FISCAL INVENTORIES FROM AN LP POINT OF VIEW

theft (11)With January the last month fiscal month for plenty of retailers, we can all look forward to *drum roll* INVENTORIES!! Wait, am I the only one excited to count millions of pieces of merchandise in a single night? I’ve always been the odd-ball in my department I guess. Inventory is a great way to start a new fiscal year off. Clean inventory counts, accurate pricing and getting back in stock is the key to making sales in the 1st quarter. Remember, customer service starts with being in stock!

I am responsible for nearly 30 stores, so it’s practically impossible for me to get out each store’s annual inventory, however I do manage to see a few. I’ve also built up quite a few pointers, from an LP perspective that is aimed at helping managers and making the counting process that much easier. As my Christmas gift to you, I’ll share my top 5 best practices.

Do you have basedecks?

Those are the bottom shelves of your gondolas. They make great hiding spots for employees to stash product. About one week prior to inventory night, it would be a wise idea to assign someone to go aisle by aisle, lifting up every single basedeck in the store. I normally find the equivalent to 5-7 shopping baskets of product hidden underneath. This equates to thousands of dollars that would have otherwise been written off as shrink.

What about warehouses, common areas and offices?

I find these ripe with stashed product and it drives me up the wall. Again, look in all areas that are common “hiding places” to pull all of that product out so it can either be sold… or counted.

You don’t have time to look for SKUs on inventory night!

This one is aimed at soft goods and apparel mainly. I’ve seen stores write off hundreds of apparel items because a sku could not be located 13 hours into the count. Go rack to rack, at least a few days prior and make sure everything is tagged with a scannable bar-code. Trust me, this will save you time, energy and money on inventory night.

Do you have storage containers?

You would not believe how many times I’ve seen stores post losses of $10k+ on inventory night, only to realize 3 days later that they failed to scan an entire storage trailer of product x. Don’t be this store. I find that pre-counting these areas is much more effective than counting on inventory night. Just don’t forget about them!

Don’t let just any associate scan/count!

This is for you retailers out there that scan your own inventory and who don’t rely on an outside agency. I see it year, after year. Managers try to get as many people scheduled to work that night, and now your trusting some of your worst employees with your greatest financial investment (your inventory). Choose quality over quantity. Please, believe me when I say this; 1 person can completely ruin an inventory. One lazy employee who is 1 tardy away from being terminated does not care one bit about your shrink and how it affects the store’s bottom line, or your pockets. I beg you, please only let those that have a vested interest in your store conduct your inventory. I’ve seen cases where one employee had single-handedly scanned an entire stock of baseball bats as one single sku. This mistake wasn’t caught until replenishment on every single bat started hitting the stores. It was a complete disaster. Don’t let this happen to you!

I hope you all had a safe and enjoyable New Years. I hope 2016 is profitable, prosperous and full of (good) surprises. I hope your 2015 inventory is just the same.


COMBATTING RETURN FRAUD WITH CUSTOMER SERVICE

theft (13)I’m seeing a huge spike in return fraud, so I’m betting you are too. For my particular stores, it is a huge problem. I will venture to say that it is the biggest and most financially impactful fraud scheme that is affecting my stores; and it’s only getting bigger. I’m fortunate enough to have a small team within our LP department that do nothing but review returns data. When they see something that is indicative of fraud, we actually cancel the store credits unless proof of purchase can be verified. We are poised to break 5 million dollars in suspended store credits this year. Insane.

My company only operates a little over two hundred stores, so that number is quite high. That is 5 million dollars in external theft that we recovered. I have my own theories on why this is a growing problem and a few solutions that any retailer can adopt to help limit your exposure to this madness. Would you believe me if I told you that most return fraud can be prevented with a simple “hello”?

Customer service is the most proven and effective way at deterring criminal activity in your store. A simple greeting, acknowledgment and/or engaged employees can, and will stop most would-be thieves. If your employees are engaging with all of your customers, this will prevent the theft from ever happening. If there is no theft of product, then there can be no refund of stolen goods. See where I’m going with this?

Every store that I visit and audit that I conduct, it seems as if I’m noting some challenges in the customer service department. Do you really think that your product is that great and your prices that low, that the customer absolutely must purchase their item at your store? If you think this, then I hate to be the one to tell you this, but you’re wrong. Customer’s come to your stores for more than just an item; they want to feel as if they are appreciated. It’s your job to make that happen. Likewise, by providing exceptional service, you are not only increasing your sales, you are reducing shrink.

