Transforming LP and Operations at Zale Corporation

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As technologies evolve in the world, so often do the ways that organizations do business. When George Slicho, senior vice president at Zale Corporation, decided to consider the latest in security technology solutions for his 2,300-plus stores, little did he anticipate the extent to which his journey would take him, and where he would end up.

It is surprising to many onlookers in the loss prevention community to hear the results that have come from Slicho’s efforts. Slicho, who often speaks at LP industry events, is a huge proponent of remote video monitoring technology due to what it has been able to accomplish for Zale. The results are so compelling, he often has other LP executives visit Zale’s headquarters to see the technology in action for themselves.

Slicho will tell you that his latest success at Zale Corporation has been driven by a simple philosophy to “ask why” and a vision to fully utilize technology to do things differently

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A 16-year Zale veteran, Slicho has always focused on the bottom line, as so many in the LP industry do. Over the years, Zale has grown into a leading specialty retailer of fine jewelry in North America. Its brands include Zales Jewelers, Gordon’s Jewelers, Bailey Banks & Biddle, Peoples Jewellers, and Mappins Jewellers.

Along with the growth of the company comes the operational and other challenges associated with growth. When dealing with fine jewelry, these things are heightened even more.

Like most in the jewelry industry, Slicho faced a myriad of issues, including smash and grabs, break-ins, hold-ups, shrink, and false alarms. He also faced ongoing workers’ compensation claims and in-store customer claims.

Drop-Down Case Strategy

Zale Corporation realized over time that it was not realistic or cost effective to pull every piece of merchandise at night and secure it in a safe. Typically, safes were not large enough to accommodate all of a store’s merchandise, especially in smaller retail locations.

Handling of the merchandise was also an issue. It was estimated that 25 percent of the time that fine jewelry was handled, the potential for damage existed. Given the reality of the situation, Slicho felt there had to be a better way and a different approach.

He imagined a store with no visible merchandise in the showcases at night and thought that many of his issues would be solved. Slicho turned to long-time Zale showcase manufacturer Faubion Associates. Faubion was asked to come up with a cost-effective, user-friendly showcase that allowed the entire selling deck, including the elements and jewelry, to be lowered into the bottom of the showcase and secured at night.

After eighteen months of extensive testing and design changes, Faubion delivered the first drop-down cases for the Zale Corporation’s first store in Manhattan in early 2000. The dropdown case was an instant success. “What we learned was our associates loved being able to secure almost the entire store with the push of a button,” said Slicho. Because of the drop-down cases, only the most expensive merchandise is pulled and secured in the safes. Operationally, setting up in the morning is also completed in less than half the time.

Best of all, burglaries stopped in store locations that contained drop-down cases. After the successful launch of the drop-down cases, Slicho started thinking about his alarm systems and what could be done differently to operate more efficiently and cost effectively

The Search for a Better WayVideo motion technology has been around a long time, but has been prone to false alarms. Although false alarms remain a problem to both businesses and police forces across the country because approximately 99 percent of alarms are false, Zale’s management was committed to finding a solution.

 

Of major concern to Zale was police response to their burglar alarms. Due to the overwhelming problem with commercial false alarms, in addition to rapidly expanding verified response laws in many cities, police response was getting worse. “Unless a criminal activity can be visually verified, the police are most likely not going to show up,” said Slicho.

Verified response can be sloppy in certain major cities as police resources are already stretched thin and are challenged in reaching all locations where dispatched. Knowing that response to commercial alarms was a low priority to police, Slicho once again turned to a local Dallas-based company, DV Dallas, to help him build a solution.

Intelligent Video Solution

“I was very fortunate to meet Darjon Bittner, the CEO of a technology company called DV Dallas that was working on cutting-edge remote video monitoring technology,” said Slicho. “I told Bittner what I had in mind for a solution and DV Dallas was able to bring it to life.”

Slicho’s idea was to leverage Zale’s existing surveillance hardware and use it after-hours as “smart cameras.” The key was to develop software that would be able to not just detect motion, but would be able to distinguish between a false-alarm motion and motion that was caused by the presence of a crime taking place by a real intruder. At the time, such advanced technology did not exist.

DV Dallas, later acquired by Westec InterActive, developed a platform for Zale that could intelligently evaluate motion in the store before triggering an actual alarm event. This development eventually led to the elimination of false alarms for Zale Corporation.

