Designing out Crime
The Power of Partnerships
What Has the ECR Europe Shrink Group Ever Done for Us?
For those not familiar with Monty Python, a British comedy team, there is a scene in the film Life of Brian where John Cleese's character threatens to kill his valuable hostage, Brian, unless the Romans agree to dismantle the apparatus of their imperialist Roman Empire. In his pomp, he asks the question, “And what have they ever given us in return?” Much to the frustration of Cleese's character, the party members then suggest that the Romans have done quite a lot—aqueducts, sanitation, roads, irrigation, medication, education, wine, public baths, public order, fresh water, peace, etc.
Like the Romans, the plethora of industry groups working on important industry initiatives are often accused of being nothing but “talking shops” with nothing concrete or tangible ever coming out of the many expensive meetings and conferences they organise.
I humbly suggest that this is not the case with the ECR Europe Shrinkage & On-shelf Availability (OSA) Group. Established in 1999, and with the continuous support of shrink and OSA experts from the leading European retailers and manufacturers, the group has made a significant impact with its goal to find new ways to fulfil consumer wishes better, faster, and at less cost. In fact, a 2007 academic study estimated the group's impact (on retailers and manufacturers that adopted the ECR approaches) stood at over €1 billion in terms of improvements to the top and bottom line.
To deliver this impact, the group invested over €1 million in new research to quantify the scale and nature of the problem, to identify the role and benefits of collaboration, and then to design a structured and end-to-end approach to the problem, an approach they proved worked through a series of case studies. Most importantly, they established a template for a corporate policy on shrink management. At the core of this policy was the principle of collaboration.
Collaboration with internal functions is obvious; after all, what chance is there that shrink can be solved if buyers flood stores with too much inventory, too many price changes, too much range complexity, and no regard for the potential vulnerability of these items to theft? Other functions such as marketing, logistics, customer service, human resources, and top management also have to be part of the solution and not part of the problem. External collaboration is less obvious. However, hot product manufacturers can play an important role in the packaging, technology, and expertise they deliver, while law enforcement supports the efforts of retailers and manufacturers to dampen the demand for stolen goods.
If nothing else, the last 15 years of ECR work has given us three important lessons on collaboration and partnerships. First, the loss prevention team cannot be expected to solve shrink on its own. Engaging others is critical, and to do this they must speak and understand the retail business language. This means talking to the CFO with clear data on the bottom-line impact of shrink, to the buyer in terms of the sales and improved availability benefits of reducing shrink, to marketing about how improving shrink can lead to improved shopper satisfaction, and to HR on the benefits of tackling shrink to employees and staff, and so on. Secondly, the lesson has been that significant steps towards changing shrink can only come through collaboration. Some experts would say that 70 per cent of losses are down to operations and that more than 50 per cent of loss happens before the store receives the products. Put another way, if you only focus on the store, you will significantly limit the potential improvement in shrink that your loss prevention team can deliver. Finally, and linked to the first lesson, the role of loss prevention has to shift from being seen as the “thief catchers” to being business partners and to being a support group that guides the organisation to improved profits through the reduction and successful balancing of retail risks.
Ahold—A Founding Member
Ahold, a leading grocery retailer with stores in Europe and the USA, has participated in the ECR Europe Shrinkage & OSA Group since its very beginning, missing just one of over 100 meetings in the last fifteen years. Through its participation in the group, Ahold loss prevention practitioners learned how to align business objectives and interests with those of the business by creating effective partnerships through communication, collaboration, and the understanding of how to provide essential conditions for success.
Ahold’s successful business model and strategy has become our common language and point of reference in making sure that company-wide, we are aligned in delivering our performance and our promise to our customers, which is essential because we are aware that people both inside and outside of our organisation do not always understand each other, even though they speak the same language.
Communication is therefore the basis for creating awareness. Mutual understanding of each other's positions and methods of communication is the means to understanding what is important to others and what is driving them. Why do people make certain decisions? Why do they resist change in one case and in other cases present themselves as the leaders in the change process?
These are questions that loss prevention professionals are confronted with every day, especially when dealing with managers from other departments within the organisation and with external stakeholders. It often leads to tense situations, demanding the utmost of the head of LP in convincing the business and stakeholders to buy in to their proposed vision and approach, and they do not always succeed. That disrupted communication and lack of understanding that the LP team encounters is the result of the conflict between the priorities of management and key stakeholders in increasing sales and revenue versus the LP team's objective of reducing loss and risk.
Ahold's participation in the ECR Europe Shrinkage & On-shelf Availability Group taught us that the key to working together as one team lies in identifying the common priorities and building a partnership based on equality: the LP team must “learn the language” of the business and its key stakeholders.
At Ahold, we work on joint processes and projects with multiple departments, including buying and merchandising, store operations, distribution and logistics, legal, brand management, and store auditing in order to protect our brand and improve our operational effectiveness. Externally we co-operate with our manufacturers in strategic partnerships to improve waste numbers and total loss of product lines. We are members of brand protection groups that help us to understand how retailers can collaborate to improve the industry performance on loss prevention and to work more closely with national authorities, Governments, and Police forces.
Over the past couple of years, Ahold has made major improvements by using internal and external partnerships to run collaborative loss prevention projects in retail, delivering great results in crime prevention, loss reduction, and the arrest of national and international criminal gangs. Partnerships have proved to be essential, and we are convinced that this is a key enabler for successfully delivering added value to our bottom line.
