Insight Retail Issue 06 Q2-2014 (Apr-June)

SHRINKAGE IN RETAIL RETAIL INTELLIGENCE EAS TECHNOLOGY RISK MANAGEMENT MOVING ON: FRANCIS MASWILI

9 772305

556001

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ISSUE 06 / APRIL - JUNE 2014

ISSN 2305-5561

RETAIL BUSINESS INTELLIGENCE

KENYA | Karuna Hse Commercial/Enterprise rd Junction Industrial Area, Nairobi

Tel: +254.728 607 000 e: info@securityworldtech.com UGANDA | Ntinda Ind. Area Plot M275, Opp, Britania Kampala Tel: +256 414 223 1767

Cell: +256 782 115 464 e: info@securityworldtech.co.ug RWANDA | Kigali , Remera, Kisimenti

Tel: +250 252 581 741 Cell: +254 788 382 626 e: info@securityworldtech.co.rw TANZANIA | Hifadhi EPZ Ubungo, Off Morogoro Rd , Dar Es Salaam, Tel: +255 22 277 3391

Cell: +255 767 607 000 e: info@securityworldtech.co.tz

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CONTENTS INSIGHT RETAIL | ISSUE 06 APRIL - JUNE 2014

14

08.

LEASING SOLUTIONS

10.

INVENTORY MANAGEMENT

11.

DISPENSING DIVERSIFIED

12.

CONTROLING STOCK PILFERAGE

14.

EAS TECHNOLOGY

16.

ANTI-THEFT STRATEGIES

17.

RISK MANAGEMENT

18.

ONE-ON-ONE WITH FRANCIS MASWILI

20.

RETAIL CONFERENCE PICTURES

22.

TO TRUST OR NOT TO TRUST

23.

PILFERAGE MANAGEMENT

24.

PROFESSIONALISM IN FAMILY RETAIL BUSINESSES

26.

LOYALTY LESSONS

28.

14 TIPS

INSIGHT RETAIL | ISSUE 06 | APRIL-JUNE 2014

CLUB 2013/14

RETAIL SECURITY

Electronic Article Surveillance & Display Security Solutions

Magic Mirror

RETAIL POS HARDWARE

Hard Tag

Detacher Display Alarms

Multi Alarming Cable Tag

Open Display Security

Optical Tag

RETAIL POS & ERP SOFTWARE

CARDS TECHNOLOGY

• • •

Proximity Cards Swipe Cards Smart Cards

RETAIL Mobile Data Collectors, PDAs, mPOS, mERP SOLUTIONS

OTHER PRODUCTS

Level 3, Amee Arcade, Westlands, T: 254 (20) 374 9056/7, 737 267813, E:info@totalsolutions.co.ke, W: www.totalsolutions.co.ke

556001

ISSN 2305-5561

RETAIL BUSINESS INTELLIGENCE

9 772305

W

elcome to our sixth Issue of Insight Retail Magazine, a quarterly publication whose aim is to offer the retail industry and other interested readers with insightful local and global news, trends and solutions on various retail industry topics.

06

PROJECT DIRECTOR’S NOTE

ISSUE 06 / APRIL - JUNE 2014

Talk of stock pilferage or “shrinkage” ; measured by counting the difference between the inventory on the books of a retailer and what it actually holds and you will be ushered into retail l industry’s biggest nightmare.

For upcoming retailers still struggling with format issues, high rentals, expensive debt and inefficient supply chains, the problem of high shrinkage often takes a back seat as they try to sort out other problems however, as many retailers realize, cutting down shrinkage losses — even if they cannot be extinguished altogether can mean the difference between being a profitable operation and a loss-making one. And every percentage reduction in shrinkage can result to savings. This Issue takes a look at various measures aimed at combatting this monster through a combination of global and local insights.

Still in this Issue, readers have a chance to catch up with Francis Maswili, a familiar name across stakeholders in the supermarkets’ fraternity. After more than a decade in the management level at one of the most vibrant supermarket chain stores – the employee becomes the employer. Coupled with good words for his employer, having played his part, leaving a legacy there comes a time when one steps aside, to do something different ; a change is as good as rest.

We also feature our first Regional retail conference held in North Rift (Eldoret) and Central Rift (Nakuru) as we announce more of what is planned ahead in the next quarters of the year. We look forward to hosting more retail conferences / seminars in selected regions as well the climax of all - the Annual Retail Forum & Retail Awards 2014 which we are excited to unveil towards the end of the year. As you plan your ever busy business calendar, I urge you to keep these valuable events in mind and call upon your support and participation.

We wish to extend our gratitude to all our sponsors, conference participants and cocoordinators/ event organizers who made the Retail conferences a success.

We believe that the Magazine will be useful to your organization in one way or the other and welcome your feedback and comments by writing to us on info@insightretails.com and probably share with us what you would like featured on subsequent upcoming Issue, We urge our readers to subscribe to the magazine as we endeavor to deliver it at your doorstep.

An online version of the magazine is available from the link: http://www.insightretails.com Finally, we thank all our readers and the entire retail industry stakeholders for your continued support and contribution.

Happy Reading!

Titus Korir Project Director & Associate Publisher

SHRINKAGE IN RETAIL RETAIL INTELLIGENCE EAS TECHNOLOGY RISK MANAGEMENT MOVING ON: FRANCIS MASWILI

Editorial and Advertising Insight Retail East Africa Contributors Trushar Khetia Jasper Ouma Wambui Mbarire Alice Katheu Thomas Mbewa Publisher Insight Retail East Africa © 2014 Insight Retail All material is strictly copyright and all rights were reserved.

Reproduction in whole or in part without the written permission of Insight Retail is strictly forbidden.

The greatest care has been taken to ensure the accuracy of information in this magazine at the time of going to press, but we accept no responsibility for omissions or errors.The views expressed in the magazine are not necessarily those of Insight Retail or Retail Interchange Centre.

Retail Interchange Centre Ltd P.O. Box 36106 City Square 00200 Nairobi, Kenya +254 725 350 690 +254 735 350 690 email: info@insightretails.com www. insightretails.com

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INVENTORY MANAGEMENT

Do you know your stock level at any given time?

O

ne of the major challenges that retailers are facing today is how to control and manage their inventory. This is a big problem as there have been no solutions to assist the retailers perform stock takes and its related activities in an easy and timely way.

