The Retail Notes blog on loss prevention and assets protection is moving to a new address. We are now going to incorporate the blog and all of its archives onto our PCG Solutions site which will also give you access to our library of LP Managment articles and related white papers.
The new address is http://www.pcgsolutions.com/industry-insights/pcgblog. If you are an RSS subscriber, the new blog can be subscribed to at the site or by using this feed – http://feeds.feedburner.com/PCGBlog
On March 30th, the Ministy of Justice announced 1 July 2011 as the date for the new anti-bribery act to be fully instituted. Additionally, they issued updated guidance on the act that was generally perceived to soften the anticipated severity of the act by clarifying such things as whether organisations listed on the UK stock exchange but that don’t do business there fall under jurisdiction, clarifying that corporate hospitality is still allowed, and also suggesting that a company’s suppliers are unlikely to be viewed as acting on the company’s behalf.
The official guidance and a Quick Start guide can be found HERE.
In past posts, I have noted the criticism that civil recovery has been receiving in some of the mainstream media in the United Kingdom. However, just as has been the case in the U.S., the law is very clear on the statutory rights that retailers hold in using this process to help offset the costs of retail crime. Recently, The Parliamentary Under-Secretary of State for Justice, Mr Jonathan Djanogly, gave strong support for civil recovery on the floor of the House of Commons.
“Civil recovery is the legal means by which anyone who has suffered a financial loss due to the wrongful actions of someone else can seek appropriate compensation under civil law. Civil recovery schemes are used by many high-street retailers to deter shoplifting and recover from shoplifters the management, administration, security and surveillance costs incurred in dealing with the case, including the costs of the civil recovery action itself. That ambition is both understandable and justifiable. Shoplifting is not a victimless crime. Businesses employ civil recovery agents to recover through the civil courts often relatively low-value losses arising from, for example, shoplifting or employee theft. The alternative would be criminal proceedings rather than a suit, with the likelihood of a criminal record for the person being prosecuted.”
“Retailers have a clear legal right to recover the costs of goods that they lose as a result of crime. The Government recognise the appropriate and proportionate use of civil recovery as one option available to retailers for dealing with low-level criminal activity that also amounts to a civil wrong. We believe that civil recovery, when used proportionately, provides an effective response to low-value and often opportunistic crime that often involves teenagers and other vulnerable people.”
“Let me be clear that the Government are entirely satisfied that retailers have a legal right to recover the value of any goods lost or destroyed as a result of an individual’s actions. Defendants can go to their local CAB and receive advice about what to do with the claim. The Government accept that a retailer arguably has a legal right to recover any additional costs or losses directly caused as a result of dealing with a case. However, we appreciate that there is no statutory or other clear basis for setting the amounts of such costs or losses that can be recovered in an individual case. Therefore, the amount of money, if any, that a retailer can recover from an individual accused of low-level theft in respect of its wider costs is entirely a matter for the courts based on the circumstances and facts of the case.”
Serious opposition is mounting at the state level against using credit checks in making hiring decisions. Perhaps this comes in light of the recent economic recession and fear that otherwise qualified candidates will be rejected, but it comes at a time where many states are also imposing the use of criminal convictions in hiring decisions.
According to a recent article in USA Today, 25 states have proposed bills aimed at restricting when credit histories can use in the hiring process. A recent article in the Pittsburgh Tribune-Review that cites efforts to remove the question, “Have you ever been convicted of a felony?” from applications for city jobs there is indicative of the thought process. The EEOC has long given guidance to employers that criminal convictions cannot be used capriciously in the hiring decision, but the movement towards ignoring them altogether seems like a new trend.
In the first prosecution under the United Kingdom’s Corporate Manslaughter law, a private company was held responsible for a “gross breach of duty of care” that resulted in the death of an employee.
The company involved, Cotswold Geotechnical Holdings, employs eight people. Its senior management consists of Peter Eaton, who is its sole director and major shareholder. He was charged with gross negligence manslaughter and a health and safety offense, but a judge ruled last year that he was too unwell to stand trial.
The prosecution contended that the employee was working in a dangerous trench because the company had failed to take all reasonably practical steps to protect him from working in that way. During the trial, it showed that the company’s health and safety policy document had been written by Eaton in 1992 and had not been updated since that time. It also showed that the company had been warned about allowing employees to enter unsupported pits in 2005.
