| How To Succeed In Retail Business | | | | leadership. Like smart buying, strong sales/turnover |
| | | | | depends on the economy, fashion trends and so |
| When last have you heard of trusted employees who | | | | on..Shrinkage is the only factor that is within the control |
| betrayed their employers trust? Here are three the | | | | of the retailer. |
| more common instances. | | | | Every retailer in the UK loses on average 2.5% of their |
| (One) A former Marks & Spencer department | | | | turnover to shrinkage, which is a considerable amount |
| Section Manager based at the Trafford Centre, | | | | in an industry particularly when margins are sliding. |
| received an eight- month suspended sentence and | | | | Shrinkage occurrence can take many forms: shoplifting |
| 240 hours of community service for stealing £6,700 | | | | being the most prominent. However, internal activities in |
| from the stores POS terminals between July and | | | | retail organizations, themselves cause more shrinkage |
| August 2009. | | | | than shoplifting. Cashier theft or error, accounts for |
| (Two) In September 2009 a Tesco checkout assistant | | | | 32% of retail shrinkage, general employees 24%, |
| in line for promotion as ‘the face of | | | | receiving 10%, errors and damage 13% while shoplifting |
| Tesco’s,’ turned out to be an illegal immigrant. | | | | accounts for only 21%. |
| A major high street retailer in Manchester contacted | | | | I recently asked a number of retail employees if they |
| police in connection with a warehouse worker who | | | | received shrinkage awareness training. The response |
| was suspected of stealing DVDs. A subsequent Police | | | | that I received from all of them was shrinkage, |
| search of the employee’s residence exposed, | | | | “what is shrinkage”? Given the importance of |
| what was described as ‘another warehouse full of | | | | shrinkage to the success or failure of any retail |
| goods’. This was a trusted employee with over | | | | organization, one would expect it to be a buzzword in |
| four year’s continuous service. | | | | retail circles. |
| So what do these cases have in common? They | | | | For the benefit of those and others like them, |
| highlight the fact that these retailers had failed to | | | | shrinkage is simply the difference between the value |
| establish or follow standard operating procedures. | | | | of goods received and the amount received for those |
| In this article I will attempt to outline the main factors | | | | same goods at the point of sale. Now the question of |
| that are responsible for the demise of a majority of | | | | how does merchandise lose value from the time of |
| retail organizations. I will also offer a number of best | | | | delivery to the time of sale is at the heart of the |
| practice strategies that can be utilised by any | | | | success or failure of many retail organizations, and it all |
| organization. | | | | boils down to good operational standards and best |
| Our research has identified four root causes of the | | | | practices. |
| demise of any retail venture, | | | | The employment of an illegal immigrant would have |
| - The lack of robust policies | | | | cost Tesco £5,000. Marks and Spencer nearly lost |
| - Employee error | | | | £7,000 though it managed to recover a bulk of it |
| - Fraud | | | | from the offender, it will take time to recover the legal |
| - Policies compliance. | | | | fees and the damage the incident caused to its |
| The creation of good policies and ensuring there | | | | reputation, considering the fact that this individual had |
| compliance is vital for the success of all retail | | | | already been cautioned for dishonesty by another |
| businesses, and especially large national & | | | | retail employer will not help. |
| international retail brands. The flip side of this is that | | | | 1. Poor adherence to recruitment and selection |
| when there are strong operational standards and best | | | | procedures allowed this individual to gain employment. |
| practices ‘built in’ success comes that little bit | | | | Had accurate reference checks been carried out, a |
| closer. However, having a good policy on its own does | | | | trail might have taken them back to the previous |
| not automatically guarantee success. What is | | | | employer. What retail jargon views as |
| required? A simple answer is… nothing short of | | | | ‘unnecessary expenditure’ is in truth and in fact, |
| robust checks and balances that are aimed at | | | | a factor in what is considered shrinkage. I should also |
| ensuring compliance. | | | | note here that the other big retailer might not recover |
| There are numerous factors responsible for the | | | | a single penny from the warehouse employee. So |
| success of a retail organization. Here are the three I | | | | then it behooves each retailer to ask the |
| have singled out as most relevant: (a) Smart buying, (b) | | | | question…”what will an additional 2.5% of profit do |
| Strong sales, (c) Shrinkage reduction. | | | | for my organisation’s balance sheet”? |
| However, the implementation of these strategies is | | | | 2. To succeed, in addition to smart buying and |
| sometimes dependent on external circumstance. For | | | | increasing sales retailers must focus on shrinkage |
| example, smart buying is dependent on suppliers, the | | | | management and reduction. This is a truly controllable |
| availability of merchandise, the supply chain, currency | | | | cost. Robust policies & measurable operational |
| exchange and to an extent the mood of the Chinese | | | | standards will also ensure success. |