After an extensive market research, Vortex Solutions has developed a Store Assistant Inventory Management System that uses barcode enabled terminal device and a software suite that makes managing stocks and related activities in the stores effective and easy.

The software is able to do the following: 1. CARRY OUT STOCK TAKE Store attendants will use the terminal to scan items and enter quantities available. The entries will be saved and either, verified first before they are updated to the ERP system alternatively the system can be configured to automatically update the ERP system with the quantities captured.

2. PERFORM STOCK REORDER Items reordering will be done easily by simply scanning and imputing the quantities to be re ordered. The reorder list will then be verified and then posted into the ERP system as a Purchase Order.

3. PERFORM PRICE CHANGE VERIFICATION Sometimes the prices that are being pushed to the shelves are not updated, it is important to ensure that the pricing indicated at the shelves and the prices in the ERP system are the same. To verify this, the terminal is used to scan the item at the shelve, and the price on the shelve and the pricing on the ERP system are compared, if there is a discrepancy the entry is logged into the system for later verification and updating, so that the pricing on the shelves and the ERP pricing are the same.

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INSIGHT RETAIL | ISSUE 06 | APRIL-JUNE 2014

Vortex Solutions also offers an array of solutions for the retailer. The company offers an End to End fully integrated comprehensive Retail Information Management System that includes a Point of Sale, an Inventory, Customer Loyalty System, Promotions Management Kit, Voucher System, HR and Payroll and Financial and Accounting.

RETAIL EQUIPMENT

Dispensing concept can be diversified into other products

“Our feasibility studies have shown that customers are in need of affordable, clean and quality edible oil,” Mr. Gitonga explains. He says similar to the milk model where the company sources for the product from reliable farmers, it is sourcing for sunflower and corn farmers able to supply quality oil. “Some of these farmers are not able to sell their produce through the main stream supply chain; we want to leverage on this,” he adds.

OPPORTUNITY FOR RETAILERS Depending on the demand, retailers have an opportunity to invest in a one stop dispensing model combining milk, edible oil, yogurt and fermented milk. Mr. Gitonga further notes that the modern ADMs have factored in the component of space - which could be a challenge to some stores and shops. “For ADMs to be used for dairy products, retailers can install a machine composed of only the dispenser and cooler while the back-up cooler is provided at the back office,” he adds.

LIQUIDS ON TAP

T

oday, many city residents have fast embraced the concept of dispensing milk through the now popular automated dispensing machines (ADMs) which have given milk consumers an opportunity to purchase clean and affordable fresh milk. Besides the fact that some milk consumers still prefer purchasing processed and packaged milk, the longer queues of people patiently waiting for their turn to dispense milk have become usual in the various retail stores.

Behind the ADM- Italian borrowed concept is Farming Solutions Limited, a company which has diversified the dispensing concept into other products. According to Geoffrey Gitonga, the chief executive of Farming Solutions Limited, retailers can invest in ADMs not only for milk but also for retailing edible oil, yogurt and fermented milk popularly known as ‘Mala’ depending on the customer demand.

MALA

Generally, ADMs have a number of advantages. As a crowd puller, an ADM increases traffic into the store/shop; an opportunity that supermarkets have fast grabbed. The ADM concept has currently spread its wings to more urban centers such as Nyahururu and Meru. Smaller retailers and individual shops ‘kiosks’ have also seen the need to invest in such a machine taking into consideration that for many urban residents, milk is a must-buy item.

Whether the ADM is dispensing milk, edible oil, yogurt or ‘Mala’, the machine provides a retailer with the opportunity of serving a wide market; low income to high income earners against a background of a tough economic time as the consumer will dictate the quantity to be dispensed.

YOGHURT TASSIA SUPERMARKET

SUNFLOWER OIL

Celian House, Embakasi Village Next to Total Petrol Station Mezzanine Floor, Room No. 6 +254 722 249 600 info@farmingsolutionsltd.com www.farmingsolutionsltd.com

INSIGHT RETAIL | ISSUE 06 | APRIL- JUNE 2014

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RETAIL TECHNOLOGY

Technology usage to control retail stock pilferage

By JAMES OKELO Business Dev. Manager / SWTL

E

lectronic Article Surveillance (EAS) and Radio-Frequency Identification (RFID) are two technologies that are used separately to reduce theft of retail merchandise and track retail merchandise respectively.

RFID technology provides retailers with many operational and marketing benefits other than tracking products through the supply chain. This is the reason the use of RFID has been on the rise for some time now.

EAS is an extremely simple technology used solely to protect retail merchandise from being stolen, which is why leading EAS and/or RFID companies are designing and promoting products that combine the two technologies. In the not too distant future, standard EAS Security Systems and passive Security Tags and Security Labels will become obsolete and will be overshadowed by readers and tags that contain all of the components necessary for security, shipment tracking through the supply chain, inventory management, applying QR codes, and much more.

Factors to consider when selection an EAS system; • Reliability • Effectiveness • Price • Maintenance • Ease of use (workability, i.e. security tag remover)

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INSIGHT RETAIL | ISSUE 06 | APRIL-JUNE 2014

EXISTING SOLUTIONS Supermarkets: There are a variety of solutions to address supermarkets’ precise needs - from advanced shrink management solutions, safety and security systems and merchandise visibility solutions to prevent out of stock situations. Increasingly, supermarkets have expanded their offering to include in-house pharmacies presenting a unique challenge of protecting and deterring theft of high-risk assets such as pharmaceuticals. Innovation and broad product protection portfolio provides such stores with solutions to effectively protect high-theft, high-value merchandise.

Hypermarkets: There are solutions designed to help hypermarket operators address security systems and merchandise visibility concerns while providing a rewarding consumer shopping experience. In these expansive stores, selling everything from fish filets to fishing poles, there is a premium not only on maximizing every square foot of selling space but to closely track the flow of goods in and out of the store, from the loading bay to the shelves as well as the checkout counter.

There are innovative solutions to help companies stay ahead of the pack by reducing shrink on big-ticket and high-theft items alike, trimming out-of-stocks, enhancing store security and lowering operating costs through source tagging and apparel labeling solutions.

Apparel Stores: Globally, the fashion industry is one of the fastest-moving consumer-driven businesses.

