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Theft and the modern store

BY Steph Koyfman

On June 23, 2013, a man stole 18 semi-automatic handguns, worth approximately $14,000, out of a display case at Stewart’s Ace Hardware in Roosevelt, Utah.

Incidents like this seem unusual, except when they aren’t. Hardware stores are targeted as much for their resalable items as any other retail establishment, and such activity appears to be on the rise.

According to the "25th Annual Retail Theft Survey" by Jack L. Hayes International, 23 major participating retailers apprehended 1.1 million shoplifters and dishonest employees in 2012, an annual increase of 7.4% and 5.5%, respectively. That means more than $189 million in recovered dollars, up 29.7% overall (retail losses amount to $37.1 billion each year). Mark R. Doyle, president of JLH, said these increases are on par with similar gains reported in previous years — apprehension recovery dollars have been on the up for the past 11 years, and non-apprehension recovery dollars have increased for the past 16 consecutive years (25.2% in 2012 alone).

Though this can be partially attributed to higher rates of theft in general (organized retail crime, for example, has tripled in prevalence over the past decade), store owners seem to agree that technology is helping them work smarter in this regard.

Bob Mulder, manager of McGuckin Hardware in Boulder, Co., said that he experiences less theft in his store than he did 15 years ago, when there were well over 200 apprehensions a year. These days, those numbers are hovering, between 120 and 150, which he attributes to smarter displays, better customer service, security cameras and computerized systems that help him pinpoint and clamp down on specific trouble spots. A full-time loss prevention staff doesn’t hurt either, as well as keyed electronic access to help curb employee theft.

Curt Bates, store manager of Price True Value Hardware in Atlanta, Texas, is quick to agree that technology helps a lot. His 32 security cameras allow him to zero in on license plates, among many other things. Customer service, attentiveness to trends, and checks and balances with regard to employee oversight are all cited as well, not to mention stricter laws that help him prosecute shoplifters.

Rick Karp, president of Cole Hardware in San Francisco, has a Sensormatic system that takes things one step further with antitheft labels on certain items and an integrated POS system.

The most effective loss prevention strategy is arguably that of Joe McLaughlin, owner of Grumpy Joe’s in Big Bear City, Calif. Being a retired cop and the sole employee of his small, manageable store has ultimately served him well — to the tune of zero loss. Note to others: A 600-sq.-ft. store in a small community is difficult to rob. But even McLaughlin gets by with a little help from his security system: His cameras are wired to a feed that goes directly to his cellphone, making him well-equipped to provide a picture, video and detailed description in the event of a theft. Overall, he says that the ability to provide these crucial details right away is what’s helping companies apprehend thieves quicker.

Shoplifting in general is estimated to account for 30% to 40% of total retail shrink, according to a University of Florida and Hayes International study. On average, employees steal about 5.5 times that of shoplifters, but Mulder, McLaughlin and Bates all cited non-employee theft as a more prevalent issue.

To be fair, it’s a non-issue for McLaughlin; Mulder gets rid of "hiding spots" via the use of trash compactors and baled boxes; Bates has a "mature workforce," where the average age is over 40. Karp, who faces the added challenges of running a store in a dense urban area, figures these kinds of losses into his costs and has a manager on duty to ring up employee purchases.

"We try to maintain an atmosphere where we trust everyone, knowing full well that we can’t," he said. "It does happen, but we don’t want an environment where [employees] are shaken down at the end of the day."

It should be said that while technology has made store owners faster on their toes in either regard, prevention strategies appear to remain the most important tool in one’s belt. For every $1.00 that was recovered in 2012, $25.00 was lost. That means only 4% of retail theft loss results in a recovery.

In order to buck this trend more completely, hardware stores will have to continue leveraging the latest retail innovations, but perhaps more importantly, they’ll have to mind the unique issues that hardware stores face.

"Hardware stores have a lot of little pieces — whereas a clothing store sells [bulkier items]," said Bates. "I’m always amazed at what people steal. Most of the time it’s not worth stealing — they’re items that cost less than $2. But all those little pieces add up, and it affects your gross margin."

Indeed, it’s the little odds and ends — screwdriver and router bits, nuts and bolts, locks, fishing flies, lures and other easy-to-conceal items — that hardware store owners tend to put up front in a high-visibility area, at times in a glass display case for especially high-cost items.

