LPRC - CrimeScience Episode 54 – The Evolution of Loss Prevention, Counterfeiting, and Theft ft. Keith Aubele (Dri-Mark)

Episode Date: May 27, 2020

In this episode, Keith Aubele, Dri-Mark Board Member, joins our host Dr. Read Hayes to discuss the changes in loss prevention, internal versus external theft, implications of counterfeit currency on businesses, and much more. The post CrimeScience Episode 54 – The Evolution of Loss Prevention, Counterfeiting, and Theft ft. Keith Aubele (Dri-Mark) appeared first on Loss Prevention Research Council.

Hi, everyone. Welcome to Crime Science. In this podcast, we aim to explore the science of crime and the practical application of the science for loss prevention and asset protection practitioners, as well as other professionals. We would like to thank Bosch for making this episode possible. Take advantage of the advanced video capabilities offered by Bosch to help reduce your shrink risk. Integrate video recordings with point of sale data for visual verification of transactions and exception reporting. Use video analytics for immediate notification of important AP-related events and leverage analytics metadata for fast forensic searches for evidence and to improve merchandising and operations. Learn more about extending your video system beyond simple surveillance in zones one through four of LPRC's zones of influence by visiting Bosch online at boschsecurity.com. Welcome everybody to another episode of LPRC's Crime Science. I'm coming to you from Gainesville, Florida, home of the University of Florida.

Today, I'm joined by a longtime colleague and friend, Keith Obley. Keith and I go way back to his Walmart and Sam's Club days. And we've worked together since then continuously in different ways and different formats, his Home Depot days and so on. So welcome, Keith, to Crime Science. Well, thanks a lot, Reed. I'd like to start out by saying that the LPRC is probably by far my favorite asset protection, loss prevention, operational organization in the industry for what you do, for what we do, and how effective your program is in what we're trying to accomplish today in fighting crime, shrink, and loss. So hats off for a wonderful vision years ago and great execution all the way through. Really do appreciate that, Keith. And, you know, obviously we're not looking for that. We,

and you know, you and I both have a tremendous respect for, you know, really everybody that's come before, during, and someday after us in trying to shape this APLP landscape. And, you know, I love the relationships we've been able to set up with the National Retail Federation, you know, formerly NRMA, and with Rila for formerly IMRI and IMRA and so on and FMI and many, many others. So and through it all, you know, we've tried to work together. And you and I talked right before we started recording about Walmart days. I can remember really kind of first meeting you were in some meetings there. there. And let's kind of go there where, you know, where Dave Gorman, the VP of LP's office was at Walmart in Bentonville in the corporate office, the proximity. And in fact, if you leaned out of his office almost or out of his office and you went in the hallway, you could see, you know,

who down at the end. Tell us a little bit about those beginning times and how you got into the LP, later AP field and those experiences around Bentonville. Yeah, those were some great times. I think if I look back, the fact that you had Sam Walton, David Glass, Don Soderquist, icons in the industry, just literally feet away from Dave's office and ultimately from my office when I was able to promote up to a director with the company. It was fascinating to be able to walk to the bathroom, literally, and run into two or three people that had shaped the confluence of retail forever. And it was exciting. I remember, and Dave was quite the character, as you can remember, and everybody had such a great relationship back then. It was hard work. We worked hard,

but we played hard. A lot of practical jokes, a lot of practical jokers, and that's what made it fun. Of course, we're going back a long time, Reed, back in the early 80s. I remember when I applied for Walmart and was interviewed at Missouri Southern State University while I was working on my undergraduate degree. They asked me to come into Bentonville, and I did, and I showed up. And I know you'll remember this, but when you walked in the entrance of Walmart into the vendor area, it was a bunch of multicolored chairs that looked like you'd walked into a laundromat. I sat down at that chair. There was a lady about 90 years old that sat behind a gray military desk. And right to the left of that desk was a 10 cent coffee machine. While I was sitting there, and I'm the only person in that waiting room, a door opens from the side

