This is an early heads up for the retail stores who carry out stocktakes in the spring period or even later in the year. Coming up to Christmas most retailers will have had huge stock intakes and hopefully large sales to sell through on most of it. Its after Christmas when the shelves empty out the effectiveness of last years stockloss strategy (or lack of) becomes apparent. I also want to talk about security staff getting involved with reducing stockloss in a meaningful way. Not just in arrests and recoveries but in delivering an overall stockloss strategy.
The first step in reducing loss is in recognising that there is and will continue to be an issue. This is true in every store. There will always be external theft, internal theft and a variety of other ways that your store can lose money. Not burying your head in the sand is the first step. This can happen in a few ways:
- Lack of awareness of the issue
- Complacency because the issue isn’t being raised.
- Overconfidence: Thinking that your security is so good that it’s not a problem.
Always assume there is an issue and work on the next steps.
Before losses can be managed they must be measured. The more data you are gathering in your store the easier it is to manage losses. What’s more important than gathering lots of data is the quality of the data. The security plan should outline what the key performance indicators are for the department and focus on measuring and managing those data points. Choose the data that best meets the overall business need. For example measuring number of arrests and value of recoveries is nice for massaging security operative egos but meaningless if the store is still losing lots of stock or cash. Criteria such as stock inventory figures on high risk items, cash loss and damages can be good indicators. Of course if you are a contractor you may not be privy to this information ( you won’t know until you ask) but get what you can
Stockloss and Shrinkage
It always amazes me the divergence in how stores measure their stockloss or shrinkage. It also amazes me how many retail security staff don’t know how it’s calculated. If you don’t what it is then how can you reduce it.
The terms stockloss and shrinkage are often used interchangably and often seen as the same thing. I prefer to define them separately. I always consider stockloss a monetary figure measured in € and shrinkage as a percentage figure. Both are always reflected as a minus figure. The reason for this in my thinking is simple. Stockloss is lost revenue and the best way to measure pure loss is as a money figure. Shrinkage is a percentage figure and shows by how much sales have shrunk by due to stockloss. That’s not an academic definition it’s just how I always view it.
Stockloss should always be calculated on the retail price of the goods not the cost price. It’s calculated by taking the amount of stock received from suppliers (BOUGHT) and subtracting amount of stock sold through the tills (SOLD). This gives you what you should have on the shelves (Potential or POT STOCK). To get your loss you either count or get somebody to count the stock on the shelves (ACTUAL) . When you subtract the ACTUAL from the POT STOCK you get your STOCKLOSS.
Shrinkage is calculated by dividing your STOCKLOSS by your SOLD figure and multiplying by 100 to get a % figure. So shrinkage is stockloss as a percentage of sales.
The Security Equation
The dilemma for security staff is where to start. The reality is that most store managers will focus on shrinkage as it effects their profit line %. The other reality is that security staff can only really focus on reducing stockloss especially if they are using an arrest focused strategy. For example I might get much more arrests this year than last year and reduce stockloss but if sales reduce then the shrinkage figure still goes up. That is why a total store security strategy is needed. One that focuses on all areas of loss but also on boosting sales and getting the balance right.
Proactive vs Reactive
By its nature retail security is reactive. We are reactive to the actions of those who choose to steal in many cases. Even devising a stockloss strategy is quite a reactive method as we are reacting to last years losses. It does over time help us to become proactive. Over time by measuring and breaking down stockloss we can start to see patterns emerge that lead us into a proactive approach. Looking at high risk items year after year we can start to analyse things like:
- Are the top loss items consistently displayed in a particular area of the store
- What do the top loss items have in common (size, price, brand etc)
- Which of our reduction efforts work year on year and can we do the same in other departments
- Are there areas of the store where we have no arrests and high losses.
- Are there trends in the losses that might indicate an internal or delivery issues.
All of these things can be seen by measuring and investigating historic losses and turn them into proactive stockloss planning
Stockloss Action Plan steps
- The first step for security staff is to get a hold of the stockloss figures immediately after a stocktake. There is no point in starting a stockloss strategy 3 months after a stocktake. Trends and losses change over time and the longer you leave it to implement change the less effective it will be.
- Drill down into the figures. The percentage in high sales areas might look good but the high sales can mask a lot of loss so look at the stockloss figure and the percentage.
- Plot the high loss areas/products on a store map. I also like to overlay the CCTV camera positions, exit doors and till points on the map. It can highlight some obvious areas visually.
- Pick your top 5 departments and top 10 products (if some are outside of those departments). Write them down on a stockloss action plan.
- For each department set yourself a realistic target to achieve for next year. Set out 4-5 action points that you will implement to achieve these targets.
- Highlight these areas to all staff across the store and make everybody aware. Communicate it in a way that staff can relate to. Don’t just say we are – €5k stockloss and -2.4%. Relate it back to their role. That is 200 additional extra hours of work and a part time person to help you on the till that has been lost last year. Think of how much benefit you could get from that. Also dont forget to celebrate the positives though.
- Every week and month work through the steps you set out. Go for the quick wins first and do things which are easy such as CCTV moves or signage and work on the longer term things over time.
- Give a weekly or monthly update to staff and managers on how things are going. Keep stockloss on the agenda throughout the year.
You may notice that a common theme among the steps in that there is a lot of mention of buy in from management and staff. This is essential for an effective security strategy. There is only so much a security team can achieve and without the support and assistance of staff they are hindered in their strategy. Remember that security and stockloss will never be high on sales staff agenda. They generally wont have the mindset, or training to make them aware of such risks. Our job is to make it simple, make it so that they can relate to it and make them want to help. This relies on you delivering awareness, training and praise when it is needed . When negative feedback is needed then we do it in the right way. This builds extra sets of eyes and a workforce who are security conscious.
Stockloss and shrinkage are real things. They close stores, cost jobs and have lost many a security contract. Being a security professional who is just there to deter and detect shoplifting is not doing even half of the job. For many years security teams weren’t given the information to do this effectively but nowadays there is no excuse for not asking. Making yourself an asset to the organisation is the best way of safeguarding your job and progressing. Security staff need to take ownership of store stockloss and be proactive in mitigating it. Its not difficult to do and it pays dividends both for the store and the security professional.
If anybody would like a copy of a template for stockloss action planning just drop me an email to firstname.lastname@example.org or a message in the comments.