Apparel retailers need to have nimble solutions to support high-impact branding, secure their merchandise, and provide real-time feedback on product availability throughout a complex supply chain. From high-end suits and leather coats to smaller items such as intimate apparel and footwear, apparel retailers and their suppliers also need to ensure their merchandise is properly branded and ticketed, as well as protected, available to consumers and easily tracked and traced.

Electronic Stores: In the past decade, the consumer electronics industry has exploded, with retailers stocking and selling items ranging from under a dollar to tens of thousands of dollars under the same roof.

At the same time, electronics stores stock highly sought-after merchandise; often a target of thieves.

Tie this with the fact that today’s must-have item may be outdated six months from now, and the problem becomes apparent: How do you protect expensive merchandise that is tempting to shoplifters, dishonest employees and organized retail gangs, while providing easy access to shoppers looking to compare multiple models and features at their convenience?

From advanced EAS systems with data analytics to paint an accurate picture of alarm trends in the stores, to digital video, fire and life safety and burglary alarm systems to the only 24/7 monitoring station dedicated to the retail industry, there are right solutions for all the needs of an electronic store with special high-theft solutions to keep merchandise secure while openly displaying the same to customers. This offers the stores selling expensive merchandise a piece of mind while helping to increase sales and protect retailers’ profits.

Warehouse and superstores: Warehouse clubs have become very popular among today’s busy consumers, who look to do more of their shopping in less time and place a premium on getting a great price. Warehouse clubs are formatted to encourage purchases of higher unit volumes, since their products are packaged for easy transport and storage. And these retailers stock a very broad product mix for their members, who often join to take advantage of favored pricing opportunities on everything from diapers and cleaning products to plasma TVs and jewelry.

Such a wide product range not only attracts consumers but potential thieves looking to take advantage of these stores’ openmerchandising formats.

Shoplifting is in most cases the largest reason for shrinkage and one of the most important tools for preventing the shrinkage is through such technologies. If they have not already, retailers should start searching for companies developing products that will allow a smooth and gradual transition from current EAS and RFID platforms to a single solution.

RETAIL INTELLIGENCE

HIPORA BUSINESS SOLUTIONS

HAROLD RICHTER Managing Director harold.richter@hiporabsea.com

Hipora Business Solutions is a dynamic company born in search for truth and integrity combined with synergies of individuals with collective experience in a wide spectrum of retail business disciplines.

• Conduct audits on systems, controls, policies and procedures and the supervision thereof • Staff intentions and their grievances towards management and the company • Irregularities within the organization.

The company provides a highly cost efficient and effective Turnkey solutions over a short, medium and long term period whose ultimate approach is to identify and obtain the necessary evidence to curtail critical losses.

SECURITY MANAGEMENT & CONSULTING SERVICES

Measured growth and stable clientele base within East Africa has ensured a solid infrastructure.

Our operation’s ability is assured by teams of investigators and managers, who are supported by a strong logistical team and administrators.

BUSINESS INTELLIGENCE Our newly launched multi-skilled agents are placed in organizations countrywide with a specific brief to infiltrate and successfully identify sources of loss and irregularities, thus providing our clients with reliable information on which to make informed business decisions.

JOHN WANJOHI Finance & Admin. Director john.wanjohi@hiporabsea.com

We have developed a solid network of informers in most areas of trade and industry which allows us to rapidly validate information received.

Hipora’s undercover agents are individuals from diverse backgrounds with both operational and professional experience.

Agent/s traditionally operate from within the workforce on a casual, semi-permanent or permanent basis ensuring that he/she outwardly appears to be a bona fide employee. All aspects of the agent’s employment relationships are exactly the same as those of our client’s permanent staff.

Information gathered from the debriefing of agents is forwarded to the client on a weekly basis, reflecting the progress of the investigation.

The reports contain factual observations, recommendations and proposals for further operational planning.

TSHEPO MONNANYANA Operations Director tshepo.m@hiporabsea.com

The training of our undercover agents has been focused mainly to the following: • Identify and report on theft activities • Productivity of all staff • Staff attitude towards management and the company

Hipora is confident that a professional and highly efficient security management and consulting service will be provided should you leave it in our care.We keep abreast of trends and developments within the security industry, ensuring that systems and services provided are superior and will suit your specific security needs.We constantly strive to provide our clients with an effective and professional service and pride ourselves to be independent with no alliance to any service provider or product guaranteeing the following: • Security Risk Assessments and recommendations • Manage your physical security portfolio • Security performance measurement • Design security policies and procedures (SPM) • Weekly security compliance and performance audits • Regular monthly management meetings • Implementation of security processes • Manage vendor procurement.

Other Services we offer Include • Loss control Managers • Front end Controllers • Double checkers • Stock room controllers • Camera Room Operators • Staff Entrance • Floor walkers • Personnel Trainings / Customized We stand on our reputation for first class service but do however, believe that in order for us to secure the best possible results, we need to bind ourselves into a contract outlining the terms and conditions and the required expectations.

Hipora Business Solutions (EA) Ltd Mombasa Road, Panari Sky Centre, Ground Floor, Room 1D Tel: +254 020 2 51 4 781 / 0715 346 746 Email: info@hiporabsea.com www.hiporabsea.com

RETAIL TECHNOLOGY

Sensormatic Acousto-Magnetic EAS Technology

A store’s solution for reducing shrinkage

At the completion of the study, the grocery retailer discovered that: • Stock shrinkage in general merchandise and drug departments was reduced by 79 basis points, which is a significant percentage of overall shrinkage, in stores with the AM - EAS as compared to stores without; • Tagged items resulted in better inventory management, inventory reductions, and improved in stock position; • Minimizing in-store tagging by store associates enabled them to carve out more time to focus on customer service while simultaneously increased employee awareness towards controlling shrink; • The combination of the Sensormatic AM - EAS technology and source tagging can drive a “halo” effect onto other items in the same department preventing further theft.

C

ompulynx Limited, a retail software solutions provider has partnered with Tyco Retail Solutions, a global provider of retail performance and security solutions, to help retail stores curb stock shrinkage significantly through the Sensormatic Acousto-Magnetic (AM) electronic article surveillance (EAS) technology.

Based on a recent study by IDC Retail Insights, the implementation of the EAS technology not only serves as a theft deterrent to minimize loss, but also helps improve inventory management and maximize labor usage.