and in walks an elderly gentleman, walks over, puts a dime in the machine, gets a cup of coffee, turns around and scopes out the entry, sees me sitting there and walks over and says, young man, what are you here for? And I said, well, sir, I'm here to interview for a job. And he said, what job? And I said, loss prevention district supervisor. And he said, well, good luck. Good luck, young man. He said, my name's Sam Walton. If I can ever do anything for you, let me know. And he turned around, walked back into that door. That doorway led to where Dave Gorman ultimately had his office and where I was able to sit. So that was my first introduction to Sam Walton at Walmart. And it wouldn't be my last. I ended up being mentored by him, which was

incredibly fascinating. So that started my career in loss prevention back in the early 80s. career and loss prevention back in the early 80s. That's good. That's good history. And, you know, I was, I had the opportunity then and really now, other than the travel restrictions during COVID-19, to go and visit a lot of executives and a lot of corporate offices. And none were in, you know, and I think everybody knows what I mean that's been involved with Walmart. None were less impressive than Walmart's, It was hard to find anything but a 1960s metal desk. And the emphasis was on the people and the customer, right? on the furnishings as you described the entryway and really I don't think the entryway has changed dramatically even now in 2020 compared to back then there's been some remodeling and you can't you can't now go through that door and get into anybody's offices but yeah that's always been an interesting aspect to me

and what I appreciated indeed yeah you didn't live unless you had indoor outdoor carpet that had been duct-taped, and that's what we lived with. That was the normal. That was it. So I was in there. We got to plot and scheme a little bit. And at that time, who were some of the leaders, some of your co-leaders in there? So we have Dave as the vice president, and his hiring alone is a really interesting and funny story in a way.

But who else was on the team back then, the leadership team with you? Sure. We had Richard Wells, who was a director as well, and Richard was a former judge. Actually, the Clintons had cut their teeth lawyering in his courtroom, and then he went on to join Walmart in the 70s and was a part of the organization. You had John Blevins, who had been there for quite some time and did a tremendous job in creating a wonderful culture around loss prevention and shrink. You had Steve Lindsay, who ran the Sam's Club organization, a very good friend of mine. You had Ron Lance, who was a part of the team, Renee Bell, and also many others that played a critical part in significant and historical impacts in the organization that allowed Walmart to become the success they are today. And I think there are leaders of Walmart that would tell you that as well, operational leaders, Reed, not just those of us from the APLP side. Good stuff.

Now, you, I believe, went into Sam's after Steve's tour of duty there. Is that correct? Not actually. I, uh, I never did go to Sam's club as a director. I worked with them on a number of, uh, when, uh, Dave, uh, promoted me to the, uh, regional director position, he put me over into the super center group. So that's really where I cut my teeth and ultimately became the director of super centers, which was their growth vehicle at the time. Okay. That's my recollection now. Yes. I mean, that is correcting my recollection because I do recall that now. It was super centers. I knew it wasn't, yeah, the standard stores as they were known at that time that you took over an area.

So, okay. Yeah, excellent. And it seems to me, I'm trying to remember, you had a counterpart over there at Dan Faculty at Kmart. I remember when he got the Super Kmart. And knowing both you guys, they seemed to put the guys in there with the hard chargers into the super before the brand name. Indeed. And Dan and I have presented mutually back in those days on our strategies with the super center concept, which was very novel at that time and still stay a good friend of Dan's

today. He's doing a great job down at Southeastern Grocers. So how have you, from your perspective, seen things change? Because you've had different views. Obviously, you had your Walmart view and seeing how things were evolving in the industry, and particularly with LPAP, and then the Home Depot perspective, and then now working with different solution partners and providers to get them up to speed and connect and enhance what they do and how they do it. So what are some observations you've seen over the years? That's a great question, Reid, because with my Walmart experience, which was a great career, and then leading the

