In this interview LP Magazine sat down with representatives of Tiffany & Co. and Ralph Lauren Companies in London to discuss security and loss prevention strategies for U.S. retailers with international operations. Both U.S.-based executives and European-based managers were part of the discussion. Representing Tiffany were David McGowan, vice president of worldwide security services, Hank Siemers, group director of retail branches worldwide, and Helen Mackay, regional security manager for Europe. Representing Ralph Lauren were Tim OConnor, vice president of loss prevention and global security, and Syed Raza, director of loss prevention for Europe and Asia.
While some of the names have changed since this interview first took place, the importance of understanding and respecting cultural differences and other international aspects of the business modeland how they impact loss prevention strategies on different levelsremains an important lesson for all loss prevention professionals.
EDITOR: Dave, in the ten years you have been with Tiffany, how has the scope of your international responsibilities changed?
MCGOWAN: When I joined Tiffany, the international component of the job was minimal. It was a domestic U.S.-centric position with some basic oversight for international retail operations, which primarily involved periodic visits to the countries with Tiffany operations to see if the stores were in compliance with general corporate policies and to ensure the physical security of the assets.
As Tiffany began to grow both domestically and internationally, particularly in Japan, there was a desire for the security group to become a more involved partner in the business. As a result, they decided to change the position from a domestic to a global focus. The focus also expanded to incorporate not only retail operations, but the total enterprise, which includes distribution, manufacturing, and sourcing. The intent was to make the position more involved on an international basis from a complete operational perspective.
EDITOR: The types of challenges for Tiffany are different than those for Ralph Lauren Companies, which has the more traditional loss preventionstrategies associated withthe apparel business. Talk about the differences, particularly related to physical security.
MCGOWAN: The jewelry business is a very dangerous business. It involves commodities, such as diamonds, gold, and platinum, that have a cash value that can be brought across borders and have value no matter what country youre in. As a result, there is a constant desire and risk posed by external groups who know the value of the commodities and the strong resale value of the product. Therefore, the desire to get those assets from us is very high. So, especially from the aspect of protecting our employees, as soon as we open the doors for business, its a risky business.
The Tiffany model on a worldwide basis, except for a few markets, is unique in the jewelry business. Unlike most jewelers, we have a very open store environment. We want people to come in and shop. Most jewelers control access into their stores, are restrictive in terms of the customers that are coming in, how many, and who it is. The Tiffany model, no matter where weve gone, even in challenging markets like South America, has broken that tradition. Therefore, our store needs to be accessible. That dramatically increases the risk factor.
The deterrent factor becomes paramount in terms of protecting our employees and customers during business hours, and then, certainly, after hours the risk doesnt go away. The sophistication from the criminal element in the jewelry business is second to none. These are the best of the best. Theyre looking to get you during the day and to break in at night.
EDITOR: Would I ever find a uniformed police officer or security person standing at the front door of Tiffany?
MCGOWAN: Its not the norm in all locations. It is the norm in the United States and other select environments, such as the UK and Australia. But they wear suits, not uniforms. Due to the risks and the value of the commodities, we believe we are better served having a proprietary force.
EDITOR: Tim, did you have international responsibility when you first arrived at Ralph Lauren?
OCONNOR: No. Ralph Lauren has several distinct store concepts. We have the high-end Ralph Lauren stores, the factory concepts, the factory jean stores, and the Club Monaco stores. When I first came here four years ago, I did not have responsibility for Club Monaco, nor direct oversight for Europe and Asia. The initial loss prevention strategies were to pay only little attention to Club Monaco and spend ten percent of my time in Europe. But within a year, that changed and I was given direct responsibility for Club Monaco and Europe. About a year ago, we brought Syed to Europe to take responsibility for Europe and ultimately Asia.
Polos growth strategy is essentially the speed at which the company moves, including security and loss prevention strategies. We bought back our product licenses in order to take direct responsibility for the things we think we can do better than anybody else, which is apparel. This gives us better control of those designs and brands.