On average, IDC notes that food retailers report that two percent of sales are lost due to stock shrinkage from shoplifting, check and gift card fraud, employee theft, vendor fraud and organized crime. While these percentages vary by product category and company size, the most substantial losses are from general merchandise such as razors and batteries, health and beauty care, and baby related products such as infant formula.

The study evaluated the shrink performance of four stores over a six month period by using Tyco’s Sensormatic anti-shoplifting technology and compared the results to stores without EAS. During the test, theft prone general merchandise and drug items were tagged at the source by product manufacturers, or tagged at the retailer’s distribution center. Most items had EAS tags placed inside products or their packaging, ensuring tagging consistency, and increasing the level of security.

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INSIGHT RETAIL | ISSUE 06 | APRIL-JUNE 2014

By combining our proven Sensormatic AM - EAS technology with vendor source tagging, our customers can not only leverage a powerful theft deterrent, but also drive operational improvements

“For the purposes of this study we focused on the potential to reduce loss through the EAS technology; however, the business benefits extend beyond that. The ability to reduce out of stocks also improves the customer experience enabling them to find the products they want to buy.

This is critical as customer satisfaction, in stock performance and customer loyalty go hand–in— hand in today’s competitive market where there are simply too many other places a shopper can go to find the products they want,” noted Leslie Hand, the author of the IDC report.

“By combining our proven Sensormatic AM EAS technology with vendor source tagging, our customers can not only leverage a powerful theft deterrent, but also drive operational improvements,” added Nancy Chisholm, Vice President and General Manager, Tyco Retail Solutions adding that the study reconfirmed the value of the customer’s EAS investment and reinforced that, with proper execution, greater results can be derived.

TYCO RETAIL SOLUTIONS Tyco Retail Solutions is a leading global provider of integrated retail performance and security solutions, deployed today at more than 80 percent of the world’s top 200 retailers. Operating in more than 70 countries worldwide, Tyco Retail Solutions provides retailers with real-time visibility to their inventory and assets to improve operations optimize profitability and create memorable shopper experiences.

The Tyco Retail Solutions portfolio for retailers is sold direct through Tyco businesses and authorized business partners around the world. In East Africa, Compulynx, a leading local integrated information technology solutions provider providing a wide array of retail solutions is Tyco’s authorized business partners.

Total Security for Your Products & Merchandise Providing Security Solutions for top global retailers’ high theft merchandise which increases the prootability of their customers by increasing sales while decreasing the theft of their merchandise.

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RETAIL STRATEGIES

Anti-shoplifting strategies

A

nti-shoplifting strategies are devised for retailers and aimed towards reducing retail shrinkage. Retailers across the world, lose millions of dollars’ worth of merchandise targeted by shoplifters. Rightly so, antishoplifting products are increasing and in demand, as all stores, no matter what they sell, are susceptible to shop theft – an ever-growing concern among small and large retailers alike.

If your store suffers from shop theft, a few easy anti-shoplifting tips could help you identify shoplifters and their techniques and shared with all store staff.

IDENTIFY A SHOPLIFTER A typical shoplifter is difficult to describe unfortunately, as they are across all demographics. There are ways, however, to practice identifying abnormal consumer behavior signs. Be alert with shoppers who might; • Watch store staff more than a normal customer • Come in a group while some distract store staff • Wear baggy clothes or carry old empty bags • Enter the dressing room with a large amount of merchandise and leave with fewer • Fiddle with stock with little or no interest in buying • Have entered the store frequently without making a purchase to plan the best way to steal.

A simple gesture such as asking them if they require assistance is an effective antitheft technique used by staff that discourages the shoplifter.

PREVENTIVE MEASURES Store Design: A good store design and management, teamed with consistent security practices shared with all store staff, is imperative to any anti-shoplifting strategy. Store layout and product placement work synergistically to deter stock loss.

In the past, high-shrink stock was either put behind the counter or glass cabinets or in the case of leather jackets, chained to the rack. However, innovative technology has freed this expensive merchandise with high-technology electronic security tags and handheld display systems.

• Keep stock neat and not overstocked – this will make it easier to notice if something’s been stolen • As much as possible, keep shelves and racks as low as possible – this allows a better view across the store • Display signage that an anti-shoplifting system is in place Train Staff: First of all the loss-prevention staff must become very familiar with their store, from the loading dock to the front exits. Also, staff should be aware of the shop floor at all times. A simple acknowledgement or greeting by staff will deter shoplifters by making them aware they are noticed.

Anti-shoplifting system: Preventative measures should be teamed with the technology of an Electronic Article Surveillance (EAS) security system in your store for maximum anti-theft protection for retailers of all sizes.

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INSIGHT RETAIL | ISSUE 06 | APRIL-JUNE 2014

• Apply security tags to all high-shrink merchandise. The tag will alarm on exit if it has not been removed by the sales assistant • Security tags are the perfect anti-shoplifting device as they are a clear and visible deterrent for shoplifters, while unobtrusive to customers • All types of merchandise can be “tagged” and is therefore a viable option for any retailer Closed Circuit Television (CCTV): CCTV is also a significant deterrent to external and internal shoplifting or embezzlement. The shop owner or manager can gain a better view of potential suspects and record incidents while identifying stock theft patterns in their particular environment. Modern technology allows managers to view live CCTV footage remotely - from another office, home or other portable device such as an iPad or smart phone.

STOPPING A SHOPLIFTER Utmost caution must be taken by staff when approaching a shoplifter, as wrongly accusing a customer of stealing is not only unlawful, but embarrassing. All store staff should consistently adhere to your store’s guidelines. Here are some quick tips; • Ensure you’ve seen the person approach the article and take it • Keep an eye on the shoplifter to ensure he/ she is going to leave the store without paying first • Only when they have left the store – or the anti-theft EAS shop security system has alarmed – should you approach them.

RISK MANAGEMENT

Building a more effective fraud risk management T

oday’s business landscape is evolving, and fraudulent techniques are evolving with it. Fraudsters are perpetually seeking new ways to steal from retailers or to take greater advantage of existing weaknesses.

Fraud methods in new and established areas, such as organized retail crime (ORC), point-of-sale (POS) manipulation, refund fraud, employee and customer theft, credit card fraud, fraudulent transactions over mobile devices and vendor fraud have all evolved over the past decade, adapting to new retail technology and changes in fraud prevention measures. Retailers will likely have to step up the pace of innovation in their fraud prevention and detection activities if they are to recover more of the margin currently being lost to fraudsters.

