4 Ways Supermarkets Can Build a Shrink Elimination Culture

by Andrew Hoeft | Jan 17, 2018 12:00:00 AM

Supermarket and retail shrink is a battle that may never truly end, but is increasingly being better handled by companies investing themselves in finding new ways to reduce it.

We’ve covered some of the specific tools and strategies supermarkets and retailers are using to win the war on shrink, but this time, we thought we’d step back to consider how leaders can power their shrink elimination efforts by making it a core pillar of their company culture.

While shrink remains a major issue for many supermarkets, one major factor at play for those making meaningful progress on this front is more investment in loss prevention programs. Before these programs can grow legs, however, they require a company culture that puts its objectives center stage.

Here are a few ways company leaders can begin building a shrink elimination culture of their own:

1. Adopt habits common among retailers with low shrink rates

Professor Adrian Beck of the ECR Europe Shrink and On-Shelf Availability team, undertook research to discover the common practices and themes among the five U.S retailers with the lowest shrink rates consistently: Target, The Gap, Limited Brands, CVS, and Best Buy.

The research was conducted with the full participation of each retailer and included in-depth personal meetings with heads of each company’s loss prevention team. The practices, themes, and habits Professor Beck discovered are applicable throughout the supermarket world as well as traditional retail.

  • Genuine commitment from senior managementSenior management from all five retailers were seen to be meaningfully committed to prioritizing shrinkage, overseeing action plans, allocating resources, and monitoring results.

    CEOs were crystal clear on the significance and impact of diligent shrinkage management. They not only recognized shrink reduction as a company-wide priority, but could articulate the benefits of reducing shrink through the lens of sales growth, net profit improvement, and earnings per share.

    These findings make the action-item clear: CEOs and other leaders should make shrink a regular item at every business review meeting. Shrink should be communicated to the board as well as all associates and key external parties at important occasions and times during the year. In some organizations, CEOs even personally chaired a multi-functional shrink task force to personally reinforce its importance as a cultural element of the company. These are the actions that reinforce shrink’s importance at a cultural level.

  • Embedded loss preventionBeyond bringing greater awareness to the problem of shrink, all parts these organizations recognized their accountabilities and developed action plans to address it, including human resources, buying, store design, marketing, supply chain, IT, replenishment, store operations, store associates, and, of course, loss prevention.

    This company-wide approach was observed at each of the retailers studied with researchers noting that “trusted, credible, and inarguable data on shrink and sales at the item and store level” was the key enabler to collaboration.

    An example of shrink elimination culture at this level might be providing visibility on item-level shrink information to a buying group, informing them of the true profit after shrink. This in turn encourages collaboration with others, such as the vendor and operations, to lose less and sell more when carried out on a monthly or quarterly basis.

2. Use smart management techniques to engage everyone around the issue of shrink

A 2014 report by the ECR Europe Shrinkage & On-shelf Availability Group examining the role of employee engagement in controlling retail losses surveyed more than 200,000 staff members in 1,570 stores under three retail chains to understand what factors influence store losses most.

Employee engagement was measured across 18 factors, including “staff believe their ideas and suggestions are taken seriously” and “staff feel appreciated and valued.” Four indicators of retail loss were examined: shrinkage, waste, cash loss, and lost sales driven by out-of-stock merchandise.

The study found that 15 of the 18 employee engagement factors that were examined influenced store loss. It also found that the stores with the highest loss rate could significantly reduce those numbers by re-engaging the workforce through effective management practices.

To heighten engagement levels and reduce loss, the authors recommend managers provide more opportunities for staff development, keep staff informed about the organization, solicit staff ideas, and make sure that staff have satisfying, manageable roles.

“For all the advances in technology and analytics, the importance of employees must not be minimized,” the authors write. “Retailing is fundamentally about people—principally the customer but also the employees tasked to service their needs.”

3. Don’t hire against other deep-rooted company values

Smart hiring is critical to building a company culture around particular principles. This requires leaders ask an important question that can often get lost in the shuffle of competition hiring priorities: What is required to be a good cultural fit in our company?

While many hiring processes place a premium on the short-term benefits and prior work experience of a potential hire, the primary goal of influencing others throughout the organization to avert risk likely won’t be achieved if the values important to achieving that goal aren’t aligned in the person being brought onboard.

Put simply, even though they look great on paper, they might not effect the change you want if they don’t embody the values that bring your company together.

If, for instance, an organization has found that the cultural importance it places on embracing and encouraging a sense of optimism is key to building and maintaining trust and healthy relationships, a highly-skilled and experienced security professional won’t have the positive impact you’d expect them to have in your organization if they prove to be an unrelenting pessimist.

Don’t sacrifice the deep-rooted values that gives your culture practical utility when changing course toward a more shrink-conscious destination. Square pegs will never fit in round holes no matter how shiny they are. Make sure your most important values are reflected in the people you bring on when building a culture rich with high-value relationships at every level.

4. Inspire shrink elimination principles beyond the loss prevention team

“Optimization,” “leadership,” and “integrity” are core values found among just about every loss prevention team. But holding up these or other universally-applicable core values as the driver’s behind your LP team’s success misses an important fact about how groups identify their purpose: employees don’t turn to statements on the company website to look for clues on how to behave; they look to each other.

Company cultures feel most genuine and garner the greatest buy-in when they’re manufactured by the people representing each department. Rather than simply declaring a shrink elimination culture and working backwards to give it legs, start by engaging your loss prevention team to understand how their roles connect with the broader goals everyone else is working to achieve and how those passions and values can be realized in everyone.

Part of what makes loss prevention unique and particularly powerful for culture-building is the ability to change attitudes. While this happens day-to-day at the store level through working with management and floor staff to improve a process or fix an issue, that proactive approach to making change happen can be scaled to effect company-wide cultural changes when given the voice to do so.

Learn how you can enhance your company’s shrink reduction culture with loss prevention technologies in our free eBook.

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