Managing risk: How organized crime has changed the retail security business

Podcast

Walter Palmer graduated from Eastern Kentucky University in 1986 with a degree in Security and Loss Prevention. He went on to become a leading expert in the retail loss prevention industry. He built a business, PCG Solutions which was recently purchased by a national risk management company.

Tom Martin talked with Palmer about the profession.

Question: What are some significant ways the loss prevention business has changed since you graduated from EKU?

Answer: People think of security guards, maybe store detectives. And actually loss prevention can become quite complex and go in a lot of different directions so people may have a misconception about it.

Q: In the business you now use the phrase “total retail loss." What does that mean?

A: The Retail Industry Leaders Association published a commissioned research on this recently. It’s a way to think about loss in a more holistic fashion so that you’re not just thinking about shoplifting, employee theft and credit card fraud. Certainly those are important factors, but what about the losses a company incurs from damages, regulatory fines or safety accidents? Most of those things are cross-functional, so no one person owns them.

Q: What brands have you worked with that people might recognize?

A: Everybody from Best Buy and Bed Bath Beyond to Toys R Us and Pet Smart.

Q: What have been some key technological innovations in recent years?

A: Cyber security data breaches are very important to retailers because they end up on the front page and collect so much customer data.

We always hear about Big Data and the analytics available to us now for forecasting potential hotspots, for catching crime. All that is very beneficial to us, but with every one of those things comes a new risk related to the environment we live in, from a technology perspective.

Q: Do any of these technologies actually cause problems for you?

A: Sure. You hear a lot of retailers talking about social media and the ability to fence goods. In the old days it was a shady deal on a street corner or a flea market. Now, with very legitimate sites like eBay, Craigslist and Letgo one of the concerns is the ability for people to convert stolen goods to cash. That’s a very simple thing that’s just a byproduct, not an intended product, of any of these sites.

Or if you think about the social media aspect of people learning how to defeat countermeasures or understand particular policies or sensitivities to liability. All of this information sharing that benefits us in so many ways can also work against us.

Q: How about “mobile point of sale”? Are there problems there?

A: Yes. In Europe they actually are doing a lot more mobile POS. It’s starting to come back to our shore again in some different iterations. The penetration is not really high yet, but there are lots of logistical issues about it.

I’m checking out how we audit for that; how do we do analytics; and how do we make sure that we don’t get in the way of the good customers? It’s the same challenge we’ve always had, but it’s just accelerated because now we’re removing human interaction from the equation.

And the Internet of Things, in general, is providing more access points around that whole data breach cyber security issue.

Q: From the National Federation of Retailers: more than nine in 10 retailers have been victims of organized retail crime in the past 12 months. What is organized retail crime?

A: It’s probably the biggest hot button issue in the last 15 or 20 years. Organized retail crime has always been around on some level. You’ve always had people that were in retail theft for profit. There is a real sense of an acceleration there. There are a lot of factors that play into it. One is what I mentioned before — easier disposition of goods, conversion to cash, and some of the technologies enabling that.

There’s certainly a significant element of people out there who are doing this for a living. They’re very rational actors.

Q: According to that survey by the National Federation of Retailers, more than a quarter of responding retailers said that these gangs are exhibiting much more aggression compared to not so long ago. Are you seeing that? Can you confirm it?

A: Yeah. It in fact it’s been a significant amount of conversation in the last several years. You couldn’t go to an industry meeting over the last three years and not end up talking about violence against staff. All of my clients are concerned about it.

Sometimes it’s actual violence, sometimes it’s the threat of violence or intimidation which still feels really bad. Sometimes it’s coming in and stealing a whole table of merchandise and spraying mace to cover your tracks. There are a lot of different views around why this is happening. There are probably some macro-level things happening in society around the way people act that we probably aren’t going to be able to control.

So, we’re trying to figure out how to protect our people: our associates, employees and customers. You know, this is not something that anybody wants in the public domain.

Q: What would you say would be the biggest challenge that loss prevention professionals will encounter in the coming year or so?

A: Right now we’re being very reactive because there is so much change going on in the retail market place right now: mobile POS, e-commerce, ship-from-store, buy-online-pick-up -in-store; all these different variables are introducing potentials for abuse or just unintentional mistakes.

Those things are being driven by the competitive market place and are constantly challenging loss prevention people to take them on in addition to the core baseline stuff. We’re also very focused on safety issues, workers comp and keeping people safe and being compliant with OSHA.

Those core responsibilities are not going to go away, so now we have to build on top of that the skill-set to deal with these other things, as well. We’re in an environment where resources are tough because it’s a very competitive, low-margin business in certain sectors.

Q: What excites you most about what you do for a living?

A: Most of what we deal with are things that you wish as a business didn’t have to deal with: catastrophic accidents, robberies, violence, theft. These are not things that are creative to any business.

In my mind, if we’re able to manage those risks for a company, it feels good. You know if you can take a distribution environment and reduce their workers comp injuries by 30 percent like we just did with a client, that feels pretty good because it means people aren’t getting hurt and it means the companies are doing better financially and we’re adding value.

So, It’s pretty rewarding actually.

Tom Martin's Q & A appears every two weeks in the Herald-Leader's Business Monday section. This is an edited version of the interview. To listen to the interview, find the podcast on Kentucky.com. The interview also will air on WEKU-88.9FM on Mondays at 7:35 a.m. during Morning Edition and at 5:45 p.m. during All Things Considered.