Eliminating false alarms was the first step in what Slicho saw as a huge opportunity for Zale to capitalize on an intelligent video recorder platform. Even though the false-alarm problem was solved, Slicho and his vendor partner continued to work together to address every inherent limitation to existing alarm and video CCTV technology.

Remote Monitoring

Zale Corporation had been utilizing remote video monitoring of their high-risk stores as a way to effectively protect their employees, customers, and assets during business hours. Slicho asked why he couldn’t also change how their after-hour alarm protection was handled.

Slicho envisioned leveraging video technology to remotely monitor these stores 24 hours a day, seven days a week. The challenge seemed fairly simple. By leveraging the existing CCTV systems in the stores to also serve as the alarm system, they could eliminate the expense of installing traditional alarm technology and equipment that was prone to false alarms and was becoming increasingly ineffective in stopping burglaries.

He also thought about the money they could save by essentially eliminating their traditional alarm fees by relying on their own resources in what he envisioned as the Zale Monitoring Center, known today as the ZMC.

The Zale Monitoring Approach

After incorporating all the benefits of remote video monitoring and designing out all of the limitations, the ZMC was launched just over three years ago in 2004. Zale initially approved eighteen new stores to test the system and prove whether the “never done before” system and technology would work.

There were many skeptics of the new system, including some senior executives at Zale. They questioned the lack of a traditional alarm panel, relying on the Internet for security, and the entire concept of in-house monitoring.

After just three months in operation, everyone quickly became believers in the ZMC. The system was far superior in every operational category. The best part was the cost savings. Slicho said that the ZMC was much less expensive than the “old way” of doing things. “We blew away the ROI hurdle just from an expense and capital expenditure reduction,” says Slicho. “The benefits of added safety for our customers and employees, lower shrinkage, and less losses, along with no false-alarm charges make it a no-brainer.”

Zale’s plan is to essentially replace all its burglar alarms with intelligent video recording systems at all its stores.

Today the expanded ZMC is located in the Zale corporate office in the former server room that was moved late last year. It provided the perfect location. Chris Hackler, senior director of asset protection who is responsible for operations, said the large former server room was the ideal location for the ZMC expansion with raised floors, controlled air, and redundant power.

There are currently over 400 stores using the system, with the count growing every month. “When we built out the new ZMC, we added enough capacity to immediately handle 640 stores with expansion to 1,280,” explained Hackler.

The center is managed on a day-to-day basis by the manager and his team of ten operators. Currently, there are four monitoring stations capable of simultaneously handling 160 store locations.

At all times ZMC operators have a single-camera view of every Zale’s store. At any time store employees can alert an operator of suspicious activity by pushing a wireless “suspicion button” or a hard-wired under-the-counter button. Once the alert is received at the ZMC, the operator can pull up every camera view of the entire store, typically sixteen cameras or more, on an expanded screen. The options at that point can be to just monitor the store or send one of nine prerecorded “voice-downs” through the remote store speaker system.

The voice-down is to acknowledge the triggered suspicion button alert, while simultaneously notifying everyone in the store that everything is being monitored and recorded. This simple audio notice prior to a true crime occurring has been very successful in making suspicious individuals leave the store. The successful interventions are recorded as “saves.” According to Hackler, “We track safety and security violations with the idea to identify and correct behavior and non-compliance before a loss occurs.”

In the event that an intruder has entered the store after-hours in the midst of a break-in, the ZMC can confirm to police that an after-hours burglary is in progress. The ZMC operator can immediately retrieve and email video or still images of the suspects to the police. They can also describe the individuals to police with great detail, explaining what the suspects are wearing and what part of the store they are in, and precisely where the store is located.

The voice-down during a break-in is very stern and notifies the intruders that they are being recorded and to leave the store immediately, and that the police are en route. The recording also contains an audio file of a dispatcher talking to the police, along with a siren to scare away the intruders.

In most cases, the ZMC operator is aware of a break-in prior to actual entry due to an “always-on” view of the location. Numerous after-hour situations have been averted with a simple voice-down notifying criminals that they are being observed and recorded.

