DataBar Likely To Mean More Fraud, At Least Initially

The long-awaited GS1 DataBar is about to come into its own, as the high-density barcode becomes the default code for grocery coupons on July 1. Although the increased information packed into a DataBar is supposed to improve inventory management and cut coupon fraud for grocers, early indications are that some manufacturers are getting parts of the code wrong, thereby wiping out some supply-chain and inventory advantages. And if grocers have to be forgiving of all those DataBar errors, it could make coupon fraud easier, not harder.

Big retailers that handle groceries are theoretically ready to handle DataBar coupons at POS, but the reality is that there has never been a large-scale, full-on test of these coupons with no UPC-A codes to fall back on. And no one from the barcode's sponsoring organization seems to be offering practical advice on cutting the risks—which could lead to unhappy customers and a backlash among grocers.

"Already we've been finding variations in the expiration date format in some manufacturer coupon barcodes, such that the field is all but unusable for practical applications," an IT exec at one of the largest U.S retail chains said. "Can a retailer afford to be lenient with some aspects of these barcodes and still hope to meet the conflicting goals of reducing fraud while accurately collecting data and properly serving their customers?

"We can lay some of the blame on the GS1 organization for making its standards so complex and expensive to acquire that manufacturers would rather guess at what a proper coupon looks like than pay a consultant," she said. "But customers who are wronged will blame only the store that denied their coupons, and will not accept or even understand excuses that 'it's a specification error.'"

Coding information like expiration dates on product stickers, especially for produce and other quick-to-spoil items, was a big selling point for DataBar when it was still the Next Big Thing. It still may be an advantage, but both traditional supermarkets and big chains that carry groceries (such as Wal-Mart, Target and Kmart) are coming up against the flexibility built into the DataBar specifications. With a huge number of suppliers and too many options, decoding DataBars becomes complex and error prone.

Still, that's no worse (and probably a little faster) than keying in item numbers for produce. The real problem with DataBar errors comes in coupons, where DataBar was intended to eliminate the need for checkout clerks to manually check coupons to make sure they match items and to confirm expiration dates.

But that only works if all the information packed into a coupon's DataBar is trustworthy. When an authentic coupon has bad coding, it won't fly to reject it at the POS—that just makes customers unhappy. They know the coupon is real. The best case for the checkout clerk is to accept the coupon anyway, probably after a delay and a manager's approval.

The logical IT workaround is to loosen your standards for coupons, especially for particularly error-prone fields. But that opens the door a little wider for the thriving online community of coupon counterfeiters, who reverse-engineer coupon coding to create their own forged coupons.

This problem isn't small potatoes, either.This problem isn't small potatoes, either. Example: In December 2010, $200,000 in online coupons for Tide detergent were redeemed by consumers over a three-week period. Just one problem: Procter & Gamble has never issued any online print-at-home coupons for Tide or any other product.

That's according to an FBI affidavit in the case of a 22-year-old college-student coupon forger named Lucas Henderson, who was arrested in May after he allegedly posted faked online coupons for PowerBars, Campbell's Soup at Hand, SmartOnes TV Dinners, Bagel Bites, bags of Hershey's Kisses and Budweiser beer. Henderson, a one-time Wal-Mart cashier, also wrote a tutorial on creating counterfeit coupons and gave online advice on cashing the coupons ("At Wal-Mart self checkouts, the watcher person will still need to come over and check your ID. But as long as you don't use more than $20 worth of coupons, they won't have to check the coupons").

According to the affidavit, those using the forged coupons reported that even when checkout clerks noticed the coupons gave unusually large discounts, they didn't reject them as long as the POS accepted them.

That's what DataBar was intended to stop. But at this point, counterfeiters have already surpassed the DataBar technology. They can crack coding by trial and error—and the more forgiving POS systems are for errors in the DataBar coding, the more quickly the counterfeiters will be able to create their forgeries.

As such, retailers may find it necessary to add whitelists and blacklists to POS coupon-processing systems—codes for known good coupons to accept and known forgeries to reject. Coupon-industry groups and Coupon Information Corp. are putting together the lists, but it's up to retailers to get the databases into their POS systems. And if that's necessary, it pretty well demonstrates that for fighting coupon fraud, DataBar by itself is a lost cause.

Unfortunately, coupon fraud isn't the end of the problems that those overly flexible DataBar standards could bring in. "A cashier often doesn't even see the barcodes when they're printed on the bottom of a product. They can easily be tricked into scanning a customer-applied sticker," said the retail IT exec. "If a retailer created automatic markdowns based on a product's shelf life and built those rules on the expiration date embedded in the DataBar, a shrewd forger could slap on a replacement barcode sticker claiming this particular product's expiration date is tomorrow and obtain the maximum discount."

With all the flexibility of the GS1 DataBar spec, label fraud could be even more lucrative than coupon fraud. "Is it possible that a GS1 DataBar could be constructed such that a product barcode also contains its own coupon for 50 percent off?" the exec asked. "We don't know yet what the forgers will try. We know only that they will try things nobody has expected."