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DVD Shrinkage: Case Makers Think Inside the Box

18 Apr, 2002 By: Bruce Apar

Retail shrinkage on entertainment software for the past four years has averaged 1.9 percent to 2.16 percent of sales, according to an annual study by the University of Florida.

DVD and game theft, according to packaging maker AGI PolyMatrix, is double that of recorded music.

Those numbers were enough to impel about 125 representatives from the country's leading software retailers and labels to attend a one-day meeting, held in New York earlier this month, to promote improved loss prevention at retail for video, game and music media.

The Entertainment Retail Security Conference was the brainchild of Michael Lax, executive chairman of Clear-Vu Products, which co-sponsored the unusual industry event with a competitor, AGI PolyMatrix. Both firms are makers of the plastic cases used to house rental and sellthrough entertainment media.

Seeking a New Packaging Standard
Retailers and suppliers have several requirements before embracing a new packaging standard.

The design mechanism must be:

1) Efficient enough so the time and money spent to install and decouple the locking mechanisms don't offset profit margins;

2) Elegant enough that the locking mechanism doesn't add bulk to the exterior of the case, reducing the “shelf density” of copies on display;

3) Customer-friendly enough that the security mechanism maintains or increases sales, can be quickly removed at checkout and does not obscure package graphics; and

4) Strong enough to prevent break-in in an open-sell environment while decreasing theft.

Another option is a locking mechanism that is internal and can only be removed at home by the rental or purchase customer. The consensus by retailers at the conference, however, is that home removal is asking too much of the consumer.

The not-so-hidden agenda of the sponsoring companies was to forge a consensus on, as Lax put it, “the next generation of packaging.”

“Source tagging doesn't work by itself,” he said. “Protecting the media inside and the package itself can make EAS systems better.”

Each company gave presentations of its next-generation so-called “internal locking” configurations and other packaging options, some that include decoupling keys.

Currently, the industry uses so-called EAS, from firms such as Sensormatic and Checkpoint, where plastic “chiclets” or sticky coil is inserted into the package, either by the supplier or retailer. Source tagging is the name of the process where the supplier inserts the anti-theft device. There also are keeper cases, which wrap around the outside of the original package and eat up shelf space density. Unless the item is demagnetized at the checkout counter, it activates an alarm when the customer exits the store.

Electronic security systems were characterized as very beneficial but insufficient without additional measures by retailers on a panel moderated by Tom Warren, chair of the Video Software Dealers Association. The veteran owner/operator of 12 Video Hut movie rental stores in South Carolina said his experience is 80 percent of shrinkage is internal, the rest committed by shoplifters. Of those, he said two-thirds are professionals, the remainder “convenient” or “casual” shoplifters. “Our focus here is the convenient shoplifter,” he said. “Whatever we come up with, the pro will think of a way to break through it. Margins are so narrow, controlling the convenient thief is essential. If you're losing those battles, you should get out of those categories and into something else.”

At Wal-Mart, source tagging has resulted in a “significant reduction” in shrinkage, said Gary Seversen, VP/divisional merchandise manager of the chain, “but it's not all the difference we need.” He told Video Store Magazine Wal-Mart is “interested in testing things that seem to make sense, and if they make sense, we'll move them forward.”

Wal-Mart's objective, he added, in looking at the “integral locking” packages introduced by Clear-Vu and PolyMatrix, is to go to a complete “open sell” system in all its stores. Currently, video games are kept in a locked case, and retailers like Wal-Mart are convinced the extra steps customers must take to retrieve the product inhibits sales.

“Source tagging is not foolproof,” said Toys “R” Us loss prevention director David Liskiewicz, “but it's the best way to control shrinkage and drive sales.” Toys “R” Us, which once put games under lock-and-key, has pulled games into the open with keeper cases.

Best Buy director of loss prevention Paul Stone said the shrinkage percentage of DVD at the electronics and software retailer is “under four-tenths of 1 percent.” As with other merchants, Best Buy currently uses the keeper cases that protect the package from easy theft and must be unlocked by store personnel with a decoupling key at checkout. Borders' Tom Ellis, regional loss prevention director, said the bookstore giant has “slowly discontinued keepers over the past five years [because] they inhibit the grab-and-go environment.” Also represented on the panel were Electronics Boutique and HMV.

Each type of keeper uses a proprietary key. Best Buy's Stone added it's “difficult to go to an integral locking system if all the vendors don't do it. We don't want two to three keys at the cash register.”

Reduce Multiple Packaging Models
On a content provider panel moderated by Charles Van Horn, president of the International Recording Media Association, Joshua Pine, sales VP of replicator Technicolor, stressed the need for any new system to be easily automated to save time and money. He said a consensus on media packaging also might reduce the multiple configurations, as many as seven, that can be required by retailers on a single title. According to one industry source, for example, Warner Home Entertainment's Harry Potter and the Sorcerer's Ston DVD will be shipped in no less than six different packages to meet retailers' customized needs.

Also on the content panel were Marshall Carr, VP of operations at New Line Home Entertainment, BMG consultant Lou Vaccarelli and Konami operations VP Linda Stackpole.

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