Since opening its first store in 1962, Target has set itself apart from other discount retailers by differentiating itself as a design leader with fresh and innovative approaches to everything from marketing, store architecture, and community relations. While perhaps best known for its flashy commercials and iconic bullseye logo, Target is not only reinventing the retail landscape, in the process it’s establishing itself as a solid leader in the loss prevention world.
With more than 1,500 stores in forty-seven states, Target has taken a unique approach to supporting the communities it serves. Through local partnerships and a national giving program, Target gives five percent of its total income to support education, the arts, and social services.
Additionally, Target has established strong relationships with law enforcement on a local, regional, and national level. It is these key relationships that have helped the company evolve its security strategy, expertise, and philosophy.
Assets Protection Organization
Target’s overall loss prevention and security strategy resides with the assets protection (AP) organization, a team of thousands in the stores, distribution centers, overseas, and at its Minneapolis headquarters. As the company has grown, AP has also grown, reinventing itself from a cops-and-robbers role to become a critical player in the company’s mission to drive profitability and sales. With that responsibility also comes greater pressure to deliver, so AP leadership has built diverse teams to help ensure it is positioned to be successful.
“One of the things I’m proudest of is our team,” said Tripp Welborne, director of assets protection for Target. “We have expertise from traditional fields such as law enforcement, but we also have team members from finance, store operations, communications, and technology, which allow us to take a more sophisticated and strategic approach to security.”
Through the wide-range of expertise and experience, Target has shifted from traditional security methods where the focus was on catching shoplifters to a more risk-based approach, which allows the AP team to maximize efficiencies and its effectiveness on helping the company’s bottom line. While employees continue to tackle petty theft, they are also tasked with using intelligence, such as video surveillance, to stay ahead of the criminals and types of crimes pervasive today. Just as the security approach and methods become increasingly sophisticated, so have the crooks.
Gone are the days when retailers’ primary issue was bad checks. Today’s loss prevention professionals are dealing with everything from data security to international supply-chain security, and basic store security. Target has also seen a significant increase in activity from organized retail crime rings who are using the worldwide web to sell stolen goods.
“It requires a careful balancing act to ensure we are responding quickly to stop illegal activity, while at the same time anticipating what’s next and identifying ways to prevent those criminals from being successful,” said Welborne. “One of our current priorities is to stop the activities of organized retail crime rings who sell thousands of dollars of stolen merchandise on unregulated Internet auction sites. But that doesn’t negate the need to continue our work around other areas of fraud.”
And while check fraud has been increasing in the retail industry, it continues to decrease in Target stores. Target continues to successfully manage fraud risk within its credit products, even as its portfolio grows and it works to speed approvals for guest credit during checkout.
But despite that success, Target’s AP team continues its work in this area as it expects the biggest trends in fraud will continue to be driven by technology and the Internet. They also expect that the recent growth the retail industry has seen in credit and gift card-related fraud will only continue along with the prevalence of identity theft.
Fine Tuning the Return Policy
Target and other retailers continue to face other challenges as well, including return fraud. The National Retail Federation (NRF) estimates that in 2006, return fraud alone cost the industry more than $9.6 billion. Target, like others in the industry, has made return fraud a high priority and has taken a number of steps to address the issue and minimize losses.
The retailer now has a cross-functional company team charged with gathering, reviewing, and analyzing data to make recommendations to leadership on ways to reduce such losses. Leadership from stores, legal, guest relations, and others are working collectively on innovative solutions. Several measures have already been implemented, while others continue to generate discussion.
The difficulty in the issue is that while Target identifies ways to prevent and eliminate return fraud, it must also consider other important factors, including guest impact. While the company does want to make life more difficult for criminals, it doesn’t want to negatively impact its guests. Thus, any changes are analyzed through a guest lens, just as other company policies and procedures would be reviewed.
One of the more recent and visible changes for guests was Target’s adjustment to its return policy earlier this year. Target was not alone in its efforts and according to the NRF, return fraud has become so rampant that more than two-thirds of retailers are changing their return policies in an effort to address the issue.
While Target has required a receipt for all returns and exchanges since 2001, it has made several adjustments to its return policy in an effort to crack down on fraud. In April 2007, the company began limiting non-receipted returns to $40. Target’s previous limit was $100 for non-receipted returns. In August 2007, Target decreased the limit even further to $20. While the changes have had a minimal impact on Target guests…as more than 95 percent had a receipt or were able to use Target’s receipt look-up option, which can retrieve transaction information for guests paying by debit, credit, check, gift card, or by serial number…the retailer expects this small change will have a significant savings for the company long term and further reduce any loopholes thieves have attempted to exploit.
