Crime Busters

Over the past few years, retailers have struggled to get a handle on organized retail theft, which costs retailers as much as $5 billion annually. While there are various vendor solutions to detect and prevent retail theft, these products don`t work together, leaving loss prevention managers on their own islands of information with few opportunities to track theft trends with one another.

Now, the National Retail Federation is rolling out a web-based database that will allow retailers and law enforcement to share organized retail theft information and intelligence, bridging the gap between retailers` various in-house systems.

Vendor solutions typically don`t offer the information-sharing mechanisms that the NRF`s network offers, says Addison Chan, vice president of business development and loss prevention for Triversity Inc., which sells its own loss prevention systems. "There have been some private initiatives to address some of the requirements here but this network is more of an open source approach," he says.

Phase one

The NRF began phase-one testing of the Retail Loss Prevention Intelligence Network Database in mid-July. Five pilot retailers--with a national presence and representing different sectors--began using the system in mid-August and more users will be added this month.

The network is funded by the NRF and retailers pay monthly subscription fees of a few hundred dollars, says Joseph LaRocca, NRF vice president of loss prevention. That allows them to enter data into the system and to query data that`s already in the database. NRF thus far has invested $100,000 in the network.

Just how widespread organized retail theft is can be seen in the results of a May NRF survey of 41 senior loss prevention executives nationwide: 78% said their companies had been a victim of organized retail theft in the past 12 months and 46% reported an increase in organized criminal activity over the past year.

In addition, 61% said that organized retail theft accounts for the majority of the external shrinkage dollars. More than half said they are allocating additional resources to address the problem.

What`s more, 29% categorized organized retail theft as a significant or severe threat to their companies and another 44% classified it as important. 98% of the executives polled said there was a need for a national database designed specifically to track organized retail theft. "The database is one of the next big steps retailers need to take in helping to protect our customers and businesses against organized retail theft," says a Sears Holding Inc. spokesman.

The Retail Loss Prevention Intelligence Network Database is the NRF`s response to that need.

The precedent

The NRF is patterning the database on the National Crime Information Center, a computerized index of criminal justice information operated by the Federal Bureau of Investigation. The NCIC collects such information as criminal record histories, fugitives` names and aliases, and lists of stolen properties, and is available for use by federal, state and local law enforcement.

"RLPIN will do the same thing for retailers," LaRocca says. The database will hold information entered by retailers on organized retail theft incidents--such as burglaries, robberies, or gift card fraud, he says. Other retailers and law enforcement agencies will be able to access the information to use in their investigations.

The network`s value lies in its ability to link separate crimes in different stores and locations that have similar characteristics. For example, it could link the data on burglaries of large numbers of laptop computers from three different retailers in three different states, LaRocca says. "Retailers can look at that trend and see there`s a spree of somebody stealing laptop computers," he says.

Without the network, retailers would file reports with their local police and the police would treat them as single incidents within their jurisdictions, LaRocca says. "RLPIN allows them to cross over those jurisdictions and look at it as being a felony that`s occurred in multiple cities, even multiple states," he says. "They now can investigate it as an organized retail crime incident so they can go after these guys with multiple resources."

Linking the crimes also makes it more likely that law enforcement will pursue the case, LaRocca adds. He notes that police have limited resources and may not launch a full-scale investigation into a single burglary or robbery. "But when retailers can put the information together for the law enforcement agency, it`s more likely to help because we can clearly establish the trends and the additional losses," he says.

The AI approach

The NRF initially will be using artificial intelligence to analyze trends and identify where problems exist, LaRocca says. The system then will send e-mail notices to retailers who have expressed interest in receiving information about certain types of crime, he says. Retailers then can pass the information to law enforcement.

"In the future, we`re looking at the establishment of a group that would do that sort of analysis and then work with the retailer, the retail sector involved and law enforcement agencies in the region that would have a vested interest in the information," he says.

Retailers can enter information into the database via a web browser or they can import it from their existing case management systems, LaRocca says. No special software or hardware is needed.