Here’s a case study to help drive home my point:

Susie G is a thief. She’s only hooked on heroin and needs a daily fix. She’s unemployed so she resorts to stealing to fuel her drug addiction. She’s learned from some of her buddies that “Store X” doesn’t have strong controls and it’s super easy to steal from them. Even better, you can come back later and return the stolen merchandise and they’ll give you a gift card. (How nice!) She learns that she can easily sell that gift card for quick cash in the parking lot, or at a local pawn shop. Thus, a small criminal enterprise is born. Susie then tells all of her heroin addicted brethren and before long, groups of 5 and 6 are targeting your store and committing return fraud on a daily basis.

Why did Susie and her friends find it so easy to steal from you and not the store down the road?

I’m not going to put an answer here. I want you, managers and owners to stop for 10 minutes and really think about this question. What can you do to prevent this in your store? Can you up your customer service game? The answers may surprise you.


Shoplifter Quick Tips

Sshoplifting1ince you are in the middle of your Christmas selling season and do not have much spare time I wanted to give you a very brief list of important shoplifting prevention tips:

  • Impulse, amateur and professional shoplifters are all deterred by customer service. If you suspect shoplifting, pour on the customer service. They will get the message.
  • Shoplifters tend to hit when you are busy and not paying attention. Do not give them the opportunity, they will exploit it.
  • Some shoplifters work in teams. One person will distract as many of your staff as they can allowing their partners time to steal.
  • Greet EVERYONE who enters your store! Well, established studies have shown that a solid verbal greeting such as “Welcome to XXXX” WITH brief eye contact will deter most impulse shoplifters.
  • If you see or suspect a person has concealed your merchandise, customer service them “to death”. Try one of these:
    • “May I help you?”
    • “Can I show you a _____________ to go with (concealed item)”?
    • “Can I hold (concealed item) for you at the register?”
    • “Will this be a charge or cash sale?” 
    • “May I ring this purchase for you?”   
  • At checkout EVERY CUSTOMER should be asked, “Is there anything else”. There are 2 very good reasons for this question:
    • Legitimate customers may remember an item they forgot. Can you say “add on” sale!?!
    • Impulse and amateur shoplifters may feel anxious or guilty about what they have done. Or they may fear that you know or saw them and produce a concealed item.

I hope this helps you this season. Please let us know, if we can assist you. FYI Checkpoint Systems has just released the new N10 EAS system that fits on your door frame. We have it! It is an awesome system at an awesome price.

Happy Holidays!


HOW SECURE IS YOUR BACKDOOR

LPSI EVOLVE-Store Mobile AppWhere are you losing the most to employee theft? Is it cash through the point of sale, bogus invoices, or fraudulent discounts? If you’re like most retailer stores, it’s more than likely a little bit of each. One area that is so often overlooked is our back doors. If not properly controlled, you can lose tens of thousands of dollars’ worth of merchandise before it even hits your sales floor.

Just this past year, I worked a case in one of my high shrink stores. The managers were reported huge losses in electronics items and hunting accessories. After an investigation was conducted, we were able to determine that the product had never made it to the shelves. After a few days of surveillance, it was clear that a handful of receiving associates were operating their own small business. Product was simply taken off the truck and taken right out the back doors.

Just a few months ago another store was missing approximately 10,000 units of ammunition. We tracked this shipment from our warehouse, where we had video of it leaving the dock, as well as video of the merchandise being unloaded at the store. Video also showed a receiving employee wheel it out the back door on a pallet and load it into his personal vehicle.

I could sit here for hours recalling case after case, where employees exploited physical security failures around our back doors. In just about every single case, there was a violation of our company’s policy that led to the associate being able to steal the product. As managers, you have to take ownership of this area, or else it will bleed you dry.

First, ensure that only managers have a key to the back door and that a manager is the only one using those keys! All too often, I’ve seen managers give their keys to a “trusted” associate, in an attempt to delegate tasks, only to have that associate rob them blind. Your managers are key holders for a reason; and that trust should only stay with them.

