Everyone in the retail profession knows that the face of Loss Prevention/Asset Protection (LP/AP) has changed several times over the last several decades, with good reason. Although it may seem untrue at times, the retail industry changes quite frequently. When gasoline prices increase, retail sales soften. When the housing market is booming, retail sales also improve. And those are just the first layer of levers that affect retail sales. Deeper KPI’s, such as the unemployment rate, can have a long-lasting impact on sales, both good and bad depending on the actual rate. Yet, regardless of how consumers react to whichever lever is pulled, how each retailer will fare is determined mostly by one very important factor: inventory levels.
Time for Another Change
Going from the title of Loss Prevention to Asset Protection never became a mandate. In fact, the departmental name change was such a slow burn in the industry that it actually fizzled out before fully catching on. Today, both terms are used interchangeably for the most part. However, some say a new change in titles is looming on the horizon, and an increasing number of indicators tends to support the claim. Imagine LP/AP executives having new titles designed to describe the one area in which they can make the most impact on the health of an organization. What might that title look like? Some say a new title that is inclusive of Inventory Management. After all, poor inventory issues, such as out-of-stocks, are costing retailers $984 billion in lost sales worldwide, $144.9 billion of which is from North America alone. That’s 984,000,000,000!
With inventory levels emerging as the top priority for retailers’ survival, someone has to take the proverbial bull by the horns and start making some positive waves. Who better than the LP/AP department? Truth be told, there is no department in retail more equipped to address this problem than LP/AP professionals. The LP/AP department is the only team with its hands deeply embedded in every other department. From Merchandising, Operations and Logistics, to Procurement, Human Resources and Financial Accounting, no other department can make a more positive impact in the shortest possible timeframe.
The Current State of Retail
In recent webinar hosted by the IHL Group, a leading global research and advisory firm specializing in technologies for the retail and hospitality industries, it was revealed that consumers experience an out-of-stock situation as often as 1 in 3 shopping trips. According to the IHL Group, the consumers define an “out-of-stock” as any time they come into a store with intent to buy and leave for any reason other than the price is too high. This could mean that a store may have the desired item somewhere in the store, such as the rear stockroom or in the wrong location, but the shelf that was supposed to display the item was empty. Either way, poor inventory management is the culprit.
The world of online shopping has magnified the inventory management problem for retailers. Prior to online shopping, consumers had no choice but to wait for an item to be restocked by the retailer or simply visit another of the retailer’s locations. Today, consumers are just a few clicks away from finding the exact same item and having it delivered to their doorstep within 24 hours – much faster than it would take the retailer to reorder and restock the same item. In fact, IHL Group states that 24% of Amazon shoppers first sought their desired item in a retail store.
The Future of Retail
If a retailer was able to boast a 3.4% increase in same-store-sales, it would be a triumphant close to a magnificent year. Yet 3.4% in same-store-sales is exactly what retailers are losing due to poor inventory management practices that lead to out-of-stocks.
Retail executives are well aware of this problem. They have been implementing new processes, technologies and systems for several years trying to address the issue. Although some have seen improvements, most are still unhappy with their in-stock positions. To date, many experts point to only one technology as the savior against brick-and-mortar decline – RFID.
When utilized properly, RFID technology allows retailers, at store level, to know exactly what inventory they have in the store and its precise location. When integrated properly with other store systems, it can be used to ensure stock replenishment occurs before an out-of-stock situation damages a customer/retailer relationship. RFID also reduces “sweethearting” by dishonest employees, and virtually eliminated Refund Fraud by those attempting to obtain refunds for merchandise never purchased.
The face of the LP/AP professional is changing, and how it changes is really up to these professionals themselves. Those who elect to maintain the status quo within their currently defined duties will find themselves struggling to compete within the next few years. However, those who have the courage to walk into the CEO’s office and ask to get involved in solving the inventory management epidemic will undoubtedly flourish in this crazy new World of Retail.
Crawl Before You Walk – Walk Before You Run
The beauty of today’s RFID technology offerings is that retailers do not have to take a full plunge right away. It is not necessary to implement an entire RFID infrastructure in order to adopt the technology. Many retailers choose to begin with RFID-capable EAS systems. These systems act as traditional EAS, yet they have the capability of reading RFID tags when the retailer is ready to implement that particular phase of their RFID endeavor.
LP/AP executives have an obligation to offer up solutions to their respective organization’s profitability woes. This obligation doe not begin and end with theft prevention, fraud prevention and paperwork/pricing errors. Those days are long gone. Today’s LP/AP executives must become knee-deep in all aspects of profit erosion, such as out-of-stocks. Inventory Management is at the core of what LP/AP teams do. Ensuring inventory and pricing accuracy, coupled with protecting inventory from theft and fraud make up the ingredients required for the most successful retail Loss Prevention and Asset Protection careers.
Change in the retail industry has us all in check. It’s your move.
“In times of drastic change it is the learners who inherit the future. The learned usually find themselves equipped to live in a world that no longer exists.” – Eric Hoffer
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