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Loss Prevention Consulting: A Conversation with an Industry Expert

Robert L. “Bob” DiLonardo is the principal of Retail Consulting Partners LLC and a well-known authority on the electronic article surveillance business, cost justification of retail security products and services, and retail accounting. DiLonardo started his loss prevention consulting practice after several years in sales and marketing for Sensormatic, Security Tag Systems, and Decision Point Data. Prior to that he held various accounting, shortage control, internal audit, and loss prevention positions with Macy’s and Carter Hawley Hale Stores. DiLonardo is a frequent seminar speaker for industry conferences and has written extensively for numerous business and security publications, including LP Magazine, where he was the contributing writer of the Industry News column until his recent retirement. He holds a master’s degree in finance from George Washington University and a bachelor’s degree in economics from Georgetown University where he also played football and baseball.

EDITOR: You have a lengthy resume, but let’s start by telling our readers who Bob DiLonardo is in just a sentence or two.

DILONARDO: I would describe myself as a professional student and practitioner of retail loss prevention and shortage control methods. I would also say that those who know me value my hard work, honest opinion, and forthrightness, which are at the heart of my loss prevention consulting practice.

EDITOR: What was your first exposure to loss prevention?

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DILONARDO: I had my first preview of loss prevention in 1974. I had just started at Davison’s, which was the Macy’s division headquartered in Atlanta. I was meeting with my peers to get acquainted, and I had an interview with a guy named Joe Vaux, the security manager. His office was in the bowels of the headquarters store next to the boiler room. All he had in there was a table, his chair, and a seat for a visitor. He offered me a seat, but before he sat down, he pulled out his .38 and put it on the desk. Then he piled a stack of checks on the desk. After sitting down he said, “I’m not gonna keep you long, but I want to tell you what I do. You see these checks? These are bad checks. My job is to go collect them.” And that was my first exposure to loss prevention. It surprised me that the guy had to be macho enough to make a show like that.

EDITOR: What role did you have at Davison’s?

DILONARDO: I was the budget and statistics manager in the controller’s division at the time reporting to the controller. About a year later, the CFO called me while I was on vacation and said, “When you get back, you’re going to be the head of internal audit because we’ve got some problems, and I think you can do a good job solving them.” That’s basically how I backed into loss prevention. I spent several years working in the controller’s division where I became expert in retail accounting, merchandise statistics, and inventory control. Later I switched into merchandising as a buyer in women’s and men’s wear, which I thoroughly enjoyed. I think that those skill sets made me the prototypical shortage control guy.

EDITOR: Where did you go from there?

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DILONARDO: In 1978, Carter Hawley Hale Stores recruited me to go to San Francisco to Emporium as their first director of shortage control. Thats where I met my friend, mentor, and idol Earl Welliver, who was the director of security. Earl showed me about a much more professional side of loss prevention. We worked on a number of cases, had a great time together, and always had each other’s back. Our corporate boss was the late Bascomb Shanks. Chuck Sennewald was Broadway’s director of security, and Carl Donnelly was on the corporate staff at the time.

I had six solid years of experience in retail and loss prevention, mostly shortage control, before Earl and I were recruited to San Diego by a German outfit called FedMart. To be kind, they didn’t know how to operate in the U.S. retail environment and eventually closed the company. Based on that bad retail experience, I went to work for Sensormatic in 1980.

EDITOR: What was it like going from retail shortage and inventory control to the vendor side?

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DiLeonardo (22) with the other starting defensive backfield at Georgetown University in 1966

DILONARDO: At the time Sensormatic was small, only selling about $25 million a year, but they were in a growth mode. The late Al Tate, western region vice president, was looking for sales guys with either military or sports backgrounds, and I had both. So they hired me as a bag-carrying salesman, one of only three in Southern California. That’s how small it was. My territory ranged from Tijuana west to Phoenix and north to Long Beach. The only product Sensormatic had at the time was a microwave-based system, the granddaddy of all EAS. Emporium had employed them in a couple of stores. As of 2015, you could still find some of them working famously in legacy Macy’s West or May Company stores.

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EDITOR: Did those use the old gator tag?

DILONARDO: That’s right. Sensormatic did not have a disposable label at the time, so we were renting gator tags and microwave systems to apparel stores.

EDITOR: Back when you started with Sensormatic, what was the sales argument that you made with retail buyers?

DILONARDO: I had never been a salesperson before, and frankly, I was nervous. I performed poorly when it came to selling product features and functions, but I certainly knew my way around inventory shortage math, so I decided to try selling the economic benefits and the return on investment. I needed a compelling sales pitch, so I devised the financial logic to convince prospective customers that EAS should lower shortage and would be worth the investment. I took classes in Lotus 1-2-3 spreadsheet software and constructed my first ROI model. Nobody was taking the same approach at the time.

