurants—both of which have their own separate and unique needs. Said Ball, “We have to fly at a much higher level. We have to stay cognizant of resources and time. We have to handle things by phone, which includes coaching and investigations.” Although occasionally, as Thomas pointed out, “Sensitive

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GUARDIANS OF THE GOLDEN ARCHES

McDonald’s serves 27 million visitors per day at it’s nearly 15,000 restaurants scattered throughout the US.

issues require boots on the ground, and you need to get into a restaurant.”

What makes US Security’s job such a challenge is the inherent dichotomy between the McOpCo restaurants and the franchisee restaurants. On the one hand, LP needs within the McOpCo restaurants function much like any corporate loss prevention enterprise. In those restaurants US Security enjoys a tabula rasa approach at loss prevention activities. Things like camera systems, safes, lighting, alarm systems, and exception-reporting software can all be purchased as a whole and then rolled out to each location much as would happen in any other corporation. In this environment, McDonald’s US Security team is free to test new technologies and practices, which can then be offered as solutions to the owner operators. In McOpCo restaurants, these new methods and procedures are

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thoroughly vetted, so by the time they are offered to owner-operator restaurants, US Security knows they are proven solutions.

Don’t think, however, that US Security merely issues an edict or proclamation and then leaves it to the owner operators to follow. That’s really not how it works. “We are here as a resource for best practices.

In the end, it is their restaurant, their time, their employee base,” said Schaefer.

Ball expanded upon that thought.

“McOpCo restaurants are the test beds, the restaurants that we do all these things in to show what works,” he explained. “Then the franchisees can see that it works and determine whether or not to adopt those methods within their restaurants as they see fit.”

When called upon by owner operators, the RSMs can serve as valuable resources and consultants in LP. Said Thomas, “We try JULY - AUGUST 2015

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to walk in their stores from a loss prevention standpoint and determine which LP methods might be effective from a security and cost standpoint and which might be less so.”

In many cases the adoption of new technologies or methods involves a large degree of consulting and influence with the owner operator. “It’s all about building those relationships,” stated Ball. “It’s your subject-matter expertise that you have to convey to the operators. You have to show them results through metrics, through data.” Ultimately, however, the owner operators are free to do what they see fit from a security standpoint, including what equipment to use and what process to employ. US Security’s role is to make sure they understand the options and resources available to them to make their restaurants safer and more secure. continued on page 48

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GUARDIANS OF THE GOLDEN ARCHES

McDonald’s US Security team is free to test new technologies and practices, which can then be offered as solutions to the owner operators. In McOpCo restaurants, these new methods and procedures are thoroughly vetted, so by the time they are offered to owner-operator restaurants, US Security knows they are proven solutions. continued from page 46

In fact, US Security is also quick to point out that McOpCo’s test bed status is a tool for the owner operator, a resource they can tap into, showing them that certain best practices work and are not merely a corporate push. “What we do from a security standpoint at the corporate level needs to make sense to our owner operators,” explained Jara. “Our McOpCo restaurants provide us an opportunity to showcase new security initiatives, technologies, and put them in place to demonstrate to our owner operator the value that these systems work.

This type of relationship is rewarding for us because it gives us the ability to put our influencing skills to work.”

In many cases, the regional security managers act as lobbyists at the local co-op meetings. Each major city will have its own co-op, which is a group of owner operators and McOpCo restaurants that hold monthly meetings. “Every co-op gets together each month,” said Ball. “As a security professional, you want to get on those agendas

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to influence McOpCo’s business and operations, and then hopefully, McOpCo can influence the owner operators on security best practices.”

Thus, to the thousands of franchisees across the nation, US Security can take on a number of roles when supporting an owner operator. Depending on the situation, that role could include a security professional resource, a trusted advisor, or a strategic business consultant, with the goal of helping them address all manner of loss prevention issues. Whether it is offering assistance with the selection of a surveillance camera system, or referring them to an armored car service, assisting with an internal investigation, or serving as a liaison to local law enforcement, US Security is there to consult.

Considering that the RSMs don’t have any direct loss prevention staff that report to them, they clearly have a lot on their plates. However, when asked whether he could use more LP staff, Holm replied, “Part of me says yes. It’s a knee-jerk reaction. The thing is, we are not a security company.

We are an operations company that JULY - AUGUST 2015

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sells hamburgers. In that sense, I have 90,000 security members on my staff.”

At the end of the day, it is truly remarkable that such a small team is so effective in protecting what just might be the most identifiable brand across the globe. It ultimately comes down to the attitude of retail security pervasiveness throughout the organization, as Holm puts it, “from the boardroom to the crew room.”

Every employee is a loss prevention node, and each owner operator has a vested interest in brand protection and the safety and security of McDonald’s restaurants. And with US Security at its best, the brand is in great hands with the Golden Arches shining brightly!

EDITOR’S NOTE: McDonald’s, Big Mac, Chicken McNuggets, World Famous Fries, Happy Meal, and The Golden Arches are trademarks of McDonald’s Corporation and its affiliates, and are used with permission.

ADAM PAUL is a business writer based in Los Angeles, California, and an ongoing contributor to LP Magazine. He can be reached at AdamP@LPportal.com.

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DIGITAL DIALOGUE

Taking a Fresh Look T

he team at LP Magazine want to provide you with the best possible resources to help support both industry needs and professional development. To be the best, we have to seek critical input and accept that feedback with an open mind. We must welcome different opinions with reverence and respect. We have to embrace change and explore new ways to serve your needs. All of the different things that we advocate as part of professional development for those in the loss prevention industry must also apply to our team and our professional resources. That will always be a part of our commitment to you as our readers and our colleagues.

That also compels each of us to continue to pursue new and different ways to share that product with you. This demands introspection, but action as well. It will require new approaches, new columns, and fresh perspectives. But to be most successful, it also requires your participation. The voice of loss prevention is something that we share—not something that we are. It is a collective voice that is only meaningful when it is genuine.

This column is intended to keep you up to speed with what’s going on, what we can expect, and what’s being said by and about retail loss prevention and our collective interests across digital channels. We actively seek both input and feedback, encouraging an interactive resource that meets your needs and expectations.

Your ideas and opinions can make a difference, and we want to provide any opportunity that we can to give you that voice. Every one of us has the ability to influence change and help shape the future of the industry. However, it’s still up to you to seize the opportunity and make sure that your voice is heard.

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By Jacque Brittain, LPC Brittain is editorial director, digital, for LP Magazine. Formerly a director of learning design and certification, Brittain managed the development of the LPC and LPQ certification programs in collaboration with the Loss Prevention Foundation. Prior to that he was vice president of operations for the industry’s largest executive search and consulting firm. In his thirty-plus years in the LP industry, he has helped build and enhance many learning initiatives and provided career counseling for thousands of industry professionals. Brittain can be reached at jacb@lpportal.com or by phone at 704-246-3143.

We would like to review with you a few of the changes that we have made thus far in 2015 and that will continue to evolve as part of our commitment to you. In the event that you haven’t viewed our digital content, this will also give you a better feel for what is available to you. Our goal is to keep you aware and informed, but also to encourage you to participate in our growth as your loss prevention resource.

Expanding Resources

Our two weekly e-newsletters have now expanded to a Monday-Wednesday-Friday format called LP Magazine Online. The expansion of our digital offerings has provided us with a greater opportunity to share important news and information that is most relevant to the retail loss prevention community. When we look at the expanding roles and responsibilities of our profession coupled with the vigorous evolution of the entire retail industry, we feel that it’s important to have a resource that can help keep all of us informed, educated, and up-to-date with today’s most important topics. There is a purposeful flow to these offerings intended to help provide what is most important to you as a professional.

By the same respect, we recognize the precious value of your time and attention. As we’ve promised since our first conversations with Digital Dialogue, this also means that we have a responsibility to share that content in a way that is respectful of that critical aspect of your day-to-day agenda.

Every news story is notable. Every incident holds value in some way, and we never want to miss reporting on what’s most important to you. But do you really have time to sift through 60-plus stories every workday? How many will you actually read? Having choices is great, but there has to be a balance rather than a bucket. We will remain diligent in our commitment to bringing you the top stories and the top news. We have the LP Magazine app to offer you a broader spectrum of ongoing loss prevention stories and events.