When manager does open the back door, they should stay at the doors. I’ve had cases where a manager would step out of the warehouse for a minute with the door open, and an employee would run product out. If the door is open, the manager stays posted until the doors can be locked. This is a non-negotiable item for my company. Unsecured and unattended back doors can get a manager a coaching in their file. It’s that serious.

Plenty of stores don’t have the luxury of a compactor and have to take the trash out to an open-top dumpster several times a day. This is a great time for employees to stage product inside of trash bags. To prevent this, you should mandate that all boxes be broken down prior to the door being opened. In addition, use clear garbage bags instead of solid black. This lets you see what each bag contains before it goes outside.

Securing the back door, to me, is just as important as any other physical security measure used in the store. I can use all the EAS devices and anti-theft tools in the world, but they won’t be effective if the product is flowing out of the back door. This is one of the biggest areas of potential loss for any store and I can guarantee that if you have any weaknesses, or lapses in policy, a dishonest employee will find them and they will exploit them. Do yourself a favor and make sure your back door policy is locked down this holiday season.


HOW TO SPOT A SHOPLIFTER

theft (8)What does a shoplifter look like? How do you know if someone is going to steal from you? I get asked these questions all the time by store associates and mangers. The real answer is, a shoplifter doesn’t fit any specific demographic. There is no common appearance to a thief. I’ve personally apprehended 12 year old kids, soccer moms, grandmothers, lawyers, doctors, truck drivers, college professors in addition to the professional thieves. There are a few tips to look out for that you should share with your teams.

Looking around/up for associates and/or cameras

Most people shop by looking at the product in front of them. I always get suspicious when I see someone looking everywhere but in front of them. Subjects that are constantly looking up (for cameras) are pretty easy to spot; when’s the last time you looked at the ceiling at the supermarket? These people usually catch my attention rather quickly.

Grabbing items without regard to size, color or size

If I’m shopping for a pair of pants, I am looking for a specific style and size. Thieves who are looking to steal to resell usually will just take whatever they can get their hands on. If you see someone walk by a display of clothing and just start randomly selecting product, they may be planning on stealing that product from you.

Clearing pegs/shelves

If I’m buying *electronic item x*, chances are, I’m only going to buy one. If you notice someone clear an entire peg or shelf, especially if it’s a high risk product, which is another great indicator that their intentions may be less than honest.

Wearing unseasonal clothing

This one is my favorite. Every time I’ve seen someone wearing a coat in the summertime, I’ve ended up throwing them in jail for stealing from me. If it’s 90 degrees outside, someone wearing a thick coat should send up some major red flags.

Staging merchandise

Maybe you walk by a quiet corner of the store and see a subject place a few pairs of headphones on a back aisle. Perhaps they decided not to purchase them; or perhaps they’ve staged them to steal after they’re convinced that the area is clear. I’m always suspicious of buggies of product near fire exits. Often times, a thief will stage product prior to committing the theft. If you find product out of place, it’s best to simply return it to its home location

Removing/attempting to remove EAS devices

No brainer, right? If you walk by someone and they are really struggling to remove an EAS device, they probably don’t have intentions on buying the item. If you, or your team see this, the customer should immediately be given customer service. I usually ask if I can help them with the security device… it gets the point across that I am aware of their actions, without me actually having to say anything accusatory.

While not every shoplifter will demonstrate the same overt acts, if store personnel are attentive and engaging with all customers, these behaviors can be picked up on and properly relayed to store managers. Remember, there is no better anti-theft tool than a well-trained, attentive employee. By looking out for these subtle cues, your team can better protect your #1 financial investment, store inventory.


HOLIDAY SAFETY TIPS FOR YOU CUSTOMERS AND YOUR EMPLOYEES

theft (12)It seems like the months of November and December are just ripe for criminal activity in our stores. These are the months that we see a spike in not only internal and external, but other, more serious crimes like burglary, armed robberies, car theft, and purse snatchings. Over the last decade, I’ve put together some holiday safety tips for my stores and I’d like to also share them with you.

One of the most common crimes that occur in our parking lots during the holiday season are vehicle burglaries. Busy shoppers are running from store to store and packing their cars full of goodies. Valuables left in plain sight attract criminals like a moth to a flame. What’s worse is that with all the hustle and bustle, often times, shoppers inadvertently leave their car doors unlocked. This one is simple to solve. First, leave all valuables and gifts in your trunk, out of sight. Second, LOCK your doors. I once partnered with local law enforcement in a store I had significant issues in and printed up some small reminders. We gave these out to every customer during checkout all season long. The customer’s appreciated the tips and we saw a reduction in parking lot incidents.

