While the perception of shrinkage among the loss prevention industry has evolved from thinking about loss strictly in terms of theft to the consideration of all causes of inventory discrepancy, this change in approach hasn’t necessarily diffused into all of the other teams in a retail organization. Retail buyers are a prime example of a team that can help reduce shrink.
In 2015, the Retail Industry Leaders Association’s (RILA) Asset Protection Leaders Council commissioned a study to look at the relationship between retail buyers and the asset protection function. The study was performed and authored by Nicole DeHoratius, adjunct professor of operations management at the University of Chicago’s Booth School of Business, and Dragana Pajovic, PhD student at the University of Chicago’s Booth School of Business. Checkpoint and Ernst & Young underwrote the research.
Of the buyers surveyed in the study, only 32 percent “viewed the asset protection team as a partner in efforts to drive sales.” Further, “when asked whether asset protection was a factor they regularly took into account, less than 10 percent of [buyers] surveyed identified it as a key driver for their category performance. The categories where asset protection was mentioned repeatedly included electronics, cosmetics, and fashion accessories. Most other buyers considered asset protection to be an activity delegated to other parts of their organization over which they had little control or influence.”
Buyers are often seen as the CEO of their product category. They oversee decisions within their category over which products to offer, how those products are packaged, how new items are set up and rolled out, and product pricing, promotions, and planogram design as illustrated in the chart below.
But the scope of these responsibilities is multiplied to staggering proportions when one considers that a typical buyer in the survey managed 13,000 SKUs and 34 different vendor relationships. “Not surprisingly,” say the study authors, “our interviews revealed that buyers are essentially pushed to their limits in just trying to fulfill the requirements of their existing role.”
Given such herculean workloads, is there any room for a closer relationship between buyers and loss prevention? Of course, any initiative towards reevaluating that relationship should respect the workload pressure that buyers are already under. But there can be significant overlap between the goals, outcomes, and methods of buyers and LP.
How Buyers May Help Reduce Shrink
Just as product designers must consider supply-chain constraints in their design decisions, buyers’ choices have consequences reaching far beyond simply considering what assortment of products will best match their customers’ preferences. The loss prevention objective would be well served by advocating for buyers to consider full supply chain and operational execution in their choices, in addition to LP goals.
For example, while conventional wisdom may view an increase in the variety of products on offer as an unambiguous positive, variety can actually reduce sales. Too much variety among a single product category can cause a customer to decide to make no purchase rather than decide among myriad similar alternatives. Variety can also cause chaos in inventory management processes like stocking and counting. A group of products whose packaging lacks clear visual differentiation can confuse both customers and stockers, leading to errors, wasted time, and frustration. “Research shows that lowering the level of product variety can result in lower levels of stock discrepancy; however, few buyers are aware of this link.”
The study authors identify five key ways in which buyers can help reduce shrink:
- Manage Vendor Relationships—Since buyers are the primary company representatives who interact with vendors, if LP wants to change something like product packaging, buyers are invaluable, necessary intermediaries. Buyers may also be the first to hear of widespread issues in a particular product category or product line and could tip off LP to a problem before it gains traction.
- Product Selection—When selecting products, buyers can identify those items that might need additional security tagging and can work with vendors to ensure these items are delivered as desired.
- Merchandising Decisions—Buyers can select items to minimize the chance of discrepancies. Their decisions about the location of product placement can have significant impact on theft and operational losses.
- New Product Introduction and Resets—Introducing products correctly means that all of the data used to make management decisions about those products are accurate from the beginning.
- Determine Product Flow—Since buyers often are responsible for deciding how products move through the supply chain and how they are delivered, they can directly influence loss caused by complexity and mistakes.
Based on the results of this study, there exists a clear need—and opportunity—across the retail industry to have buyers and loss prevention teams work more together closely and better understand their mutually entwined goals. Winning over buyers’ hearts and minds would benefit the buyers, the loss prevention department, and the company as a whole.
For more helpful ideas, read the full article, “Engaging Merchants in the Protection of Assets,” which was originally published in 2015. This excerpt was updated August 9, 2017.