My department has doubled in terms of responsibility. Weve had to be very scalable to take on that growth without adding endless headcount. Weve actually taken direct responsibility for the supply chain, eighty Club Monaco stores, and thirty-four stores in Europe. At the same time, weve reduced head count by using the tier program, allocating resources, and utilizing technology to improve our service levels.
EDITOR: Before taking these positions, neither of you had previous international loss preventionexperience. How did you get up and running? Was there a need to do anything differently?
OCONNOR: For Ralph Lauren, there was definitely a need to do things differently. Our retail loss prevention were crafted to be and viewed as the typical guard at the door. We did little investigation in terms of employee theft and little to no auditing. We did a good job at the things we did, which was stand at the door, deter shoplifting, and help in the receiving area. But we needed to change from less of a guard mentality to more of a business mentality.
The first thing we did was bring Syed here. We didnt have a leader in the international realm. Loss prevention reported into inventory control. Loss prevention strategies in Europe were nothing like loss prevention strategies in the U.S. In the U.S. we control the backroom. Weve trained every receiver. We own the product-flow issues and the supply-chain issues from a security perspective. We needed to have all these programs rolled out in Europe. Its very hard to do that because in Europe we had to look at our business country by country to decide what we could and couldnt do. Making the change from a guard mentality to a business mentality is still an ongoing process.
EDITOR: From your perspective, Dave, how did you put yourself in a position to direct international loss prevention operations?
MCGOWAN: I can go back to a specific event that occurred. When I first joined Tiffany, the corporate organization expected me to go out to the international markets and take a look at how our loss prevention strategies compared against corporate best practices and corporate governance. So I did that. In particular, I met one of our international executives and over lunch I told him that corporate was expecting that we play a greater role on a particular new project and then have ongoing oversight of the space. I asked him how we could overcome any challenges he might have with us doing that. He told me, quite honestly, as soon as I got on the plane, they would go back to doing things as they always did, regardless of what corporate thinks.
That experience taught me that if you truly want to become a player in the international operations, you have to become a business partner and an active player in that business. Our company has been unique in respect to many U.S. corporations in that we have very few LP staff within the organization. We have relied heavily on recruiting and developing local management. That was the tactic we took internationally.
EDITOR: Was there an initial listening and educational process involved before you could build your new international loss preventionstrategies?
SIEMERS: Yes. We sat down with the senior business leaders to listen to what they needed, what they thought about security, what they thought the structure should look like. We received some surprising insight from them in terms of where they think shrink comes from. Its very different from the U.S. Most people in U.S. retail think mostly in terms of internal loss, employee related, operational, and lastly external. In Europe external loss is the biggest concern followed by operations and lastly internal theft. In Asia one of the biggest challenges is just to get them to believe that theft exists.
EDITOR: As you look at the Ralph Laureninternational shrink pie, is it still divided across internal, external, paperwork, and vendor?
RAZA: Yes, but we have multiple concepts in the U.S. as well as Europe. Because the high-end stores have one shrink pie, the factory stores have another pie, how the pie is divided is different by concept and country.
EDITOR: Can you make distinctions within your company in terms of internal and external causes of shrink? And does that pie look the same with your operation as it does with other retailers?
OCONNOR: Shoplifting is historically not a big issue for us, particularly in the high-end stores. Our employees tend to be much older and are higher paid because they are commission-based sales people. We have relatively lower turnover. Every shoplifter needs one thing to complete the actthey need anonymity. In a commission-based environment, if our people do their jobs correctly, the potential shoplifter should not be left alone, they should be serviced. Factory stores are a little different. At certain stores there is heavy shoplifting gang activity and organized retail crime. So, shopliftings geographical for us, its not every store all the time. On the other hand, internal theft is across the board.
EDITOR: Do you find that to be the case in the European operation as well, that shoplifting is not as significant an issue as internal theft?
ALL: Yes. Absolutely.
OCONNOR: I live for the day that the only shrink we have is shoplifting. Most people operate on the supposition that shoplifting is the number one problem. For us, its really not, particularly in the high-end stores. Certain U.S. and European stores have a shoplifting problem. We can attack that through a variety of means. With internal theft, we use more of a technology-driven program to fight that.
