Who ‘Owns’ Retail Loss? The Value of Engaging Staff

Who ‘Owns’ Retail Loss? The Value of Engaging Staff

Time to consume: 4 min

Reflections on Retail Loss - By Professor Adrian Beck

Introduction

It is becoming ever more important that retailers effectively manage their businesses –not only to drive sales but also to control costs. For most retailers some form of loss is an inevitable part of doing business – it is a regrettable yet inevitable part of the retail landscape. What form this loss takes and critically how much it costs the business varies enormously depending upon the type of retailer and the quality of their operations. In addition, the customer experience is often heavily dependent upon the way in which retail employees behave and deliver an organisation’s culture and ethos – they are often the most visible and defining representation of the business. In turn, the extent to which retail employees feel valued, rewarded and are offered meaningful opportunities by the business that employs them is a key component in delivering customer service – unhappy, demotivated and disengaged staff are much less inclined to deliver great customer service.

The Role of People in Retailing

From restocking shelves to serving customers and selling products, employees play an active and essential role in the daily functioning of a retail organisation. Despite this, they are often portrayed as a drain on business profitability, either through the direct costs of wages or as generators of loss, through malicious and non-malicious behaviour. However, research has shown that good levels of employee engagement and satisfaction are often associated with positive benefits for a retail business – happy and supported staff tend to sell more. However, is it the same case when it comes to keeping retail losses under control – do more contented staff lead to lower losses?

Understanding the Impact of Employee Engagement on Retail Losses

The ECR Retail Loss Group has undertaken research to explore the relationship between employee engagement (based upon 18 measures) and various types of retail loss (shrinkage, wastage, cash loss and lost sales through out of stocks), in particular seeking to answer the question does higher levels of employee engagement make a difference? The research was based upon analysing data from questionnaires completed by more 200,000 retail employees working in three large European retailers.

The research found six key employee engagement factors were statistically correlated with lower levels of retail loss, ranked in the following order of importance:

 

   Ranking

Engagement Factors

   1

Staff feel appreciated and valued.

   2

Managers communicate effectively with staff about performance and objectives.

   3

Staff believe there are good opportunities for development

   4

Manager/company is good at keeping staff informed about what is going on in the company.

   5

Staff are happy to recommend the company.

   6

Company provides a safe and tolerant working environment.

 

The research found that if the participating retailers were able to improve the levels of staff engagement on these 6 key engagement factors in the bottom quartile of stores to the levels found in the rest of their businesses, they could make the following savings:

  • 10% reduction in waste.
  • 20% reduction in lost profits through out of stocks.
  • 12% reduction in shrinkage.
  • 10% reduction in cash loss.

Loss Prevention and Employee Engagement: Don’t Forget the People!

The ECR study provides a fascinating insight into the role employee engagement might play on the levels of loss experienced by retailers. Whilst most previous research has focussed upon the potential impact retail employees play in increasing business profitability through boosting sales, what this study does is look at the potential role of employees in reducing one of the biggest drags on retail profitability – the losses they incur as they go about delivering their increasingly complex and ever more demanding retail value chains. This study suggests that there is enormous potential for changes in levels of employee engagement to impact upon retail losses, and that this can be translated into improvements in profitability, possibly by as much as 20% in poorly performing stores.

There is a general trend within the world of loss prevention to characterise the control of the problem of loss as one best done through the application of a range of technologies – Electronic Article Surveillance (EAS) tags, closed circuit cameras (CCTV), safer cases, Radio Frequency Identification (RFID) technologies and so on – the appliance of science to solve the challenges of retail loss. In some ways this is perfectly understandable, particularly when the definition for loss is mainly premised upon causes that are malicious in nature, such as theft by customers, which is one of the more difficult loss problems to tackle. But there is also a danger that Loss Prevention departments can become over-reliant on technology to prevent loss and forget the value of one of the retail organisation’s biggest assets and expenses: its employees. This could take the form of not only more informed training for those with management responsibilities, but also the training provided to all staff operating throughout the organisation. Above all, there should be an increased awareness of the critical role employees can play in not only selling more but also losing less.

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