Best Buy, BusinessWeek, and the Rest of the Story

Yesterday, the new CEO of Best Buy made one of the silliest announcements I’ve seen in the last couple of months when he announced that they were reassigning about 2,000 loss prevention employees to focus on selling customers more merchandise.  The reason it sounded so silly was in the explanation for the move – “Customers told us they did not like having their receipts checked when they left the store.”

Seriously??

Retail analysts have already detailed the significant, fundamental issues that Best Buy faces in its market segment, but this move is going to help solve those issues?  Now, I would have had more appreciation for the move if they simply said, “Hey, we are grasping at straws here!  Amazon, Wal-Mart, and Costco are kicking our butts, we’ve thrown billions of dollars away in failed international expansion, our management team is in turmoil here, and our stock price is in the pits.  We are trying to cut as much expense as possible and willing to roll the dice that shrinkage won’t go up too much.”  That might have made at least a little bit of sense, but the idea that their sales issues are because customers are staying away from their stores because of rabid receipt checking?

How are Sam’s Club, Costco, and BJ’s doing so well then?  They check receipts.

As a Best Buy consumer, I can’t remember the last time my receipt was checked.  What I can remember is my experience in their Tinley Park, IL store a few weeks back when I popped in to buy the latest Zac Brown Band CD that was at the top of the charts.  First, there might have been four customers, counting myself, in the store at 3:00 in the afternoon.  Second, when I went to the music section, I had plenty of opportunities to buy those $6.99 specials but not a Zac Brown CD to be found.  Surely, if you are going to carry music, you need to have the best-selling CD’s available?

But, yesterday’s announcement would suggest that in the mind of a new CEO, the reassignment of loss prevention employees is more important than looking at their buying and distribution issues.  At least that’s what it looks like to me when I read the BusinessWeek article.

Now, here’s the rest of the story..

The changes Best Buy is making in regards to its loss prevention strategy are more thought-out than the article suggests, driven by different factors, and probably shouldn’t have even been publicized in the business press.

Best Buy has operated their front-end control model for a number of years.  Originally, it was focused on improving accuracy and integrity of the POS area through receipt checking and presence in that area.  As a side benefit, it also put the loss prevention personnel in a place where they could monitor the flow of customers in and out of the front doors.  Personally, I think they managed the process pretty well.  I typically found their front-end loss prevention associate to be friendly and knowledgeable about where to direct customers for certain product categories.

However, a few years ago, the leadership team of the Loss Prevention group began to explore how they could focus their personnel more on process related issues that affect shrink and have a bigger impact throughout the entire four walls of the building.  One option given consideration was to change the front-end model.  In fact, not only was it given consideration, it was tested in several markets to see if it might help accomplish the shifting goals of the organization.

The test results showed them that by un-tethering their people from a fixed location in the front of the building, it did, in fact, allow them to have greater engagement and impact on shrinkage throughout the building.  In the process, they were also able to give a few hours back to the sales efforts and they feel good about supporting the efforts of the organization to increase top-line growth.

Back to the BusinessWeek article..

Without knowing the rest of the story, it is easy to read the article as an indictment of the loss prevention group.  It would be easy to think the loss prevention department was going away.  It would be easy to view the senior leadership as being short-sighted and grasping at straws to fix their sales problems.

This is the reason I received quite a few inquiries from people in our business asking for my take on the reports.  It was seen as a very negative view of loss prevention and a simplistic view of the role that loss prevention strategies play in relation to sales.  Unfortunately, this type of thing happens pretty regularly.  When a senior executive says, “Our customers don’t like it when our high-end product is spider-wrapped,” I want to ask them how they know that to be true.  Have they done customer intercepts?  Have they done behavioral observations where they saw this behavior manifested?  Have they surveyed non-customers to find out why they are not shopping in their stores and heard a consensus that it is because of the organization’s merchandise protection standards?

In my years of retail experience, I’ve seen this time and time again.  Companies who are struggling with fundamental issues start to focus on minor issues that only distract them from their larger challenges.  But, from what I understand of the situation, this is a deliberate strategy shift, led by the Loss Prevention team, that will show its results in time.

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