Category Archives: Industry News

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.

RILA Loss Prevention Conference Recap

I had the opportunity to participate in RILA’s Loss Prevention & Safety Conference in Dallas, TX last week and thought it went very well.  I know not everyone is fond of industry conferences but I always enjoy the chance to catch up with others and hear what they are doing, what is keeping them up at night, and their take on how our industry is doing – both the overall retail business and our function specifically.

At last week’s show, a couple of presentation stood out for me:

  • Erik Newcomb from lululemon athletica did a great job in sharing how their Loss Prevention approach has to be very customized to fit into his organization’s very strong and unique culture.
  • The folks from Target presented, in conjunction with Shawn Evans from P&G, a good glimpse into how they tackle systemic and process issues with some specific success stories.
  • I always find it interesting to hear about the challenges that senior leaders in large organizations face and we got that chance when Jim Lee moderated a panel made up of Stan Welch, JC Penney’s, Ken Amos, Walgreens, and Claude Verville, Lowes.
  • Liz Benson from RILA coordinated a really nice student program that included attendance at the conference, some pre-work assignments, and presentations from the student’s themselves.  They did a better job than I could imagine myself having done in that situation at that age and I heard lots of compliments about them from retailers.

There were several others sessions that I heard good feedback about but just wasn’t able to attend.  And, of course, there were lots of networking opportunities where it was great to connect with industry friends and colleagues.  Congrats to all of the presenters and the organizers who put the show together!

Global Loss Prevention – 2011 Review

As we close out last year and move onto the future, it is natural to reflect on what we’ve learned and where we have been in 2011. This post will focus on the growing attention that international issues are garnering from Loss Prevention and security professionals.

The Global Retail Environment

Over the past year, we’ve seen the international retail market take center stage for many retailers, sometimes for the good and sometimes for the bad. Across the globe, retailers are announcing that international expansion is their growth market. Nowhere is this trend more pronounced than in the specialty apparel segment of our business. A&F, American Eagle, Gap, Uniqlo, and many others have announced their intentions for greater concentration and focus away from their home bases. In fact, there was speculation that Motherhood Maternity, a UK-based organization, might close their UK stores to focus on international opportunities, although this seems unlikely.

Yet, there have been plenty of retrenchments and pullbacks along the way. Leading brands such as Best Buy, Wal-Mart, A&F, and many others have reported less than expected earnings or even had to pull back from underperforming markets. Retailers have found operating expenses much higher than expected, infrastructure severely lacking, consumer acceptance not guaranteed, and, in some markets, political environments and corruption issues more challenging than initially estimated.

In recent months, many companies – retail or not – have curtailed or scaled back plans for Europe given uncertainty about the future of the Eurozone. For CFO’s of companies operating in the Eurozone, the fourth quarter found most of them grappling with contingency plans for what to do if the Euro starts to unravel over the next year.

Retail Loss Prevention Challenges – 2011 Recap

As retailers expand internationally, Loss Prevention executives are challenged to learn the different challenges, cultural influences, regulatory differences, training and learning orientations, and communication styles of vastly different markets and audiences. Privacy laws in the EU, works councils in Germany, corruption in Russia and former Soviet states, local politics in China, and violent crime in Central and South America all present challenges to our goals.

In the past year, we had the privilege of working with retailers around the globe and had many opportunities to meet, network, and travel around the globe.