They can benefit from implementing a holistic fraud framework, continuously innovating in fraud management strategies. Rather than simply augmenting traditional activities, retailers can take a fresh approach to improving retailers’ ability to prevent and detect fraud.

CULTURAL ASSESSMENT According to a study ‘Shrinking retail shrink- Using analytics to help detect fraud and grow margins’ by Deloitte, the first step is to assess your company’s culture; specifically its business ethics and actions. You can gather anonymous feedback from a large group of people simultaneously using an established web-enabled survey tool.

Such an assessment can give you valuable insights into your ethical culture and help to quantify the internal impact of your fraud and ethical risk management activities.

The survey may include six principal areas; • Awareness of relevant policies and follow-through • Corporate culture • Observed unethical or questionable actions • Issues that either facilitate or reduce the likelihood of fraud occurring • Respondents’ perceptions of the desired outcomes of ethics and compliance efforts • Specific risk issues.

Such a survey not only provides critical insights but also the process of sending the survey to staff and management also has the benefit of raising the profile of ethics and integrity risk. By evaluating the results of the survey, companies can better identify areas of fraud risk using objective data rather than the potential biases and misinformation of decision- makers.

TECHNOLOGY AND DATA ANALYTICS According to the study, often simple rules-based solutions, such as real -time POS transactional monitoring, may not be enough for many companies to achieve their fraud risk management goals. Knowing the specific fraud -related issues in your company can help a retailer focus his efforts and implement a tailored technology solution.

A retailer may be able to discover his specific areas of exposure by leveraging the rich data environment common in retail companies. This includes data from daily transactions and activities such as purchasing, accounts payable, POS, sales projections, warehouse movements, employee shift records, returns and store-level video and audio recordings. Rigorous and regular sample-based analysis of data across the company can help; • Identify fraudulent activity • Develop appropriate priorities for case management and investigation • Reduce the false positive rate of your detection and prevention strategy.

Effective control activities Many companies begin to build control frameworks and processes after a large and public fraud has caused significant negative financial and non-financial damage.

But even companies with established control activities can benefit from reviewing the existing environment and processes, and helping to ensure they are supported with leading edge innovation.

The study explains that preventing a critically damaging event before it occurs by mitigating the risk of fraud is far preferable to scrambling to react and reduce losses. One way of evaluating one’s control environment is a series of facilitated stakeholder workshops, which can help to; • Assess the likelihood and potential impact of different types of fraud in the business • Assess the ability of the current control environment to mitigate these risks adequately • Identify limitations in one’s control environment, such as potential management override.

Staying one step ahead of the fraudsters is the key to protecting a company’s hard-earned assets and reputation. Implementing data analytics into all elements of the fraud framework can help find patterns, trends and anomalies in one’s data. It can help detect a broader range of exposure, including previously unknown risks, and uncover new patterns of fraud.

Source: Deloitte INSIGHT RETAIL | ISSUE 06 | APRIL- JUNE 2014

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RETAIL MOVERS / EXECUTIVE ENFOLD

ONE ON ONE WITH

Francis Maswili Retail is my passion and way of life Francis Maswili is a familiar name across stakeholders in the supermarkets’ fraternity.

For over a decade, Mr. Maswili served as a senior manager at one of the most vibrant supermarket chain stores – Naivas. His major and memorable achievement while at the company is that of playing a major role in the growth of the stores – from a single branch to 28 by the time he was leaving. “I introduced the first computer in the company. I have supervised all major departments – Finance, Human Resource, Administration, and Marketing – before rising to a General Manager,” he explains.

He has good words for his employer, having played his part, leaving a legacy which he hopes will be catapulted higher and to a better level and as they say there comes a time when one steps aside, to do something different ; a change is as good as rest.

A few months later, having made a decision to change, Mr. Maswili has comfortably taken over his new responsibility as a co-Director of Smart Price, an upcoming supermarket store with four branches; two in the busy Mlolongo township along the Nairobi –Mombasa highway and Utawala area along the Eastern by-pass respectively. “I am fast adjusting to the role of employer,” he quips.

Reminiscing about his busy schedule while at Naivas, Mr. Maswili says his focus is to grow the two-year old business. “It takes a lot of sacrifice, dedication and commitment as this is where I hope to retire from,” says Mr. Maswili adding that the Naivas experience has made it easy for him to flow into Smart Price’s day to day operations which up until he took the decision saw him juggle between his former employer’s work.

Moving on

Like any other entrepreneur who finally plunges into the business world, Mr. Maswili has his focus on taking this business to a new level. Citing that a lot needs to be done at the company, he has setup a schedule to achieve what is under his sleeve – six months to get it done. For starters, he has focused on establishing sound business structures.

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INSIGHT RETAIL | ISSUE 06 | APRIL-JUNE 2014

supplier relationship at the highest level can be excellent; on the flip side at the employees’ level it can drain the same relationship since they are responsible for handling the goods.

RETAIL MOVERS / EXECUTIVE ENFOLD

Francis Maswili, Director, Smart Price

“We need to have systems in place; an efficient point of sale, back office and invest in modern security controls,” he explains. Retail businesses are prone to pilferage and based on his experience, it is important to put up control measures to curb it in good time especially those related to inventory herein where the problem lies. This is backed up by other security systems such as CCTV and anti-theft machines at the exit points. Estimates indicate that major supermarkets’ lose up to five percent of their revenue through various pilferage forms however, Mr. Maswili is certain that most of the large retail stores are not in control as the systems they have put in place do not provide the exact position.

With the controls in place, building the Smart Price brand will be of essence. This, he says will require an ambitious marketing and brand awareness plan to grow the brand whose target is the middle to lower income earners. “Retail – big or small apply the same techniques,” Mr. Maswili says adding that these are just but a few of the indicators which will propel Smart Price into the next level.

On retailer – supplier relationship, another key element in the success of a retail store business, he advises that the goodwill of a supplier is vital for growth. Again based on his former experience, he is quick to point out that it is important for a retailer to be in good terms with his suppliers while keeping in mind that a major point of stock pilferage happens at the receiving bay where millions

are lost as suppliers bring in merchandise.

