LP Magazine

SEP-OCT 2017

LP magazine publishes articles for loss prevention, asset protection, and retail professionals covering shrinkage, investigations, shoplifting, internal theft, fraud, technology, best practices, and career development.

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SOLUTIONS SHOWCASE APPRISS RETAIL Controlling Shrink by Monitoring Sales-Reducing Activities L oss prevention departments have, for some time, successfully examined risk flags within point-of-sale (POS) transactions to identify exceptions that may indicate theft or loss. These risk flags, many of which decrease potential revenue, are increasingly categorized as SRAs or sales reducing activities. Today, monitoring SRAs to drive shrink reduction is attractive for several reasons: ■ They are identifiable with analytics. ■ They can be indicators for both fraud and unintentional loss. ■ They are controllable through policy, procedure, and systemic changes. ■ Remediation delivers ongoing profit protection. In this article, Appriss Retail will review some common retail POS SRA events and their connection to shrink. Common POS SRA Categories Many activities that generate SRAs exist to improve customer service and to correct errors that occur occasionally in the normal course of conducting a sales transaction. The goal of analyzing high-level SRAs is not to eliminate all instances of the activity but rather to determine the natural frequency at which these events occur within the organization and to identify behavioral outliers from the baseline. Some SRA categories commonly seen across retail verticals are: ■ Line voids and error corrects ■ Post voids ■ Suspends ■ Coupons ■ Price modifies ■ Refunds ■ Tender swaps ■ Tax override ■ Manual entries Your retail business process may not encounter all categories, but your point-of-sale captures any SRA events and records them in the t-log. From there, exception-based reporting (EBR) solutions, like Appriss Retail's Secure™ Analytics, can be used to analyze SRAs in detail and combine them with additional risk variables at any level within the store operational organization. Individuals with store-level responsibilities can find hotspots and resolve root causes in individual locations or request retraining for specific associates. Regional and corporate-level personnel can find and address the broader issues and causes using similar analyses for the whole organization. An uptick in SRA frequency can indicate fraudulent activity, but when employee fraud is not found, the analyst should look for systemic or execution problems, as store employees may have developed a work-around for a problem that is not readily visible to the corporate office. Shrink, Loss, and SRAs Fraud—The Short-Term Concern Even before there was a specific term, loss prevention pros monitored what we now call SRAs to find fraudulent activity. This works well when the EBR system is in the hands of a skilled user. In the course of a year, a retailer can save hundreds of thousands—even millions—of dollars and achieve excellent results by focusing on the largest cases. Independent research by graduate students at the University of Texas at Austin showed a strong relationship between SRAs and fraud. The researchers ranked a national convenience retailer's stores against each other for SRAs and calculated a risk factor. The 20 percent of stores with the highest risk factors were considered likely to have experienced fraudulent activity. Systems and Processes—The Long View A report from LP Magazine stated that in one retail chain, 77 percent of the employees who were terminated for stealing from their employers took advantage of an opportunity the employer created. As the cost for criminal prosecution continues to rise, retailers are increasingly likely to overlook petty theft and focus only on the big cases. While a justifiable use of resources, this approach should not exclude the methodical analysis of these SRAs, which offer a better opportunity for success. By tracking SRAs and remediating the weaknesses they reveal, retailers enjoy immediate savings as well as ongoing profit protection. Consider these scenarios: ■ A retailer attempts to install a software modification to block expired coupons from being redeemed, but a software bug prevents the modification from taking place, and the coupons continue to be accepted. ■ Confusion over a new employee discount policy leads to the sale of merchandise below cost. ■ Professional discounts are extended to shoppers based on their appearance instead of through identification. Those examples make it easy to understand how using SRAs to find and fix systemic problems can deliver lasting margin-protection results. As an added benefit, resolving these issues clears the clutter from transaction analysis, which makes it easier to identify employees who intended to defraud. 61 LP MAGAZINE | SEPTEMBER-OCTOBER 2017

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