Conference Attendees Agree: RF Source Tagging Gets Results; Shrinkage Reductions and Sales Increases Both Significant.

Business Editors & Retail Writers

THOROFARE, N.J.--(BUSINESS WIRE)--May 23, 2000

Approximately 200 major retailers, consumer product manufacturers, and labeling and packaging suppliers met in Chicago May 8-10 to share their successes with source tagging -- embedding radio-frequency (RF) electronic article surveillance (EAS) security tags at the point of manufacture or packaging. Source tagging has proven to be an effective loss prevention and merchandising tool. At a gathering of RF-EAS users, attendees got a glimpse of other benefits the technology can deliver.

The RF Users Group Spring Conference attracted such leading names as Babies R Us, Brown-Forman, Canadian Tire, Circuit City, Codigo, Copeland's, CVS, Eckerd, Energizer, El Palacio de Hierro, Kohl's, Maybelline, Nike, Nintendo, Revlon, Target Corp., and Toys R Us. David Bernauer, president and COO of The Walgreen Company, delivered the keynote address.

"Walgreens has enjoyed 25 years of record sales and earnings, and controlling shoplifting has been part of it. Nothing is better than source tagging, and my hat is off to the vendors who are doing it," Bernauer said. "We studied a lot of EAS technologies and were convinced that RF was the way to go."

Prescription for higher sales

Faced with tighter margins in the pharmacy, Bernauer explained, drugstores are pressured to make up profits through impulse sales at the front end of the store. The ability to display merchandise openly without fear of shoplifting losses is critical. Yet store managers often must put high-shrink items behind the counter or stop carrying them altogether. When products are locked up, sales decrease for both the retailer and the manufacturer.

With support from leading consumer products manufacturers such as Whitehall-Robins, Walgreens and other drugstore chains now receive thousands of products with RF EAS tags hidden in the product packaging. The results, Bernauer said, have helped build Walgreens' bottom line through increased sales and reduced shrink.

For example, he said, shrink rates of nearly 40 percent of sales forced Walgreens to place Monistat behind the counter. When the manufacturer began source tagging the product, Walgreens placed it back on the shelf. Shrink was reduced to 5 percent, and sales doubled.

"And what a difference we've seen in batteries and film," Bernauer added. "About five percent of customers have the potential to shoplift. There is no better way to reduce temptation than by RF source tagging."

Similarly, RF EAS tags used to protect bottles of prescription drugs helped Walgreens reduce internal theft.

Today, more than 2,500 suppliers use RF source tags to protect tens of thousands of SKUs, ranging from fragrances and pain relievers to power tools. The growing list of source tagged merchandise includes batteries, vitamins, prerecorded videos, CDs, DVDs and computer software, consumer electronics, toys and sporting goods, earrings, shoes and apparel.

Fashion forward

Mervyn's California recently became the first retailer in the United States to implement a high-volume RF EAS source-tagging program for soft goods. Debra Hager, merchandise protection specialist, told attendees how the Hayward, Calif.-based retailer now protects its private-label apparel lines with a single printed tag that integrates brand graphics, price code information and RF EAS security circuits. Mervyn's integration partners -- Paxar, Shore to Shore, Security Printing and RVL -- were also on hand to describe their successes with and capabilities for integrated RF EAS tickets for apparel source tagging.

"Checkpoint's circuits are completely concealed and allow us tremendous design flexibility," said Paxar's Chris Robins.

During the program's first year, Mervyn's received 43 million units with integrated source tags. Source tagged categories included dresses and intimate apparel. Shortage reduction results were significant. Dress shortages dropped from 5.05 percent to 1.35 percent. Wonderbra shortages dropped from 17.63 percent to 3.6 percent.

"We had been using hard tags on these items, which interfered with trying on the garments," Hager said. "Our merchants and the garment vendors were happy that we switched to the soft tag."

Mervyn's goal for this year is to add 18,000 more source tagged units to its program, including more national brands.

What began as a tool to stop shoplifters is quickly becoming a key component in merchandising, logistics and supply chain management schemes. Conference participants heard the latest on the Performa(TM) family of radio frequency identification (RFID) products from Checkpoint Systems Inc.(NYSE:CKP). Building on Checkpoint's RF expertise, this product line supports a full range of operational applications, such as automated inventory tracking, with the added benefit of RF EAS security. Since Checkpoint introduced Performa in February 1999, nine sites have been installed and eight more are slated for installation.

Additionally, Checkpoint provided a brief preview of new source tagging technology platforms under development for future release. These are designed to help manufacturers address source tagging supply chain management issues.

Checkpoint Systems Inc. is a $750 million multinational company that manufactures and markets labeling systems designed to improve efficiency, reduce costs and provide value-added label solutions for customers across many markets and industries. Checkpoint is a leading provider of RF source tagging, barcode labeling systems, EAS, handheld labeling systems, and retail merchandising systems. Applications include automatic identification, retail security, and pricing and promotional labels. Operating in 27 countries, Checkpoint has a global network of subsidiaries and provides professional customer service and technical support around the world.