Another common theft for criminals this time of year is stealing from your customers while they shop. A busy mom sets her purse, or cell phone on the top of her buggy. In a split-second, she turns around to wrangle the kids, or to grab a hot deal. When she turns back, her purse or phone is gone. I’ve seen this happen so many times, and each time it could simply be prevented. Don’t leave your personal belongings out of sight, ever. I make it a point when I’m walking my stores, or even when I’m out shopping, to educate people on how to best protect their belongings. The last thing someone needs is to have their purse full of their hard earned money stolen right before Christmas.

We can talk about customer safety all day long, but what about your teams? We all have an obligation to keep them safe as well. Our early morning and closing teams are usually the most vulnerable. Remember that there is safety in numbers. When closing, it’s best that the entire team leave at once, with the manager, as opposed to allowing them to leave individually. This will help reduce the risk of personal crimes late at night, in addition to an after-hours robbery. The same should go with your opening team. Once the manager arrives, all employees should then get out of their vehicles, instead of waiting outside the doors. Closing and opening managers should also make it a point to drive around the perimeter of the store to look for signs of forced entry and any suspicious persons and/or activity.

Armed robbery. I dread this time of year because for my stores, every robbery we’ve ever had occurred during this time of the year. We’ve had a handful of robberies during business hours and about the same number after-hours. While it’s very hard to prevent a robbery, there are a few steps you can train your team to do in order to get out alive and unharmed. Thankfully, we’ve never had an injury as our teams followed the steps below each time. I’ll close out my holiday safety tips with these quick tips on how to stay safe during a robbery.

  1. Stay calm.
  2. Comply with all demands
  3. Give them whatever they want, as quickly as possible
  4. Get them out of the store as quickly as possible
  5. Do not call the police with the gunman still in the store. If police arrive quickly, there could be a shoot-out, or a potential hostage situation
  6. Try to remember as much descriptive information as possible (hair color, race, eye color, tattoos)
  7. Do not touch anything after a robbery. You don’t want to contaminate the crime scene, as police may be able to obtain DNA or fingerprints from the safe, doors, or countertops                                    

Do you have a Business “Go Kit”?

shopliftingMany folks have go kits set up so that in the event of a storm, natural disaster or civil disturbance, they can grab their family and the Go Kit and be covered. Personal Go Kits tend to have copies of documents such as drivers licenses, birth certificates, passports, deeds…. But Go Kits can also include items to survive such as water, food, medicines, flashlights, a weapon…. These concepts used to be confined to those among us that are expecting a doom’s day interruption or ending to our society.

However, with the complexity of our society come other issues. How would you easily prove that a house belongs to you, if the area was damaged beyond recognition? Say a hurricane, flood, wild fire or earthquake? What happens if the official records are also lost? Are you going to depend on others to put your life back together again?

The same applies to your business. How will you prove to your insurance company that your inventory is valued at $XXXX if your records all disappear in a fire? The same applies to payroll records and the like. You need to have a BUSINESS Go Kit!

Thankfully this is simpler than you may think. Consider keeping your data files in a cloud environment that has multiple backups on servers that are located in multiple locations around the US. If they are on one server located in New Orleans or Miami, I would re-think that strategy. We use Google’s cloud. It costs us $5/month per employee and the redundant backups are on five separate servers in five different geographical locations in the United States.

Scan in important documents such as business licenses, insurance documents, titles, vendor documents, etc. Put them in your cloud. That way you have access wherever you are. It might be a good idea to put photos of your business, inventory, equipment and more on there, every six months or annually. Have your backups of accounting data such as Quick Books reside their also. All of this plus payroll records, taxes and more could be rebuilt but why would you want to take the time to do this when it is simply a matter of changing your habits?

Oh but “it will never happen to me” or “I will get to that tomorrow” are favorite phrases we all like to use to put something off that we know should be done. It will happen to you and it will happen “tomorrow”. An earthquake may never threaten your business but then again a data loss, PC crash probably will.