Home Depot Global Initiative gave me incredible insight globally. And then the last 20 years working with my own group, the Navigate group. And we not only work with solution providers, as you mentioned, but I have retail clients as well that depend on me to help lay out the loss prevention asset protection mission for their organizations. But I've really seen three major changes that I'd like to briefly talk about. major changes that I'd like to briefly talk about. One, I feel that our loss prevention asset protection group is being viewed much more as a profession than a function. And I think that's very refreshing. We're seeing heads of loss prevention and asset protection programs getting

a seat at the decision table and they're being called on more for global operational input. at the decision table and they're being called on more for global operational input. This is something that I did at Home Depot. I forced my way to the table to have a seat because I felt that the decisions we were making had an impact on the global strategy, not just on one disparate area of operation. So I think that's huge and significant for our profession, Reid. Secondly, we've seen a virtual transformation in technology deployed in the retail vertical, and that's given everybody real-time data, as you know, and that data is necessary in making strategic pivoting that we all have to engage in to stay ahead of shrinking loss. gauge in to stay ahead of shrinking loss. Before, we had to generate our own reports that really weren't tied or assimilated to anything that was actionable unless we took months to analyze it and then applied it. And by that time, we had missed the curve. Today, technology and systemic processes, including analytical tools, are king. That's what's driving our business.

And then lastly, I think a big change in our operation in asset protection is greater accountability demands are being placed on our leaders and our loss prevention associates by corporate leaders and our practitioners. We've got to be delivering results more than ever. Margins are decreasing, payroll is increasing, budgets are shrinking, theft and shrink are on the rise, and it's critically important that our community drives swift and measurable results, because if we don't, then we're going to be at the mercy of these organizations when it comes time to pare down those organizations. We have to be essential. We have to be the lifeblood of a company and organization. And that's where I work with my retail partners to make sure that we're doing

everything we can to be an integral part of that organization, not a secondary or tertiary activity group, but a key core part of that organization. And that's what all of us in asset protection need to be working towards. I really would endorse that. That's a good, focused summary, concise summary. And data has always been there, but it's been hard to get. It's hard, it's been hard to bring it together and it's been hard to make it actionable. And then to push it down and down to the, to the more and more operational level, like you said, provide that, you know, people need, Hey, I need to look at this dashboard and get an idea where

we are and where I need to go and then how I'm doing. So, but with that, like you say, comes more responsibility or accountability. But that's how we get things done. We're all held accountable. So that's some good insights. You know, let's talk a little bit now about everything that we've learned and didn't learn, everything we've done or didn't do. Here we are. We've got a global pandemic. It exploded on the scene. It moved like a wildfire over a course of weeks. What are things that we should know and do now as we continue to move through this and most importantly, as we figure out how to move out of it and then not go through it again at this level of seriousness. Absolutely. I think this pandemic caught a lot of us flat footed.

I would venture to say that it caught the majority of us flat footed. But that can never happen again. We get one chance to learn our mistake. And preparation is key. mistake. And preparation is key. I would challenge every asset protection loss prevention leader and everyone in this profession to sit back and immediately do a correction of errors as to what we have to be prepared for the next time. We are a proactive preventative profession. We are not and can never be a reactionary organization. So it's up to us to provide leadership to our operational partners, to our retail leaders, to help guide them to re-entering actually the new normal, as well as preparing for what's around the corner, normal, as well as preparing for what's around the corner, the next COVID, whether it be 20, 21, 24, or 1,000.

So, Reid, I think we really have to put on our thinking caps here and figure out how we can use systems, how we can use analytics, how we can use tools, and how we can use proactive preventative measures to make sure that those criminal elements aren't taken advantage of. We're working on short staffs. We're working on shorter resources. People are operating from home, not actually in most instances on site. So criminals are going to try to exploit and take advantage of every one of those opportunities. It's always been our job to eliminate barriers. It's always been our job to eliminate barriers. So we have to focus on those barriers that will enable criminals to not be successful in our stores. the ground level a little bit and talk about, you know, we've got people, we've got theft,

we've got fraud, and we've got violence. But let's maybe look a little bit about the, on the theft side. You know, what, what are we looking at before? What were we looking at? What are we looking at now? And what might we be looking at as far as both external and internal threats, you know, those that are working for us or are some for some other reason there to shop to deliver or, or otherwise. So, you know, if we take, let's take a look at the external element of it first, because a lot of people believe that that's the largest percentage of our loss when it comes to theft. It's always been my philosophy, and I've always preached this, there are two types of customers that walk into your store.