But the newsletters will remain focused on the news and information that you feel is most important. That doesn’t mean that we can’t stretch our perspective, explore different topics, and have a little fun. But it does mean that we will continue to bring you the best possible product and respond to your thoughts, ideas, and input as we move forward. Your contribution is what makes LP Magazine the voice of loss continued on page 52

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continued from page 50

shared by industry leaders and subject-matter experts in collaboration with the Loss Prevention Foundation.

We are also attempting to bring you subjects that are both relevant and timely with attention to current events and industry calendars. For example, we provided multiple articles on the assessment process during typical employee review cycles. We reviewed networking and related subjects prior to industry conferences. We’ve discussed diversity, leadership principles, data protection, and other topics that you’ve told us are most important to you. Each article is intended to provide focused attention on the specific topic to maximize value and relevance.

prevention, and we would love to hear more of your ideas and opinions.

Carrying a Stronger Voice

What do you think about the top issues facing loss prevention professionals? Where do you think the industry should be focusing the most attention? If you could ask top leadership a question, what would it be? What is the best way to get results? What should we be talking about, and what do you have to say about it?

What we want to know is how can you make a difference? We are always looking for ways to expand your voice. In response, we have added “Instant Polls” to give you a bigger stage to ask questions, express your opinions, and share your ideas.

LP Magazine Online will be conducting regular polls to provide a greater opportunity to actively interact with your peers, industry leadership, and the entire LP community.

Each week we will be asking you to answer questions and express your opinions on topics that you want to discuss.

This won’t be a complicated or time-consuming process. We will simply pose one or two questions each week, asking you to provide an answer from a multiple-choice format that you feel best represents your views on the topic at hand. If you so choose, you can contact us directly to share a different or more in-depth perspective on the subject. Participation is confidential, encouraging candid and sincere responses.

Once we receive your feedback from the polls, we will then provide an article that offers a summary of the results, along with any comments or observations gathered as a result of the poll.

The polls that we have conducted thus far have shown strong participation and strong opinions covering a broad spectrum of response options. While some feedback has followed conventional trends, others have provided more volatile outcomes. This has been very encouraging, as it echoes your true views on the matter at hand. However, it also requires active participation in order to project more viable results. When more of us participate, the outcomes present a better and more accurate perspective of our collective opinions.

This concept is very open to your thoughts and suggestions. We want the polls to be thought-provoking, informative, and educational, but we want to have some fun with it as well. If you have a question that you would like to pose or a subject that you would like us to explore further, we welcome your input.

Thus far the feedback has been very positive, with regular discussions taking place on multiple platforms reviewing the weekly content and proving feedback on the topic at hand. It’s also very encouraging to see the content lead to additional discussions with industry colleagues offering opinions, experiences, and advice to each other with meaningful outcomes. We welcome your feedback regarding potential topics, and encourage your participation in the discussion groups as content is presented.

These are just a few of the changes that have taken place thus far this year, and you can expect more to follow. We have high expectations—and so should you. Just remember that we’re listening. If you have feedback or an idea that you would like to share, please reach out to us.

LP101

Earlier this year LP Magazine in partnership with the Loss Prevention Foundation introduced a new feature as part of our online offerings called “LP101.” These weekly articles are designed for both new loss prevention professionals as well as seasoned veterans who may need to “brush up” on some of their skills. Subjects cover a wide spectrum of industry-related content and industry best practices based upon the collective experiences, resources, and expertise

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FEATURE

WHERE NEXT

FOR EAS?

REFLECTIONS ON CURRENT AND FUTURE DEVELOPMENTS IN PRODUCT PROTECTION

By Colin Peacock

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WHERE NEXT FOR EAS?

M

arketing textbooks tell us that every product, brand, and technology has a life cycle. First, there is the launch and introduction, then a period of strong growth, then a period of maturity, and then of course, a period of decline.

The textbooks point to two decline-management strategies that are within the control of those who presently own the product, brand, or technology.

First, the product, brand, or technology can be reinvented to appeal to a new target market by better responding to new trends and needs. Olay, Lucozade, and Burberry are three examples of mature brands and products that were reinvented with great success. In the case of Lucozade, sales of this fizzy tonic drink tripled through the introduction of smaller bottles and new advertising campaigns that repositioned the brand as an energy drink used by sports stars.

The second approach is for organizations to recognize that if they don’t embrace and manage the decline, their competitors will. So in these organizations, they have a deliberate plan to create and launch new superior products and technologies that push the existing product into decline. Apple and its iPhone product is a great example. To defend its market share and stay ahead of its competitors, the company continually updates its products with new superior versions: 4 was better than 3, 5 was better than 4, 6 was better than 5, and so forth. Another example would be Gillette, where the decline of two-blade razors was triggered by the launch of three blades.

More recently, three-blade razors have been put into an accelerated decline by the launch of five blades. This approach to product life cycle management has helped Gillette remain the most popular razor brand in the world.

All this learning on product life cycles came to my mind as I started to write this article on electronic article surveillance (EAS), a mature technology that prevents shop theft through the threat of detection (at the store exit) of items that have not been purchased.

If EAS is today acknowledged as a mature technology, then the next stage could be assumed to be decline.

This then opens up the question—how should retailers and loss prevention leaders manage this decline? Should they look to avert and delay its decline by reinventing their current EAS programs, making EAS work harder, or should they start searching for an alternative, better solution to shop theft that could replace EAS? I don’t think this is a case of either-or.

I believe retailers need to do both, and to get started, they must be informed by a very robust, independent, and transparent review of their current EAS programs. To enable this change, loss prevention leaders may want to consider the appointment of a single person accountable for the review, the process of EAS reinvention, and the exploration and trials of new shop-theft technologies.

Action 1: Know How EAS Is Working Right Now in Your Organization

If EAS is today acknowledged as a mature technology, then the next stage could be assumed to be decline. This then opens up the question—how should retailers and loss prevention leaders manage this decline?

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EAS was invented in a retail context when there was no self-scanning, when ordering online was not even thought about as a possibility, and in a retail world moving away from small-box, urban convenience stores.

But these are the realities within which EAS is now operating, with modern retailers having a plethora of formats, product ranges, staffing models, and technology capabilities that all have an impact on the way in which EAS technologies function.

To answer the question of how EAS is working in an organization now, the reviewer should undertake the following: 1. Commission a full audit of the current program, 2. Complete structured interviews with store managers and associates,

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WHERE NEXT FOR EAS? 3. Review the current EAS scorecard, 4. Work with the finance function on a true cost of ownership of the EAS program, and 5. Perform a SWOT analysis.

Below are examples of the audit questions that should be considered.

Products: ■ Which products are currently being shipped to stores with tags inserted or applied either by the vendor or by the retailer at the distribution center?

■ What guidance is being given to stores regarding which products they should protect in store with an EAS tag or an EAS-enabled device?

■ Are the right products being protected?

■ What is the product-tagging compliance rate and root cause of poor compliance?

Deactivation Equipment: ■ What equipment is there in store for tag and device deactivation, and is it in full working order?

■ What is the deactivation rate?

■ How

are EAS-protected items being deactivated when being paid for by self-scanning devices, at self-scanning tills, at mobile tendering devices such as iPads, or via an online transaction shipped from the store or fulfillment center?

EAS Pedestals: ■ How many gates are there per store and in which locations? Does the appearance of the gates indicate the equipment is in working order, and do they support the store and brand standards of your organization?

■ What are the capabilities of the gates beyond reading EAS? For example, can they count customers, be used as advertising space, or identify known tag-avoidance techniques such as foil-lined bags?

■ What is the read rate of EAS gates, and how does this vary across types of stores?

Alarm Management: ■ Is the company policy on alarm management clearly understood by all members of staff?

■ Is

there evidence of strong compliance to the policy?

■ What level of visibility is there to EAS gate alarm activity and store responses to them? Is there data on the percentage caused by failed deactivation, percentage caused by tag pollution, and so on?

■ Do the stores have interventions and training in place to reduce the number of non-theft alarms?

■ Are customer complaints of false EAS alarms logged by the company or the store?

■ Do the stores have records of the number of apprehensions made and the value of goods recovered?

Next, there should be structured interviews with store managers, associates, and security guards, either facilitated by a research agency, by the loss prevention leaders themselves, or by the retailers’ own market research teams. The interviews should seek to understand how stores currently think about EAS, how it is working, whether they view it as effective and a

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WHERE NEXT FOR EAS?