In 1982 I had the opportunity to call on the CFOs of two large Los Angeles department store chain Robinsons and May Company. I ended up selling a major deal to Robinsons in LA, which got the attention of the Sensormatic hierarchy. They promoted me to national account manager with responsibility for large accounts like Sears Pacific Territory and all department stores in Southern California. I used the same approach but customized it for each client, and I was very successful.

EDITOR: Over the years, you’ve gained quite a reputation for someone who really understands the ROI proposition and how to make that argument. You’ve done many writings on that subject, including for us. Did all of that come out of formulating the financial argument to support sales?

DILONARDO: Yes, but it was a long process. I credit my financial education for giving me the tools to construct the ROI logic. But it was my stint as

Sensormatic Reunion Image
DiLonardo with former Sensormatic associates (left to right): Tim Gates, John Zambiasi, and Lance Weeden in 2007.

a buyer that showed me that preserving inventory from theft would result in incremental sales.

By 1983, the other Sensormatic salesmen got wind of what I was doing. They were having trouble expanding EAS tests because the LP guys wanted proof that it “worked” before they would buy any more. None of them knew how to demonstrate that, aside from saying that “if your shortage went down, it must have worked.”

Two salesmen who dealt with Montgomery Ward asked me to help them. They flew me from San Diego to Chicago to analyze Ward’s latest inventory results and help cost-justify EAS to management. I rented one of IBM’s new portable PCs for $400 and took it to Chicago. Wards gave me the inventory data on stacks of dot-matrix computer printouts, and I spent all night manually entering the data into the PC. I loaded my model, fed in the data, and out popped the results, which I presented to Ward’s management. They ended up expanding their test on that basis. That exercise convinced me that this was what I ought to be doing.

From there, I did 30 to 40 studies for various retailers proving the ROI in the very same manner. I kept refining my logic and modifying the model. One of the satisfied customers was George Luciano, then vice president of loss prevention for a women’s specialty apparel chain called Hartfield-Zody’s. George was like a big brother and always encouraged me to work hard and use my expertise to cost-justify other products and services besides EAS. He remains one of my best friends in the industry.

EDITOR: When did you leave Sensormatic and what did you do then?

DILONARDO: I spent eight years at Sensormatic the first time, and for the last half, I was at their headquarters in Florida, where I essentially had a desk job. I quickly learned that I had a hard time dealing with corporate politics. I also learned that I would be better off in smaller companies, because I could have an impact and get things accomplished. When I finally got fed up with the politics at Sensormatic, I quit in 1988 and went to work for Security Tag Systems, where I spent the next five years.

EDITOR: Why Security Tag Systems?

DILONARDO: I followed a couple of my old Sensormatic buddies, John Zambiasi and Perry Garvis, who told me that Security Tag was doing groundbreaking stuff. They built the first EAS transceiver, which is a single EAS pedestal instead of a pair. They also had an RFID test in place with the New York Daily News, where they put tags on the delivery trucks and readers at the distribution centers to track how long a truck was inside and where it was parked. And in 1989 we were the first to commercialize ink tags and benefit-denial devices in the United States. Much to my dismay, Sensormatic bought Security Tag in 1993. After spending an unsatisfying year commuting to Sensormatic, I decided to start the loss prevention consulting business.

Retailers who were investigating EAS hired me to help them decide what systems were the best for their environments, how much they should pay for them, and whether or not the project would be cost-justified. I’ve even negotiated contracts on their behalf. As time passed, I decided to apply the same principles for other security technology, like video, access control, and self-checkout.

EDITOR: When a manufacturer or a vendor brings you in for loss prevention consulting, what are they asking you to provide?

DILONARDO: I’ve taught their sales executives the principles of selling financial benefits and have constructed proprietary ROI models that they use with their prospects and customers. Since my experience includes marketing management, I have done competitive analyses and have assisted in product development. I hold one patent and have helped on numerous other patented products. I also have worked as an expert witness in patent-infringement cases and have helped venture capitalists research potential acquisitions.

EDITOR: How do you handle a loss prevention consulting situation where a company asks you to come in and do something for them when you’ve done something similar for one of their competitors?

DiLonardo Typing Thesis Image
Typing his master’s thesis in 1973

DILONARDO: I never accept a loss prevention consulting project without insisting upon a mutual non-disclosure agreement between me and the client. I will never divulge confidential information entrusted to me. I’ve been fanatical about that my entire career. People have tested me on this and have found out that I’m a man of my word. My clients also know that I will provide them with the unvarnished truth about an issue, a trait that has, at times, been sorely lacking in various parts of the industry.

EDITOR: As you look at the long history of EAS, what changes do you think were the most dramatic, in terms of product development, that have had the greatest impact on retail loss prevention?

DILONARDO: It’s over 40 years since the big three EAS vendors commercialized their first products. In my view, the most dramatic change has been the proliferation of source tagging, which was made possible by the development of inexpensive disposable labels capable of being affixed at high speeds in the manufacturing process. Disposable labels opened up the EAS market to packaged merchandise. They also provide the method by which apparel can be source tagged either by affixing the label to a price ticket or embedding it in a fabric label.