To read more about this decision, click HERE.
The National Labor Relations Board (NLRB) has invited interested parties to file a brief in a case, Stephens Media LLC d/b/a Hawaii Tribune Herald, which will assist the board in determining the scope and treatment of employee “witness statements.”
In previous decisions, the NLRB held that an employer does not have a duty to furnish witness statements to a union representative. The Stephens Media LLC case involves a reporter for the Hawaii Tribune Herald who was fired for insubordination after he attempted to accompany a circulation clerk, who was a shop steward, when she was called into a meeting with a supervisor.
The union requested all information considered by the company in firing the reporter. But the company only turned over the reporter’s discharge letter and personnel files. It did not provide information given by employee witnesses interviewed during the company’s investigation of employee misconduct.
If the NLRB finds that employers are required to turn over confidential witness statements, employers’ ability to conduct effective investigations may be compromised. An amicus brief has been submitted to the board by Society for Human Resource Management (SHRM), the Council on Labor Law Equality, and the U.S. Chamber of Commerce. It supports previous NLRB cases holding that there is no duty to furnish witness statements. To review a copy of the brief, filed by SHRM, click HERE.
On Wednesday, April 13th, attendees at the Retail Industry Leaders Association’s Loss Prevention, Auditing, and Safety Conference will hear from a CFO who has first-hand experience in dealing with retail loss prevention both as an executive and “on the floor.” Neil Watanabe, CFO and Executive Vice-President for Anna’s Linens actually started his career as a “floater” at a department store chain. For those who may not know what a “floater” is, it is an employee who goes around and relieves other employees so they can go on their break. As a result, a floater is working in the shoe department one minute, the housewares department a few minutes later, and then might finish up in the jewelry department. According to Watanabe, this was the starting point for him to learn about the various departments in the store and learn to become a well-rounded employee.
Since that humble beginning, Watanabe has moved on to be a senior executive with several leading retailers and has a reputation for being a strong supporter of Loss Prevention. “I’ve always had a special place in my heart for Loss Prevention and believe they can contribute greatly to any retailer’s success,” Watanabe told me when I had a chance to speak with him last week about this session. In this session, he will share his insights about what being a well-rounded business executive means to him and how Loss Prevention executives can improve their influence with their own organization. He will also share some case studies where he will give some real-life examples of how he has approached Loss Prevention challenges in his career.
Don’t miss this opportunity to learn from an executive who understands our business and wants us to be successful! This general session starts at 8:30 a.m. on Wednesday.
IBM has agreed to pay a settlement of $10 million to settle civil charges that it bribed Chinese and South Korean government officials to obtain computer equipment contracts. The The Wall Street Journal that the SEC is suing the company over cash bribes that violate provisions of the Foreign Corrupt Practices Act (FCPA). IBM did not admit to wrongdoing, but did say it has higher ethical standards for its employees and had taken “appropriate remedial action,” according to the WSJ report.
The SEC’s suit accuses employees in the South Korea offices of the tech giant of paying government officials $207,000 and providing travel, entertainment, and gifts of cameras and laptops in exchange for a contract to supply PCs and mainframes to the government. The SEC complaint also alleges that more than 100 employees and two top officials of IBM in China paid for the vacations of Chinese government representatives, through slush funds established at travel agencies.
This case raises the issue of how difficult it is to make your corporate ethics statement a reality around the world. It is almost certain that IBM maintained a code of ethics that would prevent this type of behavior but this did not prevent “widespread” bribery involving over 100 employees. PCG Global now offers FCPA/Ethics training targeted directly to front-line employees who have to make decisions about bribes, ethics, and corruption in their normal course of work without direct supervision. Contact us to find out how we can customize and deliver this training to your organization in your most critical areas of operation.
“Networking” is a term that gets abused, misused, and is often misunderstood. But, networking, when done right and with purpose, can be a key business skill. “How Leaders Create and Use Networks” is a good piece on this from Harvard Business Review. In this article, three types of networking are identified – Operational, Personal, and Strategic. There were a couple of lines in there that I really liked…first, in regards to personal networking:
“We observed that once aspring leaders..awaken to the dangers of of an excessively internal focus, they begin to seek kindred spirits outside their organizations. Simultaneously, they become aware of the limitations of their social skills, such as a lack of knowledge about professional domains beyond their own, which makes it difficult for them to find common ground with people outside their usual circles.”