EAS was invented in a retail context when there was no self-scanning, when ordering online was not even thought about as a possibility, and in a retail world moving away from small-box, urban convenience stores. worthwhile addition to store security, and how it might be improved.

The next part would be to review the scorecard and key performance indicators pertaining to the EAS system. What does the data tell the organization? For example, what are the trends in alarm activations, response rates, the number of items tagged at source, the number of apprehensions, and the number of complaints?

Next, assisted by colleagues in finance, the reviewer should undertake a full assessment of the true cost of the EAS system, including all elements of the costs associated with EAS, from tag and device purchases, cost of dedicated store labor, system maintenance, energy costs, injury claims, shopper compensation, the cost of prosecuting thieves, and so on. If the organization has implemented a clear segmentation strategy to the EAS investment to reflect the different risk profiles of stores, the analysis should aim to get a cost of ownership for each strategy.

Finally, there should be a SWOT analysis, informed by the previously mentioned analyses, identifying the strengths, weaknesses, opportunities and threats that should be used to shape an improved EAS strategy.

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Action 2: Build a More Effective EAS Program

Experienced, organized, and professional shop thieves have long ago identified how to defeat what they view as rather predictable EAS technologies.

Their habits and techniques are well advertised on YouTube and available in published books sold on Amazon.

Given this, the primary target for EAS technologies should arguably be to deter the opportunist thief as opposed to the committed criminal.

Understanding opportunistic thieves is important and relevant to loss prevention managers because potentially, in the right circumstances, they can make up the vast majority of those trying to steal from retail stores. In fact, I heard a recent respected industry expert speculate that perhaps 10 percent of those who visit a retail store could be potential thieves.

In this respect, academic research is very helpful; it suggests that there is a crime continuum whereby those presented with the right opportunity are highly likely to engage in a wide range of criminal endeavor.

To test this theory, let me ask you a sensitive question: have you broken the law this month? If you drive a car and have broken the speed limit, you have JULY - AUGUST 2015

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indeed broken the law and behaved dishonestly. But before you committed this crime, you almost certainly made a quick assessment, asking yourself four key questions: 1. What is the risk of being caught speeding? (You thought low, right?)

2. What is my level of motivation? (Were you late for that meeting again?)

3. What is the level of difficulty to do it? (Just press your right foot down a bit harder?)

4. What is the extent to which I fear the possible consequences? (You thought low, right?)

You therefore decided to break the law and speed along the road as well as along the crime continuum! In a similar fashion, before thieves steal, they will typically ask these same questions. And while the retailer can have little impact on motivation, the degree of difficulty (most retailers don’t like missing out on the impulse sales they get from making the items available for self-selection), and the impact of sanctions, they can do something about increasing the perception of the risk of being caught.

For most retailers, amplifying the perception that EAS will increase the risk of being caught is therefore the big improvement idea, but it requires the following points to be considered.

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WHERE NEXT FOR EAS? Increase Compliance. How often have you visited a store, looked at a shelf, and seen that only some of the at-risk (hot) products have been protected with an EAS device? How could stores improve compliance? More audits? More training?

A clearer direction on what to tag?

Increasing the percentage of products that are tagged before arriving at the store?

Removing the opportunity for stores to apply any tags or devices at the store completely?

Increase Risk Communication.

Retailers could request that all products that have a tag inside should have a statement on the outside such as “security protected.” In the same way, devices such as hard tags, spider wraps, keeper cases, and soft tags applied in-store could all have the words “security protected” displayed to help amplify the perception of risk. Equally, checkouts, self-scan devices, and the EAS pedestals themselves can all be leveraged to amplify risk. For example, a USA retailer is now placing public-view monitors over the store exits, and when an EAS alarm is activated,

the screen shows the image of the shopper setting off the alarm with the message “security recording in progress” prominently displayed.

Improve Meaningful Alarm Response Rate. If you work in the loss prevention team, when was the last time you spent a day working alongside the store associate or third-party security guard responsible for the handling of alarm activations? This is often an excellent way to gain insights into how the system is actually working on a daily basis. Another way is to use your video system to gain valuable insights into root cause of those alarms, as well as an assessment of the response rate.

For benchmarking purposes, you may want to consider these data points from a study by Hayes and Blackwood, which is based on audits in 320 USA food, drug, and mass merchandising retailers: ■ Only 60 percent of EAS pedestals were able to read products with a soft tag inside.

■ In 91 percent of stores visited, there was no form of acknowledgement by

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any person in the store when an alarm was activated.

■ Of the 9 percent of occasions when there was an acknowledgement, on just 5 percent of those occasions did a member of staff respond to an alarm in what was considered a “meaningful” way, such as the checking of a till receipt or identifying the product that triggered the alarm.

What this data suggests is that the odds of a thief even getting asked about the reasons for alarm activation are generally very remote. If they were to steal one item every day for 1,000 days, the odds suggest that they would get asked to help identify the cause of the alarm on just under three visits or about once per year!

The most logical starting point would be to begin with a clear understanding of the reasons for the alarms in the first instance. As a benchmark, UK researchers found that 96 percent of the alarm activations were non-theft. No wonder the alarm response is so low if the system is “crying wolf” to this extent.

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WHERE NEXT FOR EAS? To reduce the number and rate of non-theft alarms, the causes need to be better understood. Are the majority of these alarms triggered by shoppers entering or exiting the store? How many can be attributed to a legitimately purchased product not having the tag correctly deactivated? Equally, how many false activations are generated from self-scan transactions compared with staffed checkouts? Once the root causes are exposed, the solutions will become more obvious. In a recent case study, a US home improvement retailer shared how a 50 percent reduction in non-theft alarms was achieved by investing in better deactivation equipment, which in turn generated quantifiable improvements in store productivity.

Action 3: Experiment with New Shop-Theft Detection Technologies

In the shoplifters’ handbook written by Gaime and Ghone, the authors offered up the following advice to retailers: “Nothing will turn shoplifters away faster than the attentive, courteous service that every customer deserves.”

Implicit here is that prevention needs to happen almost before the item is selected and concealed. If your intervention has to wait until the exit, it is probably too late to prevent the theft. So the challenge is to develop new technology solutions that can help store associates be made aware of those shoppers, in near real-time, where the provision of an attentive and courteous service could lead to the prevention of theft.

Today, a promising solution that is already helping some retailers transform their existing shop-theft capabilities is radio frequency identification (RFID). This is not a new technology. In fact, many retailers will remember the bold promises made for this technology stretching back twenty years or more. But the adoption to date has been slow across most retail channels with the exception of apparel, where store-wide deployments have been undertaken in companies such as Zara, M&S, C&A, American Apparel, and Decathlon.

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The key building blocks for their business cases have been staff and customer satisfaction, inventory accuracy, and productivity, not shop theft. In fact, I am only aware that one of these five retailers has an RFID use case based on shop theft, based upon the following perceived benefits: 1. The tag can be embedded in the item in a way that means it is difficult to remove, or if it is removed, it is likely to reduce the re-sale value. Further, if the thief attempts to return the stolen item, the retailer can refuse it if the RFID tag is removed or the tag indicates that the product had never been sold.

2. When a tag is read at the exit gate in a “not been paid for” mode, an alert and image of the product or products can be instantly sent to the store associate or security guard. This enables a far more attentive and courteous service, since the associate will know exactly what specific product or products caused the alarm.

3. Replenishment systems can be connected to the exit gates, so items leaving the store without being paid for are recognized as missing, enabling the inventory record to be kept up to date and providing valuable information on the extent of theft in the store, helping to reduce the amount of loss where the causes are unknown.

A big barrier to the more widespread adoption of the shop-theft use case for RFID will be the cost, but there are also some very practical operational considerations as well. To date, I am not aware of any retailer that has been able to apply RFID to 100 percent of all the items they sell in the store. Simple physics and the limitations of the technology remain a large reason. For example, read rates from products with high metal or water content remain problematic. The big problem is that if you cannot get to 100 percent of the items using RFID, then a store will need two work process streams to handle items with and without RFID tags. Key processes will be product receiving, cycle counts, tendering and payment, and of course, exit detection. The presence of these multiple work processes introduces complexity to the store, dampening any possible business case.

