Monday, June 29, 2009

One Voice? More Like Two Agendas

The expected merger of the National Retail Federation (NRF) and the Retail Industry Leaders Association (RILA) has been nixed. The two boards of directors of the retail industry’s leading organizations called off the merger last week, an unexpected development considering the groups’ excitement when the merger was announced two months ago.

The executive committees of both organizations voted unanimously for the merger previously. The new organization was expected to have a powerful lobbying presence that was “going to knock the socks off of Washington, D.C.,” NRF VP of public relations Scott Krugman told me then.

However, the full boards apparently couldn’t find common ground between the two organizations’ goals and agendas, according to the Washington Post. The NRF, with approximately 2,500 members, is the world’s largest retail trade association, while RILA, with about 200 members, includes many of the retail industry’s largest companies.

NRF President and CEO Tracy Mullin, who announced her retirement in April and is in the final year of her contract, will remain with NRF.

Friday, June 26, 2009

Are You Sure MasterCard’s PCI Ruling Affects You?

If you’re a Level 2 retailer who has been dutifully completing your annual PCI self-assessments — quietly chuckling to yourself about the stricter rules facing Level 1 retailers — the joke’s now on you. And if you’re a Level 3 retailer, guess who might be next?

MasterCard has decided that all Level 2 merchants, those who process between 1 million and 6 million credit card transactions, must have on-site PCI validation assessments completed by December 31, 2010. Previously, Level 2 retailers, roughly 10,000 in the U.S., were only required to submit annual self-assessments. (Click here for MasterCard’s merchant level definitions.)

Level 2 retailers, who typically have between 50 to 250 locations, should start planning now in order to meet the December 31, 2010 deadline. “It will take six months to a year for a Level 2 retailer to implement this,” Retail Technology Experts president Mahendran Ramanathan told me.

However, retailers should also remember that the transactions are counted per each card brand. For example, if your company processes 2 million credit card transactions, you aren’t necessarily a Level 2 retailer. You may have 800,000 MasterCard transactions, 600,000 Visa transactions, and 600,000 American Express ones. In that case, you’re a Level 3 retailer and thus are not required to have an on-site validation assessment.

At least for now. “You can see the trajectory on this,” Reliant Security managing partner Mark Weiner told me. “Bit by bit, the card brands have been tightening the validation requirements. At some point, the validation requirements are going to dip lower and lower into the other levels.”

Sunday, June 21, 2009

Find Ways To Lower Your Rate Of Return Fraud

Return fraud was a hot topic at the 2009 NRF Loss Prevention Conference & EXPO for good reason. With a recessionary economy, returns increased 20% in 2008, and the NRF estimates return fraud at $11.8 billion annually.

Lowering your rate of return fraud can significantly contribute to your company’s bottom line. “Margin erosion is where you see return fraud do damage,” said Mark Gray, VP, loss prevention & risk management, TJX Europe. He spoke at an NRF LP breakout session titled, “Optimizing Returns: Preventing Return Fraud and Impacting Net Sales.”

Gifts-and-accessories retailer Coach deals extensively with return fraud because of the gift-giving nature of its products. The company attacks the problem by integrating its POS records and refund databases to compile a list of repeat returners. “The way to get the greatest impact on fraudulent returns is to focus on the most abusive rate of returns without a receipt,” said Dan Hafford, Coach loss prevention divisional VP, during the session.

Coach sends a certified letter to each frequent “returner” — many of whom have never made a purchase from Coach. The company informs them that they are no longer allowed to make returns without an original receipt. Coach has sent out 275 such letters in 2009 and more than 2,200 since initiating the program, resulting in significant company savings.

Has one of your LP initiatives helped your company cut return fraud? If so, post a comment
here or send me an e-mail.

Friday, June 19, 2009

Turn LP Into A Profit Center

Loss prevention (LP) is evolving into a revenue generator, with technology among the largest drivers of the change, according to retailers and vendors at the 2009 NRF Loss Prevention Conference & EXPO. In light of the sagging economy, LP executives need to show ROI on their initiatives and demonstrate how their efforts can impact the company’s bottom line.

I attended several sessions that touched on LP’s new revenue-driving role and technology’s part in it, and also spoke with several industry veterans about the shift. “It boils down to this: How does LP equate to earnings per share?” said Kohl’s Corporation loss prevention SVP Randy Meadows in a breakout session titled, “The Evolving Role of Loss Prevention.”

LP executives need to find revenue by tightening their existing programs and embracing new technologies. For example, POS system enhancements and upgrades automate promotions for greater efficiency, and along with video analytics, can help limit discount abuse, cashier fraud, and operational inefficiencies.

You can also find revenue and drive sales by upselling customers making returns. “Come up with a program to treat returners to a same-day discount or coupon — because 99% of them are your good customers,” said Mark Hilinski, EVP, business development and strategic accounts for The Retail Equation. “Try to get customers to spend their return money before they leave the store.”

For a more detailed look at this story, visit our site Monday and click on the "From the Editor" tab.