EDITOR: From Tiffanys perspective is the physical threat higher in the international sector than it is in the U.S.?
MCGOWAN: Outside of Japan and maybe Asia, the threat is the same. Japans risk is very low. Asia, minus Australia, is very low.
SIEMERS: The threat changes as you go. In Latin America, the biggest threat is not against the merchandise, its against our management team. Kidnapping is huge in Latin America. Therefore, most of our energy is focused on protecting the management team there.
In Europe the type of product we sell lends itself to the top tiers in the criminal world. These types of criminals will spend years developing a strategy to steal product. Theyve dug tunnels under roads that have taken them two years. They have established fake companies in certain cities so that they can rent space above or next to diamond sourcing businesses in order to enter through an adjacent wall or ceiling to get to the diamonds.
One of the keys in dealing with international locations from a security perspective is that the threat changes by country and location and you need to be flexible in how you deal with it. Successful programs in the U.S. do not always translate well or are not what should be the direction based on the local threat.
OCONNOR: American companies, certainly two of the best known American companies, Tiffany and Ralph Lauren, are a target not only for the product, but also the management team. We sell sweaters with the American flag on then, and that enhances the risk of terrorist threats.
MCGOWAN: Also, back to the question of how Tiffany has changed its international loss prevention strategies, there is an element of brand protection that the organization values greatly today. In order to ensure that brand protection, we need more consistent control and oversight. I want to let the international locations run their business, but I need to make sure its in the right spirit of the brand from a company point of view. So we were engaging the local businesses in conversation on the best way to develop a program to support the business. Its been a very dynamic conversation, which is represented in the ongoing changes in our roles. Helen spends probably more time on anti-counterfeiting and brand-protection issues than she did when she joined us.
That is an evolution that is two-way in terms of understanding what is important for our local business partners, but also for our corporation.
OCONNOR: Taking on oversight in Europe from the ground up is a multi-year endeavor. You cant be the typical American parachuting in and saying, Do this our way, because it doesnt work. You can be scalable from your American programs. Some of them work, but some of them are not culturally appropriate. We dont expect to change everything in nine months. That would not be culturally appropriate. You want to move very slowly, articulate a plan to the management team, listen to them, and have a multi-year endeavor. It has to be dynamic, not static.
MCGOWAN: Quite honestly, we rely a lot on Helen for that perspective. Helen is in a key role. Im not a retail guy, so I needed someone who has that perspective and who can push back and tell us, Well, thats not going to work here. Maybe its worked domestically, but its not going to work internationally. And just as helpful is the feedback and stance of our local management.
OCONNOR: You can teach some of the technical aspects of security and loss prevention strategies. One thing you cannot teach is business acumen. You have to have that to be successful in any endeavor, but you have to have a lot of business acumen in high-end companies like ours. You must be able to talk the language of your business partners. One of the reasons we brought Syed to Europe is that hes lived here before and knows the European culture. Thats very valuable.
EDITOR: Syed, what is your background in LP?
RAZA: I lived in the U.S. for eighteen years. I was in LP with Kmart for twelve years before joining Ralph Lauren in the U.S. as a district LP manager. The opportunity to take the overseas position was a challenge that enticed me. It was an opportunity to take some of the program from the U.S. and build something from scratch.
EDITOR: Helen, whats your background prior to Tiffany?
MACKAY: I was in the British military police just over thirteen years. I spent the first ten years in uniform and then wentinto the special investigations branch. Ive worked in security/loss prevention for the past eleven years with British retail and logistics companies. The first group I worked for was Kingfisher, a large home improvement retailer. The last group I worked for was GUS, which is a retail and business services group. There I worked in a division that had 25,000 employees, six or seven call centers, distribution centers, and warehouses. Then I came to work at Tiffany.
EDITOR: How long have you been with Tiffany and how did they find you?
MACKAY: A recruiter approached me three years ago. The first thing that hit me was the opportunity to work for a brand such as Tiffany. It was a great opportunity. I was impressed by the fact that David and Hank recognized you couldnt run European security or loss prevention strategies from New York.