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So while there is no doubt that apparel retailers will continue to expand RFID and that many in other channels will start looking at how hard EAS tags with RFID embedded can increase visibility to the extent of the shop theft problem, it is easy to see how many loss prevention leaders have now concluded that the prospect of RFID as an alternative to EAS, certainly in the short term, is not that promising.

More promising though and potentially more near-term are new shop-theft technologies that alone and connected together can help prevent shop theft by alerting staff to those customers where attentive and courteous customer service would help deter theft. Here are four potentially connected ideas inspired by technology.

Smarter Products. Beyond RFID, there are new emerging technologies such as conductive inks that can provide data on product identification and location without the need for human intervention.

Smarter Fixtures. New technologies are now enabling shelves, pegs, and rails to know what and how many items they hold. These go beyond RFID and can recognize product package-based sensors providing a range of data points including weight, quantity, and importantly, when and how many products are being removed, in near real time.

Smarter Cameras. Advances in camera technology, image resolution, exception management, networking, and remote monitoring, together with image and pattern recognition have transformed the capability of cameras and the alerts they can generate to enable engaged store associates to deliver better customer service that in turn can help prevent theft.

Smarter Mobile Devices. Such technologies were not in the minds of the inventors of EAS. But today in the hands of shoppers, they can be used to scan and pay for items. While in the hands of store associates, real-time alerts can be sent to them to help prevent shop theft through courteous customer service. The full possibilities of smart mobile devices in shop-theft prevention are still to be explored, and they could offer imaginative and innovative ways to improve product protection. continued on page 60

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WHERE NEXT FOR EAS? continued from page 58

Experienced, organized, and professional shop thieves have long ago identified how to defeat what they view as rather predictable EAS technologies. Their habits and techniques are well advertised on YouTube and available in published books sold on Amazon. Given this, the primary target for EAS technologies should arguably be to deter the opportunist thief as opposed to the committed criminal.

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Individually, these technologies may be able to deliver new levels of shop-theft prevention by connecting observed events to engaged and motivated store associates who can then present themselves to shoppers in a way that alerts potential shop thieves to a heightened risk of being caught.

However, when these technologies become more connected, the opportunistic thief’s perception of the risk of being caught may be magnified significantly.

Perhaps in a future retail store, the shopper will make a selection from a smart shelf that then sends a message to a CCTV system logging that an item has been selected. A member of staff could then be alerted in near real-time via their mobile device, showing them an image of the shopper and the product they have selected. They could then decide to approach the shopper and ask them if they need help and possibly offer them some form of discount or promotion opportunity. Together this delivers what the shop thieves themselves have told retailers is the best deterrence—attentive and courteous customer service.

Whether these technologies or RFID-based approaches become the eventual replacement of EAS is not clear right now. Both need significant further development and experimentation before this is likely to be the case. However, it could be that the emergence of these alternative technologies may mean that a replacement for EAS is perhaps not as far away as it might have been imagined.

The Role of the Shop-Theft Technology Czar

Few other technologies are as relevant to as many stakeholders as EAS. It impacts the brand, shopper experience, the store manager and associates, the supply chain, product manufacturers, and law enforcement to name but a few. Given the breadth and range of stakeholders and the requirement for an ongoing investment in innovation, retailers may want to consider appointing a single individual to be accountable and on point for shop-theft technology.

Like a czar, they would, with great passion and zeal, champion everything

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WHERE NEXT FOR EAS? According to an audit conducted by Hayes and Blackwood of 320 US food, drug, and mass merchandising retailers:

60%

91%

■ Only 60 percent of EAS

■ In 91 percent of stores visited, there

pedestals were able to read products with a soft tag inside.

was no form of acknowledgement by any person in the store when an alarm was activated.

■ Of the 9 percent of occasions when there was an acknowledgement, on

just 5 percent of those occasions did a member of staff respond to an alarm in what was considered a “meaningful” way, such as the checking of a till receipt or identifying the product that triggered the alarm.

connected to shop-theft technologies, including a scorecard that tracks and monitors current EAS performance.

The role would sit within the loss prevention team. For some retail organizations, it could be a fully dedicated role, especially through the initial current program review stages.

For others, it could be part time and just an extra level of responsibility. The skills needed would be the ability to think strategically, to being comfortable with collecting and analyzing data, and most importantly, the ability to communicate well with others and build collaborative relationships.

Finally, one further benefit of having this dedicated role would be to consolidate and integrate the disparate

systems to ensure the technologies work in unison to achieve the organization’s goals. In many organizations, the people responsible for EAS, video systems, investigation systems, and intrusion systems often are different. Having one person lead these efforts may ensure the systems are working towards the same goals.

Just the Tonic the Industry Needs

This article set out to answer the question—what next for EAS? While there is potential here for the industry to continue to work together on this question, now is the right time for each loss prevention leader to define the answer for their own organization.

I believe that avoiding the question and doing nothing is no longer an option.

Perhaps the most significant intervention any loss prevention leader can now make is to appoint a single individual in their team to be accountable for the reinvention of EAS and the exploration of the new technologies, where a 360-degree review of the current EAS technology can be the foundation and inspiration for new thinking.

Taken together, this appointment might just be the tonic retailers need to revitalize their shop-theft technology thinking and the key to getting an even stronger grip of the shop-theft problem, a major drain on today’s retail experience, sales, profit, shopper satisfaction, and loyalty.

COLIN PEACOCK is a visiting fellow at the University of Leicester and strategic coordinator for both the ECR Europe Shrinkage and On-shelf Availability Group and RILA’s Asset Protection Leaders Council in the US. Prior to these appointments, Peacock had a thirty-year career at Gillette and Procter & Gamble where he was responsible for leading their on-shelf availability, brand protection, and shrink prevention capability. In this role he was responsible for delivering new thief, counterfeiter, shopper, and store manager insights; an innovation pipeline of new solutions, including RFID; and the oversight and delivery of successful collaborative projects with customers and distributors around the world. Peacock has published articles on loss in the Harvard Business Review and LP Magazine. With Professor Adrian Beck, he co-authored New Loss Prevention: Redefining Shrinkage Management, published in 2009. Peacock can be contacted at colinmpeacock@hotmail.co.uk.

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EVIDENCE-BASED LP

Walmart Moving More to an Evidence-Based Approach

G

etting it right is tough. It’s not always obvious what will work best to control a problem. And it takes a strong, secure leader to admit they don’t have all the answers.

Nobody has all the answers. But I had the distinct pleasure to work with Mike Lamb, Walmart’s US vice president of asset protection, presenting some of the results of our joint anti-theft research and development at this year’s Retail Industry Leaders Association Asset Protection Conference.

Lamb explained to the standing-room-only crowd that the incredible scale that Walmart operates in—billions in sales and losses, large high-loss product offerings and inventories, very high and growing store count, and challenging store geographies— requires his team to get very close on their solutions. At their scale, investments to protect just a few product categories in a small percentage of stores can total millions.

He outlined to session participants how he and his product-protection team are working with the Loss Prevention Research Council (LPRC), University of Florida, and internally with their buyer and operations partners to very carefully craft theft-prevention treatments, so they maximize positive while minimizing negative impacts by working with their partners to improve process design and execution, as well as via better theft and fraud control.

The LPRC provides the guiding crime deterrence theory, facilitates multi-method research in active stores, and confers with Walmart’s experts to continue to tailor techniques to small and large formats, as well as in varying neighborhood risk levels.

Walmart and other retailers should be applauded for their key leadership moving toward evidence-based practice to further focus crime and loss control while dealing with progressively complex and numerous threats. Precision is the key to cost-effective, high-impact efforts. And at large scales, precision is the best option.

Impact vs. Engineering Questions

This may sound controversial, but it’s been my observation that over the years so many loss prevention questions, articles, and conference sessions on technology with both retailers and vendors have been much more about technical improvements than deterrence enhancements. In my humble opinion LP

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by Read Hayes, PhD, CPP Dr. Hayes is director of the Loss Prevention Research Council and coordinator of the Loss Prevention Research Team at the University of Florida. He can be reached at 321-303-6193 or via email at rhayes@lpresearch.org. © 2015 Loss Prevention Research Council

professionals are behavioral experts first and technicians second.

LP decision-makers should strive to deploy countermeasures that effectively convince criminals not to attempt or commit a crime.

