Tried-and-True Loss Prevention
Television’s new drama series, “The Black Donnellys,” recently illustrated how easy it is to foil an electronic-article-surveillance (EAS) system. During the second episode, two of the main characters entered an apparel store with a paper shopping bag lined with tin foil. As they filled the bag with EAS-tagged clothes and walked out of the store undetected, I remember thinking, “Leave it to Hollywood to offer a ‘how-to’ lesson in theft.”
Less than a month later, a group of brash shoplifters successfully pulled the same stunt at a Victoria’s Secret store in the Newport Center Mall in Jersey City, N.J. Besides proving my point, the incident also made me question just how well retailers are really protecting store-level merchandise.
Three shoplifters crammed panties costing $5 to $20 each and bras worth $20 to $50 each into lined “booster bags,” and walked out of the busy store. Upon reviewing the closed-circuit-television (CCTV) system’s tape following the incident, the store estimated the lost merchandise was worth almost $12,000.
The next day, a similar incident occurred. Again, three thieves used lined bags to steal 100 bras from the Victoria’s Secret store in New Jersey’s Burlington Center Mall. Two of the three criminals were arrested, though officials are unsure if it was the same group that pulled off the Jersey City heist, according to an article in The Star Ledger.
Many issues were factored into the thefts. According to reports, poor-quality CCTV tapes made it difficult to identify and nab the criminals. Some mall employees even reported that small staffs can’t manage the fairly spacious retail footprints.
I think there is a bigger issue. Loss-prevention technology solutions need the supervision of educated users. The incidents at Victoria’s Secret should be a wakeup call for any retailer whose EAS and CCTV systems may be failing to thwart thieves.
Pinpointing theft after the fact is not the ideal way to manage loss. Instead, chains need to focus on loss-prevention programs that include location audits, internal benchmark compliance programs and most importantly, training.
If chains want to protect their merchandise, their associates and even their shoppers, they should recommit to monthly loss-prevention training sessions. A combination of instructor-led and computer-based training (CBT) sessions can help store-level managers and associates correctly and consistently use security tags and solutions, as well as understand how to detect a theft.
Retailers also need to analyze each session’s results. This will teach corporate and store-level associates where loss stems from, and why it may be occurring.
Maybe it is a staffing issue. Maybe anti-theft solutions are not being used correctly. Maybe merchandise placement is too risky. Regardless of the answers, retailers need to use data to make better decisions and manage (or even prevent) future occurrences.
What good is having a loss-prevention program if it is not followed?
There are daily reports of the extra steps that retailers are taking to protect mission critical and customer data from savvy hackers and cyber thieves. I just hope these efforts are not contributing to retailers’ growing complacency to uphold technologies and risk-management operations that protect store-level assets, including merchandise, store employees and, of course, shopper safety.
Weekly Retail Fix
THE NEWS: SAM’S REALIGNS STORE-LEVEL MANAGEMENT
BENTONVILLE, ARK. Sam’s Club is changing the management structure in its stores. In the realignment, approximately 250 positions will be eliminated, Wal-Mart Stores announced last week. The company said it’s replacing five lower level management positions at each Sam’s Club location with three new higher level and higher paying assistant manager positions. —
“This is not a cost cutting effort. We expect a slight increase in payroll upon completion of this change,” said Sharon Orlopp, senior vp of Sam’s people division.
THE FIX: Differentiation would better help Sam’s
Since Sam’s decided that its refocus on the business customer was too narrow, it has sought to find ways to make its clubs more attractive to primary shoppers, i.e., women. And that’s a pretty tough row to hoe, as Costco has done a pretty good job at satisfying the club customer in general and BJ’s has been going after female shoppers for several years now, with some success.
Having fewer managers with more direct responsibility could create a tighter knit club-level management and shorten lines of responsibility and accountability. Yet, without differentiating the offering, execution isn’t going to overcome all of Sam’s challenges.
That being said, a store-level management realignment might be overlooked at other retailers, but, this being Wal-Mart, everyone has to make a big deal about it. But that’s the price you pay as the big guy on the block.
Weekly Retail Fix
THE NEWS: TOYS ‘R’ US EARNINGS GAIN 40.1%
WAYNE, N.J. Toys “R” Us today posted net earnings of $199 million for its critical fourth quarter, which meant it turned a profit for the fiscal year ended Feb. 3. But special charges and gains had an impact on its numbers. —
Sales for the previous fiscal annum were $142 million, the difference translating into a net earnings increase of 40.1% year over year. For the last fiscal year, Toys “R” Us posted net earnings of $85 million versus a net loss of $384 million for the previous period.
Operating earnings in the fiscal 2006 fourth quarter gained 53.1% to $571 million versus $373 million for the fourth quarter of fiscal 2005. For the last fiscal year, operating earnings were $649 million versus an operating loss of $142 million for the previous period.
THE FIX: Improved shopper experience ups comps
Of course, any observer has to take into consideration special financial circumstances. Fiscal 2006 operating earnings were positively impacted by $96 million from gains on property sales, slightly offset by restructuring and other charges. In fiscal 2005, operating earnings were negatively impacted by $410 million in costs relating to the merger of the company, as well as $58 million of costs and charges relating to contract settlement fees, restructuring and other charges.
Still, sales were trending up at last year’s end. Net sales gained 15.8% to $5.7 billion. In the full fiscal year, net sales advanced to $13 billion, up 15.2%.
Comparable-store sales for the Toys “R” Us’ U.S. division gained 0.6% in fiscal 2006, and that represents the division’s first comps increase in six years. Comps at Babies “R” Us were up 4.8% and those at Toys “R” Us international were up 2.6% for the fiscal year.
Jerry Storch, chairman and ceo of Toys “R” Us, said the company is “pleased with the strides we made in fiscal 2006 to improve at all levels of the organization and reposition the company for profitable growth over the long term.”
He said the company’s new management team has been focusing on executing a strategy that would turn the retailer into a global toy and baby products authority.
“This translated into higher overall sales, positive comparable-store sales, improved gross margins and strong operating earnings growth for the 2006 fiscal year,” Storch asserted. “The key to our strategy has been improving the customer shopping experience in our stores. We are accomplishing this by delivering a more compelling merchandise selection, better service and a cleaner and more comfortable shopping environment.”