Tag: ROI

How To Allocate Retail Loss Prevention

Profit in any business requires an increase in income and decrease in expenditure. The same theory applies to the retail industry. To make profit in retail requires an in increase sales and reduction in shrinkage. This concept has so far been non-existence in the retail industry where the focus has always only been on increase sales and hoping that the problem of shrinkage will miraculously disappear.
Retail shrinkage occurs as a result of poor or non-existent loss prevention policies and procedures. Therefore, it is imperative that any retail organisation that wishes to remain profitable include loss prevention in its standard operational practices.
Loss prevention is the series of activities that are geared towards the reduction or elimination of all potential loss within an organisation. In the past, loss prevention has been confused with security. While security is a part of loss prevention, security is reactive, basically geared towards identifying shoplifters and employees suspected of stealing, loss prevention is centred around all the activities that are responsible for store loss. It can be known loss such as damages, returns and errors or unknown loss such as shoplifting or employee theft. Preventing shrinkage is simple if we understand the sources of the loss. Last year, UK retail industry spent 771 million on loss prevention, despite this spending, retail shrinkage rose by 5.4%. This has remained the story of loss prevention in the UK for many years. Shrinkage reduced by a few percent one year and increase by several percent the following.
What is the reason for this, the answer lies in the way loss prevention funding is allocated. Even though the levels of funding differ from one organisation to the other, the principle remains the same: spending more for less return on investment (ROI).
The Global Retail Theft Barometer report stated that for the 12-months ending June 2009 crime cost UK retailers 4,063 million. This is broken down as follows:
Customer theft 1,767 million (43.5% of all shrinkage)
Employee theft 1,479 million (36.4% of all shrinkage)
Distribution chain theft 175 million – (4.3% of all shrinkage)
Administrative error – 642 million – (15.8% of all shrinkage)
Total Shrinkage – 4,063 million – (100.0% of all shrinkage)

Total loss prevention spending for the same period was 771 million slightly down from the previous year of 785 million.
Broken down as follows:
Contract Security – 270,621,000.00
In-house Security – 162,681,000.00
Security Equipment – 223,590,000,00
Cash Collection – 61,680,000,00
Other LP Spending – 52,428,000.00
However, in this same period, shrinkage as a percentage of sales rose to 1.37% a rise of 5.4% from 2008 figure of 1.30%.
This brings us to the central thesis of this article: Why is retail loss prevention measure ineffective?
The answer lies in the way funding is allocated. To produce the desired result, retailers first and foremost need to determine the source of loss and allocate funding according to the ratio of loss and the ROI.
The below table outlines this point better, it shows last year retail spending on loss prevention and their return on investment:
Measures: Spending: ROI Achieved:
Trained Employees – 6.8% – 50%
Security Personnel – 56.2% – 2%
Security Equipment – 29% – 45%
Signs & others – 8% – 3%
Customer related theft accounts for only 21% of retail shrinkage the remaining 79% can be broken down into cashier cause 32%, followed by general employee cause 24%, receiving 10% and the remaining 13% is the result of damage and error. But the interesting point that needs to be noted is that even though 79% of retail shrinkage in caused by internal activities, retailers spent more on combating customer related theft than on employee cause.
56.2% of loss prevention resources were on security personnel that produced only 2% ROI, 6.8% was spent on staff training that produced 50% ROI. It is not difficult to see why despite the huge spending on loss prevention, retailers have not been able to affect their shrinkage level. There is a direct correlation between loss prevention spending and the ROI. Until such time that retailers get the balance right, loss prevention spending will continue to produce negative result.

How to make loss prevention effective?
The following are measures when implemented can lead to massive reductions in shrinkage levels and increased profits:
Measure the Scale of the Problem
Analysis daily profit and loss report
Complete top management involvement
Create awareness of the problem
Continuous education and discipline of employees
Inspect What You Expect
Set Measurable Targets
Take Advantage Of Technology
Develop the act of flexibility in approach
Change from present paradigm

Loss prevention is a science and like any science, it requires a systematic approach. Loss prevention personnel cannot approach it with cross fingers praying for the best. Gone are the days when retail crime such as shoplifting was seen as teenage leisure activities, or conducted by drug addicts. Many incidents of shoplifting are now carried out by Organised Retail Theft rings with levels of sophistication never before seen in the retail industry. We as loss prevention experts along with law enforcement agencies have to wake up to this fact and try to build our own capabilities to respond accordingly.
Increase sale does not necessarily mean increase profit the quicker retail executives crabs this concept, the sooner they will be making sustainable profit.

Retail Dashboards Monitor Key Performance Indicators

Every business unit needs to keep a track over the costs and the revenues generated over a period of time. There is every possibility of a mismatch between the two. Key performance indicators form the basis for determining the performance of any organization. The indicators are sales volume, price management, price optimization and others. These figures help the business units in increasing their sales and profits and in determining the market trends. A retail dashboard summarizes all the data in a top level snapshot. It displays the revenues received in different intervals of time as to have clear distinction of the revenue generated in a specific state in each month.

The laser focused dashboards shows the key performance indicators of every type of business models. Within a dashboard, the KPI (Key Performance Indicators) charts are different for every kind of enterprise. There is large volume of POS data and the dashboards offer retail data solutions by displaying all the KPI. In this competitive world, the retail dashboards have become an integral part of every organization. The owners cannot wait for the data to take crucial decisions. The multiple levels of data are very effective in boosting up the level of sales. The dashboards help in promotional planning, inventory management, and merchandise tracking.

eSENSE Retail make use of the latest technology and offers retail data solutions to the business firms both small and large. The eSENSE Retail solution is a web based application and it integrates various data points into the customized dashboards. Their retail dashboards help in identifying the areas which require action or follow up as to have increase in revenue. eSENSE Retail was established by a team of experts in the field of category management. They have been working with manufacturers distributing retail management tools, products and services to the retail community from many years. Get this opportunity and boost the ROI and have high sales volumes. For more details about their excellent services, please browse through www.esenseretail.com.