“Many of the managers we study question why they should spend precious time on an activity so indirectly related to the work at hand. Why widen one’s circle of casual acquantances when there isn’t time even for urgent tasks? The answer is that these contacts provide important referrals, information, and, often, development support such as coaching and mentoring.”
Second, in regards to the mindset of many managers:
“..we often hear, ‘That’s all well and good, but I already have a day job.’ Others..consider working through networks a way to rely on ‘whom you know’ rather than ‘what you know’ – a hypocritical, even unethical way to get things done. Whatever the reason, when aspiring leaders do not believe that networking is one of the most important requirements of their new jobs, they will not allocate enough time and effort to see it pay off.”
How do you view networking? Is it a “dirty word” or an essential business skill?
At the upcoming Retail Industry Leaders Association’s Loss Prevention, Auditing, and Safety Conference, attendees will have the opportunity to attend a free four-hour workshop on the SCAN (Scientific Content Analysis) technique for detection of deception. I had a chance to talk with this session’s instructor, Tim Bos, who is with the Laboratory for Scientific Interrogation (LSI). Mr. Bos first learned the SCAN technique while a police officer with the Clovis, CA Police Department. When SCAN was introduced in their department in 1994, confession rates increased by over 20% and Bos was hooked. Since retiring as a Captain with the force, Bos has become an instructor with LSI and traveled the world teaching this program.
“One of the things that many investigators misunderstand is how to get useful information. Their first instinct is to ask lots of questions. But, questions produce responses, not necessarily information.” The SCAN technique emphasizes the importance of getting an open statement from the subject, in their own words, before you ask any questions. This written statement can then be analyzed from beginning to end. Every word in a subject’s or witness statement – the pronouns and connections, the subjective time, the changes in language – will “talk” to you and provide you with answers. This session will introduce you to the concepts and give you some new tools to take back to your job.
Not only can these techniques be applied to the analysis of written statements, the same principles apply to interviews and interrogations. Once you go through this session, you will pay more attention to the semantics and structure of oral narratives and statements. In fact, Mr. Avinoam Sapir, the developer of the SCAN, has used these techniques to analyze the verbal statements and interviews of individuals in many high profile cases to identify what they are really saying and what they are leaving out. A successful investigator has multiple tools in their tool kit. Thanks to RILA for providing the opportunity to be exposed to this new tool!
If all of this wasn’t enough reason to attend the conference, all attendees to the RILA conference are eligible for continuing education credits (CEU/CPE). In addition, attendees of this SCAN workshop will earn an additional four credits towards CFI (Certified Forensic Interviewer) recertification!
This session will be held on Thursday, April 14th, from 1:00 p.m. to 5:00 p.m. To guarantee your place in the workshop, RSVP today to Liz Benson at email@example.com.
There is a good article over on The Economist, “Employer, beware,” about labor laws in Brazil and how onerous they can be to employers. According to the article “They are costly: redundancies “without just cause” attract a fine of 4% for the total amount the worker has ever earned, for example. (Neither a lazy employee nor a bankrupt employer constitutes just cause.)..In 2009, 2.1m Brazilians opened cases against their employers in the labour courts. These courts rarely side with employers.”
Supply Chain Security: Vulnerabilities and Loss-Combating Measures Retailers Can Take
The retail supply chain is subject to great vulnerability when it comes to potential losses. The risks are obvious: goods being transported across and even between countries, changing hands several times. Due to the large volume of goods, it is simply impossible to check every container and pallet of goods. Over long periods of time, items are loaded and unloaded at several different locations, increasing the likelihood of damage. All of these conditions increase the risk of loss to the retailer.
To complicate matters more, there is no single supply chain configuration across retail. Large retailers may have regional warehouses, distribution centers and corporate-owned truck fleets, whereas small retailers may rely exclusively on direct store deliveries (DSD) by vendors. The risks in each of these situations are different and require targeted solutions. Top concerns include physical security – as forklifts and high stacks of heavy inventory can cause accidents – the security and integrity of merchandise during transport, proper receipt and verification of the right kind and amount of product at the store, and the oversight of vendor visits to prevent theft and/or administrative errors.