To cost-effectively do this without seriously harming the customer experience, LP leaders should be their companies’ psychology experts. Psychological concepts are about shaping offender choices and decisions. Doing that in a busy shopping environment with challenging employee compliance issues is very tough. After a protective technique is shown to cost-effectively curb theft attempts via good research evidence, only then should we turn to engineering-type questions.

One analogy might be a pharmaceutical company spending most of its attention on deciding to make a tablet chewable or not rather than focusing on making it as effective as possible for curing a certain illness before deciding how to best administer it. Following are some protective impact versus technical issues I’ve noticed.

Radio frequency (RF) versus acousto-magnetic (AM) EAS. For so long many retailers debated whether RF or AM was the better technology. Some of the debate made sense due to entrance and exit widths and metallic merchandise, but the initial and more critical R&D belonged on how to make EAS work better to deter low-attention shoplifters in differing store types. Boosting deterrence via “see-get-fear” concepts was and is job-one in my opinion, not where a given tag was on the radio frequency spectrum, or even who made the system.

Analog versus Digital Video. Here’s another example of engineers in basements driving protective technology rather than experienced LP experts. In LP CCTV is supposed to, first, deter crime attempts; second, provide quicker detection and response to crime attempts to reduce their severity; and third, generate crime event documentation for forensic and process improvement use.

It seems to me the digital or analog image capture format argument comes last, not first. Camera deployment tactics—such as what type (ePVM, dome, camera), where it’s placed (location, number, height), and other tactical considerations—is much more critical to reducing crime attempts and their collateral damage than image technology. Storage, easy search, and chain-wide access is very important, but first things first—deter crime attempts.

Source or Hidden Tagging versus Visible Employee-Applied EAS Tagging. This issue has long been highly discussed in our industry, with initial efforts seemingly focused mostly on tagging application costs and compliance |

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rather than how to make a tag more readily deter an inexperienced or even determined thief. First, we should find the best way to curb theft attempts and scare bad guys away. Then we can look at implementation cost-efficiency.

Miniaturization of Camera Domes. This phenomenon might well be the “poster child” for engineers driving protective device development rather than the AP experts. Overwhelming research shows offenders need to spot, recognize, and fear deterrent cues to be deterred. Making things tiny doesn’t get us there. Miniaturization can actually reduce deterrence. Plus, worrying about customers being offended by CCTV is not a primary issue. Our studies show most customers, like most offenders, don’t even notice most CCTV, and when they do, they either ignore it or even welcome it. It is good practice to conceal some CCTV for the most hardened criminals and to preclude camera disabling by select offenders. But we really want to scare most of them off, not catch them in the act.

EAS Pedestal Concealment. Concealing EAS pedestals is another concept that can seriously degrade the preventive nature of a legacy protective system. Our research shows time and again that customers are not offended by visible deterrents. In addition, honest customers do not tend to notice advertising on pedestals either according to our research. But offenders, especially opportunistic types, can be partly deterred by visible cues like pedestals, tags, or deactivators, so hiding or covering them up can be detrimental to deterrence.

This discussion is designed to get our LP leaders and solution partners thinking and talking and, most importantly, testing. We all want the same thing—lower crime and loss. We absolutely need to work closely with LP solution providers, but retail security experts should guide protective R&D based on human psychology first, not smaller, faster, lighter technical details, which will follow. The features and benefits to start with are those that strongly deter crime attempts.

Having said all this, I’m very encouraged by the brilliant and talented retail and solution executives moving to further weave psychological concepts into enhanced loss control tasking and technologies.

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This year’s conference will also feature a golf outing, a reception at the LPRC Innovation Lab, and a casino night and dinner on campus to provide multiple networking opportunities. As we fill up, I invite you to learn more about the annual Impact conference, and consider joining us. For more information, email Jessi Dudley at jessi@lpresearch.org.

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From time to time I like to recommend books that can add to the knowledge base of retail LP professionals. Environmental Criminology and Crime Analysis edited by Wortley and Mazerolle brings together great chapters on situational crime prevention by leading criminologists. Many of these chapters are very adaptable to retail environments.

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ASK THE EXPERT LP Magazine Interview with Dan Cremins

Video Analytics: Crafting a System for Success

Dan Cremins is director of product management with March Networks, a leading provider of video surveillance and video-driven business intelligence solutions used by retailers worldwide. He has more than sixteen years of experience in the video security industry. Prior to joining March Networks in 2009, he worked at Tyco/American Dynamics, where he held management positions in application engineering, product management, and business development.

Cremins has spoken at leading security events and is a frequent contributor to security and retail publications on topics related to video-based applications.

V

ideo analytics applications have evolved from earlier versions that produced less than spectacular results.

When combined with other data sources in easy-to-use reporting tools, today’s analytics can help measurably reduce losses from theft and fraud. The challenge is defining up front what you want to achieve with your analytics, understanding what’s possible, and then setting up your system for success.

To help find some of those answers, LP Magazine recently sat down with Dan Cremins, director of product management for March Networks.

A presence-detection analytic on its own is not going to provide much relevant information for LP, for example, but combined with transaction data and video, it enables LP investigators to start catching refunds where no customer is present. They can then use the same software to search

LP professionals are in an enviable position of being able to demonstrate how video surveillance combined with analytics, POS transactions, and other systems can provide retailers with a valuable, more complete view of their business and help increase profits.

What are some of the capabilities today’s analytics offer LP teams that previous generations did not?

Overall, the video analytics available today provide better accuracy compared to past generations. That’s not surprising given advances in the technology and earlier experiences with analytics that didn’t perform to their promised levels, leaving many users feeling frustrated and manufacturers focused on improving performance. In that same vein of “lessons learned,” manufacturers also are careful to clearly explain what customers can expect in terms of accuracy.

In some cases 85 percent accuracy might be perfectly acceptable for the application, while in other instances a retailer might opt to pay more for higher accuracy.

Faster and easier configuration is another characteristic of most of today’s video analytic products. An analytic that once might take an installer an hour or more to configure can now be setup in just minutes thanks to innovative software features some manufacturers now build into their analytic products. For LP teams that means time and costs saved on installation and less or no time spent beyond the initial setup to get camera calibrations working as they should.

Probably the most interesting contrast is how retailers are using analytics today. When the technology first appeared in the market more than a decade ago, it was primarily used for mission-critical security applications. For example, a retailer might use a tripwire analytic to trigger an alert if someone entered a high-value stockroom or a store after business hours.

While those security analytics are still being used and evolved, many of the new analytic offerings we’re seeing now have been developed to capture data for business trend analysis rather than for security. Pulling in other data sources, including point-of-sale (POS) transaction data and the synchronized surveillance video in easy-to-use reporting software is key to the value of these analytics for loss prevention.

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for recurring incidents with the same employee or at the same store. Similarly, a people-counting analytic could help identify an instance of back-door theft by revealing an unusual number of entrances and exits in a given period.

What questions should we be asking systems integrators and solution providers regarding video analytics for LP? The first thing I would recommend is ensuring that you have a very clear understanding of what your LP team wants to accomplish with the analytics being considered. Then have a conversation with your systems integrator, manufacturer, or both, so you know exactly what the analytic can realistically deliver.

A facial-recognition analytic might be ideal for certain applications, but if someone steals from one of your stores, it’s still unlikely that you can take that image and check |

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it against faces captured with surveillance in a crowd of shoppers in your other locations. If you want to receive an alert when someone is lingering for an unusual length of time in front of a high-value counter, which may be suspicious behavior or possibly a customer waiting for assistance, then a dwell-time analytic could be very effective.

You also want to understand where your analytics cameras will need to be placed to achieve the best results.

Setting up an analytics camera for side-view capture, for example, when an overhead view is recommended can impact data accuracy significantly. I’d also advise LP professionals to consider what other views in their stores or restaurants need to be recorded for investigation and security purposes.

An analytics camera alone is not going to deliver complete coverage, and you will probably need to pair it with dedicated, high-resolution IP cameras over your POS terminals, perhaps a 360-degree camera for panoramic coverage, and others depending on the footprint and where surveillance cameras are already installed.

Remember that all of this information is important for LP professionals and systems integrators to understand. Your provider should be asking you how you’ll be using the analytics and discussing camera placement and other security and LP requirements, so they can guide you toward the best possible solution.

How do I make the best business case for analytics?

