SECURITY/RISK

Report: Retailers will lose $50 per person in shrink this holiday season

BY Deena M. Amato-McCoy

The retail loss burden overall is expected to be $132 per person this year.

However, $50 of this loss — about twice as much as in other calendar quarters — is expected to be incurred in this holiday season, according to “The 2016 Retail Holiday Season Global Forecast” from Checkpoint Systems. The report provides an analytical view of business risks that major retailers face during this holiday season.

Strains on profitability manifest during the holiday season largely because of increased shrink and theft from internal sources — primarily via employee theft and other sales reducing activities (SRAs) — and external factors (primarily via shoplifting and organized retail crime). These loss increases place an enormous burden on retailers and, ultimately, on honest consumers who pay for it in higher prices.

“Despite more than one-third of the year’s retail sales expected to be registered in just these three months [of the holiday season], more than 40% of SRAs are also incurred in this same time period,” said Ernie Deyle, an independent retail loss prevention analyst. “This leads to increased shrink, and puts additional strains on brick-and-mortar retailers already reeling from an ongoing inhospitable retail market.”

As expected, inventory — including the space to store it — is the largest single cost of doing business, the report said. While reducing inventory means lower costs, insufficient inventory leads to out of stocks, lost sales and unhappy customers. So balancing these two factors is critical to profitability and growth, particularly in omnichannel environments.

As a result, more companies are aligning and using advanced data analytic tools, inventory management strategies, and sophisticated technologies, such as RFID, to gain the advanced visibility needed to track merchandise as it moves throughout the supply chain to distribution centers, retail backrooms and store shelves. This increases the overall value proposition specific to item, category and department financial contributions.

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DEVELOPMENT/REDEVELOPMENT

Austin named top town for real estate development

BY Al Urbanski

Texas is the go-to state for real estate developers in the U.S. and Canada, according to PwC and the Urban Land Institute.

In the 38th annual edition of the joint study, “Emerging Trends in Real Estate,” investment companies surveyed named Austin and Dallas/Fort Worth as the top two cities for development. The Northwest put in the second-best showing, with Portland and Seattle coming in at numbers three and four.

“Austin, along with many of this year’s top 10 cities, boasts attractive, niche neighborhoods and a vibrant, diverse economy,” said PwC Partner and research leader Mitch Roschelle.

One of the most dynamic trends in development, said the study, was “optionality”—people using the same space for different purposes at different times of day. It boils down to building communities, stated the report: “Instead of focusing on building “stand-alone” mixed-use buildings, they’re increasingly building mixed-use neighborhoods and communities that pack residential, retail, and commercial space into a dynamic whole.”

The investment professionals’ rankings for return on investment, were all over the board on retail development. Urban/high street properties were ranked as the third subsector overall, neighborhood centers received moderate rankings, and power centers and regional malls were at the bottom of their list.

Favored retail investment vehicles of the experts were mixed-use developments and niche power centers, along with grocery-anchored and lifestyle centers.

The complete top 10 list of trend-setting cities:

1. Austin, Texas

2. Dallas/Fort Worth, Texas

3. Portland, Ore.

4. Seattle

5. Los Angeles,

6. Nashville, Tenn.

7. Raleigh/Durham, N.C.

8. Orange County, Calif.

9. Charlotte, N.C.

10. San Francisco


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Insights

Three Pieces of External Data Impacting Retailers’ Bottom Lines

BY CSA STAFF

Retailers are constantly looking for smart ways to gauge their performance, and understanding data is crucial to this process. When looking to make quick decisions – from determining which products to stock at certain locations to optimizing pricing based on in-store promotions – much of a retailer’s success relies on insights gained from its internal data. Information collected from POS systems and loyalty programs can provide key insights, helping retailers make the best possible business decisions. However, retailers are missing out on a big piece of the equation by not incorporating external information into their analysis, too. There are various uncontrollable factors that have an impact on a retailer’s business that often aren’t considered.

By taking these outside aspects into account when monitoring performance, retail decision-makers will have a much clearer and more complete picture of their business as a whole.

Here are three key data sources most retailers didn’t even know could be affecting their bottom line, and why they need to start incorporating them into their performance accounting process.

1. Geospatial data: Looking at the wider environment

Previously, analyzing geospatial data meant looking at dots on a map in order to understand a retailer’s general market penetration in comparison to its competitors. This has quickly transformed into a much more complex application, allowing retailers to gain a clear view of business operations in a specific locale and helping them spot opportunities to continuously improve based on each environment.

By incorporating geospatial data into their analytics tools, retailers can gain a full overview of performance. However, the real benefits come from pairing this capability with additional data sources, such as census information. This combination allows retailers to dive even deeper into understanding how each specific product is performing against the maximum available potential in a particular market.

2. Census data: Knowing your customer across locations

This brings us to layering in census data to the analysis. At both the national and local levels, census information can provide more powerful insights into issues and opportunities that could have an effect on a retailer’s bottom line.

Specifically, this data allows retailers to measure characteristic information at the most granular level – from population size to average income to demographics and ethnicity information – in order to gain a full picture of penetration per capita. The value of this capability is that it allows retailers to analyze demographics of current customers, all the way down to the specific products they purchase. From there, census and geospatial data helps retailers identify similar population pockets that they can begin to target. Looking at the overall market and layering in this additional information helps retailers truly understand where they stand amongst their competitors, ultimately helping them make smarter and more strategic business decisions to support growth.

3. Weather patterns: Anticipating and preparing for potential issues

A final key factor that few retailers take into consideration during their performance analysis is weather. Have sales been slow due to heavy snowfall in the winter? Notice delayed deliveries caused by a nearby hurricane or tornado warning? Even though they can’t control it, weather affects retailers every day, from the manufacturer all the way down to internal operations issues. Therefore, it only makes sense to incorporate this data into their performance accounting process.

Not only does this information allow retailers to better understand why they over or underperformed on a specific day or time period, but drawing in weather data offers the ability to anticipate potential issues by making correlations between weather patterns, stock and sales. For example, if a grocer is aware of an upcoming blizzard expected to hit in the next couple of days, it can properly prepare by overstocking common products that customers bought during the previous snowstorm. This means no more empty shelves where the water, milk and bread used to be – ultimately increasing sales and making for happier customers.

For retailers, the ability to gain a full picture of operations and performance is invaluable – but this is only achievable if retailers move beyond traditional data analysis and start making correlations between both internal and external data. In performance accounting, there are so many environmental constraints that could be affecting a retailer’s bottom line and once these factors are accounted for, retailers will have a more complete view of their world and be able to optimize how they do business.


Guy Amisano is CEO of Salient Management Company, a provider of performance management solutions with experience developing industry-specific strategies for businesses in retail and wholesale distribution markets.

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