Unless you are wealthy beyond belief, then like the rest of us that are not, we depend on our business to provide for our families and life style. We will need to restore that cash flow in the quickest manner possible and with the least amount of effort to get there. Your business Go Kit will help make that happen.

It is also a good idea to keep a few extra cases of water, blankets, candles and canned soup on hand. I may be miserable but being warm, having a full stomach and a little light to read by will make it a little less miserable.


COPYING EMPLOYEE THEFT

shoplifting1Quite often, I like to showcase a new theft trend, or perhaps a funnier shoplifter story for a bit of humor. This month is no different. We’ve talked about some pretty serious issues on the past two articles and now I just want to share a story that goes along with that employee theft piece. It’s something I bet each and every one of you will react to immediately after reading.

At one point last year, our company finally gave us (Regional LP Managers) access to our store’s P&L statements. You would think we would have already had this… Better late than never I suppose. It’s a great tool for me to see the overall profitability of the store. I can use my expertise to help the store reduces losses/expenses and to become a more profitable business. One store in particular stuck out. They were over their office supply budget by thousands of dollars. Odd.

Most stores spent between $500-$1000 a month on office supplies like toner, paper, pens and pencils. This particular store was spending triple that; at least $3k each month. I met with the store manager during a visit and asked about that line item. He was just as perplexed. Where were these office supplies going each and every month? We devised a plan. We initiated a “buy back” program for all employees. We put up signs in the offices and common areas asking all employees to clear their lockers, cars and homes of any supplies they may have taken home. It happens, no big deal. When the employees returned the items, we weighed them on a digital scale. The employee with the heaviest return received a gift card. Well, it worked. We had pens and pencils for the next two years. Next month, the store still spent $2k in supplies.

Baffled, I reached out to our accounting department. Surely, there had to be an error somewhere. Perhaps a line item was being mixed in where it shouldn’t be. It took a few days, but I convinced one of the accountants to give me an itemized breakdown of all office supplies the store had ordered over the past year. Toner. The store was ordering toner. Lots and lots of toner.

I questioned the managers and personally searched the store. Over the past six months, the store had ordered nearly 25 replacement toner cartridges. Couldn’t find them, and couldn’t explain why the store was ordering so many. I decided to ask the administrative assistant. A kind of last ditch effort to explain why the store kept ordering copy toner. 15 minutes into my conversation and I had a theft confession.

Toner, apparently, will resell very easily online, especially if you mark it down about 50%. The administrative assistant was ordering toner, then simply walking out the front door with it. She’d post it on eBay and was making a pretty healthy profit from it. It was a first for our LP department. No one else had ever, in my company’s history, uncovered this form of theft. It was a bit unusual, but still cost us well over $12k. My advice to you; look over your office supply orders.


EMPLOYEE THEFT IN THE 4TH QUARTER

theft (2)It always seems that as we get into the 4th quarter, cases of internal theft seem to rise. Every year for the past 8, I’ve dreaded the case load that I know will be coming in the next three months. While it is impossible for me to predict, with any certainty, internal theft cases at any point in the year, I can always guarantee that each one of my 29 stores will have at least one case in the next three months. Good thing I’ve got my bags packed.

I would almost bet that I’m not alone here. Those of you reading this right now have experienced the same thing. Yeah, sure, we see employee theft cases all year long, but why do they seem to increase during the end of the year? Are more people just desperate to satisfy those wish-lists? Is it driven by greed for the season’s hot new electronics? Is it our temporary associates, who may not receive a background check? Probably a little bit of all of those.

Holidays bring pressure, especially if you have a family. Even more so if you are struggling financially. Those children surely need a new tablet, even though rent may take up an entire 2 weeks’ salary. Let’s not forget about utilities and groceries, clothes and other essentials. If someone is desperate enough, Santa will pass, but it will be on your dime. I grew up in poverty. My father worked long hours for minimum wage, and my mother raised 3 kids. When the holidays came around, I can remember my mother taking on temp work and my dad taking on another job. Nowadays, it seems as that type of work ethic is completely unheard of. Why work yourself to death, when you could just steal what you want.

