July 13, 2005

New Retail System Peeks Under Shopping Carts

By Evan Schuman, Ziff Davis Internet

Updated: Retailers are using cameras and pattern recognition software to fight back against shoplifters who try to hide items in the compartments underneath grocery carts.

Those spacious compartments underneath grocery carts may be convenient for shoppers, but retailers say they are also attractive to shoplifters as they usually can't be seen by a cashier nor by typical security cameras.

A robotics firm has sold several major retailers on a new approach to the problem, using a small video camera, pattern recognition software and a way to interface directly with a store's point of sale system.

The approach—which will cost retailers about $2,500 to $3,000 per lane and is called LaneHawk—is practical because of the relatively limited number of items that can fit underneath the cart, said Jeff Sakaguchi, vice president and general manager for Evolution Robotics Inc., of Pasadena, Calif.

A typical large grocery store may have about 100,000 product SKUs (stock keeping units), but fewer than 500 "actually ever show up in the bottom of the basket" and those items are mostly beverages, paper products, detergents and pet supplies, Sakaguchi said.

LaneHawk has thus far been purchased by "about a half-dozen" major retailers, said Michael McWilliams, a company sales vice president, including Pathmark—a $4 billion regional grocery chain with 142 stores primarily in the New York, New Jersey, and Philadelphia metropolitan areas—and Giant Eagle, a $5 billion regional supermarket with 138 corporate and 81 independently owned and operated stores throughout western Pennsylvania, Ohio, West Virginia and Maryland.

Here's how the system is designed to work: When the shopping cart enters the checkout lane, it passes by a small lane-mounted camera that records images of the products beneath the cart and compares them with a database of known products that are considered likely to be stored underneath the cart, Sakaguchi said.

Using visual pattern recognition—which considers the colors, shapes and images on the product but not its barcode or RFID tag—the system tries to identify the product and then automatically puts that product into the point-of-sale system. If it works, the item automatically appears on the display just as if its barcode had been scanned by hand, Sakaguchi said.

This would theoretically reduce the loss of products due to shoplifting or accidental theft, as well as make a small dent in the number of items that cashiers would have to scan, which appealed to Pathmark officials.

"Our customers demand faster checkout times and greater value. Offering larger sizes and bulk packages is part of delivering this value," Pathmark CEO Eileen Scott said in a statement. Using the retail term BOB, which stands for Bottom of Basket and actually refers to the compartment below the bottom of the basket, Scott said she liked the product's claimed dual capabilities.

Pathmark liked "LaneHawk's ability to not only reduce our BOB loss, but also potentially reduce the number of those items a customer or cashier needs to physically handle and manually scan," the retailer said in a statement.

Evolution's package includes the camera Ňand a processing unit that contains our algorithms and the database," Sakaguchi said.

Company officials concede the system's current accuracy is only at about 70 percent, pointing to challenges ranging from poor and inconsistent lighting to the many different ways people insert the products below the cart, which influences how various images can be viewed.

But those officials also say that the accuracy is as good as, if not better than, current cashiers, and that the lack of accuracy stems from the inability to precisely identify some similar-looking products.

"It tends to be confusing items, such as confusing Diet Lime Coke with Diet Lemon Coke," Sakaguchi said. "Tide is a great example of something that is confusable. Often times, the only differentiator (of one Tide version from another Tide version) is a small splash of color. About 90 to 95 percent of the time, we'll correctly identify that there's a Tide product there," but it may not correctly identify the scent. In that regard, he said, the accuracy of the typical cashier is no better.

The lack of precision on the exact product—Lemon Coke versus Lime Coke, for example—might indeed be an issue for Pathmark, said Bob Oberoslet, the senior VP for asset protection at the $4 billion grocery chain.

"I would hope that their accuracy would be better than that from a standpoint of our system reordering the right product for the shelf," he said.

"It's important that we put the right flavor back on the shelf. That might be an issue for us."

Pathmark has yet to start testing LaneHawk and plans to begin initial testing next week, Oberoslet said. But much of that testing will be looking at productivity and efficiency issues.

"We're bringing in the industrial engineers, the time and motion guys. We may pay for this issue as a productivity issue" instead of as a shrink-reduction issue, but he wants to see the reports from the industrial engineers first. "They're the guys with the stopwatches."

Pathmark's initial plan is to have products identified by LaneHawk to appear on the customer-facing display screen that shows a running tally of all products as they are being scanned, but the LaneHawk items will appear on the side and will not be tallied.

Instead, Oberoslet said, the cashier will ask, "I see these items under the cart. Do you want these items?"

That way, if the item is the property of the customer—such as a customer's wet umbrella stored there, which might appear similar to an umbrella sold by the store—the customer can say that. Or if the scan is in error, that would also become apparent.

This is a huge time savings compared with the current process, which involves the customer bending down, retrieving the lengthy or heavy item, placing it on the conveyor belt, the cashier scanning that item and the cashier then handing the item back to the customer, who puts it back underneath the cart, Oberoslet said.

"When you ring as many transactions as we ring, every second is money," he said. "This could have a productivity potential that far exceeds the shrink potential." Shrink is the retail industry term for product loss, including shoplifting.

The process of keeping the store's database current with constantly changing packaging will likely be pushed back onto the supply chain and become a distributor's or a manufacturer's headache, Oberoslet said.

If this process catches on and other retailers—including Wal-Mart—start using it, distributors and manufacturers will automatically provide multi-dimensional digital images of all packaging.

Until then, Pathmark will either have distributors or manufacturers provide the images, or "we may charge the vendor $25 to set it up digitally here."

The loss problem is bad partly because of the creativity of some professional shoplifters. Some use lots of paper coupon circulars to carpet the bottom of the shopping cart to prevent overhead cameras from seeing below the cart, Sakaguchi said.

"There are customers who see this as a no-risk attempt" at theft, he said. If the customer gets caught, a simple, "Sorry, I forgot I put it in there" is all that's needed to avoid prosecution. And if the customer does not get caught, it's free merchandise.

Pathmark's Oberoslet said a heavy—and expensive—item they often discover beneath the cart is a 2-pound box of shrimp. "Some customers play the 'catch me if you can' game" with that $25 frozen box, he said.