"Someone once walked out with a generator, but that’s pretty rare," Mulder said.

Additionally, many products sold at hardware stores have street value, making them an especially lucrative target for organized retail crime.

But opportunists come in all shapes and sizes, and thwarting them can be as simple as narrowing their options.

"It doesn’t matter if it’s Scotch tape or a hammer or a plant — if they can steal it, they will," Karp said. "I’ve caught mothers putting things in baby carriages; even the grandpa of an employee [was apprehended]."

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Before and after: Stanley’s Hardware

BY HBSDEALER Staff

Before: Stanley’s Hardware in Philadelphia started out as a mom-and-pop card, candy and smoke shop in 1948, later evolving into a hardware store after relocating a mile away in 1958. Years later, it’s still in the family under third-generation owners Joe and Mark Jaconski, only now it carries the Destination True Value (DTV) seal.

Things that hadn’t changed since 1958: its enviable location on the town’s main drag and the problematic 2,800 sq. ft. of space it contained. The family had expanded into an adjoining building in the 1970s, which served as additional retail and storage space. The limited space meant that customers were often unable to see all the merchandise they had in stock. "We’d have light fixtures on display, but we’d have our stock upstairs," Mark said. "Anytime someone wanted something, we’d have to run up there. We made the space work, but it was very inefficient."

Solution: The brothers reached a tipping point last year, and they decided to remodel — right on top of the existing store’s parking lot. This allowed the store to maintain its business hours right up until the old store needed to be demolished.

The solution was simple: triple the space. The new store measures 13,000 sq. ft., with roughly 10,000 going to retail space and 2,250 allotted to a building in back that now serves as extra storage. The brothers believed in DTV’s bright, open layout, and they were especially eager to appeal to female shoppers. The transformation involved a housewares department, as well as lawn and garden products that feature flowers and live plants.

The new space also opened doors in the form of additional niche markets. Mark and Joe’s store now offers garden and rental, as well as Dickies clothing.

After: More elbow room, brighter displays, expanded product offerings and a much smarter workflow are among the changes since opening February 2013, with construction continuing into March and April. April saw a 48% increase in sales, even though the parking lot was still a work in progress.

"People love the new space because everything is bright and airy," Mark said. "It’s extremely female friendly, which was a huge component that caught our eye with the Destination True Value model. It was so important to us to have a female-friendly store."

More space has meant more sales to the tune of 62% in the second quarter alone. The average sale is up 20%, but many of the added benefits are non-quantifiable.

"We’re known for service first — now everyone can do both," Mark said. "Everyone’s accessible. I don’t have half my crew outside carrying stuff around."

That being said, customers seem content to help themselves. With more products, more space to encounter them in and a better layout, the trouble is no longer finding what they need — it’s discovering what they may want as well.

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Omega Flex wins in court

BY HBSDEALER Staff

The makers of a corrugated stainless steel tubing product are celebrating a recent court victory.

After a lightning strike set fire to a High Ridge, Mo., house in April 2010, the homeowners’ insurance company, American Automobile Insurance Co. (AAIC), sued Exton, Pa.-based OmegaFlex. The suit alleged that lightning burned a hole through the OmegaFlex TracPipe corrugated stainless steel tubing (CSST) and caused a fire.

Court papers show that the plaintiff was looking for a $1 million payout, plus court costs. The jury didn’t buy it.

"Omega Flex proved that AAIC’s claims were false, and, in fact, the damage to the CSST pipe was caused after the fire had already started," according to the manufacturer’s statement in a release.

The jury found for Omega Flex on all counts and awarded AAIC nothing in damages.

The case appeared in the U.S. District Court for the Eastern District of Missouri. Several other similar cases have been brought against Omega Flex, including by plaintiffs Allstate and Home Owners Insurance Co., leading to settlements or dismissal. The cases bring a familiar complaint: that lightning burnt a hole in the CSST and ignited the natural gas that ran through it.

Omega Flex says it’s prepared to fight for the reputation of its product.

"After years of use by millions of homeowners, the evidence proves TracPipe CSST is not uniquely susceptible to damage from a lightning current that may enter a home," the company stated. "In fact, CSST has a superior overall safety record as compared with other appliances or equipment. OmegaFlex will continue to vigorously defend itself against frivolous claims about the safety of its products."

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