  • In January, we were in Bogota with a client doing market assessment and FCPA training.
  • In May, we were back in Europe meeting with clients and gauging recent developments. I was able to avoid any volcanic disruptions this year and also got to spend some valuable time in Paris with Bernard Geiben, our Senior Consultant for international issues. With his in-depth experience in over 30 countries, he is a critical part of our global strategy and able to bring our clients real-world insights into operating in differing cultural and regulatory environments.
  • In July, I was in Mexico City with a key client and also had the chance to participate in the CSO Roundtable meeting held there to discuss current status/trends in the security environment in Mexico and Central America – a key concern to any retailer operating there.
  • In late August, I was able to spend some time in Shanghai and Beijing networking with both loss prevention and business contacts. One of the highlights was reconnecting with a good friend who grew up in China and is now relocating to Shanghai. Due to his extensive experience in China, he has an amazing network of expatriate friends who have been operating in China for years. Senior executives from companies such as Intel, Ogilvy PR, and other leading companies were able to share some of their insights with me. My favorite quote from the trip came from one of them, “Spend a week in China and you’ll want to write a book about it. Spend two months in China and you might want to write a column. Stay for a year or more in China and you’ll realize you know nothing about China.” Good advice.
  • September brought me back to London and Paris. While most of the trip was pleasure, I did get to connect with some US executives who were over to do some assessment and we had a chance to break bread together and compare notes.
  • In October, I was able to get back to Madrid for the ASIS Spain Chapter’s retail loss prevention seminar, “Encuentro profesional de la Seguridad en la Distribucion.” PCG’s Bernard Geiben was a featured presenter and we had an opportunity to network with several leading retailers including executives from Carrefour Spain and DIA. Plus, I got a side-trip to Barcelona to catch some world class football at Camp Nou.
  • In November, I finished the year in Washington, D.C. at the Control Risk Seminar, “Risk and Reward: Successfully Navigating an Unstable World.”

Looking Forward to 2012

In the coming year, all of us will have to become more knowledgeable about the challenges of taking what we do across the globe. In the first four months of the new year, we already have plans to be in China, South Africa, and the United Kingdom. This, of course, is in addition to meeting with companies around the US to hear about their lessons learned, their challenges, and how they have found ways to be successful in new markets. We hope to see you on our travels and good luck with your global ambitions!

2012 Retail Huddle: Using Procedural Review Audits to Tackle

Guest Blog: Andrew Wren

The year is quickly drawing to a close. With the final quarter upon us, retailers are tabulating the score for 2011 and building their game plan for 2012.  Unfortunately for the retail industry, there was no economic rebound in 2011 and the economic malaise will likely continue.  Surviving – and certainly winning – in this challenging economic environment will depend on retailers’ ability to maintain complete control and awareness over their business, and streamlining operations to achieve greater profitability and complete customer satisfaction.

Procedural review audits (PRAs) are an excellent way for retailers to do this.  PRAs are designed to audit critical areas of retail operations in order to identify failures and enable managers to address them before they begin to cause significant losses.  These audits help retailers move toward their goal, scoring better profits and customer satisfaction critical to their survival.  Here are some things to keep in mind when reviewing your plays for 2012.

Start the 2012 Line-up Now

Economists are sending clear signals that an economic recovery will take longer than anticipated, painting a gray outlook for retailers in 2012.  Higher gas prices continue to eat into discretionary income and also trigger increases in online sales, causing many brick and mortar stores to lose footing.

Savvy retailers will use the remainder of this year to begin mapping out their game plan for 2012: making the most of limited resources, focusing on known areas of loss, and putting measures in place to keep a close eye on what is going on in the field.  PRAs are a critical part of this process.  Retailers can begin identifying areas that require monitoring and create and issue audits in those areas so they can start off the new year with full awareness.  Retailers can use this final quarter of the year to test audits in local stores to see what works and what doesn’t work, train employees on the audit process and to learn from the greatest loss-causing problems in 2011.

Strengthen Offense and Defense

Retailers’ efforts should be focused on two strategic areas in 2012:

  • Defending every penny of profitability by preventing losses and streamlining operations
  • Proactively achieving the best possible customer satisfaction.

Customers have a wealth of choices when it comes to where they shop.  They expect and prefer clean, safe shopping environments where items are available, easy to find, and competitively-priced.  They want their experience to be pleasant.  They want good service and short lines.  A bad experience could lead the customer to go elsewhere, never to return, and walking away with the retailer’s current and future revenue stream.  PRAs should evaluate customer service to ensure that the experience is optimal for every customer, every time.

This could mean auditing merchandising to ensure that displays and promotions are properly and safely displayed, that shelves are stocked so that customers can easily find the products they want and need.  Or it could involve checking front-end operations: conducting randomized audits to monitor wait times at checkout, determining if employees are asking customers if they found everything they needed, and ensuring the exits are clear of carts, boxes, debris.  It’s a good idea for store managers to conduct an exercise to walk in the customer’s shoes all the way through the store, noting areas where frustration might occur and building those areas into audits.