While the retailer – supplier relationship at the highest level can be excellent; on the flip side at the employees’ level it can drain the same relationship since they are responsible for handling the goods.

This consequently means that an employer – employee relationship is an inevitable subject in any retail business. Highly motivated employees, he notes will translate to better handling of suppliers and customers in this competitive market. As an employer, Mr. Maswili is categorical about staff being able to ‘get it right’ from day one; an element he further notes is the missing link in most businesses. To achieve this, basic training of what is expected on them from a retail perspective coupled with induction before being deployed to a store is necessary.

With branch expansion plans not part of his near future plans, Mr. Maswili is carefully calculating his business moves. Nevertheless, he is quick to point out that the opportunities available in the retail scene are far from being exploited. The market is still undeveloped with statistics indicating that only 40 percent of the retail opportunities have been taken up. This is the reason why retail stores such as Smart Price have an opportunity to catch up and leverage on the gaps. “The culture of self-service stores is far from taking over in a market well represented by the so called ‘kiosks’, wholesalers and other middlemen,

translating to more business opportunities for supermarket stores,” he notes.

He advices young and upcoming retailers not to give up yet as there are immense opportunities in the sector. They should be ready to work hard to succeed in the current competitive market taking into consideration factors such as target market, location, customer service and product selection.

His business mentors are his former bosses; Directors of Naivas Limited – David Kimani Mukuha and Simon Gashwe Mukuha. `

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RETAIL INTELLIGENCE

TO TRUST OR NOT TO TRUST! BY: TRUSHAR KHETIA

T

he best way to find out if you can trust somebody is to trust them.” Ernest Hemingway, American author.

One of the most prevalent global challenges in the retail industry for decades has been shrinkage (pilferage). Whether it is at Walmart, Tesco, Nakumatt, Tuskys or Khetia’s all retailers lose millions of shillings every year via theft of goods. What is more interesting is that majority of the loss does not come from a customer’s perspective as many people might assume, but actually from the employees of the company who are capable of causing a lot more damage in terms of the value of the loss in question.

This leads to the question, ‘should we or should we not trust our employees?’ Trust is a very sensitive issue to most people. No human being likes to be doubted when they have not committed any offense. Yet, several retailers operate by offering very little trust and empowerment to their staff from the day they employ them. The key is to assure them they have your full trust by making them feel part of the family (retail store) they are managing. A retailer should make the staff feel that they are a vital part of the organisation while providing them with an environment in which they can progress. This can easily be achieved by creating an open culture right from the board of directors down to the person responsible for cleaning.

On the other hand, creating this culture does not happen overnight. It will take years to foster this coupled with effort across the company. For instance through weekly departmental meetings where performing employees are recognised and appreciated, awards/initiatives such as employee of the month are just but a few of the forms of rewards and recognition that work towards creating mutual trust. You have to give trust, before you can get it.

A retailer can also think of involving the management and employees in the decision making process, which makes them feel valued and respected. When one’s contribution is recognised and implemented it assures one of the senses of importance and belonging.

The idea is to create a highly motivated group to operate like a family. Who would want to steal from their own house or from their own family?

This brings us to the remuneration issue. I always believe that an employer needs to pay people what they are worth. However, there are many retailers who will pay their senior branch managers a monthly salary as lows as KShs. 30,000/= to head a branch that could be realising a daily turnover of KShs. 3 million especially if the total sales in the outlet are due to his leadership and effort. Therefore, it is only fair for him and his colleagues to be rewarded accordingly both in monetary and non-monetary terms.

Fully trusting your people, however, does not mean that you do not prepare yourself against possible risks. Retailers should continue investing in the advanced IT technologies to manage their inventories and work processes as well as security systems for monitoring and regularly running risk and security audits in their businesses to identify and address any areas of concern with strong preventative measures before they happen. It is important to note that retail is a people driven business, be it the consumers, suppliers or the employees. The key to managing risk is about how effectively people are managed.

Blog: www.tria.co.ke/trushar-khetia

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INSIGHT RETAIL | ISSUE 06 | APRIL-JUNE 2014

TRUSHAR KHETIA Founder & CEO – Tria Group Twitter: @trushark

Trust is a very sensitive issue to most people.

No human being likes to be doubted when they have not committed any offense.

Yet, several retailers operate by offering very little trust and empowerment to their staff from the day they employ them.

RETAIL TRAINING

Pilferage Management through staff relationship and training

P

ilferage is generally defined as “Taking small items that do not belong to you” or “Petty thievery by employees.” From this definition, it looks like something that we can easily ignore. In the retail industry, this “petty theft” by staff runs into millions, in fact no outlet has come up with correct figures on the impact of pilferage to the industry. Two percent is usually allowed for accounting purposes, which is quite significant given the fact that this goes directly to the bottom line. Some store managers quantify this activity as contributing around 40 percent to the total shrinkage in retail outlets. Where does all this ominous information lead us? One of the keys to combating employee theft involves understanding why employees steal. Do employees steal simply because they “need” or want something they cannot afford, are they natural thieves, or is it more complicated? What really is the motivating factor behind staff stealing stocks or other items from their employers?

WHY EMPLOYEES STEAL Based on a Doctorate research document entitled “Employee Theft in Retail Industry”

by Ashley E. Foest of University of Florida, the following are the basic reasons – which are a combination of both personal and situational factors.

Types of Pilferers Casual Pilferers: Mainly done by staff. They steal primarily because they are unable to resist the temptation of an unexpected opportunity and have little fear of detection. Casual pilferage occurs whenever the individual feels that the need or desire for a certain article.

Casual pilferage is very serious if it becomes widespread, especially if the stolen items have a high cash or potential value. Casual pilferers are normally employees of the organization and usually are the most difficult to detect and apprehend.

Systematic Pilferers: These ones steal according to preconceived plan. They steal for monetary gain, as their acts are premeditated, and they may or may not be employees of the installation. They work with another person or well-organized groups.

Controlling Casual Staff Pilferage Psychological Deterrents: One of the most practical and effective method for controlling casual pilferage is through the use of psychological deterrents. One psychological deterrent is to search individuals and vehicles leaving the installation at unannounced times and places. When conducting spot searches, care must be taken to ensure that personnel are not demoralized nor their legal rights violated by oppressive physical controls or unethical security practices.