Retailers must take decisive steps to prevent potentially crippling losses that occur before the merchandise even reaches the store shelves. The following are some strategic ways that retailers can help prevent supply chain losses.
Building processes that impose consistent verification and corrective action is one of the most effective ways to battle losses occurring in the supply chain. By narrowing the window of opportunity for purposeful or inadvertent losses to occur, retailers successfully reduce their risk and identify “red flags” before significant losses result. For example, by having a merchandise receiving process by which particular employees are assigned and trained to manage the receipt of deliveries and compare item or pallet counts with invoices, there is a greatly reduced opportunity for losses associated with incorrect amounts or types of goods received.
Verify those processes
It’s not enough to just put processes in place, but critical to continually monitor them for consistent implementation and proper execution. A combination of regular and unannounced audits is a great way for retailers to determine with certainty whether or not recommended processes are being implemented properly throughout all locations. Audits should be designed, not only to verify proper implementation, but to help pinpoint the root causes of problems in the supply chain. When audits indicate a process failure, retailers can take action by assigning immediate follow-up tasks and notifying key players within the organization about problems that require further investigation. Taking immediate action based on audit results is important to inciting change.
Video surveillance provides another great way to verify that employees are properly trained and following-through with recommended procedures. Without constant verification, processes may be little more than symbolic gestures on paper.
Control what you can
Another good strategy is for retailers to determine if there are parts of the supply chain management process that can or should be brought in-house or outsourced to prevent losses. For example, by centralizing shipments to a warehouse, stores can receive complete loads, avoiding confusion that frequently occurs with the unloading of trucks that contain shipments for multiple destinations. By ordering larger shipments to supply more stores, retailers benefit from larger volume orders, bigger discounts and less hassle. In addition, if they use their own trucks to deliver items from the warehouse to the stores, they can potentially reduce risk of loss due to theft.
Hiring a separate LP team to manage supply chain risk and losses could also be a good move. Since the problems associated with supply chains are somewhat unique, they require dedicated solutions and resources to ensure product integrity until it reaches its place on the store shelf. The real key is to provide visibility into the problems.
We are pleased to feature this guest blog by Eric White from Wren Solutions. Eric has over 20 years of experience in our industry and currently serves director of retail strategy for Wren. White maintains his regular blog at http://www.wrensolutions.com/LPXtra_blog/ and can be reached via email at firstname.lastname@example.org.
Ikea, the world’s biggest home-furnishings retailer, has been held up over the past few years as the model of a company that has opened in Russia while refusing to compromise their corporate standards on bribery and standards. But, apparently they’ve had enough. The company says it won’t build more stores outside the Moscow region until local officials stop withholding permission for two of their outlets due to Ikea’s refusal to pay bribes to safey inspectors.
Ikea’s experience is not unique. Carrefour, Wal-mart, Royal Dutch Shell, and Nestle SA have all faced trumped up government regulation according to the National Anti-Corruption Committee, a NGO based in Moscow. To read more, find the Bloomberg article here.
The Retail Industry Leaders Association’s Loss Prevention, Auditing, and Safety Conference will be held this year from April 11-14th at the Gaylord Palms Resort and Convention Center in Orlando, FL. I’ve had the opportunity to participate in this event over the last several years and have always walked away with lots of new ideas and insights as a result. This year’s agenda is loaded with some great sessions and I will be highlighting a few of them over the next several weeks to give you some ideas about why you should be there next month.
On Thursday, April 14th, there is going to be a great opportunity to hear from some of the leading Loss Prevention executives in the industry about the challenges they are facing, the issues that keep them up at night, and how their strategies are evolving and changing with the needs of their businesses and the economic context of the last few years. Joining Lisa LaBruno, Vice-President of Loss Prevention and Legal Affairs for RILA, will be:
- Monica Mullins – Vice-President of Asset Protection & Safety for Wal-mart Stores
- Mike Lamb – Vice-President of Asset Protection for The Home Depot
- Paul Stone – Vice-President of Asset Protection for Best Buy
This is a great line-up of seasoned veterans who run the AP efforts at some of the most successful organizations in the industry. There will also be an opportunity to ask them questions that are on your mind and get their input to help you inform your own thought process. In fact, at the end of this post, I will give you a link to submit questions in advance to be incorporated into the session.