One of the most exciting things about business analytics is the ability to provide data intelligence that extends well beyond more typical security and LP applications. The same analytics that can alert LP teams to possible theft can also provide valuable insights for colleagues responsible for marketing, operations, and customer service, especially when combined with other data sources in user-friendly reporting software.

A people-counting analytic integrated with POS transaction data can provide important conversion-rate information that retailers can analyze and compare across stores and over time to identify areas for improvement.

A dwell-time analytic can offer marketing groups detailed statistics on endcap display performance, while queue-length analytics can deliver relevant information on how long customers are waiting in line. If the answer is “too long,” then it’s easy to pull up the associated video to find out why, and then address the issue.

The ability to extend the use of surveillance video to other areas of the business by adopting analytics helps LP professionals build a compelling business case for the investment. Some may opt for a cost-sharing model and look to a system with flexible, user-based permissions. Other LP teams may continue to be the primary system users, while introducing the organization to a rich, new source of business intelligence.

However the model evolves, LP professionals are in an enviable position of being able to demonstrate how video surveillance combined with analytics, POS transactions, and other systems can provide retailers with a valuable, more complete view of their businesses and help increase profits.

Two-Way Business Radios

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1-800-950-5005

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SOLUTIONS SHOWCASE CEC

Reforming Generations through Education Worldwide Dilemma

By Jeff Powers

S

Strengthening Community Partnerships

hoplifting is a worldwide dilemma.

National retail theft in the United States is at an all-time high of $44 billion. At the local level, communities are affected in numerous ways, from the rising cost of retail prices to offset shrinkage, to the rising tax rates to cope with increased thefts. At the retail level, a loss prevention associate loses valuable time on the floor responding to low-risk, first-time offender situations that could easily be resolved with the CEC Restorative Education™ program.

“CEC has sown together ideas from societal sciences with practical wisdom to develop and implement a program with the potential to not only reduce recidivism, but also improve lives. I think students who put time and effort into this program will enjoy it, learn from it, and see the benefits from applying it,” says BYU Professor of Psychology Sam Hardy.

CEC’s Restorative Education Program gives all participants the chance to make a bigger, broader impact on society by altering the path of as many as 250,000 annual first-time offenders in the US alone. This volume of offenders crowds legal dockets, distracts police from more serious crime prevention, and creates a cycle of crime that is avoidable with an alternative solution.

In addition to the societal impact, the average cost to process a shoplifter through the criminal justice system is in the $2,000 to $3,000 range. “Positively identified, low-risk offenders may opt into the diversion program at the store locations, freeing store-level loss prevention officers, police officers, and criminal intake prosecuting attorneys for other duties,” states a participating chief of police where the CEC platform is being utilized by the local retailers of that jurisdiction. The CEC Restorative Education Program is the right application to offer a second chance.

How It Works for Retailers

Based on rational emotive behavioral therapy (REBT), CEC’s Restorative Education proprietary course utilizes a highly successful approach of providing low-risk offenders second chances to right their wrongs.

The CEC program holds the offender accountable throughout the duration of the course, while allowing the retailer to offer an alternative to the criminal justice system.

CEC provides the loss prevention professional with a software-enabled iPad to use in the retail setting. This allows for quick reporting, tracking, and processing of detainees at the retail location in approximately twelve minutes per offender. If the detainee is a low-risk or first-time offender, they will likely qualify for the CEC curriculum.

To further expedite the process, the CEC software determines offender qualification with a simple image capture of a state ID or driver’s license using the iPad camera and CEC software.

This feature helps the retailer mitigate any subjectivity from the detainee process.

About the Author

Jeff Powers is chief customer acquisition officer for CEC. Leading an incredible team of professionals dedicated to promoting restorative justice, Powers focuses on building partnerships with corporations, law enforcement agencies, and prosecutors. He has over thirty years of experience in sales and sales leadership serving the retail loss prevention industry, including relationship development, hiring, and training of highly successful sales executives. He has extensive experience in To learn more about CEC’s solution and solution selling hardware, the impact it can have, watch his latest loss prevention video. https://www.youtube.com/watc software, and services. h?v=8dVkImGwe8I&feature=youtu.be.

D.A.R.E. America Partners with CEC

D.A.R.E. has created a partnership with CEC to strengthen their shared beliefs in recognizing that impulsiveness of youth can lead to bad choices, and behavior modification will lead young people toward positive lives. Many first-time offenders are juveniles, according to the Global Youth Justice Organization—“The number one crime committed by juveniles is shoplifting.” This understanding of the first-time offender profile allows D.A.R.E. and CEC to offer juveniles a second chance for offenses “often regarded as an entry crime, from which juveniles graduate to more serious crimes,” according to the US Department of Justice. The new and improved juvenile-based curriculum is known as D.A.R.E. to Make the Right Choices™.

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SOLUTIONS SHOWCASE AXIS COMMUNICATIONS

Overcoming the Top Five Objections to Video in the Cloud

T

he video surveillance market is a constantly evolving ecosystem and is not immune to scrutiny. It wasn’t long ago that skeptics questioned the feasibility and even need for video surveillance. They saved it for niche or boutique applications, but trailblazers forged ahead, and a multibillion dollar industry was born. In the ‘90s IP security cameras were introduced to the market, and though it took longer than expected, more IP security cameras are now purchased and installed than analog. And the market isn’t looking back. There is again an intersection in the video surveillance market—to cloud or not to cloud. Here we will explore the most common objections, the facts, and what’s on the horizon.

1. Security

Any system’s security, whether cloud-based or locally stored, is reliant on adherence to best practices like secure firewall management and password protection. The data being transmitted is encrypted using standard encryption methods like symmetric and asymmetric. The data is then stored by the cloud provider in a datacenter that follows strict security classifications. By following these guidelines, a cloud-stored video system is just as secure as a local system, but offers the additional benefits of redundancy and remote accessibility.

2. Bandwidth

Resource utilization will always be a key focus area, regardless of the resource type. Fortunately, bandwidth availability has improved exponentially in recent years. Still, it is coveted in a network environment due to the many systems that require it in order to function and create operational efficiencies. Camera technology lends itself to this very paradigm, as cameras offer multiple streams in order to flexibly and easily implement systems in any environment. A video stream storing data in the cloud can be configured with a lower resolution and frame rate, while a full resolution and frame rate stream can store data on the camera itself, using SD card edge storage. Furthermore, recent compression technologies allow full resolution video to be transmitted and stored with less impact to the network and storage size.

3. Complexity

Although camera technology is capable of being highly sophisticated, that doesn’t have to mean complex. In a cloud-based deployment using cameras, installers can pre-configure hardware so that there is less interaction needed at the retailer’s site, simplifying the process and saving time. What’s more, the supporting technology allows the system to connect to the cloud without forwarding ports or requiring static IP addresses, so there is less or no involvement of IT staff.

4. Reliability

There is an opportunity in video surveillance for redundancy and adapted access to systems when using the cloud. Consider the ability to mitigate the risk of lost or destroyed video evidence onsite with even just a few specific cameras in high-risk environments, such as cash rooms, high-end jewelry, or server closets recording to the cloud as backup. If desired, multiple entities can easily access the stored and live video using a smartphone or browser, agnostic to the phone or browser type. Even corporate headquarters or law enforcement teams can participate at the local branch level, which is particularly relevant in video verification for intruder detection, robberies, or emergencies as the remote video creates early situational awareness for loss prevention teams or first responders to take the most appropriate action.

5. Readiness of Retailers

It is not uncommon to have perceived objections to cloud solutions. However, think about ourselves as consumers who utilize cloud on a daily basis for our personal email accounts, social media, and even mobile banking. Other departments may even be turning to cloud commercial applications like salesforce.com and HR personnel management databases. All of those instances require that highly sensitive data be transmitted securely, following the same security principles mentioned above. As a result, security and loss prevention departments are now turning to cloud-based solutions and seeking opportunities to have video systems and functionalities in the palms of their hands. Literally.

The adoption of cloud-stored video systems has been under way for some time, with early adopters pioneering the effort and preparing the market. The next phase of technology will see a more homogenous system that is integrated in the cloud, incorporating video, intrusion alarms, access control, and other edge devices.

Analytics providers are bringing cloud-based solutions to the market, and the combination creates a true managed-services platform that will offer more than simply the hardware’s capabilities; it will introduce statistics, trends, and business intelligence. Concepts like the Internet of Things (IoT) and “connected home” indicate that we have only seen the beginning.

