Magazine Article | August 1, 2002

Loss Prevention Beats POS Pilferers

Source: Innovative Retail Technologies

$1.4 billion Ann Taylor installed an automated LP (loss prevention) software system to help its LP investigators reduce shrink at the POS (point of sale).

Integrated Solutions For Retailers, August 2002

Ann Taylor Stores Corporation (Taylorsville, UT) is a specialty retailer of apparel, shoes, and accessories that targets the professional woman. The company operates stores across the United States under the names Ann Taylor and Ann Taylor Loft. The Ann Taylor Stores Corporation LP (loss prevention) staff harbored suspicions that a large proportion of the company's shrink took place at the point of sale, but they had no easy way to confirm it. They also wanted to monitor cash- and credit-related loss cases in a way that was more efficient than the paper-intensive and time-consuming procedural audits it had been conducting.

In September 1999, the company integrated an STS paperless sales audit solution called Connected Retailer Sales Audit application (formerly AuditWorks). It began using the LP application, an exception-based, transaction reporting tool, in September 2000. Four regional investigators cover 80 to 90 stores each, on average. They report to five regional loss prevention managers, who in turn report to two directors. The Vice President of Loss Prevention, Maurice Cloutier, oversees the entire group.

Patterning The Losses
"We didn't have efficient means of seeing post-void, refund, or return activities at the cash registers," notes Cloutier. "Our department spent many valuable hours researching cash- and credit-type cases because we had to physically review register receipts to develop suspicious patterns." STS' LP solution automatically detects patterns of fraudulent activity and procedural violations that happen at the point of sale. During overnight processing, POS transactions that break user-defined rules are flagged as exceptions and presented to the investigator for further examination. The LP directors get a full-view report of all the data in the application, while the investigators see only the stores for which they are responsible.

A "Money-Back" Guarantee
The department started using the application aggressively in September 2000, and has seen significant payback since then. "Using STS loss prevention, the cases we solved during the first quarter of 2001 increased by 382% in total dollar value over Q1 2000. Overall, we saw an increase of 150% in the number of cash- and credit-related cases we solved," says Cloutier. "There's no doubt it's made a big impact on our approach to internal case investigations. The average dollar value for an individual case generated from the STS LP application in Q1 2001 skyrocketed 664% over the average dollar value of a case in Q1 2000, before the application was in place," he says.

Cloutier claims that the increase in volume and dollar value of solved LP cases at Ann Taylor can safely be attributed to the new application, since there were no other significant changes made to internal investigations in 2000. "The LP application was the only major new tool that we implemented for internal investigations in the year 2000," he says. "I think it's safe to say that these results are the result of the new application." The total dollar value for cases in the last six months of 2000 exceeded the entirety of 1999's dollar value for cases by 39%. The average dollar value for a 2000 case using the LP application was 81% higher than a 1999 case.

Software Frees Up LP Time
With onscreen means of investigation, there's no longer a need to pull and analyze all the paper documents (receipts and ledgers) associated with a flagged or suspicious transaction. And because the LP application collects, organizes, and stores all the data on a suspicious transaction for them, investigators can get a much more accurate picture of the total value of a potential case before opening an investigation. "Investigators now take 85% less time to develop a case," claims Cloutier. The LP department is also conducting an education campaign, informing stores of solved cases and the unseen presence of the new monitoring application. Ann Taylor hopes the information initiative will contribute to future prevention of fraud through deterrence.

The application spells a new direction for the department, since with the new tool, it can now turn its attention to cash- and credit-related cases. If an employee is not following proper POS procedures, the LP department simply refers the case to store operations staff, allowing the LP investigators to focus on high-priority cases.

With these results, the company plans to maximize its investment in the application by following a five-year implementation and review plan. The first two years will be spent getting fully familiar with the application's features and enhancements. In years three and four, Ann Taylor hopes that individual case values will actually start to decline, as cases are detected earlier and as employees become more aware that their POS activities are being monitored. The final year will see a complete review of the department and the LP application, with a focus on identifying its successes and areas for improvement.