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AP Fundamentals: Understanding Business Trends

The success of any retail organization is grounded in strong performance and ensuring the business is operating at the highest level possible. If profits don’t remain in line with expectations, business strategies and organizational structures will be reviewed and revised as necessary to keep the company profitable and competitive. The most successful retail organizations are those that understand this concept and are able to adjust to changing situations quickly in response to changing trends, market conditions, and the activities of competitors.

Retailing grows more complex every day. Most retailers sell their products through multiple channels, work relentlessly to optimize product merchandising, juggle pricing and product discounts, and labor relentlessly to meet ever-increasing consumer demands. Understanding business trends and performance, making sound decisions, and tracking company progress takes experience, intuition, and strong management practices. Participating in the dynamic business environment requires focus and attention on several key industry questions, such as:

  • What trends are shaping the retail business environment?
  • How will those trends affect the business enterprise of the future? How will they impact the organization? How will they impact our competitors?
  • How do we determine what products will best meet the needs of our core customer?
  • How do we identify and interpret sales patterns to meet the changing needs of the business?
  • How do we best evaluate growth opportunities by product, category, and/or class?
  • How do we best design inventory flow to meet customer demand and the capital needs of the business?
  • How do we most effectively design merchandise presentation to optimize exposure, attract customers and sell products?
  • How will mergers, acquisitions, remodels, etc. impact a company’s growth? What are the potential benefits, challenges, and drawbacks?
  • Does the company face any reorganization or downsizing issues? How might any potential issues affect the business?
  • How do economic growth and recession, employment trends, price stability, and other economic factors impact the health of the organization?
  • How are social trends impacting the business?
  • How might changing trends in training and development affect the business?
  • How might potential leadership changes at different levels throughout the organization impact the business? How might we prepare for potential changes?
  • How can technological effectiveness help the company reach its goals?
  • How has information technology transformed the business? What types of systems will be incorporated into our management information systems?
  • How can we use technology management and planning to help optimize our information technology systems? How will this influence our decision making?

These questions and countless others will influence the way that business is conducted and the way companies are managed. As a business partner, it is crucial that loss prevention professionals at all levels of management strive to maintain a strong understanding of business trends and changes to serve the best interests of the company. Building an effective program must be founded around the core concepts of the organization, maintaining a strategy that emulates the focal approach of the company’s business plan.

- Digital Partner -

Company Initiatives That Impact Shrink

Examining the retail model from a global perspective, one could argue that practically every company initiative has the potential to impact shrink. This thought process is fundamental to the loss prevention mentality, and incorporated into most everything that we do. However, when it comes to building an effective program, we must focus our attention on those areas where we can have the greatest impact; and those initiatives where we can demonstrate the most influence on the profitability of the business.

There are core company initiatives universally recognized by every loss prevention department as critical to the success of their program. There are also key initiatives that carry greater weight and consideration based on the specific type of retailer, the products that are sold, and the way the business is managed. However, as we develop as leaders and as business partners, one of our greatest values can be realized through our ability to react and respond to incidents as they occur; serving the company and our business partners both swiftly and proactively based on the needs of the company as a whole.

Evaluating the history of key company initiatives can provide insight and direction on how to manage similar initiatives as we move forward. However, that insight and direction is only constructive when it is properly utilized. We must learn from past successes and mistakes, but we must also apply what we’ve learned in a constructive and effective manner. This requires introspection as well as retrospection, sharing responsibility and accountability through self-improvement as part of our global evaluation. Let’s look at a simple example:

Let’s say that a store receives a shipment of leather jackets that are among the hottest selling products on the market. Our store or department manager wants to display the jackets at the front of the store without securing the jackets; giving customers full and immediate access to the merchandise and allowing for the greatest “exposure” of the product. Despite our concerns, the jackets are displayed unsecured. As often happens in such situations, the store experiences a grab and run theft, and a large number of the jackets are stolen.

We can predict that this is going to happen. We grow angry and disappointed when it does happen, and immediately cast a shadow of blame on the department or store manager for leaving the jackets exposed. We take the necessary steps to secure the remaining jackets (assuming any are left), complete the necessary reports, and mourn the loss. But where should the blame really fall? How do we learn from this type of incident? Sometimes the answers can surprise you. Sometimes the answers can fall in an explanation as simple as a vocabulary lesson.

LP Solutions

“Exposure” is a vital word from a marketing/display perspective. The presentation and promotion of merchandise drives sales. This is a good thing:

“Exposure” is also a vital word from a loss prevention perspective, but typically in a much different way. In the loss prevention vocabulary, exposure is associated with risk, which of course is a bad thing:

- Digital Partner -

The issue? Both answers are correct. The store or department manager saw the benefits of the exposure, but didn’t fully value the potential risks. Chances are we didn’t do a good enough job driving our point and making our argument. If this is the case, we failed.

But that’s by no means the end of the story. By the same respect, the loss prevention department saw the risks of exposure, but didn’t fully value the potential benefits that management saw in leaving the jackets unsecured. Management made their decision based on their perception of the potential benefits, and simply wanted to sell the product. This perspective is often downplayed by the loss prevention professional who focuses on the risks and simply wants to protect the product. If this is the case, we failed.

The answer? Finding the correct balance and perspective through effective communication between the stores and the loss prevention department—we have to share a definition. We must share perspective and understanding, not simply present our side and expect it to be followed. Management simply wants to sell their merchandise. Loss prevention wants to ensure the merchandise remains available to be sold rather than stolen. It therefore becomes our responsibility to learn and respect the selling perspective to find the best solutions. Effective program development requires effective leadership, and strong leaders understand the value of good listening skills rather than simply good speeches.

The business of retail is sales and selling, and as business partners, we must always embrace and support this focus. We serve the stores and the company. Our ability to follow through on plans and tasks is driven by understanding the initiatives being implemented. The stores might not always make the decision we like, but it is still our responsibility to see that informed decisions are made. This can only happen when we learn to think and behave like business partners so that we can present an argument that is well-conceived, reasonable, and clearly understood.

The extent to which many company initiatives will impact shrink is largely a product of our attitude and approach. Whether a specific initiative involves a few leather jackets placed near a door or the decision to implement a company-wide promotion or project, a remodeling plan, a staffing directive, or any other important and impactful initiative, our actions moving forward are best served by learning from the lessons of the past.

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