Beyond Security

When Slicho first envisioned the ZMC, he knew it would grow into other areas of servicing the company. Twenty-four/seven views of the stores meant he would be watching and documenting with the ability to use that data to improve operations in creative ways. With the goal of protecting employees and stores during business hours, and monitoring the stores after-hours, the system quickly expanded to include a diverse suite of solutions, including operations improvement, a human resources investigative tool, interactive training, mystery shopping, customer intelligence, and in-store marketing.

Operations. Operations improvement meant that Slicho could instill a focus on better corporate policy adherence. Zale’s management is able to remotely tour a store at any time during business hours to determine if procedures are being followed, such as store openings and closings, employee attire, display case key control, jewelry showings, and general customer service. This is a distinct advantage for a small box retailer. Slicho refers to the fact that big box retailers have multiple supervisors around most of the day, while smaller retailers do not have the benefit of constant supervision because it does not make financial sense. However, with remote video monitoring, it’s like having a supervisor watching over things 24/7.

Human Resources. Like most corporations, human resources plays a vital role at Zale. Remote video monitoring is critical in cases where an HR issue is being investigated. Zale has the ability to remotely login and review detailed video to either validate or invalidate claims such as sexual harassment and in-store accidents related to workers’ compensation.

Training. Interactive training will be a big part of Zale’s future. With the video archive growing each day, Zale Corporation is building a wealth of video and audio that will be used for training future employees on the right way and wrong way to conduct business in Zale’s stores. Future Zale’s associates will become comfortable and perform better in their jobs having seen real-life examples of what they will be faced with on a day-to-day basis.

Mystery Shopping. Mystery shopping remains a great tool to measure the quality of retail service. While typically, mystery shoppers are physically deployed into store locations, remote video monitoring takes mystery shopping to the next level. At any time, Zale management can decide to monitor the customer service and brand experiences within their stores. Management is able to determine if customers are greeted correctly, and if employees are following correct procedures, including how customers are serviced, checked out, and much more.

People Counting. Customer intelligence and data mining are not items you would typically consider alongside remote video monitoring. Zales is now testing real-time people counting from remote sites. The people-counting function allows management to know how many customers enter their stores on a daily basis, tracking minute-by-minute how many customers are in and out. When this data is compared to POS data, management is able to identify peak sales times and staff each store accordingly. This technology also offers a view into site selection based on foot traffic.

Marketing. In addition to security and operational tools, Slicho is considering leveraging the intelligent video monitoring platform for marketing opportunities. With the existing system, Zale is able to distribute multimedia messages directly to store locations by the push of one button at corporate. These interactive marketing messages can promote a new product, advertise seasonal promotions, and provide market-specific information.

The Results

Since the opening of the ZMC and the rollout of remote video monitoring, the reduction in capital expenditures for alarm equipment that was no longer needed in stores financed the entire ZMC investment at corporate headquarters.

Slicho often gives visitor tours of the ZMC and is given positive feedback. However, visitors always ask about the cost. When he tells them the answer, they are typically surprised to learn that Zale Corporation spent less to build the ZMC than they would have spent had they continued to deploy alarms in their stores and paid third-party companies to monitor their system.

Among other significant operational statistics, Zale has experienced a 40 percent reduction in shrinkage in stores that contain the remote monitoring system.

Slicho believes that the very culture of Zale Corporation is evolving for the better based on remote monitoring and the results are echoed from the store level. “When employees know they are being observed in all aspects of their job, it changes the behavior and the way they operate. Our employees appreciate the fact that they are a push-of-a-button away from receiving help from the ZMC.”

What’s Next?

Slicho’s goal is for the ZMC to monitor all of Zale’s 2,300 stores as quickly as they can deploy the systems. He is also utilizing Westec as a redundant monitoring center to protect stores in case of a natural disaster or other situation.

Remote video monitoring has been the driving force of the company’s successes in reducing shrinkage, protecting customers and employees, heightening human resources capabilities, streamlining procedural policies, and improving overall working conditions and morale for Zale employees.

While the industry has certainly taken note of Zale Corporation and the ZMC, Slicho admits he has a long road ahead of him. But, he looks forward to the journey knowing that he has built the ZMC around a solid and now proven technology that is offering endless opportunity for future expansion.

“Zale will remain one of North America’s leading specialty retailers of fine jewelry,” says Slicho, “and will continue to leverage remote monitoring technology to protect its customers, employees and assets. I’m thrilled to be along for the ride.”

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