You've got a positive customer and you have a negative customer. The positive customer walks into your store with the pure intent, selecting items and then paying for those items. The negative customer walks into your environment, your retail operation with a specific intent to defraud you, either a merchandise, cash or both. So you have got to structure tools in a message read that addresses both the positive and the customer front forward, but affects them in different ways. For instance, back in my Walmart

days, I don't know if you'll remember this, but you might, we had a term called aggressive hospitality. And it was part of that process was a 10-foot rule, where an associate, if they came within 10 foot of a customer, would address them, ask them if they needed assistance. Now, take that instance of aggressive hospitality, and let's apply it to the positive and the negative customer. The positive customer sees it as a good thing. Hey, these people are interested in me. They want to help me spend more money in their organization, in their retail operation. To the negative customer, that is not received exceptionally well.

And in our LPC conferences, when we bring in individuals that have been arrested for shoplifting, the first thing they're going to say, Reed, is I don't want any attention. I want to get in, get my job done, and get out. Aggressive hospitality addresses that negative customer in a negative way. We can do the same thing with CCTV, with public view monitors, with proactive measures, with analytics. We can send a message out that the positive customer addresses as, this retail organization is interested in my safety and safekeeping. I want my wife to shop there because I feel comfortable because they've got security elements in place. Whereas the negative customer is saying, I don't want to see this. I want to

go somewhere where there's less of a security presence so that I can steal without being uncovered. So that's how I see us addressing these things going forward by presenting a message that addresses the positive and negative customer equally. Good stuff, because I think, like you say, and it's really interesting to parallel at LPRC right now, as know we're we're using the red and green shopper analogy to do just what you talked about now we know that a green shopper the one we want to come there and come back can flash red and the same thing even with the red shopper the bad guy we don't want to come there or can't or won't come back um they might flash green and actually pay for something but But having said that, I love the parallel. And these simple analogies like the positive, negative, the red and green, which as I just think about it could be almost if it was red and black,

could be positive or negative on a battery, for example. But they help us understand and focus. And I think they help those in the store operations and others that are out there understand and focus as well. Having those simple and the positive side, like you say, we're here to sell more and to provide a great experience for our associates and our customers alike. We're not here to put anybody in jail and do this or that. Unfortunately, we have to enable the business. And sometimes that means putting people in jail. But at the end of the day, we have to enable the business. And sometimes that means putting people in jail. But at the end of the day, I like what you're saying. Let's be

positive. Let's do what we can. Now, one thing I was going to point out about that, and I think you can probably relate, I know you can, the 10-foot rule. Sometimes the joke was with some associates, they learned how far that was and they had had the 11 foot rule. But that's an aside. And I think that's our challenge, though, in LP and AP, right? You know, Keith, how do we overcome the resistance or the natural human, you know, desire to not do something they know they should do? something they know they should do. Yeah, that's a good point. And that's one of the biggest struggles. But when you go to a store within a store concept, and it's another concept that Sam Walton invented at Walmart, whether you were someone that worked in the back, filling the baler up and taking care of the trash, or whether you ran the largest department in the store, you owned that business. You owned that area, and that was your pride. And that's where your job satisfaction came from. That was the contribution that you made overall to the organization and to your success within that company. So take the pride being as a store owner,

a storekeeper for your area responsibility. And if you can instill that in your employees to where they know that what they do to contribute contributes to the profit of the company and ultimately contributes to the viability of their role and their paycheck and their bonus, then that enables them to have more latitude, I think, and more control over what they do. And if you give people that power, normally they will use it for good and they will use it to increase and enhance the business model. And that's what we're asking them to do. I like it. Now let's switch over now and talk a little bit about

currency. And, you know And there were those out there predicting that we'll become a cashless society, this and that. But the reality on the ground and the data show that actually there are millions and millions of people that can't or won't use credit cards or now digital apps for transactions. They don't have the ability, they don't have the desire, they can't afford, they're not going to walk around with a wallet full of credit cards or can't do that. So cash is everywhere. And I've even seen, like in New York City, where they have an ordinance that you've got to offer a cash option for transactions. But we know with currency, with cash, there are a few things, not only transmitting a virus, for instance, or a bacteria,

but that currency might not even be real, authentic. And now, like everything, we see people leveraging this COVID-19 where not a lot of people want to spend a lot of time holding up money to lights and things like that. They don't want to touch anything. We are in a low, no-touch environment. So, Keith, let's talk a little bit about currency, the risk and benefits, and what we should be thinking about doing. Yeah, that's very timely because cash is not going away. As a matter of fact, not too long ago,

