Sensormatic Corp.’s Tiny, Electronic Security Tags Reaping Huge Sales

In security-conscious America, everything from newborn babies to health club towels and tubes of Preparation H hemorrhoid cream are sporting tiny magnetic security tags to prevent theft.

Industry analysts expect most U.S. retailers, industrial plants and institutions to use tags or other kinds of electronic anti-theft devices during the next few years.

That’s good news for companies such as industry leader Sensormatic Electronics Corp., whose revenue should top $1 billion by 1998, according to Chairman Ronald Assaf.

The Deerfield Beach, Fla.-based company supplies an array of anti-theft devices and technology, including closed-circuit television and the bulky white plastic “alligator tags” found on women’s apparel.

But its hottest-selling device is a fingernail-sized disposable electronic tag that can be embedded in virtually any kind of product or packaging. The tag emits a loud sound when it passes by a magnetic security sensor at strategic locations, such as doorways.

Sensormatic has already signed up several hundred hospitals, which attach the tags to newborn babies’ diapers or wrist bracelets. Should anyone try to remove the infant from the maternity ward, an electronic tone is activated, automatically locking elevators and main doors on the floor.

Some nursing homes attach the tags to ankle bracelets of patients with Alzheimer’s disease to prevent them from wandering, he said.

The tiny tags have also proven popular at health clubs, which lose thousands of towels to members each year, and at gambling casinos, where employees sometimes pocket $25 and $50 chips.

But the biggest immediate markets for the disposable tags are retailers, including clothing stores, discounters, record stores and drugstore chains.

They use the tags on selected merchandise and are now trying to persuade their vendors and manufacturers to install the small tags as part of the production process.

“The numbers are potentially so huge, it’s hard to even estimate what size this market could become,” Assaf said.

Industry analysts say Sensormatic’s market share in security products already dwarfs its competitors, Checkpoint Systems, Minnesota Mining and Manufacturing Co. (3M) and Knogo Corp.

But the battle to persuade manufacturers to buy the disposable tags and add them to goods at the plant may not be an easy one.

The major U.S. recording studios last year rejected Sensormatic’s similar technology for cassette tapes and compact discs, saying the electronic tags degraded sound quality. Sensormatic denies the claim, and contends the music studios simply didn’t want to alter their manufacturing plants to apply the tags.

Music retailers, meanwhile, are eager for the new security tags to cut down on shoplifting and employee theft, and are continuing to buy large numbers of them from Sensormatic.

Drugstores also lose huge amounts of merchandise each year, including batteries, cosmetics, camera film and other small items.