I’ve had a chance to talk with each of the panelists this week and get some insights into what is on their minds for this session. There were three themes that emerged from these conversations. First, everyone talked about the challenge of attracting and developing great talent for their Asset Protection group. In an environment where everyone is doing “more with less,” the need for outstanding individuals is obvious but the other challenge I heard from them was how to dedicate time on everyone’s busy schedules to make sure managers are spending time on development and not putting it behind other, pressing issues. These panelists will share how they are able to prioritize this issue despite the pace of the business that only gets faster.
Second, the panelists talked about the need to constantly recalibrate and examine their own strategies for their departments and how they must change over time based on needs of the organization, budgetary considerations, and results. How broad of a role should AP/LP play in operational issues, safety, merchandising, and risk management? Does expanding the role of your team create a risk of taking the focus off of shrinkage results and “core” responsibilities such as investigations, physical security, and operational controls? I know from conversations with executives from across the industry that this is a top-of-mind issue for many, so this session will help inform your thinking on how you approach this for your company.
Third, everyone talked about the need for developing strong business cases and return on investment models for their programs and proposals. While others may think that budget dollars flow more easily in large organizations represented by the panelists, they can assure that they do not. Like almost every loss prevention executive I know, each of them stressed the importance of this issue and several talked about how it has led them to look for fewer “cookie cutter” approaches and more individualized strategies by region, district, and store.
Those three themes alone would make for a compelling reason to attend, but the most anticipated part of this session will be the opportunity to present questions to the panel that are on your mind and have them respond. If you have a question or issue you would like to see addressed, please email email@example.com. Thanks for your input and I look forward to seeing you in Orlando!
The Food Marketing Institute (FMI) Asset Protection Conference will be held next week in Orlando, FL at the Buena Vista Palace Hotel. This conference focuses on the grocery and pharmacy segments and their particular risks, exposures, and concerns. Rhett Asher, Vice-President of Industry Relations, has worked with industry leaders to put together a full agenda and the weather looks like it is going to be great. The event kicks off on Sunday night with a welcome reception. For more information, visit the above link.
It seems as if there is no end to high profile fraud and corruption cases in the news. In the past couple of weeks, we’ve seen the two senior executives at China’s leading e-commerce site, Alibaba, resign due to pervasive fraud on their site and the former Security Director for Rooms to Go charged in a major kickback scheme by federal prosecutors.
In addition to the direct losses caused by these types of frauds, organizations face business disruption, bad publicity, and, in the case of U.S. organizations, potential Sarbannes-Oxley issues or FCPA compliance liability if the fraud or kickback involves government officials. While this has typically been the domain of the finance or internal audit group, the Loss Prevention/Asset Protection function may have a role to play. This topic certainly merits a conversation with your organization’s CFO to discuss how your function can support and assist on this important topic.
The Foreign Corrupt Practices Act (FCPA) continues to be an area of increased enforcement by U.S. agencies. Eight of the top 10 FCPA settlements have occurred in the past two years and leadership at the SEC, DOJ, and the Attorney General have made it clear they intend to expand focus on this area. Both the SEC and FBI now have dedicated FCPA teams and the recent Dodd-Frank Act has provided for increased “bounties” for whistle blowers.
In addition, the UK Bribery Act of 2010 is currently scheduled to be implemented in April of this year. This act goes beyond the FCPA’s focus on bribery involving government entities and expands the scope to commercial bribery. The UK Act, as currently drafted, also eliminates exceptions for “facilitation payments.”
If you have retail operations, sourcing offices, or manufacturing operations in other countries, you had better be sure you understand these regulations, the duties they impose, and the potential consequnces of violations by your organization, any subsidiaries, and any contracted third-parties. If you are not sure what your responsibilities are, email us and we can discuss.
Yesterday, LP Innovations published a guest column from me on their blog at titled “Loss Prevention as Management Science.” In this post, I argue that we need to do a better job, as an industry, of helping senior management understand that shrink results can be influenced by certain practices, routines, and activities that are largely within our control.