The return policy shift is a perfect example of how Target had to balance several, and in some sense, competing factors—a reduction in loss versus a reduction in guest service. How could Target manage legitimate returns, avoid punishing impulse shoppers who later decided to return an item, and at the same time target the shoppers with malice intent to return an item before purchase? Ultimately, and upon careful review by a range of departments, they were able to find a solution that met both needs.
In addition to employing solid and thoughtful policies to reduce return fraud, Target is also using advanced back-end investigative capabilities and is leveraging technology to build those cases. For example the company has employed proprietary systems to help monitor and track returns. Whether through top-notch video surveillance or sophisticated forensics techniques, Target’s internal investigations teams have been able to both catch and thwart criminal activity. Several large cases have been solved and successfully prosecuted in the past year.
The Proof Is in the Video
Target routinely partners with law enforcement in cases of fraud or theft. Internal Target teams investigate, collect evidence, conduct interviews, and build a case that can be presented to law enforcement. With the limited resources of most police departments, retail theft is typically not a high priority. But with Target’s assistance, these leads have led to the capture of thousands of criminals nationwide. In March 2007, one suspect was arrested and charged in connection to burglaries spanning four states, one of them involving a Sacramento Target store. The individual, along with four others was accused of returning Apple iPods containing only batteries and gum. In that case alone, the company loss was in the thousands.
In another case that occurred in Target’s hometown of Minneapolis last May, one subject was arrested and charged with fraud at thirty-one Target stores. The suspect was detained after police learned he was removing hard drives from their packaging and reselling them on the Internet for his own consulting business. He then returned the incomplete resealed products to stores for a full refund. His actions resulted in tens of thousands of dollars in losses.
But one might ask why a $60 billion retailer like Target is concerned with return fraud, which is a relatively small portion of overall losses. The answer is simple according to Brad Brekke, vice president of assets protection for Target.
“The goal is minimize loss, regardless of amount,” explains Brekke. “When one criminal knows there are ways to get around the system, it’s only a matter of time before others catch on, and the issue becomes much more pervasive. We’re here to prevent just that from occurring.”
New Methods of Fraud
But as one door closes, yet another opens. New methods of fraud continue to emerge as thieves become more sophisticated and their crimes more elaborate. Wardrobing, or renting, while not a new issue, remains a constant problem for retailers. Holiday parties and pre-game events continue to fuel these fraudsters.
The perceived need for a one-time product use goes beyond clothing to automotive and housewares to the latest in high-tech technology. For example, retailers selling electronics are seeing an increase in upgrading, that is customers who return a product stating that it is defective and in return receive a newer version of the old product.
Fraud continues even further into coupon-clipping criminals. These are guests who clip coupons, purchase the discounted products, and then return them for retail price.
While the return policy changes and restocking fees have made these tactics more difficult and less lucrative for criminals, Target also utilizes a number of behind-the-scenes measures to reduce losses related to theft and fraud.
Target’s AP team works to identify shoppers who enter a store with the sole intent to commit fraud or theft. Target uses a variety of technologies to prevent, deter, and investigate any potential crimes. While the retailer won’t elaborate on the specific details of its security measures to ensure the integrity of its system is maintained, it will say measures include closed-circuit television systems, cutting-edge video analytics, electronic article surveillance, and other investigative tools. This high-tech equipment helps catch potential criminals.
“We have both a speedy and efficient process that helps track store transactions,” said Welborne. “But while technology is a great weapon, we’ve found that team member engagement is a key to help deter theft and fraud.”
In fact, one of Welborne’s favorite lines is that everybody has a hand in security. As he travels from store to store, week after week, Welborne isn’t simply on the lookout for would be criminals. His security approach mirrors the company’s philosophy, which is focused on guest service.
When he walks into the store, he looks to see if it’s stocked appropriately, if it’s neat and clean, and if there are team members available to assist guests. While some might be surprised, Welborne is quick to point out that each of these details factor into the overall security landscape.
“Team members who care about the appearance of their store pay attention to detail and are acutely aware of their surroundings,” said Welborne. “They will notice the difference between a guest and a potential criminal, and so they play a critical role for AP.”
Additionally, anyone who has shopped at a Target store has probably heard, “Can I help you find something?” from a team member. That interaction, according to Welborne, might be just enough to discourage a would-be thief from attempting to steal from that store.
While seemingly so simple, that very formula has worked well for Target. The combination of engaged team members, properly positioned video cameras, and carefully analyzed polices have led to great success in the area of fraud. Target has fared even better in return fraud and while the company declined to disclose specific figures around loss, officials expect return fraud to soon be virtually eliminated, just as check fraud has lost its appeal with criminals.
By working with other teams internally and partnering with law enforcement externally, AP has cemented its place as a valued organization who is supporting the company’s continued profitability and success. But don’t be fooled, this success is not enough for AP to rest on its laurels. The team must continue to work hard to ensure it’s staying ahead of the next big crimes thought up by a whole new wave of thieves.