As a culture of open technology and connected devices converge, what better place to do that than the cloud.

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INDUSTRY NEWS

Law Enforcement, Retail LP Professionals Honored at NRF PROTECT

O

ne of the highlights of the National Retail Federation (NRF) PROTECT conference was recognition of the annual Ring of Excellence inductee, as well as the Law Enforcement Retail Partnership and Retail Case of the Year awards.

The presentations were announced on the last day of the event June 25 at the Long Beach (CA) Convention and Entertainment Center.

Ring of Excellence Award

Richard “Rich” Mellor was added to the list of Ring of Excellence honorees that recognizes pioneers in the retail LP community whose honor, integrity, and character serve as an Richard Mellor example for the loss prevention industry.

Mellor began his career in law enforcement as a police officer in Philadelphia before spending forty-plus years in retail security with a variety of companies. His resume includes titles of divisional vice president for Helzberg Diamonds, divisional vice president of LP and security for Bon-Ton, regional director of security for Macy’s East, and divisional vice president of security for both Woodward and Lothrop and John Wanamaker.

Following Helzberg Diamonds, Mellor was vice president of loss prevention at NRF from November 2011 until his retirement in 2013.

He continued to consult for NRF until July 2014. During his time with NRF he was tasked with leading NRF’s efforts on retail security and safety issues and managing the NRF

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Sergeant Charles Anderson, St. Paul Police Department, and Senior Special Agent Michael Olson, US Secret Service, (center) are flanked by members of the Twin Cities Organized Retail Crime Association (TCORCA). The two were given the Law Enforcement Retail Partnership Award for their work in taking down a large criminal enterprise. The case also led to the formation of the TCORCA.

Loss Prevention Advisory Council, a committee on which he had served for twenty-five years during his retail career, including chairing the council from 2002 to 2005.

Law Enforcement Retail Partnership Award

Sergeant Charles Anderson of the St. Paul Police Department and Senior Special Agent Michael Olson of the US Secret Service were recognized for their work tracking and apprehending a large criminal enterprise in the Twin Cities metropolitan area from 2006 to 2014. The crime ring owned and operated thirteen mobile phone stores that were used as fronts to funnel illicit proceeds of their criminal activity.

Over twenty people were arrested, federally indicted, and convicted for interstate transportation of stolen goods, access device fraud, and identity theft.

JULY - AUGUST 2015

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The partnerships developed in this case also led to the formation of the Twin Cities Organized Retail Crime Association. TCORCA is the first organized retail crime association in Minnesota and has representation from local, state, and federal law enforcement/prosecutors as well as retail and financial loss prevention and fraud investigation professionals.

Loss Prevention Case of the Year

This award is a recognition program for retail LP investigators whose work has made a significant impact on their companies, communities, and industry.

Christian Placencia, market investigator for JCPenney, was lauded for his work uncovering and investigating a lucrative international fence operation in the San Fernando Valley area of California.

Placencia played an integral role in the undercover operation

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CASH HANDLING/SAFES

Christian Placencia, market investigator for JCPenney (center) was awarded the LP Case of the Year for his work uncovering and investigating a lucrative international fence operation in California’s San Fernando Valley.

conducted by the Los Angeles Police Department (LAPD) and its Interstate Task Force, the FBI, and the JCPenney investigative team.

In March 2012 the LAPD Interstate Task Force executed search warrants at

four different fence locations resulting in the recovery of $750,000 worth of merchandise. The case was adjudicated in 2014 resulting in six arrests. Retailers affected in this case received $120,000 in restitution.

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MY TURN

Franchisees: Building an LP Program from Scratch?

C

onsider this. Loss prevention programs require monetary output for potential safety and security measures, such as buying and installing CCTV cameras or implementing access systems. Such programs also demand an investment of time and effort on the part of the entire organization for activities, such as training security guards or involving multiple departments in the risk management processes.

While LP professionals and restaurant owners understand the need for additional security, many are scrambling to get the most “bang for their buck” when it comes to investing in or updating their security systems.

Security Program Considerations

Millions of people are employed in the food industry for good reason—one out of every four adults eats in a restaurant on a typical day. Due to the sheer volume of business conducted on a daily basis, the high number of people employed by the industry, and the magnitude with which consumers frequent these establishments, LP professionals have a lot to consider when designing effective loss prevention and physical security programs.

■ Risk management ■ Securing property ■ Safety of customers ■ Safety of employees ■ Employee theft ■ Robbery ■ Lighting ■ Security cameras or other monitoring devices ■ Cash protection ■ Credit card protection ■ Alarm systems ■ Crisis management ■ Honesty policies ■ Loss reporting ■ Employee training ■ Environmental design for safe workplaces ■ Food safety ■ Privacy issues ■ Legal concerns and much more There is simply no “one” LP program that is right for every company. An effective security program will depend on many variables from the number of employees in your organization to the

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by Jeff Levitt LPC, CPP Levitt is senior manager of loss prevention for Panera LLC. He currently serves on the board of directors for Loss Prevention Foundation, where he is a charter member. He formerly served on the NFSSC board and is currently vice chairman of the ASIS International Retail Council. Levitt can be reached at 314-984-2672 or via email at jeff.levitt@panerabread.com.

number of people you service. It will also depend on such factors as the vulnerability of your company to security breaches, the specific store locations, the ease with which those with malicious intent can gain access to your records, or even something seemingly as easy to fix as proper outdoor lighting.

There are many components to consider, but the best security programs are typically designed by loss prevention professionals who have a deep knowledge base. Active and consistent learning experiences that review the risks and vulnerabilities of the restaurant industry will inform and enlighten those given the daunting task of designing an effective LP program for their company.

Physical Security Fundamentals

All physical security plans must be thought through and designed very carefully. There are no easy fixes to our physical security challenges, and we should approach these tasks with an open mind and a global perspective. We should never hesitate to get a second opinion, especially from someone in the legal profession.

Let’s take a closer look at an example. A restaurant owner decided to solve the vandalism problem in the bathrooms of his restaurant by installing security cameras to monitor the activities in the facilities. (The installation was designed to monitor the general or common area, not the stalls). While the owner did not post any signs indicating that cameras were in use, when his regular customers noticed, they stated that they felt he was right to take this action. However, it only takes one customer to disagree.

The restaurant is currently under investigation, and the owner could face a misdemeanor crime for infringing upon a person’s “reasonable expectation of privacy” in various areas of a business.

The lesson in this example is when you install a monitoring device: ■ Make sure you know and understand both your rights and the rights of the public, including all jurisdictional laws/ordinances, ■ Make sure the device installed is in a public area, ■ Alert all employees to the presence of the security camera and its purpose, ■ Keep surveillance to just video footage, ■ Consider having employees submit signed acknowledgements that they have been made aware of the monitoring device as part of their hiring paperwork, and ■ Post signage.

Audio is more legally problematic and should be avoided.

All of these steps will also help reduce internal theft, as employees will become more aware the store is being monitored. |

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PEOPLE ON THE MOVE

Caglar Ari was made District Manager of AP, South UK, and Anthony Bruni was made Senior District Manager of AP for Abercrombie & Fitch.

Christine Sampaio is now National Security and LP Manager for Acklands-Grainger.

Adrian Contreras was appointed Regional Risk Services Field Partner for Axcess Financial.

Justin MacIntyre, LPC, CFI is now a District LP Manager for Beall’s.

Mike Keeler was made Head of Safety for Bloomin’ Brands.

Paige Thompson was named Regional LP Manager for Chanel.

Danielle Foley was made an LP Analyst for Claire’s.

Brian Wildman, CFI was appointed Regional LP Manager for Compass Group North America.

Amy Spiehs-Hicks, CFI is now a Regional LP Manager, and Tony Leon was made a Field Advisor, Regional LP for CVS Health.

Denny DeMarcy, LPC is now Senior Director of LP for DICK’S Sporting Goods.

Gordon Bourne was named Regional AP Manager for Dollar Tree Stores.

Paul Jones, LPC was appointed Executive Director of Global AP for eBay. Mark Camerot and Connor Quinn were made Regional LP Managers for Family Dollar.

Gina Guardamondo, MSM, CFI, LPC was appointed Senior Director of LP for Finish Line.