I was involved in a project with one of the largest retailers in the world putting in cash recycling systems into their cash offices. And they're investing hundreds of thousands per unit. And they've got a lot of stores and a lot of locations and they wouldn't be doing that, Reed, if cash was lot of stores and a lot of locations, and they wouldn't be doing that, Reed, if cash was subsiding. As a matter of fact, to your point, cash is growing.

And there are a lot of people that don't have checking accounts or don't have credit cards or don't want to have either or one of the above. And therefore, they will continue to operate in cash. the above. And therefore, they will continue to operate in cash. The challenge is that the criminal element, as we know, always seem to build a better mousetrap. And a lot of them are turning to the counterfeit currency scheme. And the reason is, is because it's fairly simple and easy once you get the processes down. And that's a plague on our retail operation environments today, because it's very challenging and difficult nowadays to identify counterfeit currency. We not only have individuals here in the United States that are working hard at manufacturing counterfeit currency, but we have dark state agents that are doing this to prop up their own country organizations financially, where they are perfecting the currency to where it is very

difficult and challenging to detect that it's counterfeit. The great thing is there are tools out there. And a company that I'd like to mention is Drymark, based in Long Island, New York. It's been in business for over 60 years. They've got what's called a flash test. It's a currency detector that, in a matter of less than seconds, will identify bad bills. in a matter of less than seconds will identify bad bills. And it's very easy for the cashier to do that at the point of sale. And that's where you have to do it. Because if you allow it to get to the cash office, it's too late, you've incurred that bottom line profit loss. But in this environment today, we're seeing a tremendous amount of counterfeit currency that's being passed in the stores. Now, our loss

prevention practitioners may be shaking their head and saying, I don't really know about that. But here are two things to ponder. One is traditionally your Treasury Department that deals with it because it's an after the fact item. Once the banks identify it several days after receiving the deposit, then they notify Treasury and say, you've got bad counterfeit bills here. Our asset protection loss prevention people never hear about it. But if you go and investigate and look, you're going to understand that it's a cancer and it's growing. We have a home improvement store in Long Island that's constantly contacting our corporate office each weekend with literally piles of $100 bills that they've accepted that were bad. So if we continue down this path, the criminal element is going to realize, and they are

realizing, that this is one of the ways to become an organized crime element easier than walking in and risking stealing goods. Because if you're not prepared as a retailer, it's very easy to get it by the cashier. So, I mean, and we had our theme, as you know, and many know at the LPRC impact that we had, a prior one was trust and that the customer's got to trust the merchandise, the quality and authenticity of it, that everybody's got to trust everybody. We's got to trust everybody. We've got to trust the employee. The employee must trust the customers, must trust their employer.

But we've got to trust that the app, the credit card, the cash or currency that we're presenting is also authentic and that we will be paid and so forth and that our information won't be compromised or, and, and all the above. So I can see where clearly where currency comes into that. Everybody's got to trust everybody that,

that what they're doing is authentic, that everybody's going to be paid. And we've got, we've got sound and honest commerce. So let's look, so let's look a little bit forward. We've got a couple more minutes. Keith, what should we all be thinking about and doing individually and collectively here to reduce theft, fraud, and violence, to enable our enterprises in this COVID-19 crisis as we move through it and then as we come out of it? Yeah, we've got to batten down the hatches, no question about it. And we have to, as we mentioned on the counterfeit, for instance, let's take that as a microcosm. You've got to have tools in place that's going to be able to detect that you have something wrong

going on in your organization, no different than if you're receiving a bad credit card. You've got to have ways to validate whether it's with a black light that identifies the credit card is accurate or valid or invalid. Same thing with currency, this flash test that Drymark has that will identify three different processes of counterfeit that will also work on identification and credit cards. So we've got to find those areas of opportunity and we've got to tighten them down. Refund fraud, for instance, is one that has to be focused on because that's going to be an opportunity for people looking to get quick cash as it always has been in the retail environment.

