Failing to Save the Sale Increases Shrink
The Evolution of “Saving the Sale” and What It Means Today
By Wouter Ubbels
By Wouter Ubbels
I have noticed an interesting shift in the way inventory shortage, or shrinkage is being talked about. Over the many years, I have been in the retail loss prevention industry, I have seen the focus of loss prevention leaders volley from one thing to the next. Robberies, employee theft, shoplifting and Organized Retail Crime (ORC) are still some of the most commonly talked about LP issues. However, these discussions are no longer solely focused on how these issues impact shrinkage. Most recently, these discussions focus on how these issues impact sales. After all, retailers cannot sell off empty shelves.
The phrase “Save the Sale” started to surface in 2009, but it has recently gained even more momentum. Loss Prevention executives from retailers of all kinds are being charged with “Saving the Sale” in all areas of their focus.
Retailers like Macy’s and The Children’s Place are still hot on ‘omnichannel retail,’ which is the term used to describe how retailers connect online and offline shopping behaviours. In an article in Forbes Magazine from 2018, Macy’s Executive Chairman, Terry Lundgren, stated that Macy’s is continuing to see serious growth in the area of “buy online, pick up in-store” (BOPIS). He believes “physical stores are not going away,” and that, “customers will always want the option of coming into the store to try on jeans instead of buying three different sizes online.”
In this same article, Jane Elfers, CEO of The Children’s Place, stated her organization is also making a “big move towards digital and employing a lot of the omnichannel use cases like BOPIS and ‘Save the Sale.’” The article goes on to acknowledge that ‘Save the Sale’ requires store associates to have the ability to access real-time inventory across the network of stores, and that this inventory access enables store associates to keep customers from walking away from a purchase by finding their desired item online or at another store location with ease.
People rarely consider that sales directly impacts reported shrinkage percentages. The most successful loss prevention executives understand that when sales are up, shrinkage often decreases. Conversely, when sales are soft, the reported shrinkage percentage often increases. This is because shrinkage is typically reported as a per cent-to-sales. This is calculated by dividing the total dollar amount of inventory shortage by the total sales. For example, if a retailer that does $3 million/year in sales takes inventory and determines $100,000 of inventory is unaccounted for, they simply divide $100,000 by the $3,000,000 and report a 3.33% shrinkage rate.
This means that if the inventory shortage of $100,000 stays the same, but sales increase to $3.2 million/year, their reported shrinkage rate decreases 20 basis points to 3.13. Conversely, if sales decrease to $2.8 million, their reported shrinkage rate would increase by 24 basis points to 3.57%. This is partly why retail’s classic saying – “Sales cures all ills” – has stood the test of time.
Nedap offers practical solutions to typical challenges retailers face worldwide. Our mission is to make it simple for retailers to always have the right products available. We help you to make sure your customers feel they are the entire focus of your attention – that they can find whatever they want, wherever and whenever they want it – because your products are in stock and on the right shelf. Nedap’s solutions also help ensure your store teams spend less time looking for missing products and spend more time serving your customers.
The way consumers shop has changed dramatically over the past decade. The ‘traditional’ way of shopping; entering a physical store, choosing items and then lining up to pay at the checkout has been completely revolutionized. An increasing number of retailers are offering alternatives to the traditional point-of-sale by offering the possibility for their customers to make payment on their personal mobile devices. However, these ‘seamless checkout experiences’ tend to conflict with traditional EAS solutions. Nedap showcases how mobile payments can be combined with RFID-based EAS systems to effectively prevent merchandise from being stolen throughout the mobile payment process.
Seamless and cost-efficient security with RFID tags makes this solution sustainable. Additionally, Nedap’s solutions integrate nicely with existing systems, and the ability to use existing barcodes makes it even easier to adopt.
As digital sales continue to rise, it’s never been more important for retailers to optimize their checkouts in stores.
The role of electronic article surveillance antennas at the entrances and exits of stores have also changed. Traditional EAS systems alarm on active tags leaving stores, but intelligent article surveillance systems are capable of not only recognizing specific items. They can also detect and trigger alarms for several different scenarios. These systems are more advanced than ever before. Within this modern retail environment, Nedap distinguishes different levels of intelligent article surveillance to meet the needs of each retailer, all with one thing in mind: We make it simple for retailers to always have the right products available.
Making sure that a product in the right size and the right colour is available for your customers is crucial these days. However, merchandise availability should not result in overstocked stores and the associated high capital cost. That is why having accurate stock information at all times is key. RFID technology makes it possible to automate in-store stock management – resulting in optimal merchandise availability for customers and an in-store stock accuracy of over 98%.
To enable a fast RFID deployment and optimum scalability, Nedap has designed iD Cloud. iD Cloud is a cloud-hosted software suite that functions as a scalable integration layer between the existing ERP system and RFID readers. There is no need to replace existing IT infrastructures, add any new in-store infrastructure, or change the current ERP system.
In an article on LinkedIn entitled, The Digitalized Retail Store – a Conversion Driver or a Giant Headache?, author Tom Vieweger highlights the challenges retailers face when digitizing their operations, as well as the steps retailers must take to successfully accomplish this relevant transition. Vieweger states retailers must first lay a foundation, meaning whatever “digital touchpoints” a retailer utilizes (i.e., displays, in-store kiosks or smart mirrors), they can only drive conversion if the promoted products are actually available.
To accomplish the next step laid out by Vieweger, retailers must “play, measure, learn & adjust,” meaning they need to learn how customers react to offering new services so they can begin innovating with customers, as opposed to for customers. The third and final step Vieweger lays out for retailers looking to successfully digitize is to stay flexible by removing internal barriers while creating new, agile approaches that can be adjusted as technology changes.
The bottom line? Accurate, real-time stock information is essential for any organization launching into this new world of retail. Launching new digital initiatives that inspire customers to purchase more items, only to be disappointed when the item is not in stock, will only serve to damage a retailer’s brand and alienate customers. RFID and EPCIS standards are the keys to success in this arena, as RFID enables a high stock accuracy while EPCIS is a standardized protocol to exchange information on RFID events.