Uncovering Hidden Losses

It is said that, “What you can’t see won’t hurt you.” But in retail, nothing could be further from the truth. While loss prevention (LP) professionals are usually very focused on highly visible causes of loss, such as shoplifting, organized retail crime and administrative error, they also must consider hidden losses that occur without being noticed or tracked: A shopper does not receive adequate customer service and leaves the store. Merchandise isn’t replenished on the shelves, driving customers to a competitor. Or, worst of all, lost sales from a customer for life due to a bad experience in the store. While not classified as shrink, these losses, triggered by poor customer service or lackluster operational processes, are just as detrimental to the retailer’s bottom line as theft.

Procedural Review Audits Can Uncover Hidden Loss

So how can retailers uncover these losses, which are largely invisible? First off, procedural review audits (PRAs) help loss prevention professionals assess the areas of greatest risk and loss, enabling them to prioritize where limited resources should be directed. Audits are commonly used in retail to evaluate compliance with regulations and ensure best practices are implemented. A procedural review audit is similar, but when applied to loss prevention, can be structured specifically to identify areas of risk and point toward root causes. This enables management to effectively measure consistency, while pinpointing operational and loss prevention challenges. With a focused effort on a few common areas in which hidden loss may result, prevention may prevail.

The Checkout Line

A poorly managed checkout line can be hazardous to your store’s health. A long, slow line quickly yields unhappy customers who may drop their merchandise and leave. Time is precious and customers may decide they don’t need the merchandise that badly, or are simply unwilling to waste more time in line. Checkout lines can be especially irritating to customers if they spot seemingly idle employees in the store. Retailers should know how to avoid checkout bottlenecks, enlisting store managers, idle employees, or anyone who is available to assist at the point of sale. Even if employees are restricted from operating registers, they can still move things along by bagging merchandise or removing EAS tags. Unannounced PRAs help retailers determine if staff is doing everything they can to assist customers when the need is greatest. PRAs can focus on assessing training to ensure all employees know how to conduct critical tasks, such as exchanges or price overrides at the checkout line. They can also help assess if the culture is focused around putting the customer first.

The Aisles

A hollow “Can I help you?” or no greeting at all means little to a customer. How often do customers give clear, unmistakable signals that they are looking for something they can’t find, but associates are too busy performing administrative tasks behind a counter? Providing true customer service requires employees to go the extra mile. It may mean calling another store to see if they have the merchandise in the size needed, checking inventory in the back room, or escorting the customer to another part of the store. Is it convenient for the employee? No. Is it critical to avoiding lost sales? Yes. Unannounced PRAs or PRAs conducted by mystery shoppers can screen to see if customer service processes are being implemented throughout the retail environment.

The Shelf

One of the most significant causes of lost sales is simply merchandise missing from store shelves. This is particularly common with quick-turn merchandise, consumables and clothing. If customers can’t find what they are looking for, they will usually assume the retailer has run out and will go to another store to find it. All the while, the desired goods are likely sitting in inventory, causing a lost sale. PRAs are ideal for monitoring operational processes and ensuring that stores are consistently implementing best practices to regularly check and stock shelves. PRAs can further help retailers identify the areas that are at greatest risk for out-of-stocks, and ensure they receive special attention.

These simple steps can make a huge difference in making sure customers get what they came for and actually complete their transactions. By minimizing lost sales due to poor processes and customer service, retailers can better mitigate the risks of unseen and undetected losses.

Andrew Wren serves as CEO of Wren Solutions, a loss-prevention technology provider helping LP professionals reduce loss, increase profits and rise as heroes in their companies.