Our employees also have greater access to product. Even before that new tablet hits the display, an employee has to take it off the delivery truck. Chances are, these receiving employees are grossly unsupervised, and can simply cart it out the back door. Just last week, I had a case where two guys were doing just that. They had bilked the store for nearly $10k in product that never made it to the sales floor. The managers learned a very hard lesson about supervision, as well as back door procedures. Employees also learn our system and understand where our weaknesses are. Last year (same store as the first example), the hard-goods employees (all 10 of them) were taking cash payments from customers and loading up bulk items like treadmills, ride-on toys, and basketball goals. The store has a procedure in place for a supervisor to verify all receipts prior to bulk items being taken out. The store was not following this program and it costs them well over $75k.

Temporary workers are another pain in my side. Obviously, we need the additional support in the 4th quarter. Hiring is essential, but hiring the right person is even more so. My company waives the background check process for temporary hires. It’s the reason I’m bald at 28. There are better alternatives out there. I know a ton of other retailers also have this practice. It’s not good for business. Yes, these people are only working for you for a limited amount of time, but they can do serious damage in that time. Just last year, two temporary cashiers embezzled nearly $30k in one of my stores by processing fraudulent return transactions. Upon their arrest, we saw on their criminal records that each had multiple arrests for embezzlement and shoplifting. They would have never been offered employment outside of the temp hire period.

There is no quick fix, or simple solution to employee theft. As managers and business owners, you have to take proactive steps to minimize your losses. Employees will always find ways to steal from you; it’s your job to make it increasingly difficult for them to do so. The key to a strong 4th quarter is clearing your store of product, just not through the backdoors. 


THE IMPORTANCE OF CUSTOMER SERVICE

theft (13)For me, this is the last week of the 3rd quarter. It’s already that time of year once again. In just a few short days, the 4th quarter will ramp-up and shoppers will be in a tizzy as they check their loved ones off that holiday wish list. I just read a national report that predicts consumer spending this season will be at its highest point since 2008. That’s fantastic news to us retailers. We are poised to post some record sales in the next three months, provided that we execute to our fullest potential. What keeps the customer coming into your store? Is it your customer service levels?

I am a champion of customer service. Like many before me, prior to my LP career I was a store manager for a big box retailer. You can set all the POGs, put up all the proper signage and all those other corporate tasks, but you will find yourself on a lonely island if your store is not customer centric. It’s a two way street. Attentive and responsive employees will help drive sales. They will also reduce shrink.

Take for example a customer shopping for a treadmill. Sure, they could come into the store, pick out the item themselves and cart it out. You just made a $500 sale and you really didn’t have to work for it. Did that customer get the foam mat to protect their floor? What about the silicone lubricant for the belt? How about a new pair of running shoes to prevent an injury, or even some fitness supplements to help them with their workout routine? What if by not speaking with someone on your staff, they purchase a treadmill that doesn’t fit their activity level? You may have very well left an additional $50-$100 on the table in add-on sales. Why would you leave all these extra dollars out there?

My company, like so many others, runs a survey. Customers can call in the number on the back of the receipt and share their in store experiences. I often review these for opportunities in the store. One thing I see the most is that customers feel “ignored”. Is it so hard for our employees to simply greet a customer? I see it so often. Employees who are too task oriented, who whizz past our customers without as much as a greeting. Do you see that in your store? Is it acceptable?

Let’s talk shrink. This is an LP centered magazine, right? Do you know that the very best method for reducing shoplifting losses is? If you guessed customer service, give yourself a pat on the back. First and foremost, a thief never wants to be acknowledged. If your employees are engaging and monitoring their areas, a thief will not have the opportunity to steal your merchandise. When my LP team completes a shoplifting report, there is a checkbox at the end of the report. It asks simply if the suspect was ever provided customer service by an employee. When I get those reports that say “no,” I use that shoplifting incident as a tool to coach the managers of the store, and show them a customer service failure. By training your employees to give high levels of customer service, you can and will deter criminal activity.

Customer service isn’t just telling a customer hello. It’s about each and every employee going the extra mile to satisfy your customer. Every single person that comes through your doors has a choice. They are choosing to give you their money. You, as a manager, should be honored by that choice. You should make it a core philosophy in your building that the customer is the most important aspect of your business. Strive to be the store that people will shop at, no matter the distance from their home. Engage your customers, leave no money on the table and be proactive in reducing shoplifting losses. Remember, customer service means money in your pocket and less product walking out the doors.