"Without the Internet, it would have been more complicated and more expensive," he says. That`s because the NRF would have had to use a dial-up system to feed information into the database or lobby the government for access to such technology. "The Internet makes this a lot easier for us to execute in the private sector," LaRocca says.

NRF also is developing a data entry system in which information can be entered on a form offline and then uploaded into the database.

The NRF has been using web desktop sharing to demonstrate the system to retailers, and will use the same technology to give retailers hands-on training, LaRocca says.

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Retailers gain access to the database using an ID, a password, and a digital secure ID key. The key generates a random number based on an algorithm that the host and the key know. The number changes every 60 seconds. "We want to make sure whoever is logging in is who they say they are," says Richard Varn, NRF technology policy adviser.

In addition, only users designated by the retailers will be able to gain access to the system.

Who, what, where, how

The database is set up so that retailers can enter a wide range of information about a retail theft incident, including where it occurred, what occurred and what was taken, LaRocca says. The report would include details such as the brand name, the type of product, the universal price code number, and the serial number. "That`s important to the police for recovery," he says.

That`s because police often come across property they suspect is stolen but don`t have proof to support their suspicions. A serial number pulled from the network database would give them enough evidence to make an arrest, LaRocca says.

The retailer also could enter information about the person responsible for a theft: Was it just one person or a group who robbed the store? Did they use guns and if so, what type of guns? Did they hurt anyone or take an employee or customer hostage? In the case of a burglary, how did they get in?

In the case of online fraud, a retailer could post a crook`s screen name, eBay screen name or alias.

Retailers are given the option of deciding how much information they want to post and can designate with whom they want to share the data, LaRocca says. For example, they could limit access to specific information on the incident to people within their company, retail category, or law enforcement, he says. However, the aggregated statistics would be available to the master system.

"For instance, we could know that a robbery or burglary occurred, so we could track the number of incidents," he says. "But we wouldn`t know the specific details of the incident if the company chose to keep it private."

In addition, more than 90% of the cases that will be entered into RLPIN already will have been reported to law enforcement, LaRocca says.

Less-structured data

The network also provides for a less structured sharing of information among retailers, for example, an exchange of ideas about theft- prevention methods. "It allows for discussion boards, interaction of various kinds, news items, things that are not cases but might be trends," Varn says.

The network is also not dependent just on retailers inputting information. "It`s an actual investigative tool that allows you to go out and try to probe and find information," Varn says. "It scans and collects information."

For example, it gathers information from electronic resources, such as magazines and newspapers, and has the ability to pull information from the web in general, using technology similar to that Google uses to capture data from web sites. "It will look for things that are relevant to the incidents in the system-- e-mail addresses, particular items that are on sale at an auction site, or particular addresses," LaRocca says.

Eventually, the system will be able to delve into public records and police reports.

Retailers can query the system in several different ways. For example, they can ask for all the robberies that occurred in Los Angeles or ask to see all the robberies in all retail categories. They can also use a series of queries to drill down to a specific incident, LaRocca says.

The network also allows users to ask for e-mail alerts on certain queries. For example, a jewelry retailer might ask to be notified any time there is a jewelry store robbery in which a person used a gun, LaRocca says. The network would send a message with a summary of the incident and the retailer could then access the system via the web and look at the full incident detail.

While there are vendor systems that can collect and share information, the NRF`s goal was to offer retailers a standardized system. "We want to connect to different vendors out there--to vendor A`s system and vendor B`s system and vendor C`s system," LaRocca says. "We don`t want a retailer that uses vendor A not to use our system because we had it run or built by vendor B. That was very important to us."

More palatable sharing

In addition, the network attacks organized retail theft from a different angle than vendors` products do, Chan says. For example, Triversity`s FraudWatch product analyzes point-of-sale transactions looking for patterns that indicate potential loss or fraud, he says. It does not give details on specific incidents.

The NRF`s network also offers a more neutral environment for sharing information among competing retailers, Chan says. "If Target is getting clobbered by an organized gang of shoplifters and they give that information to the NRF, it`s a little more palatable than for them to pick up a phone and call their buddy down at Kmart," he says.

linda@verticalwebmedia.com