Each year millions of retailers all over the world lose profits, and thousands more close their doors for good. Every time I personally see a retail store not doing well or closing their doors, it really makes me wonder where they are going wrong or where they went wrong. There’s no doubt that they aren’t making profit, because surely they would be doing well. Part of me feels sorry for them, but an even bigger part of me is angry at them because something can always be done to fix their problem(s) and prevent further losses.
Losing profit is not new to the retail industry by any stretch of the imagination. It’s something that’s been happening to retailers for centuries. However, losing profits back then would be understandable, but not in today’s retail environment. Thanks in large part to advances in retail technology, retailers now have a surplus of tools that allow them to monitor and track every single aspect of their retail operations. But despite these advances in technology, some retailers are still struggling with preventing losses and increasing their profit margins. So, why is it that these modern retailers are struggling?
Retailers (all human beings, really) have a bad habit of sticking with whatever works, whatever is comfortable to them. If traffic is coming in and they are able to maintain their operations, break even, or even make some profit, most retailers will be content with keeping things as is. This usually means that they’ll maintain whatever antiquated point of sale system they have, stick with their traditional habits of doing inventory, fill out reports line by line, etc. Unfortunately, contentment doesn’t solve problems. Retailers will need to go outside of their comfort zone to identify their problems and then focus on finding a solution for those problems.
Identifying the Problem
Far too often I hear retailers say that they’re losing profits, despite their store(s) being busier than ever, and are struggling to pinpoint exactly what it is that’s causing their shrinkage. Since sales aren’t a problem, lower profit margins must be happening in one of three ways (or a combination of all): 1.) Errors such as manager errors on back office reports and paperwork, manager and associate errors at the register (i.e. improper discounting of a sale), through inaccurate inventory management, and even through errors on checking in shipments from other vendors. 2.) Internal theft from associates (i.e. fraud, collusion with friends and family, shoplifting) or 3.) External theft from customers (i.e. shoplifting, robbery, vandalism). Once the problem(s) is identified, retailers will then be able to focus on loss prevention.
Understanding Loss Prevention
Loss prevention is a set of practices and procedures that retailers put in place to prevent loss and preserve their profits. Loss prevention is about being proactive rather than reactive. Being proactive means retailers will need to implement a program or set of procedures that monitors their retail operations and make adjustments accordingly.
Implementing a Loss Prevention Program
Although there isn’t much you can do about external theft (except for maybe hiring a security guard or installing cameras), something can be done about internal theft and other managerial/employee errors. For the latter two, reduction of fraud/theft at the point of sale (POS) should be a retailer’s starting point.
As such, modern POS software, such as NCR Counterpoint is the key component of a successful loss prevention program. POS software can help retailers reduce costly errors and maintain profit margins through:
Associate management/associate performance analysis
Daily reporting/AnalyticsImproved audit trails and accounting efficiency
End of day balancing
Profitability analysis by department, user, and salesperson
Inventory visibility/Inventory management
Price over-ride tracking
Reduction of shipping errors through vendor management
Purchasing function for vendor management, shipping, receiving, and ordering
The loss of profits is a serious matter that can cripple any business, or even worse, force retail operations to come to a screeching halt. The profits a retailer is losing could mean: new products or service offerings, new store locations, more money in the retailer’s pocket and more benefits and even higher salaries for employees. Preventing losses is therefore critical to any retailer’s success.