Training: An aggressive and continuous education program is fundamental to deter and sensitize employees to the dangers of pilferage. All employees must realize that pilferage is morally wrong no matter how insignificant the value of the item taken. All employees must be impressed with the fact that they have a responsibility to report any loss to property authorities. Inventory and control measures such as identification of all tools and equipment should be instituted to account for all material, supplies, and equipment.

JASPER OUMA Managing Consultant and Chief Trainer DMS Trainers

Staff Relationship: In order to encourage ownership, it is important to develop positive staff relationship that enables employees to focus on relevant issues knowing that the employer cares for their well-being and growth. The employer should ensure that the employee recognizes the importance of their contributions to the overall growth and profitability of the organization.

Well-trained senior staff especially supervisors should explain the personal cost of stealing to employees.

Employees often see stealing as a short-term gain, just a “kitu kidogo” for a large retailer. However, if these same employees are educated on the scope and cumulative cost of theft, they may think twice before stealing.

jasper@dms-train.com

INSIGHT RETAIL | ISSUE 06 | APRIL- JUNE 2014

23

RETAIL ASSOCIATION

PROFESSIONALISM IN FAMILY RETAIL BUSINESSES

M

By: WAMBUI MBARIRE

any of the existing retail outlets in Kenya started out as or remain family run and have for a long time been the mainstay of Kenya’s retail sector. Nearly all major supermarkets, bookstores, ICT Companies, furniture and jewelry stores locally have significant family involvement. With time however, these enterprises have evolved and brought in professionals, a key attribute to remain competitive.

A company is professional when it has proper systems and structures to run its day to day operations without interference from the owner/entrepreneur.

Do family run businesses require professionals?

A company is professional when it has proper systems and structures to run its day to day operations without interference from the owner/ entrepreneur.

The entrepreneur (read family) and professionals should work together for the betterment of the retail chain, with the following in mind;

• Family businesses provide an environment which is an “extension” of the home environment, because people spend most of their day at the work places.

• The sales’ team should be more visible to the customers than the “directors” and “producers” or even the entrepreneur.

• The entrepreneur should focus on “giving direction” to the company. Focus on targets and all the support needed to achieve the targets.

Identify the core values by centralizing and controlling them to ensure that one’s presence is not needed necessarily needed in the day to day operations of the business. This gives the professional the chance and space to perform.

• The challenge is to get the professional aligned to family culture and business values. This can be done by having several informal meetings with senior professionals once they join in. The purpose is to empower the managers so that they can engage and connect with the customer, the same way that the entrepreneur can

INSIGHT RETAIL | ISSUE 06 | APRIL-JUNE 2014

One has to attract not only good but valuable people – not just at the senior level, but mainly at the front end.

Keeping off

• Professionals bring in discipline, process and systems • The entrepreneur, however, tends to have a more personal connection with the customers than the professional can achieve

24

Attracting quality professionals

• The entrepreneur should ensure that he takes on and solves challenges being/faced by the employees, to give them room to do what they ought to do at their best. Employee welfare schemes are vital as they give a sense of being appreciated.

It has been tested and proven in all sectors of an economy that professionals bring in significant gains in terms of operations and increase the bottom line of any organization.

• Both parties; family and professional members must abide by all decisions made by the entrepreneur, whether they agree with it or not.

It has been noted however, that professionals who cannot align with the family values and the business culture, do not survive long in such businesses

• The entrepreneur should not draw a line between professionals and family members thus both have to take the consequences for their decisions – good or bad. Both parties ought to be treated fairly and equally.

• Once an entrepreneur has delegated authority to a professional, empower him and ‘walk away’ – let him do his job.

• Any decisions regarding the stores should be made by the manager responsible.

Wambui Mbarire is the Administrator of Retail Trade Association of Kenya

• If an entrepreneur has to ever override the manager in front of the customer, after the incident, guarantee him that all is well for him not to lose already achieved trust and assurance.

• However keep in mind that, the customer needs you.

INSIGHT RETAIL | ISSUE 06 | APRIL- JUNE 2014

25

LOYALTY LESSONS

RETAIL LOYALTY TRENDS

FOR 2014

By ALICE KATHEU, Rewards & Recognition

E

very sector of the consumer market is more crowded than ever before making earning and retaining consumer loyalty increasingly challenging and absolutely crucial for your business success. While you constantly try to pull the consumers across the line to your side of the tug-of-war, there are other players trying to pull them with equal vigor towards the other side. Only firm and regular consumer engagement & loyalty efforts can give you an edge over your competition.

Here are some important statistics to bear in mind: • Over 80% business comes from loyal consumers • A loyal consumer spends 10 times more than new customer over a lifetime • Loyal consumers will potentially up-sell your business by 60-70% through spreading good words With these eye-openers in mind, can you afford not to focus your marketing efforts on driving the engagement & loyalty of your customers?

Here are some important trends in loyalty marketing for 2014: 1. STRIKE ALL THE TOUCH POINTS Concentrating just on sales can keep your consumers falling into the business but engaging them through all the possible touch points will invariably win over them. Make full use of modern connect points like online, mobile and social media to build a loyal relationship.

2. BUILD A CLOSED LOOP OF ENGAGEMENT A closed loop of marketing and engagement approach must be maintained that emphasizes on converting consumer feedback into affirmative consumer insights. This makes sure that you provide what is wanted by your consumers to make and keep them loyal.

3. ENGAGE TO ATTRACT LOYALTY Consumer loyalty can be more easily won if you keep your consumers engaged at different levels. Referral programs, competitions and other activities on social media are exceedingly helpful to win consumer loyalty.

4. REWARD YOUR LOYAL CONSUMERS Keep your loyal consumers feeling special and privileged through extraordinary rewards. This will not only keep them engaged with your brand but also make them your fan forever.

5. MOBILE IS THE MASTER KEY The mobile phone is present in the pocket of virtually every one of your customers and that can be the master key to unlock consumer loyalty. Mobile coupons and special offers are some great drivers to keeping consumers coming back for more.

6. GO DIGITAL Allow your consumers enjoy simplicity and expedience through online facilities of shopping, enquiring and connecting with you.

Whilst these are some of the trends to consider for your loyalty program in 2014 it is also important to understand that one size does not fit all. Being smart about how to measure ROI versus taking a cookie cutter approach when it comes to loyalty is really what will help impact the success of that measurement and their programs in the year ahead.

