Eye Spy

Ever since people first started trading and making deals with one another, there has been theft, robbery and fraud.

And stores — filled with products people want and the cash they used to pay for them — have always been a big, fat target. cover_mailer copy

According to the 2002 National Retail Security Survey from the University of Florida, the average shrinkage rate reported by retailers this year in the survey was 1.7% of their total annual sales. Nationwide, according to the survey’s report, this would amount to losses of approximately $31.3 billion for retailers.

Meanwhile, according to the FBI Uniform Crime Report for 2001, the crimes it tracks (murder, robbery, burglary and larceny/theft among them) showed a 2.1% increase over the previous year, the first such increase since 1991. And according to the National Institute of Occupational Safety & Health, beverage alcohol store workers continue to suffer the second highest rate of homicide on the job, after taxi drivers.

Retailers, however, are fighting back — and are using a spectrum of the latest high-tech equipment to do so. BioPay 200 with DL color

The BioPay 200 with DL color, which verifies identity through fingerprints, helps prevent check-cashing fraud.

Take Brightseat Liquors in Landover, MD, for example. For years, Brightseat would have liked to offer a paycheck cashing service because, if it weren’t for fraud, such check cashing can be a lucrative sideline. But, explained Benjamin Ilkovitch, co-owner, “We kept our check cashing business to a minimum because we consistently got burned on bad checks.” He explained that it wasn’t uncommon to lose $500 in a single transaction. “And you need to cash a lot of [good] checks to make up for that $500,” he said. “Many times we had to turn away potential check-cashing customers because we just didn’t know the customer or if the check was good. But that’s all changed now.”

The change is like something out of a science-fiction movie. Brightseat now uses a system from a company called BioPay that allows them to identify someone from his or her fingerprint.

Here’s how it works: when a customer first comes to Brightseat with a check to cash, Brightseat employees use their system to record the prints of the person’s index fingers, a digital picture of the customer and an image of the person’s ID, such as a driver’s license. Brightseat’s system also has a device that verifies that the MICR encoding on the bottom of the check — and therefore the check itself — is authentic and not a counterfeit produced on a laser printer.

Panasonic WV-NM100

Panasonic WJ-HD500BV
The latest in electronic surveillance includes the Panasonic WV-NM100 (top) and the Panasonic WJ-HD500BV (bottom).

After being enrolled, customers don’t have to present ID with their checks. They just place their fingers in the system’s reader to verify their identity.

Meanwhile, if they have tried to cash a bad check in the past, the BioPay system alerts Brightseat. In fact, since BioPay maintains a database of all the people enrolled in its system — according to the company, it has enrolled over 500,000 people in 31 states so far — Brightseat is alerted if that person has an outstanding bad-check history at any BioPay merchant throughout the country.

Ilkovitch originally paid $5,000 to $6,000 for the BioPay system, including the computer used to run it, three years ago. While it does not eliminate all the problems with checks — it cannot, for instance, tell him if the business that issued the check has money in its account — Ilkovitch says he has noticed a dramatic decline in fraud in his store. “It’s been worth every penny,” said the retailer, who has increased his check-cashing business ten-fold since using BioPay.

Closed-Circuit Advances

There have been many such advances in the technology used to combat retail crime. “There have been advances in closed-circuit television (CCTV), electronic article surveillance (EAS) and exception-reporting software in the past 10 to 15 years,” said Robert Blackwood, a founder of Loss Prevention Solutions, a consulting firm based in Winter Park, FL. “And the real advance is in how retailers are applying those tools.”

According to the National Retail Security Survey, 73.3% of the retailers surveyed used live, hidden CCTV and 50.8% used digital video recording systems. Almost half, 49.2%, used POS data-mining software and 17.8% used POS-exception-based CCTV recording, when a camera aimed at the register is triggered to record when certain types of transactions, such as a return, are rung.

Many retailers use EAS systems, which include a product with a tag that causes an alarm to go off at the exit if the tag has not been deactivated by a store clerk. A small percentage (almost 2%) of all the retailers surveyed use the very latest EAS technology, radio-frequency identification tags, or RFID.

Two months ago, Schaefer’s in Skokie, IL, invested in a 16-camera digital system. “We spent $10,000 to $11,000,” reported George Schaefer, co-owner. “A couple of years ago, it would have been at least twice that much, if not more.” IDCheck new photo2

Intelli-Check’s ID-Check terminal, which analyzes and displays information encoded on driver’s licenses, military identification and other forms of state and government identification.

