By Rose Spicer-Oracle on Dec 09, 2015
As Alanis Morrissette would say "Isn't it Ironic"? I have been working on the latest blog entry focused on Grocery Loss Prevention with my colleagues Bill Warrick and Rand Fernandes. I learned some pretty interesting things that I had planned to share and then WHAM! Safeway tries to break my leg. Allow me to explain.
Today I get the dreaded call of a working parent on a deadline. My child is sick and I have to pick him up from school. The doctor calls in the antibiotics to Safeway. While we wait for the fulfillment, we shop. Being a considerate shopper and self declared "retail researcher", I confirm with the pharmacy that I should buy everything else and then come back for the single transaction. No problem. Self checkout is easy.
Enter the mafia strategy. I learned the hard way that if you take one of the new loss prevention carts without going through a checkout process, the cart wheels lock and slam into your leg leaving a massive bruise. Way to go "Jimmy the fish". I believe the mafia might be behind this new development. However if you want to be careful not to impale your loyal and honest customers like me, a data strategy might also be helpful.
Grocery: The Exception to the Rule
Grocery stores struggle with loss prevention. With so many items of varying prices and so many transactions processed, the temptation to game the system arises from customers and employees alike. Incidences of fraud and theft can be so small as to go unnoticed, but they are rarely isolated and add up over time—and with razor-thin margins, finding such incidents and preventing more from happening is a make- or-break issue. Did you know that the average theft issue costs grocers $98.83 per incident?
The scams are sometimes so subtle that they could be mistakes: A bag of dog food or a case of bottled water left unchecked under the cart and carried to the curb, for example, or a manufacturer coupon redeemed without its corresponding purchase. Other scams may be more obviously deliberate—like when a cashier under rings a friend’s purchases or a self-checkout customer “forgets” to swipe a six-pack—but still go unnoticed.
Chains such as BJ’s Wholesale, Meijer, Publix, Smart & Final and Kroger use excep- tion-based reporting solutions to help head off such costly fraud, theft and employee error. By setting expectations of what “normal” transaction data looks like and finding transactions that don’t fit the norm, exception-based reporting is helping managers discover and investigate patterns of loss more quickly. Following are four common offenses that cost grocers valuable dollars and time.
The Risk of Self-Checkout (if "Jimmy the fish" is not your consultant)
One common method of defrauding stores at checkout is to ring more expensive items as produce. An unscrupulous customer might walk in and pick up a six-pack of craft beer, for example, and key in the code for bananas at the self-checkout instead, paying 29 cents per pound. Produce is a lot cheaper than alcohol. Swindles like this are so common that loss prevention architects refer to its built-in models as “banana cases,” and Oracle works with stores to define key codes to head off misuse.
Another exception the system seeks out is when transaction duration doesn’t match the number of items. Research shows that the slower a person is at the self-checkout, the more likely it is that he or she is skipping the scanner before bagging, and walking out with free groceries.
Friends and Family Discounts
Clerks can help friends save by ringing up incorrect categories—charging ground- beef prices for tenderloin steaks, for example. The exception based management solution allows a retailer to search for patterns of exception against established KPIs including refund count, no match, and credit cards with employees and non-employee activity. The system links exceptions to in-store video, identifying location, time and transaction to help management review the appropriate footage.
Coupons and Price Adjustments
Grocery is synonymous with coupons. When a retailer has one customer or one employee with frequent coupon transactions in which no items are sold, it means someone is doing a price adjustment, and that some kind of negative tender is occurring. We can show them where the risk is, and what KPIs are necessary to show it.
Loyalty & Rewards Programs
Loyalty and Rewards programs offer retailers data to analyze purchase history and create personalized recommendations. This valuable program is also becoming a very fast-growing area for fraud. If an associate waits on 50 customers in a day, and 20 say they don’t have a loyalty/rewards card, the associate has an opportunity to credit the transaction to, say, his or her own loyalty card. Like a price exchange or a coupon fraud (or low-dollar transactions), this will never be accounted for by tradition- al audit practices. Analyzing a number of loyalty KPIs, however, will reveal it.
Conclusion: An Actionable Insight Strategy is Kinder
The size, complexity, and global nature of the retail industry today, coupled with the eternal human tendency to yield to temptation, mean that new varieties of employee fraud will continue to appear. In our experience, the best protection is an analysis/ business intelligence capability that can quickly recognize deviations from pattern— and possible criminal behavior. The Oracle Retail XBRi Loss Prevention solution is designed to provide actionable insight to protect your profits.
Oracle Retail’s XBRi Loss Prevention Cloud Service is the leading data analysis and exception-based reporting tool on the market. The solution identifies trends, trans- actions and other anomalies in store data, allowing users to discover and investigate irregularities in stores. XBRi includes a number of ready-made reports groceries can use out of the box or customize to suit their needs.