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INSIGHT RETAIL | ISSUE 06 | APRIL-JUNE 2014

LOSS PREVENTION THROUGH SURVEILLANCE

RISK MANAGEMENT

By THOMAS MBEWA

S

tock pilferage or “shrinkage” is a retailer’s biggest nightmare. Most losses occur through internal and external or errors.

Internal (employee) theft is the largest contributor to loss for most retailers, regardless of size or segment and occurs through various methods. From simple merchandise theft to collusion with friends or other store employees, inventory losses by employees can easily deplete one’s profits (and the merchandise available for sale to customers).

At the same time, external theft is often caused by shoplifting, break-ins, robberies or other acts by outside sources leading to a substantial amount of loss annually to the retail industry. According to Omega Risk Management, a risk management and loss prevention company, there are two kinds of shoplifters; professional - who target stores located in the central business district and juvenile (6 – 14 years of age) targeting malls who resurface during the school holidays.

The last major area of caused loss in the retail environment is through errors. Often considered paperwork errors, these mistakes can contribute upwards of over 15 – 20 percent of a retailer’s annual loss. Ironically, most of the errors seen in retail are employee-caused, thereby making a retailer’s employee perhaps the highest contributor to the business loss every year.

For retailers still struggling with format issues, high rentals, expensive debt and inefficient supply chains, the problem of high shrinkage at times takes a back seat as they try to sort out other problems however, as many retailers realize, cutting down shrinkage losses — even if they cannot be extinguished altogether can mean the difference between being a profitable operation and a loss-making one. And every percentage reduction in shrinkage can result to savings.

To help mitigate such business threats, Omega focuses on targeted shrink, loss prevention, asset protection, risk management, safety awareness; investigative and organisational structure solutions for its clientele.

While many retailers invest in CCTV cameras, most forget to provide backup of the same.

This means that even though the cameras have real-time footage, there is usually a casual monitoring of the cameras from the backoffice. “Omega’s surveillance will be monitored in real time meaning rapid response,” Mr. Mbewa adds. The package also comes with floor walkers armed with walkie-talkies who coordinate with the CCTV operators. This makes it easy to catch up shoplifters who are liable to fines of up to KShs. 80,000 once arrested and charged though this depends on the value of item stolen.

Another area that requires high surveillance is at the receiving bay where a Loss Prevention officer from Omega is deployed. This officer is trained in document verification and will easily detect and reject a fake supply document.

Once, the documents are authenticated, another officer will physically check the supplied merchandise to ascertain that the documents and goods supplied is as required.

This does not end here, as a third officer will counter-sign before the goods are received.

“All these officers work independently to ensure no discrepancy,” assures Mr. Mbewa.

Thomas Mbewa, the company’s business development manager explains that the company seeks to address the growing need for professional risk management relating to retail risks and loss prevention and to provide solutions available to all types of businesses in the retail industry.

One such area is in surveillance. “Customer experience is important to any business operations. The feeling of attention, friendliness, security and warmth ensures happiness and repeat business by satisfied clients,” he adds.

Omega Officers are trained to create a positive security presence where clients and their staff and customers feel comfortable. Typical surveillance duties offered by the officers include; • Floor surveillance using CCTV cameras • Physical manning of both the receiving and dispatch areas of the outlet • Providing manned security at the entrance and parking bay • Screening employees and merchandisers at the staff entrance • Monitoring customers and employees by floor walkers • Interacting with customers in a secure and professional manner • Working with law enforcement officers to arrest and prosecute offenders.

RED COMPLEX GODOWN, MOMBASA ROAD TEL: +254 711 295 202 OR 722 408725 info@omegariskmgt.com

INSIGHT RETAIL | ISSUE 06 | APRIL- JUNE 2014

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14

RETAIL TIPS

Tips and Tricks for Retail Theft, Loss Prevention and Reducing Inventory Shrinkage

D

id you know that nearly 50% of retail inventory shrinkage comes from employee theft? It is a bigger problem that most retailers think thus none of them should overlook this expensive problem because it can happen to any of them.

Here are 10 tips to avoid these unpleasant experiences by using your POS software; 1. Require store managers to review register transactions every day - look for excessive openings of the drawer, small cash refunds or returns. (Important Tip: Make sure your employees can see you or a manager reviewing this information. Do not hide in the back room because just by letting them watch you can reduce more theft than anything

9. Make it common knowledge with employees that the store stock is constantly monitored through the POS system and, 10. Secure the access to customer’s personal information in the POS software... particularly, their credit card information.

In addition, here are more retail loss prevention tips that do not require a POS system that are also important; 1. Keep the back door closed and alarm it. This is one of the easiest ways for employees to sneak out merchandise.

2. Look at the “voided/cancelled/deleted sales report” every day

2. Have management inspect the garbage before it is taken out

3. Look at the “returned transactions” report every day

3. Review security videos on a regular basis. And most importantly, make sure the staff know that this is done

4. Do not share passwords which could give access to other users 5. Add password protection/security to all areas of the store software and only allow employees to access what they really need 6. Look at the “inventory adjustments report” every day 7. Look at the “profit margin reports” every day. If the margins are low in a certain category for that day, then a retail store owner should do a little research to find out why

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8. Keep the inventory count accurate

INSIGHT RETAIL | ISSUE 06 | APRIL-JUNE 2014

4. On the flip side, if a retail store owner busts somebody for stealing something.

Let all your employees know that they did NOT get away with it! Sometimes this can be one way to prevent theft and inventory shrinkage.

Shrinking Retails shrink Use analytics to help detect fraud and grow margins!

Types of frauds experienced in Retail include 1.

2.

3.

4.

5.

6.

7.

8.

POS Manipulations Vendor/Supplier Collations Employee theft Refunds Shop lifting Salary & Wage manipulations i.e. Overtime Mobile device processes i.e. payments / money transfers Financial statement manipulations to suit stakeholders â&#x20AC;&#x201C; shareholders / Investors interests

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RETAIL BUSINESS INTELLIGENCE ISSUE 06 / APRIL - JUNE 2014

CRACKING CUSTOMER LOYALTY GLOBAL LOYALTY TRENDS LOYALTY TIPS RETAIL HEALTH & SAFETY LOYALTY MARKETING RETAILER ASSOCIATION

SHRINKAGE IN RETAIL

SECURITY IN RETAIL

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