Friday, June 12, 2009

Organized Retail Crime On The Rise

Organized retail crime (ORC) struck 92% of retailers during the past year, an increase of 13% from two years ago, according to a new NRF survey. And most (73%) of the survey respondents report that the level of ORC is on the rise, compared to just 48% who felt that way in 2006. The NRF surveyed 115 retailers for its fifth annual Organized Retail Crime survey.

Interestingly, even with the economy forcing many retailers to reduce overall staff and expenses, 42% of the respondents say their company is allocating additional resources to address ORC. Perhaps that’s because retailers feel law enforcement is underestimating the problem; 61% do not believe law enforcement even understands the complexity and seriousness of ORC. (Click on these links for stories about what retailers need to know about ORC and its impact on retailers.)

According to the NRF, ORC refers to groups, gangs, and individuals who steal retail merchandise in substantial quantities through both theft and fraud as part of a criminal enterprise. Some of the more sophisticated criminal activity includes “ticket switching” — changing the UPC bar codes on merchandise so they ring up differently at checkout — and using stolen or cloned credit cards to obtain merchandise or to produce fictitious receipts for use in fraudulent returns. Popular targeted goods include designer clothing, gift cards, and electronics.

Leading LP-conscious retailers continue to incorporate advanced technology in their efforts to cut into ORC. For instance, the use of video surveillance software and hardware is on the rise. And that’s a good thing, according to Loss Prevention Foundation president Gene Smith: “The ability to select and apply the appropriate cost-effective technology is an important aspect of what determines the success of many LP programs.”

I’m headed to the 2009 NRF Loss Prevention Conference & Expo this weekend. I’ll follow up next week with more on the retail industry’s efforts to combat ORC, fraud, and theft.

Wednesday, June 10, 2009

Summer Reading For Retailers

Before you pick up another James Patterson novel for your summer read, grab a book that could boost your profitability before Labor Day. Herb Sorensen’s Inside the Mind of the Shopper: The Science of Retailing examines decades of market research to show how you can drive shopper behavior to boost sales in your stores.

Sorensen is the founder and global scientific director for TNS Sorensen, a market research company whose retail partners include Wal-Mart, Target, Best Buy, and Home Depot, along with a wide range of supermarkets, convenience stores, and drug stores. Among the company’s services and research methods is an offering called PathTracker, a technology that helps retailers understand in-store customer behavior to improve merchandizing and sales opportunities.

PathTracker is an electronic customer tracking system that records the coordinates of shoppers from the time they enter a store until checkout. The system employs RFID technology in large-format stores that have carts or baskets; in smaller stores or specific areas within a store, it uses digital video technology. Sorensen staffers then use the PathTracker Tool Suite to integrate the large volume of customer behavioral data with store sales data to produce a chart- and graph-laden report that suggests how to optimize store real estate.

Sorensen believes time is literally money for retailers, writing, “Across many studies, I have found a basic principle: The faster you close sales — the less time wasted for the shopper — the more sales you will make. In fact, when we charted this effect across a series of typical stores, we found that the efficiency of the shopping trip was directly related to overall store sales.”

There is a lot of practical advice you can instantly apply. Here are five observations and tips from Sorensen’s book to help retailers drive sales.

1. Top-selling items — your top 5% — have the greatest potential for increased sales.
2. Tell shoppers exactly what those top-selling items are — like Amazon does.
3. Put top-selling items on high-traffic pathways convenient to the shopper.
4. Blizzards of tagged special offers are not really offers at all, just noisy clutter.
5. Use reduced pricing very selectively, and prominently, to convey the value message.

Friday, June 5, 2009

Why Aren’t You Twittering With Your Customers?

Did you ever wonder why someone would use Twitter to tell the world their cat looks so cute? Or why a person would devote more attention to their Facebook than to their neighbors?

Stop wondering — and start finding ways to make people’s social media obsession pay off for your company. The psychology behind users’ online activities isn’t necessarily important; the fact that people are online and engaged is. As a retailer, you need to create ways to capitalize on this desire to interact, to have a voice, and to be heard on the web.

One recent story about social media caught my eye, because it focused on how small businesses are now embracing it, though perhaps not as effectively as they should. The article cited a recent Sage Software and AMI-Partners study, which found that the top three reasons small businesses use social media are: 1) for responding to customer questions, 2) for networking, and 3) for reference and educational purposes.

The article also suggested, however, that too few businesses are using it to actively influence purchasing decisions. Does that describe your company?

Why not use Twitter to promote an upcoming 10% off sale, or Tweet about the special deals you’re offering on overstocked inventory? Does your Facebook page deliver an impactful message to potential customers, or is it formulaic, cookie-cutter, and forgettable?

Along those lines, I’m working on a story about the impact of social media on retail, and I’m looking for retailer experiences, opinions, and feedback. Are you social-media savvy and getting results you’d like to share? Do you have success stories to pass along, or know someone who does? Maybe social media isn’t working for you, or you think it’s an overhyped fad. Let me know that as well. You can click here to send me an e-mail, or post your comments to this blog below.