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Posted On: 5/11/2009

Stop Self-Checkout Fraud in its Tracks: Four Tips for Loss Prevention Success
Andrew Wren, President and Keith Aubele, Director of Retail Business Development, Wren
For retailers looking for ways to increase efficiency, cut costs and reduce staff, self-checkout technology offers an appealing proposition. Designed to manage more traffic with fewer cashiers, self-service is often considered a wise investment for retailers during tough economic times such as these.

Yet many retailers fail to consider the risks inherent with the deployment of self-checkout technology. Unfortunately, for mal-intentioned customers or professional criminals, the self-checkout is the perfect location to defraud the retailer in broad daylight, without being caught. Additionally, there are many operational losses that can occur at self-checkout.

When adopting self-service technology, retailers should understand the risks and implement best practices to combat problems and minimize additional shrink. Losses typical at the self-checkout include the following:

Price switching: The self-checkout is the ideal location for customers to successfully conduct a price switch at the expense of the retailer. There are several different methods typically used to defraud a retailer at the point-of-sale.

In one example where scales are not properly used for product verification, the individual may hold a lower priced item's barcode under a higher priced item to appear as if they have scanned the larger item. But, the lower priced item is registered instead, and both items are placed in a bag. Another common tactic is to switch the barcode sticker from a lower priced item with that of a higher price item. The savviest of criminals may even select similar products to avoid obvious discrepancies on the receipt: a customer might replace the sticker on a $99 box of Legos, with a sticker from a $19.99 box of Legos. The customer service associate overseeing the monitoring station will read "Legos" on the receipt - see a corresponding box of Legos being scanned by the customer, and will not question the matter further. Price switching can inflict enormous damages on the retailer.

Under-ringing: Under-ringing is the process whereby the customer pretends to scan an item. The customer places his or her hand over the barcode and then places the item in the bag without that item registering. Self-checkouts have weighting systems that are designed to flag the transaction at that moment and disable the system, allowing no further action until the item has been properly scanned and then placed in the bag. However, this is an easy problem for the savvy thief to overcome. During peak times, when traffic is heavy and customer service associates are busy, they will more often than not simply override the system in the interest of expediting the process. Thousands of dollars in inventory can walk out the door quickly if regular under-ringing is taking place.

Mis-keyed PLU codes: In stores that carry produce, mis-keyed PLUs (price look-up numbers) at the self- checkout can be yet another significant source of loss. Either intentional or unintentional mis-keying of PLU codes, such as higher priced produce ringing up at lower price product prices, can add up losses. When items are bagged alone or even with more obscure product items, customer service associates are unlikely to recognize and address the problem.

Suspended transactions: Suspended transactions may be a sign that someone was checking out items at the self- checkout, waiting for an opportune moment to casually exit with the goods without paying. Usually the customer service associate is tasked with monitoring multiple self- checkout stands. While he is assisting another customer, there is plenty of time for someone to casually grab their bag of goods and saunter out the door unnoticed. An additional risk in this category is a self-void. If the customer has the ability to void a scanned item at the self-checkout register, it can appear that they actually rang up the purchase when in fact it was voided and taken without proper payment. This is an area where recent activity has escalated.

Given the many opportunities for risk and loss presented by the self-checkout, retailers must be prepared to put in place processes and technologies to combat these threats upon installation of the first machine.

Best practices
Staff self-checkout with the best:
Customer service associates working the self-checkout should earn their money, perhaps even more so than cashiers working at the register. These associates should be carefully trained in the risks of self-checkout and should be the front line on loss prevention. Associates manning these areas should be proactive, conscientious and loyal to the retailer - the best of the best among the retailer's employees.

Place public view monitors at the register: A great deterrent to any theft is letting the thief know he is being watched. Increasingly, savvy retailers are installing public view monitors at each self-checkout stand so that individuals know their every action is being recorded. Signage is also important. Plenty of signage at the self-checkout area will serve as a reminder to would-be criminals that they are being monitored. The value of deterrence is tremendous.

Conduct purchase checks: Another idea is to position customer service associates near the self-service area before the exit of the store and have them approach customers as they are leaving. There are ways to position the purchase check either randomly or targeted in a customer-friendly manner. "Thanks for shopping with us today. Did you find everything you needed? By the way, we are running a test of the accuracy and efficiency of our self-checkout systems and want to verify that everything went smoothly with your transaction. May we compare some of your purchase items with your receipt to ensure the system is working properly?"

This type of human contact horrifies thieves and will likely deter them. It also allows the retailer to check for accuracy and identify problems. These retailers can offer the customer a coupon in exchange for their trouble. This is a win-win proposition, as honest customers are rewarded for their trouble and thieves are encouraged to shoplift elsewhere.

Verify/monitor the EAS: A retailer's EAS system is usually the last line of defense before unpurchased goods leave the store. These systems are truly an underutilized resource. Many retailers do not respond to the EAS alarm and simply override the system. But careful tracking of these incidences is critical. By tracking the number of EAS alarm incidences occurring before installing self-checkout and then seeing if that number increases abruptly once installed, retailers can point to evidence of loss incidences likely related to self-service.

The EAS deactivation pad located in the self-checkout is an ideal way for thieves to deactivate a tag and return to the store to continue “shopping,” only to leave through another door without fear of an EAS alarm. This is another example of how critical monitoring of the self-checkout area is extremely important.

Generally, adoption of self-service technology can bring many benefits such as reduction in labor cost and even greater customer satisfaction due to increased efficiency. However, retailers must realize that there is additional loss attributed to self-checkout that they must address head-on. The key to success is to put measures in place to prevent loss when the system is installed and then to closely monitor losses once the system is in place to identify the greatest vulnerabilities. Many companies that jump in - without due diligence and a defensive line in place -face the frustration of dealing with increased losses that outstrip the benefits of labor savings. Up-front research, planning and preparation are critical to success.

Andrew Wren is president of Wren, a provider of comprehensive video surveillance solutions for more than 25 years. Due to his efforts, Wren's products are used by retailers including Wal-Mart, Home Depot and Target. Wren actively participates in the retail security industry and serves on the Security Industry Association's Advisory Council. Andrew can be reached at andrew.wren@wrensolutions.com.

Keith Aubele serves as Director of Retail Business Development for Wren. With more than three decades of experience in loss prevention, law enforcement, retail and related fields, Aubele is responsible for driving Wren's strategic retail initiatives including market analysis, product development, and customer advisory services. Aubele holds a Master of Science in Business Management and has earned the Loss Prevention Professional (LPP) and Certified Protection Professional (CPP) designations, as awarded by Missouri Southern State University and the American Society of Industrial Security, respectively. Keith can be reached at keith.aubele@wrensolutions.com. For more information about Wren, visit www.wrensolutions.com.
 
 
 
 





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