EDITOR: I would guess that during the recruiting process, Dave, Helens was not the only resume you looked at. What was the criteria you thought you needed for this position?
MCGOWAN: We were looking for someone locally based. Helen has a wealth of knowledge and contacts here in Europe. Because our focus is the external threat, developing contacts with the police is very helpful.
EDITOR: Helen, looking back to your early LP experience, was the same focus on relationships and tying into management such a priority with your previous employers?
MACKAY: I was very fortunate that in my first real job for Kingfisher, the chaps who ran that department knew their stuff. My learning curve was huge. I had only been out of the military a short time and Kingfisher was a very fast-moving retail organization. I personally had responsibility for 120 stores. So the first thing I had to do was work three weeks in each different store format doing everything in the store other than security. My manager understood that if I couldnt understand their business, I couldnt appreciate the impact my actions would have.
MCGOWAN: The other thing that we felt was critical for Helens role, and that we found in Helen, was leadership. This was a position that resides many miles from headquarters. In luxury retail and in our brand, the personalities can be very strong. We were in this dynamic phase of listening, gathering intelligence, and partnering locally, but we were also delivering the message that the security services organization is becoming a more active partner aligned with the entire worldwide security services department. So the leadership qualities of being able to stand alone, communicate, listen, but stand the ground knowing that your support group is thousands of miles away, is huge and cannot be understated.
OCONNOR: Daves right. Even though there are conference calls and video conferences back and forth, you are still thousands of miles away and you have to have leadership ability. While Ralph Lauren is basically a New York-centric company, we are a truly a global company. Weve historically been a wholesale-focused company, now were becoming more retail-centric. You have to have brand ownership to stand your ground; to know when to push back and when not to. Syed has amazing support mechanisms, but day in and day out, he has to interact with the senior managers over here. Besides being a great leader, Syed knew a lot of the senior executives and they knew him. They had an ongoing relationship with him so hes been more readily accepted. He has support from New York, but his leadership quality is most important.
EDITOR: Speak to some of the differences between managing an LP function in Europe and managing programs and processes in the U.S.
OCONNOR: The big differentiator for us is the retail/wholesale mix. There are very few companies that have the volume we do with the wholesale/retail and international/domestic mix. The huge-volume stores are retail-centric. Theyre much bigger than us, but do no wholesale. But the difference between loss prevention strategies operating in Europe and domestically is culture what you can or cannot do based on individual laws, country by country. In some countries, you can videotape, but only from the face down. In some countries, you can use exception reporting software, some countries you cannot. In some countries you can do a hotline, in some you cant. So its about understanding the cultural differences and individual country laws.
MCGOWAN: We have certain markets, such as London, that use contract security people. Outside of that, the staffing is light. In comparison, Helens peers in the U.S. devote a lot of time to managing the staff within their regions. In each store, there is a complement of security professionals. Allocation of responsibility domestically is focused on more traditional deterrent, investigation, intelligence gathering, et cetera. Internationally, while staffing plays a role, loss prevention strategies are more London-centric. Intelligence gathering is critical. Brand protection is what really differentiates Helens time versus her domestic counterparts. By that I mean, the actual involvement in brand protection investigations and anti-counterfeiting efforts.
EDITOR: Helen, whats a normal day like for you at Tiffany?
MACKAY: I am usually in London every week for a couple days. While Im here, I will probably be involved in meetings with either the store manager about issues that may have occurred or have been identified with cycle counting. The Circle 12 on advertiser information form ops team may be looking for a piece that they havent been able to find on the mornings count and we will talk about the places that theyve checked, start checking on CCTV, have one of the officers or a supervisor to follow that through. I will have telephone calls from the different agencies. David touched on the brand protection element. Its unlikely that I will have a week when I have not been contacted by a trading standards office somewhere asking me to look at some pieces of merchandise that may be counterfeit.
EDITOR: Syed, how would you describe a typical day at Ralph Lauren?
