Many of you know that I have spent the past 25 years teaching, training and consulting with retailers to implement Store Operations and Loss Prevention best practices supported by smart technology to grow profitable sales.
Our goal must be to align with our CEO’s corporate goals and shift team thinking to recognize total store shrink loss for what it really is – Gross Margin / Profit Loss. This can be a complex paradigm shift, but when properly accomplished, Loss Prevention can very proactively partner with Operations to gain significant business influence and an invitation to the CEO’s Round Table.
Start with the Big 4 Best Practice Focus areas:
1. Sales: Every CEO wants to optimize sales. This demand’s focus on optimal variety, on-shelf availability and an intense focus on fresh item quality. (Enter Loss Prevention and Quality Assurance Best Practices).
Customers come to shop, and our #1 job is to ensure they get what they came for. The 3 consequences of being Out of Stock or selling poor quality perishables include: a lost sale; customer having to trade off to a similar (but not desired) item; go to competing store and the likelihood of inflated shrink as a percentage of sales.
In summary, the tracking and managing of variety, freshness and your optimal in-stock condition are vital to Profitable Selling Best Practices. Tracking and managing daily sales at the lowest department or sub-department level allows managers to disrupt negative or sub-par sales trends (mid-week or mid-period) to promote for added profitable sales. Then, every Store Manager should collaborate with their Department Managers every day to review sales and take action to promote 1-2 in-store (non-advertised) Featured Items using promotional signage, special displays and CSE Best Practices to grow sales $1,000 per week ($52,000 annually). Depending upon your situation, sales may or may not be a significant remedy to your shrink rate, but two things always remain true: (1) sales are every company’s life-blood and should be the everyday focus of operators, merchandisers and (yes) loss prevention. (2) profitable sales are every CEO’s #1 priority. What does this have to do with Loss Prevention? Traditionally not much, but with nearly 70% of Store Shrink caused by a breakdown in store operations best practices, if Loss Prevention is to grow its value proposition, as a Profit Realization partner then we must think beyond “loss” to how we can help Operations to sell its way to lower shrink loss. Shifting into high gear…
2. Shrink is Your Link to Profitable Selling!75% of all companies we work with have a Known Loss program. When evaluated, just 35% of these companies have a good, efficient, and effective Known Loss program. Our operational audits and inspections show that Known Loss Control is the #1 most failed shrink prevention program. But, properly implemented and consistently executed, a Known Loss Program, can be your portal into seeing and reducing your Profit Loss.
The source of Known Loss can most often be tracked back to breakdowns in the efficiency of ordering, handling, storage, production, display, and sales. Hence, training operators in the very best and proven practices for seeing and proactively managing known loss and implementing smart Known Loss control technologies must be a top operational imperative. If you have too much store shrink caused by measurable known loss or gross margin erosion, don’t assume the fundamentals of proper ordering, handling, storage, production planning and display are being practiced, regardless of the technology you have.
We have repeatedly proven that implementing an effective Known Loss program is the first, very revealing step on the yellow brick road to 18% lower shrink loss, leading to sales and profit improvement.
What is meant by our Get Your BIG strategy? It means recording 100% of known loss and 100% of programmed gross margin erosion. When we see our BIG every day and understand the mandate to be sales driven, we can help to change the operational thinking and behaviors associated with profit optimization. The difference between a weak Known Loss program and a Best Practice guided Known Loss program is 17% less shrink with every dollar saved going straight to your bottom line.
3. Smarter Ordering: Building on the concepts of The Vital Role of Inventory Control and Getting Your BIG, Operators and Loss Prevention professionals must think about Turns-Turns-Turns. Smart Ordering is all about being 100% in-stock with full variety while turning your inventory with minimal associated Known Loss.Smart Ordering is key to profitable selling and Smart Inventory Turns is key to controlling shrink loss and making cash flow efficient. By teaching, training and executing on the principles of known loss control, every store’s profit will benefit. Easy to understand? Absolutely. Simple to consistently execute? Nope. Not at all. This is because we too often assume our Ordering and Known Loss practices are, #1 understood by all store teams and, #2 being executed. But following these programs have proven to work every time and are fundamental building-blocks to a Total Store Manager Training Program.
4. Daily Performance Visualization and Team Action: Smart technology will not reduce shrink loss. However, people using smart technology will. For too long, store operators and merchandisers have been victims to the data and paper glut and having to wait for the end-of-week or even end-of-period to see their results. We need to stop focusing on reports and graphs that provide analytics in the rear-view mirror. Rather, we should engage with and improve all vital key performance indicators every day. We can optimize practices by utilizing immediate performance metrics that discover and disrupt negative patterns before they result in missed budgets. When you put smart technology in the hands of trained store teams, you provide “disruptive intelligence” to reduce shrink, improve sales and will help to align Loss Prevention with Operations, CEO Goals and Corporate Objectives.
By merging Best Practices, Smart Technology and Operating Standards, Loss Prevention can cause vital behavior modifications that help store teams to out-perform sales and profit P&L expectations.
(Editor’s Note: This article was written by Larry Miller, President of Smart Retail Solutions. If you would like to learn more visit their website at: https://smartretailsolutions.com/