Senior management needs to view us as experts in what those tactics and techniques are and how they are best implemented within the context of a specific organization and culture. This is in contrast to be viewed simply as “fixers” who can catch shoplifters, gain admissions from dishonest employees, and respond when a store manager breaks a key off in the front door. Yes, those are things we do, but they do not encompass our mission or impact on the organization’s financial results.
As always, I would welcome your comments, disagreements, or thoughts…
Getting Ready for 2011: Tips for Making the Most of Retail Audits
In order to prioritize 2011 retail initiatives, both LP and operations professionals must have current insights into what is going on across the organization. With stores located in different states, regions or even countries, managers need to consider that each retail location faces different operational challenges, management strengths and weaknesses and economic and demographic environments. These distinct circumstances make it nearly impossible for all stores to execute in exactly the same way.
Yet for LP professionals working at the corporate or regional level, it can be difficult to obtain a clear view of what is happening at each individual location and the variance in execution. In some organizations, managers may rely on word of mouth, conversations, and other informal communications, which provide neither a clear basis for comparison nor a comprehensive view of the situation.
Most retailers conduct audits in an attempt to measure and compare consistency and compliance across stores. While employed to some extent by almost all retailers, in many cases these audits are inefficient, ineffective and oftentimes extremely burdensome. Some retailers use audits consistently to monitor highly regulated issues such as food safety and fire codes, but in areas like operations, marketing and security, retailers are not as committed to audits. Other retailers effectively issue audits, but then fail to systematically follow-up on issues identified.
In the year ahead, there is potential to use audits to monitor processes for improved insights and performance across the entire retail organization, but only if they are designed and executed well. This is not as simple as it may seem, as there are many potential pitfalls in audit design, issuance and follow-up. Here are some tips for getting it right.
Simplify, simplify, simplify – Among the most common mistakes is making audit questionnaires too complex. Multi-part questions force respondents to make a judgment call as to whether they should answer “yes” or “no” when the answers vary for different parts of the question. Complicated questions that can be interpreted in a variety of ways also inhibit the effectiveness of the audit and can generate inconsistency of results due to variation in interpretation. It’s best to ask simple, one-part questions that can be definitively answered with either a “yes” or “no.”
Design in coordination – Smaller, more frequent audits should be designed in coordination with larger, more comprehensive audits. This serves to avoid contradictions in messaging and also to ensure that all activities are moving toward the same finish line. The smaller, more frequent audits should align with a retailer’s more comprehensive, less frequent audits. Meaning that if stores can and do pass the small audits, they should be well on their way to being able to complete the larger audit.
Ask the right things – Audits must be relatively short and manageable to impose minimal burden on the auditors and encourage them to participate in a timely manner. In order to effectively collect the information needed about the great expanse of areas to be evaluated, it is important to focus questions around aspects of the process that may be broken. For example, don’t ask “Are returns being processed correctly?” Corporate already knows that returns are causing great problems in the store. Instead, ask a series of probing questions such as “Are broken or faulty items that are returned being shipped back to the manufacturer within 5 days?” and “Are all returns processed with a receipt?” The answers to these questions will help determine whether it is a problem with vendor warranties or return policies or if returns are simply being processed incorrectly without a receipt.
Practice immediate follow-up – Audits are a valuable tool because they indicate discrepancies in performance and areas that need to be addressed. Retailers lose the value of audits if they fail to immediately follow-up by assigning tasks, opening investigations or sharing issues. Retailers should identify tools and processes to assign immediate follow-up on issues after an audit.
With these tips in mind, retailers can ensure that their audits deliver meaningful information and serve as a catalyst for action. From prioritizing risks that should be mitigated by loss prevention to identifying operational issues that need to be addressed, the effective use and follow-up of audits can position retailers to maximize their time and resources for the benefit of the company.
We are pleased to feature this guest blog by Eric White from Wren Solutions. Eric has over 20 years of experience in our industry and currently serves director of retail strategy for Wren. White maintains his regular blog at http://www.wrensolutions.com/LPXtra_blog/ and can be reached via email at firstname.lastname@example.org.
