What’s on your Christmas List: Revamping Your Holiday Loss Prevention Strategy
TL;DR by Tippy
The holidays (November-December) is one of the busiest times of year, bringing in an estimated 158.9 million customers
This also attracts more thefts and internal shrink
Adjustments to your operations and administrative tasks can have major impacts on total end-of-year losses
Holiday season preparation begins with an audit to understand your current status and the fixes needed to stop any unnecessary profit leakage
Shox Art on Pexels
I'm making a list/
Checking it twice/
Gonna find out who's/
Naughty or nice/
Though this classic Christmas jingle (the Fred Astaire version gets our vote) is about the “Big Red Guy” in a sleigh, it can really apply to retail during the holiday season.
We might not be sliding down chimneys, but we are bringing joy to shoppers and the special people in their lives. This means that retailers need to have adequate products on shelves for their customers.
While we have talked about loss prevention in the past, during this final stretch of Q4, it's important to have a tight seal on your strategy.
Organized Retail Crime (ORC) syndicates already target retailers with brazen thefts, often violent in nature. So, during the holidays, when workers are busy or distracted, thefts increase. As the cost of living continues to rise, there's an elevated demand for stolen goods on secondary markets such as eBay and Facebook marketplace.
Couple this with the fact that there's an influx of inexperienced temporary seasonal workers, and you have a cocktail for increased shrink.
While it might be a little too late to start installing the latest technology before the holiday season, there's still time to clamp down on your operations and administrative errors.
So, tighten your belt and put on your favorite carol. It's time to dive into some last-minute adjustments you can make to help reduce shrink at your retail locations.
"Loss prevention refers to any practice that reduces a business’s losses from theft, fraud, and operational errors. The goal of loss prevention is to eliminate preventable loss and preserve profits."
Source: https://www.shopify.com/blog/loss-prevention
Crash Course on Retail Shrink: Internal Theft, External Theft, and Administrative Errors
When you hear the term “retail shrink”, we're typically talking about the variance between what your inventory says you have on-hand versus what's actually on-hand. Last year, that variance cost retailers over $100 billion.
Losses typically come from three categories: external theft, internal theft, and administrative errors.
Internal theft
This includes a wide range of losses resulting from theft of assets by employees. This could be stealing merchandise, time theft, giving discounts, or fraudulent refunds. Internal theft represents 29% of all shrink. Annually, internal theft costs US retailers $50 million a year.
External theft
This refers to all shoplifting incidents enacted by parties that are not associated with the company. On average, it represents 36% of overall losses. According to the National Retail Federation, 40% of retailers noticed an increase in Organized Retail Crime and 50% say that most external thefts are conducted by repeat offenders. In the modern phygital era, external theft is also attributed to online fraud, phone scams, and gift card theft.
Administrative Errors
Also known as paperwork shrink, this is often a highly avoidable area of loss since it's the result of oversight and rushing, which we're extremely prone to during the holidays. Miscounted shipment amounts, insufficient inventory audits, inaccurate markdowns, mismanagement of paperwork, and rushing through end of day floats all contribute towards admin errors. Paperwork shrink attributes to 27% of all loss.
Tightening Your Operations and Administrative Errors
By this time of year, your shrink results are starting to add up. But it's not too late to make significant changes before the big holiday rush with 91% of consumers celebrating a winter holiday, resulting in over a $1 trillion in sales.
With millions of shoppers hitting the racks, maintaining a failsafe operation not only impacts your shrink results but also customer satisfaction and employee morale. When stock levels are accurate, there are less headaches all around.
Nothing is more insane than staff running around the stock room to find inventory that doesn't exist,especially during the busiest time of the year.
Here are a couple tips to plug that loss leakage during the holidays:
1) Conduct an inventory audit NOW
Start on a clean slate and know where you stand with your inventory. This way, your system is calibrated and you're able to serve your customers better. With an accurate inventory, your allocation teams can replenish your stock adequately throughout the season.
2) Revamp your loss prevention education
Ensure that your teams know the signs of external and internal theft and create incentives to motivate staff to keep an eye out for potential theft.
Some signs of external theft include: hovering over products for extended periods of time; fidgety behavior or looking over shoulder frequently; customers arrive in groups and then split off; going to blind spots with merchandise
3) Review shipping and receiving protocol
Is your staff verifying the contents of each shipment, or just skimming? With part-timers and temp staff coming in, their attention to detail may not meet the same standard as your full-timers. Make sure that you're minimizing variances through coaching and shadowing and ensuring that senior staff are always present.
4) Review refund and discount protocol
The abuse of discount policy and refunds is unfortunately a norm for retailers. During the frenzy of the holidays, it's easy for things to slip up. Ensure that all discounts and refunds go through management and require a manager passcode to complete. For higher traffic stores, it may be necessary to have multiple managers on duty to help manage the influx of customers.
5) Staffing
Make sure that you have adequate staff to manage all the functions within your store locations. Often, we only consider sales staff and think they can float throughout the store, but this creates opportunities for theft and customer bottlenecks. It's widely considered that adequate staffing, alongside adequate training, is one of the biggest deterrents for theft. Plus, it also supports better customer service.
Credit: Burst on Pexels
Have You Begun Planning Your Loss Prevention Strategy for the Holiday Season?
With back-to-back shopping events, from Thanksgiving through to Black Friday, it can feel quite difficult to deck the halls because of all the busyness.
Having a solid loss prevention strategy in place helps you get ahead of the rush and the potential losses that come along with it. This is a joyous time of year, but it also comes with increased levels of theft and the potential for administrative errors.
By knowing where you currently stand, you're able to find the gaps and create solutions before it's too late. Third-party auditors, like Competitor IQ, can help identify the missing pieces in your operations and your customer experience.
Nothing feels better than wrapping up another holiday season while hitting your goals. Maybe that's why they call this the most wonderful time of the year.
Curious to know how your loss prevention strategy stacks up?