Although most drug stores expect their customers to eye their merchandise, Peoples Drug chain looks back. Through a network of cameras and monitors, Peoples is electronically recording its customers shopping habits in 210 of its 566 stores nationwide.

In addition, Peoples is now selling the system, which it developed especially for small retailers, to competitors such as Drug Fair and Safeway through a newly formed subsidiary called Management Safeguard.

"The camera is more a deterrent than a catcher," said Jerry Wilson, who heads the Alexandria-based drug chain's security division. "But employe theft and shoplifting are a reality for retailers. This is a program of necessity."

Peoples turned to creating its own security system four years ago, when it found a system of mirrors ineffective as shelf fixtures grew higher to accommodate more merchandise. Cavernous aisles did not allow store managers an eye-level view of customers and potential shoplifters.

"You don't want to make it easy for people to steal. I've never seen a shoplifter who didn't have money," said Wilson, former D.C. police chief, who regards young adults as the most active drug store thieves.

To battle the problem, Peoples looked into additional safeguards such as adding more security guards (it has 100) or installing electronic detection systems, but neither was cost-effective for stores with small floor space.

In 1979, technology became available for closed-circuit television systems that could be bought and installed for less than $6,000 apiece. Cameras located near store ceilings record shoppers' movements on videotape, which is transmitted via cable to several 19-inch television screens prominently displayed in the store.

At night, store managers have the option of leaving store lights on and the videotape machine running to guard against robbery.

Although Peoples will not say how much money it has lost through theft, the chain has invested more than $1.2 million in security systems over the past couple of years in its most crime-ridden stores. The chain plans to have wired more than 90 percent of its stores in the next few years, Wilson said.

"Never does a day go by that I don't catch a shoplifter," said Chris A. Cornellier, manager of Peoples Drug at 19th and Pennsylvania NW, one of Peoples' 150 stores in the Washington metropolitan area equipped with the television security system. "The camera and monitor really help in spotting shoplifters."

But Larry Wilkey, one of Peoples' 300 security guards, disagrees. "There's no reason to have the system up there because a lot of thieves have been around and know how to get around it," he said. "I catch shoplifters just by watching." Both Cornellier and Wilkey said, however, that they are more likely to kick a shoplifter out of the store than press charges.

"The D.C. police want you to get them once they leave the store with the goods, but I'd spend half my time chasing them down," Cornellier explained.

Nevertheless, the camera aided Peoples in apprehending more than 1,000 shoplifters last year, Wilson said. But the biggest impact has been in preventing robberies, which have dropped by 30 percent since 1980, he said.

But not always. Cornellier's store was hit by armed robbers last year, who stole a few thousand dollars and wounded a policeman.

Employe crime also is of considerable concern to the company. The security system recently helped Wilson nab a Peoples employe who had stolen $26,000 worth of merchandise over a five-year period. But so far, only a dozen employes out of thousands have been arrested for theft since the system's installation, Wilson said.

Although the Management Safeguard division contributed less than 3 percent to Peoples' 1982 profits of $10 million, it has picked up more than 50 clients nationwide and is expanding, Wilson said. "We recognized the need for a security system for smaller stores from our own experience," Wilson said.

Peoples is conducting a marketing campaign to capture thieves electronically for its fellow retailers. Drug Fair has purchased several systems and is looking at other firms' security devices as well, a company representative said. Safeway installed the system a year ago in two of its 115 stores in the metropolitan area, where a decrease in inventory loss has been noted. A Safeway spokesman said more installations are planned. CAPTION: Picture, Peoples has spent about $1.2 million to put closed-circuit TVs in some of its stores. Photo by Harry Naltchayan -- The Washington Post