An industry colleague recently asked me if, perhaps, retailers might be lowering shrinkage rates, in part, by the growth of their e-commerce business. It is not really a question that had come to my mind, but I think it is an interesting topic for discussion. I’ve outlined his thought process below and would be interested in hearing some responses from our readers.
Most retailers have now branched into e-commerce, some in a significant way and others are just testing the water, and e-commerce transactions represent about 4% of retail sales in the U.S. according to recent government figures. While e-commerce certainly has to deal with fraud, most e-commerce business is set up in such a manner that there is very little, if any, shrinkage in a traditional sense. Retail organizations typically account for fraud, such as credit card fraud, on a separate line in their P&L.
Therefore, if e-commerce sales are being including in total company sales and yet they contribute little, if any, shrinkage dollars, does that understate shrinkage – at least in terms of comparison to historical data? Could this be part of the drop we are seeing in shrinkage in the National Retail Security Survey results of the past couple of years?
What are your thoughts?
I’ve spent the past few days visiting retail operations in Colombia with a client and was struck by the advantages of the staffing model here in this country and other countries in Latin America (LATAM). While the model here is not likely to be adopted by retailers in the U.S., perhaps there are some good reminders and lessons.
Whereas in the United States where we have a mish-mash of employees working wildly divergent schedules, hours, and days, retail stores here are typically staffed with full-time employees who work six 8-hour days and make this their career. In addition, approximately half of them work the first shift and the other half the second shift. Staff turnover can run as little as 5% annually or less!
Think of the advantages of this model when it comes to commitment, product knowledge, workplace safety, loss prevention, human resources and the like. Employees in this model “own” their part of the store and their responsibilities. It is relatively easy to get a consistent message to all employees at the same time. And, the stores we visited showed this through their merchandising standards, their employee engagement, and product knowledge.
Of course, it is easy to argue why this might not be practical in the U.S. or in similar markets, but it is a stark reminder to the challenges faced when trying to get consistent execution while managing part-time employees who might work as little as 8-10 hours in the week and where turnover can run over 100% annually. In the U.S. model, how do you even reach your employees much less get them engaged?
This, of course, is the challenge my firm accepts when we work with our clients on their communication strategies and training programs. Please let us know if you want to find out more about how we can help.
This year’s first edition of the Journal of Applied Security Research contains a case study that Adrian Beck and I authored on one apparel chain’s experience with switching from hard tags to sewn-in, soft tags. The article highlights the importance of visual clues and difficulty of removal in creating deterrence. An abstract of the article can be found at this link “The Importance of Visual Situational Cues and Difficulty of Removal in Creating Deterrence: The Limitations of Electronic Article Surveillance Source Tagging in the Retail Environment.”
While this study was conducted in only one retail chain, hundreds of locations were involved in the test and the results were consistent across geography, internal hierarchy, etc. Additionally, similar results were realized in another specialty retail chain around the same period of time. Hopefully, this article will add to the body of knowledge in our industry relative to EAS.
My good friend, Adrian Beck from the University of Leicester, will be a featured presenter at the upcoming ECR Europe workshop on self scan check-outs and their impact on shrinkage. Shrinkage and Self Scan Check-outs: The Benefits, Challenges and Opportunities is a seminar being staged by ECR Europe on Thursday 27 January at the Sheraton Hotel, Brussels Airport.
ECR Europe (Efficient Consumer Response) is a body of academics and loss prevention experts who have carried out extensive research on shrinkage in the retail sector, a problem that is costing $235 billion per year with retailers spending a record $46 billion trying to reduce the problem.
Self-scan checkouts are becoming increasingly common sight in retail and it is anticipated that the market will have grown three-fold between 2007 and next year.
As far as many profit protection teams are concerned, the jury is still out on self-scan and its potential impact upon the shrink figures. Many struggle with the differentiation between convenience for shoppers and the ease by which potential store thieves can get away without payment or detection on non-tagged items. Many see it as a huge threat to the business, while other LP managers believe it is an instrument to cut shrink.
The one-day workshop is to review ECR’s work on self-scan technology and present the findings from its latest research – the biggest ever survey of self-scan supervisory staff.
The workshop will also deliver retailer case studies on the business benefit of self-scan and the challenges of introducing the technology into the business. There will also be a perspective from the self-scan providers on how they are dealing with the threats of shrinkage.