Basically, when it comes to surveillance or closed-camera systems, the term “digital” means computerized. The term for the old video-tape systems is “analog.” The computerized images produced by digital video recorders are stored on a computer’s hard-drive. How much can be stored at one time is a matter of how much computer memory is available.

One big advantage for digital recording is that no one has to remember to change the tape. Digital recording systems can be programmed to automatically continue recording, even if the storage space is full, and to erase the oldest stored images first. “And if you suspect something, you can always save or print out that image,” said Schaefer.

But cameras on these systems can be programmed to start recording only when something happens. By using a cursor at the computer on the image, retailers can block out areas that they do not want to trigger the camera. For example, Schaefer blocked out the view of the street from the camera at his store’s front entrance so that every passing car did not trigger the camera to start recording.

The other advance in surveillance systems is the ability to be networked. “The trend toward networked video surveillance systems opens up a whole new realm of camera viewing and control possibilities,” said Frank Abram, vice president for Panasonic Security Systems. “Networking provides many different ways for retailers to monitor their facility or facilities from remote locations and allows them to interface their video equipment with related devices such as POS systems, more easily.”

Retailers, for instance, can view their store’s live surveillance from a remote location, even from their PC at home. Schaefer thinks such remote viewing possibilities can help with customer service issues as well as security. “Right now, I’m watching a woman wandering around in an aisle and I’m wondering why someone isn’t helping her,” he said, from his office.

Another cutting-edge feature of Schaefer’s new system is a small wireless camera. “We can hide that in places we think we have a problem,” said Schaefer.

Rick Curtis, owner of the Curtis Liquor operation based in South Weymouth, MA, also has digital systems, each with 10 cameras, in his three stores. “It allows you, after the fact, to focus in on what’s been recorded, slow, stop, reverse the action, zoom in 500 to 600%,” he said. “The technology is amazing.”

Curtis paid $3,000 to $3,500 per recorder. “Believe me, it is money well-spent,” he said. “If you catch just one employee, it can pay for itself.”

Green’s, a chain with six stores in Georgia and South Carolina, uses a surveillance system from Sensormatic (a company recently taken over by ADT), which is connected to its POS system with software called POS/EM, short for POS Exception Monitoring. There is a camera trained on each register and what is being done on the register is superimposed on the image from the camera. “It’s fascinating to watch what a dishonest employee will do,” said Lock Reddic, managing partner. “They’ll scan something with the UPC code facing the ceiling. They’ll keep labels at the register and use those instead of scan what they are supposed to be selling.”

With exception-based reporting, a retailer can create a report of any unusual transactions. “If the retailer spots a transaction that in any way seems out there, there will be a camera icon next to it, which will show him a copy of the receipt and a video clip,” said Thomas Dinkel, chief operating officer for Mirasys Communications, a digital video recording company.

Perhaps the most interesting aspect of these retail-crime fighting technologies is that they are beginning to converge. Not only can surveillance cameras be connected to POS systems, but EAS tags, specifically the ones using radio-frequency technology, can be linked to other systems as well. For example, Mirasys and Checkpoint Systems recently demonstrated a “smart shelf” at the annual Food Marketing Institute (FMI) show. Products were tagged with RFID tags with a sensor located underneath the shelf. When a product was picked up, it sent a signal to the sensor which triggered a surveillance camera to begin recording. And the camera could automatically be set to send the image elsewhere, even to a personal digital assistant (PDA). So, if someone grabbed a high-priced bottle off the shelf, the store’s manager’s PDA could sound an alert and show what was happening, in real time.

Although Jack Bondon, president of the 14-store Berbiglia Wine & Spirits operation in Kansas City, MO, doesn’t connect his POS system to a camera system, he stays on top of exceptional transactions. “I watch those every day. I get a report of all the cancelled transactions and returns and, if there’s a return, for instance, the manager checks the inventory of the returned item that day. If there’s supposed to be 17 bottles but there are only 16, the manager starts asking what’s the matter here — and the employees all know that,” he said.

Exception-based reporting can be a real eye-opener. “For years, people would talk to us about internal theft,” said Bondon. “Insurance people, camera salesmen, people selling door chimes, all kinds of security people. And we‚d say, ‘Oh, no, not us.'”

Now, Bondon sees things differently. “Internal theft has always been around but retailers weren’t aware,” he said. “Now, with the computer systems, we are more aware.”

Bondon, however, is not a big believer in the effectiveness of camera systems. “In 30 years, we have never caught someone because of a camera,” he said. “After all, the employees run the cameras.”

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