Profitability depends on an enormous range of variables.  From shrink, to streamlined operations, to labor efficiency – the list is virtually endless.  Auditing profitability means conducting PRAs in areas including ordering, receiving, processing, mark downs, point of sale, security and risk management, shrink and theft, transportation and distribution, invoicing, DSD, employee awareness and hundreds of other key drivers in the retail environment.  PRAs are a great way to build awareness of loss-causing problems in the field so that the retailer can defend profitability.

Search for Root Cause

The best PRAs will not only identify key risk areas, but will also reveal the root cause of the problem.  Instead of asking exclusively if food storage areas are maintained at the correct hot or cold temperature, the better audit will ask additional questions about if all new employees have been trained on how to operate the equipment and if the equipment has been properly maintained.  This allows the audit to point to the possible reason for the failure, enabling the retailer to address the root of the problem more quickly.

Don’t Fumble

Many retailers fumble when it comes time to take action on the findings of the audit.  No PRA is successful if findings are ignored.  Retailers must have processes in place to take immediate action based on PRA findings.  The goal is to work through the point of failure and address it to strengthen the overall performance of the company.   Companies must have processes and culture in place to assign accountability for someone to carry the ball to the end zone.  PRAs can identify important and alarming trends and failures that the corporate office should be aware of to determine if lessons can be learned and problems prevented in other locations or company-wide.  Executives should support audits and create a culture that values them and gives them the importance they deserve.  This also means valuing the results from the audits, taking time to review them, and building incentives for stores and managers around completing audits.

In a tough struggle against a stagnant economy in 2012, PRAs will help retailers block and tackle their way through another challenging year in retail.  With this type of game plan, retailers in even the toughest retail segments can avoid getting hit on their blind side.

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About the Author: Andrew Wren – Chief Executive Officer of Wren

Andrew Wren serves as Chief Executive Officer of Wren, a company founded by his father, Clifford Wren, in 1983. Wren is responsible for corporate and product strategy, leveraging his more than two decades of security technology expertise.  Wren’s visionary leadership has transformed the company from a manufacturer of security components to a provider of software and technology solutions serving multiple industries including retail, education, government and healthcare organizations. Wren brings deep security industry expertise, an understanding of market requirements and knowledge of customer needs, enabling the company to develop and deliver innovative technology solutions that help customers advance their security, risk management and operational practices.

Under Wren’s leadership, the company has grown to a multi-million dollar physical security technology provider. Wren earned a Bachelor of Science degree in Marketing from Auburn University. For more information, visit  www.wrensolutions.com.

 

Doing Business in Mexico: Security Update

Retailers are trying to figure out what to do about Mexico.  On the one hand, retailers who are there are doing great business year over year and it appears the retail market is going to continue to grow over the next several years.  On the other hand, daily headlines about shootings, decapitations, and running gun fights in the streets would make any reasonable person cautious.

A few months ago, I had the opportunity to attend a CSO Roundtable meeting in Mexico City to get an update on the security situation in Mexico from experts from both the private sector and government.  I will leave the detailed “on the ground” intelligence to the experts who deal with it everyday, but I did come away from the meeting with some key takeaways.

The bad news is that any improvements in the levels of violence being generated by the cartel battles is going to be slow and we will not likely see a major improvement in the next several years.  There was a general consensus that until corruption issues in the law enforcement and judicial branches could be rooted out, there will be on-going problems.  There is a presidential election coming up and a change in administration has some potential to alter the government’s approach but it is unlikely to significantly alter the current issues.

The good news is that the vast majority of violence and murder is cartel on cartel or cartel on government.  There does not appear to be a targeting of innocent civilians or businesses other than for monetary gain through express kidnappings and extortion.  As a result, most companies are finding they can continue to operate successfully in Mexico albeit with certain areas providing challenges.

One of the other significant issues is the shifting of violence geographically.  The towns on the U.S. border have some of the most significant problems but new areas of concern are rising around the country.  Monterrey, a major center for international businesses, has become a battleground for the cartels.  Guadalajara was considered to be relatively safe a year ago, but is now experiencing some escalating violence.  It will obviously be imperative to continue to monitor these shifts and take appropriate actions.

Finally, I thought the other lesson learned was the importance of networking with other businesses who have either faced these challenges or who are in the process of trying to figure out how to be successful in this significant market.