Retail Loss Prevention On A Budget: The Power Of Staff Networking

Loss Prevention Budget

 

For small to medium and possibly even a large retail business, is it possible to operate a wide-ranging loss prevention program which consistently delivers company best results, under a very limited loss prevention budget? The answer is a resounding yes!

To set about achieving the above, it is first necessary to look at the setting up stage and what the retail business should consider in order to get off to the best possible start:

  • needs of the business – in which areas and what savings are expected?
  • suitable candidate – what type of person is going to fit the bill?
  • the level of support the business is willing to offer loss prevention to achieve the potential bottom line wastage savings on offer

Anyone who has worked in retail for a length of time will understand the following concept; in order to stay commercially viable, a typical retail business must sell relatively huge volumes of merchandise to reap a fractionally smaller profit – that is after all business operating costs (such as wages, rent and the cost of stock to name a few) have been paid for. Lurking within every retail operating cost structure is wastage. Wastage, or shrinkage, if not effectively curtailed, can erode and ultimately cancel out a retailer’s bottom line profit. The most common form of wastage is stock loss; however, wastage comes in many forms and occurs across all levels of a retail business. On the flipside, the potential for converting wastage savings into bottom line profit is an option few retailing businesses can afford to ignore.

Sources of business waste

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An important question is: What is a bricks and mortar retailer’s most important resource and, by extension, its greatest asset? The answer of course is its staff. Indeed, the combination of staff, in conjunction with networking, can prove an irresistible force against wastage. All that is needed to bring these two elements together is a suitably experienced loss prevention professional who is able to demonstrate the following skill sets.

  • COMMUNICATE
  • INVESTIGATE
  • ANALYSE

Thinking about loss prevention in the past conjures the image of a physical security guard towering over a flock of staff who (apparently) have little or no comprehension about wastage or how to prevent it. Thank goodness that perception is changing! Fast forward to the present and the picture involves the same team of staff, only now each staff member has the confidence and ability to handle waste management in their particular roles. More importantly, there is no physical security to be seen anywhere.

So, how does networking make the difference in waste management?

  • by investigating the root cause of waste (do not guess!) and through developing initiatives/processes designed to highlight, manage and finally reduce the wastage
  • by analysing data, converting results into factual tables and compliance reports, tracking historical data, providing routine feedback to key stakeholders
  • by communicating loss prevention across all levels of the business (from floor staff to general manager if possible) and ensuring that ALL staff are aware of waste management issues
  • wherever possible maintain a positive and thoroughly supportive attitude!

The benefits of waste management through networking include:

  • over time, staff and management assume responsibility and accountability for company waste
  • identifies key company talent
  • the bottom line waste savings available will far outweigh costs associated with the loss prevention function

Example 1: How do I reduce the impact of shoplifting on my retail business without hiring more staff or expensive external security?

Solution: When existing staff are well coached and supported, the opportunity to impact shoplifting is huge. Changing culture and staff attitude towards shop theft hinges on several factors, the biggest being the sales team’s willingness to confront the problem. Although it is the manager who must assume responsibility for wastage, including theft, more often than not it is the sales team who should be encouraged to take ownership of the issue. The positive is that within every sales team there is at least one person (other than the manager) who is ready to step up and take ownership of external theft. Once this person is identified, it then becomes a relatively simple task of coaching the staff member through a selection of easy-to-follow processes, all specifically designed to deter shop theft. Once the staff member has gained a measure of confidence in the process, the loss prevention message can then be spread throughout the entire sales team (often the original staff member will do this without being prompted). Progress can be measured (to a point) through the company stocktake cycle. However, what the loss prevention professional ultimately strives for is a consistent result. Indeed, consistency can and should be viewed as a measuring tool in its own right. Consider, for example, a multi-site retail business operating 20 stand-alone stores. Aside from reducing stock loss, it is critically important to close the stock loss gap between the best and worst performing stores (for comparison, think of a marksman’s grouping – the tighter the grouping the more accurate the shooter). Over time, closing the gap becomes an indicator for consistency, providing clear evidence that the company’s loss prevention initiatives are working effectively. Alternatively, if store stock loss results are ranging wildly from stocktake to stocktake, this can be an indicator that there is something seriously amiss with the company’s stock loss methodology and that a closer look at the issue is warranted.

Example 2: How do I reduce register variances?

Solution: Register variances should be placed under the heading of ‘controllable’ wastage, simply because once counted, a register will either balance or it will not. This also illustrates the key pressure point when controlling register variances. Where the temptation is to focus on the dollar variance amount (which is variable), the true controlling pressure point lies in the variance itself. Focusing on the number of variances as opposed to the dollar amount goes to the root cause of the problem (usually staff training). Just as important, once a company’s register variances begin to improve, there will be a similar improvement flow-on to the amount of dollars being lost to the business.

Finally, at the top of the article there was a pointed reference made to the level of support a retail business would be willing to offer a future loss prevention candidate. The greatest thing a company can offer its appointed loss prevention representative is support and an open mind. Loss prevention, as a resource, works most effectively when it is communicated directly to the employee. When people are forced to jump through hoops to gain access to a resource, the outcome can be frustrating and the results spurious at best. However, if that same resource is brought to the coal face, the response can be totally opposite, producing amazing results. Although still not widely practised, it is this writer’s view that the future of loss prevention lies in the collaborative approach, where loss prevention strategies and waste management principles are rolled out directly to staff in a positive, non-threatening manner, ensuring that the loss prevention function is not only cost effective but also truly integrated.

Darren Egan has 15 years of experience in the loss prevention field and is the Loss Prevention Manager for the Star Retail Group.

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