The second biggest impact was the advent of the ink tag, benefit-denial devices, and other item-level products like keepers, box wraps, and alarming tags. At the time of their inception, ink tags were successful because the EAS deterrent was flagging rapidly. In my judgment, the EAS market would have dried up quickly without these two phenomena.

EDITOR: Apart from EAS, what other technologies have you observed that have been significantly impactful to the industry?

DILONARDO: Video and data mining come immediately to mind. When I started, CCTV cameras were bulky, were set in a fixed position, and the output could only be watched with a monitor and couldn’t be saved. These technologies have improved more drastically than EAS.

In my opinion, the most important enhancements have been solid-state electronics, microprocessor controls, recording devices, and John Coutta’s tremendous invention of camera rotation along its longitudinal axis. Solid-state electronics allowed for smaller cameras. Microprocessors added “brains” and controlled switching, PTZ, and data collection. Recorders assisted in investigations and evidence keeping. And longitudinal rotation coupled with mirrors made domes the standard housing in the industry.

Superimposing a POS transaction onto video really jump-started the data mining industry because we needed some type of software to help us identify transaction anomalies, instead of staring at videotape. Now the data mining industry is very sophisticated and has provided information that is essential to properly running all aspects of the business, including loss prevention.

EDITOR: What changes have you seen in the retail LP executive over the years?

DILONARDO: That goes back to that story about Joe Vaux putting his pistol on the table. There were a lot of ex-military and ex-law enforcement in

DiLonardo and Welliver Image
DiLonardo with Earl Welliver (right) in 2011.

retail security when I first started, and many of them didn’t even have college degrees. So what we have nowand the magazine gets some credit for this, in my opinionis a situation where the LP industry has decided as a group to train and nurture the professionals that they hire. With greater emphasis on college degrees and certification programs, retail security executives today are far better trained than the Joe Vauxes of yesteryear. And that’s not going to stop as long as we continue to pay forward our knowledge and experience. It’s just going to continue to be essential to the betterment of the industry.

EDITOR: What advice would you give an LP executive or somebody on their staff regarding how to be smart about evaluating the market and sourcing the right product?

DILONARDO: I would give them the same advice that I gave to myself when I started in loss prevention consulting. Take the cue from your boss as to the direction he wants to take, and then immerse yourself in the product literature that’s out there. Go to trade shows, read the trade magazines, and ask your peers, “What are you doing? How does this work for you?”

The other thing I would say is that hiring a consultant is a good investment. I hear people say, “I don’t want to spend money on loss prevention consulting.” I think that’s a mistake because it’s my job to know twice as much as you would need to know and to help you add value to your organization. There are other guys like me out there who have the knowledge and can really provide an important service. The right consultant is worth his weight in gold when you’re looking at making multi-million dollar procurements.

EDITOR: Selfishly, I want to turn the discussion to the magazine’s relationship with you over the last 14 years. You have been one, if not the number one, contributing writer since our premier issue in 2001. We have been so pleased and proud to have had you as a part of the team. Thank you very much for all your articles and insights. Given you’ve done all this for not a penny, why did you?

DILONARDO: Let me start by saying I most certainly appreciate what you and Jack allowed me to do and what we all did together. I still remember Lee Pernice from Sensormatic asking me if I would be willing to write an article because “these two guys are trying to put out a magazine, and they are short one.” I said, “Hell, yeah!” That first article was about Federated’s source-tagging initiative and Tom Cole’s theory on “the total cost of shortage.” That became the first of over 80 Industry News columns.

Setting aside the fact that you allowed me to keep my name in front of the industry, which I appreciate, this has always been a way for me to pay forward my experience. I wanted to give back to the industry in some way. Writing for the magazine always gave me the impetus to do the research to keep myself up-to-date.

I also want to say, and I’m saying this from the heart, what you two did back when you started was uncharted territory. There were other trade magazines, but there was nothing like LP Magazine. As far as I’m concerned, it is going to go down in history as the best periodical that we have ever had in our business. I’m just glad I played a part in its success.

EDITOR: Thank you for that, Bob. Looking back over your career, would you change anything?

DILONARDO: I know the standard answer is no, but yes, I would. I ended up backing into a lot of jobs, like shortage control, which turned out fine. But I wish I would have taken a little bit more control of my career at the beginning. The thing I regret the most is what I mentioned earlier about my problem with politics. Anybody who works in an organization, even if it’s five people, has to be able to manage interpersonal relationships as well as possible. I struggled with that for a long time, and I know it cost me. In hindsight, my frustration with politics induced me to start my loss prevention consulting business, which aside from my family has been the biggest joy I’ve experienced. It allowed me to make a good living working on very interesting projects whenever I wanted and however frequently I wanted. So it’s been fantastic. I’m going to miss it.

EDITOR: Best of luck, Bob, and enjoy your well-earned retirement.

DILONARDO: Thanks, and I still have some thoughts on articles, so I might just submit something new down the road.

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