Internal theft, cash theft, and merchandise theft is something that we have to focus tightly on. We have less asset protection, loss prevention agents in the stores today. So there are people that are going to take advantage of those opportunities. We have got to use systems, and we've got to use analytics, and we've got to use our CCTV and our entire toolbox to make sure that we are doing more with less because we don't have those boots on the ground. So coming out of COVID is going to be no different than going into it in that we have to be succinct in the tools that we spend our hard-earned money on, making sure that they're doing the most that they could possibly do to return to us the data that we

can act on today to impact shrink. If you find shrink tomorrow, it could be too late. If you've inventory and you've got a shrink result that's not good, anything that you do to go back and conduct research on is not going to put that on the bottom line. You have to be proactive. You have to be preventative. And that's what these succinct tools do. Going forward, I think we have a new normal, Reid. I think we're going to need analytics that's going to help us determine how many people are entering our store versus the square footage and capacity. They're going to have to analytically determine spacing. For instance, we can't have congestion in any area, so we're going to have to have voice down

technologies or queuing. We're going to have to have more security, physical security probably, to prevent those individuals to go in and try to contaminate goods in a grocery operation, for instance. So these are all new things that we're going to have to look at, including delivery from curbside pickup. All those have to be secured. And there are technologies out there that can do that, but retailers have to look hard to find the right one. So all in all, it's going to be a fascinating and interesting resurgence back into a new normal. fascinating and interesting resurgence back into a new normal. And as loss prevention practitioners, we better be on the forefront of finding those solutions that are going to work. Because if we don't know, our organizations will find somebody else to go look for those.

Great insights, Keith, and very much appreciated. So I want to thank you for your valuable time, your insights, you know, the memories eating at the original Fred's on the Lake, meeting with the team, having the opportunity to go in the field, the war stories, but mostly the opportunity to work now, then and now, on innovation, but also driving good process. I mean, we don't want to forget that, like you said, we've got to have the blocking and tackling in place. We've got to have the customer service. We've got to be continuous and purposeful and genuine about that. You do go back and talk about Mr. Sam and what his influence was. And that was what, hey, we've got to have good relations with everybody. And we need to want to have good relations with everybody. And that's how we're going to win in the long run.

So good insights there. And we appreciate the partnership and the wise counsel. And so I want to thank you for appearing on Crime Science Podcast. Thank you very much, Reid. It's been a pleasure and looking forward to seeing you once everything gets back to normal and can't wait for the next LPRC opportunity. Perfect. Thank you.

And as a reminder, 2020 Impact is a full go. It's green light. Now, whether it will be totally virtual, which is going to be a pretty cool, amazing experience, or we end up having 50 or 500 executives come in here because you can. And those that are saying, that's it, I'm getting out of the house. The last conference I went to was 2019 Impact. So I'm ready. But it's a full go. So I look forward to seeing you, whether it's virtually or in person or both at Impact 2020 in Gainesville that first week in October, Keith. So best wishes

and stay safe to you and yours. Thank you, Reed. All right. And thank you again, everybody, for tuning in to Crime Science Podcast. Again, everybody stay safe out there. Please let us know any suggestions, questions, or comments you might have that we can use to improve the Crime Science Podcast. We are an open book. And I want to thank Kevin Tran, our producer, and from Gainesville, thank you, everybody. Thanks for listening to the Crime Science Podcast presented by the Loss Prevention Research Council and sponsored by Bosch Security. If you enjoyed today's episode, you can find more Crime Science episodes and valuable information at lpresearch.org. The content provided in the Crime Science Podcast is for informational purposes only and is not a substitute for legal, financial, or other advice.

Views expressed by guests of the Crime Science Podcast are those of the authors and do not reflect the opinions or positions of the LF's Prevention Research Council.