DEERFIELD BEACH, Fla. — Retailers committed to saving labor at the store level are prodding manufacturers to install electronic theft-control tags on products before they reach their shelves.
Representatives of Kmart, Wal-Mart, Home Depot and other retailers pressed their case recently at a conference at the headquarters of Sensormatic Electronics Corp., here. They said increased source tagging by manufacturers or third-party manufacturer contractors would allow store personnel to spend more time with customers and let retailers openly display merchandise that is prone to theft.
“In the past, many retailers gave electronic article surveillance the cold shoulder because of the costs associated with it — especially from the labor standpoint,” said Jim O’Connor, vice-president of loss prevention at the Sports Authority, Kmart’s sporting goods unit. “Now our merchants enthusiastically embrace the process and are leading the charge to get our vendors on board.”
Revco D.S. tags many items, but Chuck Beckman, director of loss-prevention services, said the drugstore chain wants to shed responsibility for applying the tags.
“If my 12,000 associates don’t have to apply labels to the 13,000 SKUs we are currently tagging, we’ll save labor dollars and those associates can go out and service the customer.”
Kmart Corp. also wants to shift responsibility for applying the tags.
“The application of the tags is the last component to making electronic article surveillance invisible to our operation,” said Ben Guffey, director of loss control at Kmart. “With source labeling, from the beginning to the end all merchandise is handled the same way, whether it has an EAS label or is minus an EAS label.”
Kmart is a relative newcomer to electronic article surveillance. “We are just at the initial stages of this,” Guffey said. “We are very aggressively installing the systems in over 100 stores.”
Adam Kustin, market development manager at Sensormatic, said manufacturer-tagged goods have been on retail shelves since 1992. The disposable plastic tags distributed by Sensormatic cost about five cents each. Kustin said who pays for the tags and their application by the manufacturer is part of the negotiating process between retailer and manufacturer.
Keith Wanke, vice-president of loss prevention at MusicLand, said source labeling would facilitate open merchandising in the shrink-prone compact disk, video and cassette categories.
“Retail shrinkage for the music and video retailer is 2.67 percent, compared with 1.88 percent for all retail sectors,” he said.
Wanke said music retailers have resorted to labor-intensive, wasteful methods of controlling their disproportionate theft problem. They often store products in plastic “keeper trays” to prevent shoplifters from pocketing them. The trays aggravate lines at registers where cashiers have to stop to remove them.
“We don’t want to put CDs in plastic keeper trays, but they’ve become a necessary evil in music retailing,” Wanke said. “If we eliminate the trays, we could eliminate labor and supply costs and save space.”
Unlike MusicLand, Sports Authority has shied away from altering merchandising to reduce theft. As such, the chain is strongly advocating source labeling.
“We afford the potential thief a great opportunity to steal,” O’Connor said. “We are extremely customer friendly and don’t want to lock anything up. If you are a customer and you want to try something on, you don’t want to wait for the retailer to get the chain off.”
He said that up to now electronic article surveillance helped alleviate the problem, but added that that remedy was not without costs.
“Electronic article surveillance gives us the ability to protect our merchandise from shoplifters, but there are costs associated with putting a label on and taking a label off.”
The push for source labeling is altering the equation.
“With source labeling, we can have our cake and eat it as well,” O’Connor said.
But even when they have to apply the tags themselves, retailers said electronic article surveillance is already benefiting their bottom lines by trimming inventory carrying costs.
“We don’t have to carry the number of items we did in the past,” said Steve Mankin, assistant director of loss prevention at Wal-Mart Stores. “We’ve realized that our shrinkage problem is treatable.”
Kmart’s Guffey agreed, and the chain is pursuing both store tagging and source tagging.
“We want to make product that is being stolen today available to our customers,” he said. “We are losing sales because that merchandise is not there, and that’s where we see a real improvement for Kmart.”
Source tagging has been applied predominantly to hard goods, like health and beauty aids and compact discs, but Sensormatic hopes to expand source tagging to soft goods.
“Our next major push is going to be into soft goods,” Kustin said.
Source tagging of soft goods, however, would be considerably different from that of hard goods. “Most soft goods would still use the larger reusable plastic tags,” Kustin said, “but we are looking into alternatives.”
He added, however, that some large retailers, Macy’s included, already tag most garments at their distribution centers.
Sports Authority store personnel currently tag all shoes retailing for $40 or more, according to O’Connor. He added, however, that the conspicuous plastic tags detract from the fashion appeal of footwear. O’Connor hopes the application of less noticeable tags at the manufacturer level will alleviate the problem.
“We’re in a fashion-oriented business, and sneakers are one of our highest theft items,” he said. “When a customer puts on sneakers, the tags distract from the fashion statement. With source labeling, we will be able to make those sneakers look more fashionable.”
O’Conner said the advent of source labeling will also allow retailers to increase the breadth of products they carry.
“We feel we are going to be able to carry items we haven’t been able to carry in the past,” he said. “We’ll be able to bring in items that are highly susceptible to theft.
“Generally, source labeling will allow us to lower our costs and increase our profitability. It will reduce labor costs in the stock room, in the back room and on the floor.”