Home Opinion Resolving Risks of Theft, Waste and Inefficiency

Resolving Risks of Theft, Waste and Inefficiency

by Brian Sims
Simon Chapman

Simon Chapman

How do you identify the ‘unknown unknowns’ when looking to root out avoidable losses and risks for the host organisation? In the words of Donald Rumsfeld, former US Secretary of Defence: “There are known unknowns. That is to say we know there are some things we do not know, but there are also unknown unknowns – the ones we don’t know we don’t know.”

Directors of retail, entertainment, hospitality and other B2C organisations are having to find new and better ways in which to identify and deal with the unknown unknowns in risk and preventable costs – those arising from theft, waste and inefficiency in their business processes.

Losses from crime in particular are on the increase. According to the British Retail Consortium, the cost to retailers of a single incident of theft, for example, has risen by 35% in a year to £325 on average. These losses are particularly hard to identify and manage at the customer interface, such as at the Point of Sale and on the shop floor, which are fluid and volatile in terms of monitoring and controlling customer, staff and third party supplier activity.

Gaining the necessary insight to find and tackle these issues is a key concern for department heads across the organisation, whether they need to spot security and loss prevention issues or find out where service, systems or processes fail to deliver the all-important ‘customer experience’ so assiduously planned by marketing, customer insight, Human Resources (HR) and training teams.

Managers are now joining together and aligning in the use of mystery shopping and test purchasing to assess exactly what’s happening in-store and what needs to change. In all honesty, we can go back nearly 100 years to see how this service evolved.

Covert observations

In the USA in 1919, Roy Lodge, the founder of Lodge Service, created one of the first recorded mystery shopping and test purchasing services. He ran a hot dog stand on the Atlanta boardwalk and wanted to know why takings were falling short on days when he wasn’t present at the business.

Covert observation revealed that a staff member was stealing from the cash till. He was swiftly fired. Following on from this, Roy went on to market a similar service to major store groups across the USA concerned with discovering the source of unexplained losses, before he then went on to establish a business specialising in loss prevention in the UK back in 1934.

That service evolved into Lodge Service’s security consultancy with a separate division, React Surveys, to test the total customer experience – from first contact with the business on site through to purchase and departure. Analysis now includes all aspects of the ease, speed and efficiency of service and business processes involving customers, staff and suppliers alike.

Assessor teams visit outlets to a pre-agreed schedule to carry out discreet checks while dressed appropriately (which might be in a uniform for corporate catering services, for example). They sample the service and observe transactions as well as greetings by staff, how complaints are dealt with and any identified issues, such as whether new promotions are mentioned at the Point of Sale.

Compliance by retailers

Audits include questions specific to the commercial operation such as checking the compliance by a retailer with a franchisor’s catering and brand presentation stipulations, or if a charity shop staff member correctly invites customers to join the Gift Aid scheme, which enables charities to claim an extra 25 pence for every £1 donated.

Mystery shoppers evaluate and report on branch performance against key parameters in a range of areas – security, presentation, promotion, hygiene and overall service quality –  as required.

Integrity testing specifically focuses on security and loss prevention, such as cash and card transactions, or dealing with receipts and returns. This includes tests of controls on physical access by suppliers and others to restricted areas, items of stock and other assets.

Audit reports highlight these as well as safety and other commercial risks. They confirm whether staff follow agreed practices or if further instruction may be required. With training budgets representing a substantial cost to all large employers, the programme helps HR managers to measure the results of their investment.

National Intelligence Centre

Data is fed to a National Intelligence Centre and used together with input from CCTV, Electronic Point of Sale (EPoS) till monitoring and other systems on each site in order to target and quantify any areas of risk to the business, its margins and brands in forensic detail.

If necessary, managers can quickly deploy mystery shopping to further investigate and collect evidence, such as where there’s tampering with security tags or a staff member may be colluding with a customer to misuse the ‘void’, ‘refund’ or other till functions to avoid payment.

In summary, then, mystery shopping enables loss prevention, marketing and HR teams to identify the ‘unknown unknowns’ and gain new insight into risks for the organisation such that they can then cut theft, waste and inefficiency as well as eradicating any deviation from the customer experience that managers have planned for them.

Simon Chapman is Managing Director of Lodge Service

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