Nicole Accardi-Aloia, CFI was appointed Vice President, Global Loss Prevention for J.Crew.

Theresa Rowsell was appointed Director, Asset Integrity for Kit and Ace. Brian Broadus was appointed Vice President of LP for Mattress Firm.

Luz Evelyn Zepeda is now a Regional LP Investigator, and Davion Mitchell is now a Regional LP Manager for National Stores.

Joe Marsico was appointed VP and Chief Security Officer for Nike.

Paul Trickett was made Senior Regional LP and Safety Manager for PetSmart.

Andrew Schneider, CFI was made a Regional AP Manager for Regis.

Shawna Newsome-Odoi was named Regional LP Director, and Nelly Elias is now an Area LP Manager for Ross Stores.

Allison Jonas was made National Manager, Learning & Development, Karen Patituce was made Market Asset and Profit Protection Manager, and Erika Wolf was made Zone Asset and Profit Protection Manager for Sears Holdings.

Tammy Mellies was made Regional Operations and LP Manager for Sears Hometown and Outlet Stores.

Damaon Cavasin is now Corporate Director, Asset Protection for SpartanNash.

Garth Gasse, CFI was appointed LP Analyst for SSP America.

Mark Robinson was appointed Executive Director of AP for Toys“R”Us. David Bowen is now an AP Manager for Walmart.

Nate Pearson was made Director of Operations for General Security Services.

John Fick, CFE was made Corporate Security Investigations Manager for GM Financial.

William Wilson, Jr. is now Corporate Manager of LP for Half Price Books.

Camille Bauer is now an Area LP Manager for Harbor Freight Tools.

The Home Depot announced that Mike Denby, CFI; John Mitchell; and Katie Klingler were appointed Territory Operations Managers, and Chris Courtney was appointed Senior Manager of Safety Operations.

To stay up-to-date on the latest career moves as they happen, sign up for LP Insider, the magazine’s weekly e-newsletter, or visit the People on the Move page on the magazine’s website, LPportal.com.

Information for People on the Move is provided by the Loss Prevention Foundation, Loss Prevention Recruiters, Jennings Executive Recruiting, and readers like you. To inform us of a promotion or new hire, email us at peopleonthemove@LPportal.com.

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CALENDAR

August 2 – 5, 2015 Restaurant Loss Prevention & Security Association 2015 Annual Conference M Resort Spa and Casino, Las Vegas, NV rlpsa.com August 3 – 4, 2015 Twin Cities ORC Association TCORCA Training & Conference 2015 Crowne Plaza Minneapolis West Plymouth, MN tcorca.org August 10 – 12, 2015 Axis Communications Retail Leadership Forum Ritz Carlton Dallas, TX axis.com/events/retail-leadership-2015 August 19, 2015 Georgia Retail Association 5th Annual GRAORCA Retail Crime Conference AmericasMart Atlanta (GA) graorca.org August 31 – September 2, 2015 Security100 Retail Summit Scottsdale (AZ) Marriott at McDowell Mountains security100summits.com/retail September 9 – 10, 2015 International Supply Chain Protection Organization 2015 Conference The Fossil Group headquarters Richardson, TX iscpo.org September 18, 2015 Cyber Security Summit 2015 New York City Millennium Broadway Hotel, NYC cybersummitusa.com September 28 – October 1, 2015 ASIS International 61st Annual Seminar and Exhibits Anaheim (CA) Convention Center asisonline.org October 5 – 7, 2015 Loss Prevention Research Council (LPRC) 11th Annual IMPACT Conference University of Florida, Gainesville jessi@lpresearch.org October 12 – 15, 2015 Coalition of Law Enforcement and Retail (CLEAR) 6th Annual Training Conference Marriott Inner Harbor, Baltimore, MD clearusa.org

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VENDOR SPONSORS

OUTSMART CRIME

NATIONWIDE GUARD MANAGEMENT

VENDOR ADVISORY BOARD Agilence Pedro Ramos Vice President, Strategic Accounts

ClickIt Inc. Jim Paul Director of Sales

InstaKey Security Systems Cita Doyle, LPQ Director of Sales & Marketing

Security Resources, Inc. Kris Vece Business Development

Alpha Diane Wise Global Marketing Manager

FireKing Security Group James Currey Senior Vice President Cash Management Solutions

Intelligent Loss Prevention Joerg Niederhuefner Director, Business Development

Sysrepublic Christopher D'Amore Owner/Partner, Global Sales

Palmer, Reifler & Associates Jeff Welch Executive Director

Turning Point Justice Lohra Miller President and CEO

Protos Security Patrick Henderson Owner/Co-Founder

Tyco Integrated Security Kevin E. Lynch, LPC Executive Director

The Retail Equation Tom Rittman Vice President, Marketing

Universal Surveillance Systems Anthony Oliver Chief Marketing Officer Chief Technology Officer

Axis Communication Hedgie Bartol Business Development Manager, Retail Best Security Systems (BSI) John Gantenbein President

Corrective Education Company Jeff Powers Chief Operating Officer Detex Ken Kuehler National Account Manager

CAP Index Stephen B. Longo Vice President, Strategic Initiatives

Digilock Betty Norvell Marketing

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Industrial Security Solutions Dave Sandoval President

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Verisk Retail David Duhaime President Verisk Crime Analytics

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PARTING WORDS

Sick and Tired and Pleased as Punch M

y Mother would sometimes say to my brother and me, “I am sick and tired of your behavior.” She put such emphasis on “sick and tired” that it was disturbing and frightening, and often led to some type of punishment.

There were other occasions—not as many—where she would say, “I am pleased as punch with you two.” To this day I am not sure what punch had to do with anything, but I know it was good stuff, and she was proud of us. I bet many of you have similar memories.

There is much going on in our world of loss prevention and asset protection. For me, I am sick and tired of some of it, and I am pleased as punch with other things. Here is my take on a little bit of both.

Things I’m Sick and Tired Of ■ Executives

whose job are eliminated when they were doing good because some C-level folks either think they can do without them or use it as an excuse to get rid of someone they simply don’t like. Most of these displacements happen years after they have worked in a company, and even worse usually come as a surprise.

■ Exhibit halls open at conferences while sessions are going on at the same time. How can someone be in both places?

Vendors who are spending big dollars don’t get traffic, while retailers are forced to make choices on where to go.

■ Negative, destructive thinking and talking about others.

Always have thought this was a mechanism to bring the good down to a naysayers level. You know who you are—lighten up.

■ Hearing about companies who still have goals on how many bad guys to catch. Shouldn’t most of our objectives focus on company programs to reduce loss, reduce shrink, and protect assets? Maybe we just like talking about our exceptional investigative skills.

■ People who say, “Let’s get together and talk” or “I’ll give you a call,” and those who don’t return calls or emails. Can anyone be that busy?

■ Those who have received a helping hand in their careers, but have forgotten to say thank you. Worse are those same people who fail to reach out to help others. Why is that?

I am sick and tired of discussing these things, so let’s switch it up.

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Jim Lee, LPC Executive Editor

Things I’m Pleased as Punch With ■ The

magazine has now featured three straight interviews with top-level women in LP—Lisa LaBruno in March, Melissa Mitchell in May, and Anne Sullivan in July (see page 27). What they all have in common is they speak and live the processes of the business first and foremost.

Will our September issue have yet another outstanding woman in LP? We’ll see.

■ The quality of people in this industry at the second tier or mid-management levels. There are tons of outstanding thinkers with excellent knowledge of the business issues.

The future of the industry is in good hands.

■ Good things happening to good people. There have been many recent promotions of strong LP professionals who were given expanded roles in their companies, including responsibilities for auditing, risk, shrinkage, data security, and operations.

■ The magazine was a featured sponsor at the USS charity golf event in Long Beach that raised $50,000 for underprivileged and missing kids. Way to go USS and the retailers in our industry. It is remarkable how many give of their time as well as money to support others who are not as fortunate. Stay the course.

■ The many who have reached back to help others coming up in their organizations or in another company. These are the stars of our industry.

■ Enhanced cooperation between retailers on finding solutions and sharing information. This has always set our industry apart. Keep it up.

■ Vendors who listen first and seek to understand before engaging in the selling process. They are the true “solution providers.”

■ Those who drink the “punch” and not the “Kool Aid.” Overall I think I am more “pleased as punch” than “sick and tired.” That’s a good feeling.

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