Here lies the core of the argument: the “total loss” prevention team of today requires the skills to convince the business and its key stakeholders that collaboration will support management not only in achieving the company’s objectives, but also in tackling potential threats and creating new opportunities for the business. Perhaps it is even possible in this way to exceed these objectives—a difficult task but one that makes loss prevention departments far more visible as business partners and participants in tactical and operational implementation of business strategy.
Going back to the Monty Python sketch, here are some case studies that show tangible examples of business improvements at Ahold inspired and made possible by the research and insights from the ECR group.
Case Study #1: Employee Engagement
Albert Heijn, a supermarket brand of Ahold operating in Holland with over 800 stores, participated in the ECR's recent study on the role and impact retail employees have on managing shrink and availability of product in stores. The research report was well received and identified as a potential contribution to our promise to customers and the overall improvement of people performance within the company.
Based on the research findings, we implemented a number of activities, including new processes, acknowledgement, and internal promotion at store and regional meetings of new initiatives to support the work of employees in managing shrink, out-of-stocks, and waste reduction.
The “role model” shrink management function of store managers has become a fundamental part of the new hire induction and training programmes with an emphasis on providing sufficient guidance on providing feedback and good communication skills in this area.
Case Study #2: Collaboration with Hot Product Vendor
As most retailers are aware, the merchandising of razor blades on open display presents a high risk to retailers across Europe, but through collaboration across multiple departments, Albert Heijn was able to significantly reduce this risk without impacting sales and as a result achieved its growth targets in the men’s shaving and grooming category.
The theft of razor blades is in itself a wonderful topic and a fantastic challenge to LP teams, professional security services, and suppliers of possible technical solutions. It is also, however, not a sexy enough topic to receive the attention and top priority of Government, Police authorities, and other stakeholders. Too few people have a clear picture and understanding of the total financial impact for retailers, employees, and customers.
Razor blades are a product with high sales values and a stunning margin. Razor blades are also simultaneously a “hot product” for criminal parallel sales channels and thus very vulnerable to theft. Consequently in our supermarkets, the sale of razor blades took place mainly from the service counter, resulting in low visibility and low sales.
The challenge for the LP team was to prevent losses whilst at the same time meeting the objectives of the business—increasing sales, making more profit, meeting the customer’s needs, and providing staff with the means to keep problems manageable. The mandate of security must be to test innovative integrated solutions in the supply chain and in stores to minimise losses and improve sales. I use the word “integrated” because this task requires cooperation between the manufacturer, category managers, store operations, and loss prevention.
A customer-friendly dispenser device was successfully developed by the manufacturer, piloted in select stores, and rolled-out. The device dispensed only one unit at a time and delayed dispensing the next unit. It satisfied the needs of our customers, supported store staff to reach sales figures while controlling, and met the manufacturer's objectives for an open sales presence. The situation offered a great example of cross-function collaboration and understanding the language of the business.
Case Study #3: Working with Law Enforcement on Self-Scanning
Ahold supermarkets are continuously improving their customer shopping experience with the objective of increasing sales and customer traffic. One of the focal points is to ensure quick and easy access to self-scanning and check-out devices.
Ahold supermarkets acknowledge the risk of scanning failures and theft and have controls in place to minimise losses. Those controls include the responses by employees, security, Police, and justice prosecutors. There are, however, restrictions by the law and threshold amounts for apprehended shoplifters. Shoplifters can only be apprehended after the last checkout opportunity and can only be prosecuted if the amount is more than the threshold. In all other cases, the Police would simply not show up at the scene of the crime.
To close the gap between what we expect from our employees and local Police authorities and what they were actually able to deliver, we started a dialogue that resulted in collaboration. We came to an agreement that communicating self-scanning conditions and consequences should be embedded in the system and that before using self-scanning customers must explicitly accept the conditions and risk of being prosecuted for theft in the case of serious non-scanning failures.
Random customer checks create a level of awareness and prevention, and exit gates only open using a barcode on customer receipts to avoid any confrontations related to passing the final opportunity for checking-out. Measurement of shrink trends before and after the introduction of self-scan provides management information on customer awareness and possible crime levels. The above controls were sufficient for a national collaboration project with security and the Police to provide a quick response, immediate apprehensions, and conviction of thieves within twenty-four hours including an administrative fine to be paid immediately to the retailer.
Your Turn to Collaborate
These three cases are prime examples of how internal and external partnerships and the business partner role of the LP team has proved to be the key to adding value to our business objectives and delivering tangible results to our bottom line.
Ahold will not only continue its participation and contribution to the ECR Europe Shrinkage & On-shelf Availability Group, but also further strengthen its total loss prevention strategies by exploring, developing, and implementing ideas and methodologies provided by this platform.
The ECR Europe Shrinkage & On-shelf Availability Group is also a professional platform to develop and share successful strategies that address the potential benefits of partnering with the national Police and local justice to combat shoplifting. It is free to join for any retailer or manufacturer, and I urge you to join us as we seek to find, through research, the next breakthroughs in thinking that can help the whole industry sell more and lose less. Membership is free for any European manufacturer or retailer. More information can be obtained via its website at ecr-shrink-group.com. The ECR group is supported by research grants from Checkpoint Systems and Oliver Wyman.