RAZA: I havent had a typical day because we are working on so many programs. Every day is different. We started with creating and rewriting the audit. We kept it pretty basic and then tested it in the stores. We took some content of the U.S. model, but some loss prevention strategies are not going to apply or work culturally in the European countries. The second item we looked at is that we dont have any updated policy and procedures manuals. So we started that project.
We rolled out a cash management program. We went to every store to train the management teams on the cash management program. We assisted the inventory control director to update stock take/inventory prep guidelines. In the past, loss prevention was not involved in inventory preparation or post investigation. I think the biggest return I received on this mid-year stock take was when I looked at the results and found several discrepancies. We went back and started a post-stock take investigation led by the LP department and found most of the missing items.
Now we are focusing on three major loss areas of the business that makes the highest impact on the total shrink results. Were doing stock take in July and we already had a meeting for full Europe on how were going to do the stock take, assigning responsibilities for each person in the store and mapping out every hour of the stock take.
OCONNOR: Syed took the U.S.-based tier program and made it his own. Very few stores account for the majority of shrink. What Syed did was go after the proverbial low-hanging fruit. It has to be a multi-year endeavor, so pick the three things that make the biggest difference. Then, reconvene and pick four things. Then, reconvene and pick five things,as you get better and better and more involved. So that makes the big difference.
RAZA: The three London stores are 39 percent of my total shrink.
MACKAY: Thats how I worked in the other retail organizations I was with. I had 150 stores, but I spent all my time in twenty-five stores that were causing the biggest shrink issues.
OCONNOR: You have to have measurements and technology. We have an operational score card that shows what theyre doing. Syed can get involved as need be. But they know what were doing. Syed said it best, pick the three things that make the biggest difference and attack them, and then youre in the game.
EDITOR: I am struck by something neither of you have said. Neither of you have mentioned catching people stealing. Both of you have taken a purist business application to your jobs. Dont you have internal shrink problems and how do you deal with them in the course of managing your business?
RAZA: The first thing I started when I moved here was to look for internal theft. Im still training the team on different areas. We never did any surveillance. We never went back to look at the videotapes. We never looked at the transactions. So the training takes time every day.
EDITOR: Most of the studies I read about shrinkage in Europe indicate that shoplifting has been the major focus, but that over the last few years that has shifted to internal shrinkage. If that is accurate, what is causing that to happen?
MACKAY: I dont think you can generalize because hiring practices are different. If you run a department store on Oxford Street, the chances are that you will have a severe internal theft issue. It will be going on between the stockroom and the delivery driver working together, staff passing out merchandise, staff turning a blind eye. Those people did not come to work for a company or a brand or to take pride and ownership.
EDITOR: Since you two have been managing the European operation for your respective companies, what have you been able to teach your U.S. colleagues about this business that your experience tells you would be helpful for them to know?
RAZA: I think the challenge is that its not easy to operate as a U.S.-based company internationally. There is constant communication about why something can not happen and why we can not do this here. However, I believe since I have been here, with constant communication with Tim in New York and his visits to European countries, we have overcome this challenge.
MACKAY: Along those same lines, my challenge is to make Hank and David aware of the considerations that need to go into making a policy decision thats going to affect all of us. And to save them from making a decision about worldwide policy thats unworkable. Im interested in protecting the Tiffany brand as well as our departments credibility.
OCONNOR: The same things were talking about from the LP perspective, our senior managers have to address from a merchandise standpoint and operations standpoint. Syeds able to give us a view into how they do that, so we have loss prevention strategies that are synergistic with their strategy for the growth of the corporation.
MCGOWAN: Consistency in messages is important. Helens role is to be an important sounding board for us.
OCONNOR: It goes back to not wanting to say something to your international business partners locally thats not true on the ground. You have to have good communication with your people and they have to have good communication with their business partners so that the information flow is concise.
MCGOWAN: I think its interesting in our industry that the lines of communication and credibility of the communication is unforgiving. There is an expectation that we have validated our information. Today, much more so than in the past, our business is about information.
This article was first published in 2006 and updated January 2016.