To register, visit the seminar home page.
As I was cleaning out some files last week, I ran across an article I had saved from the January 2007 Harvard Business Review titled, “What to Ask the Person in the Mirror,” by Robert S. Kaplan. The sub-head for the article is “There comes a point in your career when the best way to figure out how you’re doing is to step back and ask yourself a few questions. Having all the answers is less important than knowing what to ask.” Kaplan goes on to list seven areas where you should ask yourself some questions to make sure you are on track with your performance.
It is a very good article through and through but one pull-quote particularly caught my eye – “The fact is, having 15 priorities is the same as having none at all.” Wow, what a great way to sum up a major problem for individuals, managers, and organizations. One of the biggest challenges we find in working with large organizations on their training programs is the inability to prioritize the most important issues. Instead, there seems to be a tendency to try and include every issue, policy, or exception that may possibly occur during their entire working career in one training program – and it is usually given to them on their first or second day of employment!
Every individual faces the same challenge. Wouldn’t it be better for you to focus on three or four top priorities in 2011 and ensure you get those accomplished than to focus on 15, 20, or more and fail at all of them? A summary of all seven areas that Kaplan suggests you interrogate yourself on can be found here, but I’d suggest a read through this entire article that can be purchased here.
As we come to the close of 2010, I have reposted below the resolutions I posted for this year for our industry in 2010 exactly one year ago today. I think most of them still apply today for 2011…Your thoughts?
As we come upon the new year, I thought I might humbly suggest some resolutions for the retail loss prevention industry for 2010. I’m sure some of them will be controversial but they are all made in the spirit of moving our industry forward. Please feel free to comment.
#1 – Don’t make numbers up
In our quest to quantify what we do, let’s be careful about simply pulling numbers out of thin air or estimating numbers and presenting them as fact. In fact, there are several parts of our business where we simply don’t have accurate numbers. Let’s strive to change that fact, not make up facts.
#2 – Don’t make the case for loss prevention by acting like Chicken Little
The primary message I have gleaned from news articles about retail loss prevention during this past year is that things are really bad. I mean, historically bad. We’re talking drastically bad. ORC gangs are hitting all the malls, shoplifting is up because of the economy, on-line auction sites are siphoning millions, if not billions, of dollars via fenced and counterfeit goods, there are no laws on the books that help us address these issues, retail theft is funding terrorism, our budgets have been cut, senior loss prevention positions are being eliminated, cats and dogs are living together…wait, that last one was actually from the movie Ghostbusters.
And, as a result, what has happened to shrinkage? Well, if you believe the numbers in the National Retail Security Survey (see resolution #1 above), retail shrinkage in the U.S. came in at its second lowest level in the 17 or so years the survey has been done. I say kudos to all the practitioners in our business who have continued to improve the way we do our business, who have leveraged technology, and have evolved their approach and response to the emerging threats listed above.
#3 – Demand that our industry associations fund research and education
I like our industry associations. I participate in several of them. I think they are well-intentioned and have expanded what they do for our industry over the past 15 years. The staff members of the associations are hard working, helpful, and eager to serve the industry. Their advisory boards are comprised of individuals who give a broad representation of the retail industry. But, the one area where I think they need to step up is in the area of funding research and education in our industry. The lack of rigorous study and research in our industry is largely the reason that we need resolutions one and two above.
There are models for how this could work and it does not have to be difficult. The Europeans, working through the ECR framework, have figured out how to do this effectively with the process being driven by the retailers. I don’t see any reason this can’t happen in the U.S. However, this will only happen if practitioners demand it. When I look at other large professional and trade organizations, they typically have more robust offerings to their membership in this regard.
#4 – Don’t create a new name for what we do
Retail security, loss prevention, assets protection, profit protection… I really don’t care what we call our industry (I know there are some that care passionately about it), but I do know that having multiple terminologies and nomenclature does not help others understand our profession. Look at established professions like medicine, finance, IT, HR, and others. By and large, they have established consistent labels for positions within their industry. There is a clear distinction in medicine between a doctor, a physician’s assistant, a registered nurse, etc. In finance, there is a clear distinction between a bookkeeper and a CPA. I don’t hold illusions that we are going to reach consensus in 2010, but hope we don’t have more diffusion.