Surviving Q4 Intact

This article was originally written in 2016. With Q4 on the horizon and companies already feeling the chokehold of the economic impact of the ongoing pandemic, salvaging a profitable year has an even greater potential ramification. With a depressed economy, unparalleled unemployment and sustained social tension, greater challenges than usual appear to be looming for retailers in Q4. It's time to double down on the efforts to combat inventory losses.

Retail companies spend months gearing up for the much-anticipated surge of the Christmas shopping season. From product levels to staffing, from traffic count to transactions, businesses swell to distorted levels, all lending to hopes of a strong year-end finish. While this period can seem chaotic, it is the most pivotal component to achieving annual financial goals. Yet for all its importance and all the advance planning, some of the "gains" of the 4th quarter are invariably nullified by a notably undesirable attribute of this period; an increase in loss prevention-related issues. 

It's no secret that an influx of seasonal employees coupled with increased customer traffic, transactions, tempo and the general chaos of this period, set the stage for some bad things to happen. For many retail companies, there is an interesting juxtaposition that develops; in a time when key initiatives and policies designed to control inventory shortage are paramount, many retail leaders become tempted in the name of increased business, to relax some of these safeguards. The attitude of, " We'll take our chances and worry about things in January," is a game of Russian roulette and more often than not, yields completely preventable losses. Even an "uneventful" year through 3 quarters is no guarantee of a successful year for acceptable inventory loss levels....too many things can go wrong in Q4. 

Inventory losses are opportunity-based; they occur in the absence of checks and balances or control measures. Relaxing or eliminating established controls inherently yields an increase in shortage. Recognizing that maintaining loss prevention standards takes effort on the operational side of the business, finding the balance of expectations can be a delicate matter. You should never "give away the house" in the name of increased business. However, maintaining tight controls in a period of higher volume, could potentially create operational challenges that directly affect the ability to meet the demands of servicing customers. 

To successfully negotiate the surge in business in Q4, companies need to include developing a loss prevention strategy along with all the other initiatives that are set in motion for the Q4 season. Though many companies reduce loss prevention activities such as store auditing as to not interfere with the business, it remains important to maintain some type of visibility to understand what is occurring in stores. 

Here are some of the big picture items that should be included in a Q4 action plan: 

• Seasonal Hires: These employees represent a higher risk from day one. Be very selective and verify their background. If possible, use seasonal employees from the previous year....at least they have a track record. Even with that history, however, verify their background and account for what they've done since last employed by you. 
• Use exception based reporting: This is one of the best tools to monitor a large volume of data to quickly isolate unusual activity. 
• Monitor cash/deposit records daily. Q4 is notorious for internal theft involving cash. 
• Maintain accountability for all associates. 
• Maintain physical security standards. Ensure restricted areas, lock-up cages and case lines remain secure. When associates are preoccupied with long lines of customers or are in and out of locked areas or case lines frequently, there is a tendency to leave those areas unlocked. Security standards in these areas should never be relaxed. 
• Respond immediately when potential dishonest activity is identified. Don't wait until the business slows down. 
• Talk about LP: Every day, associates undoubtedly hear about sales numbers and goals, credit apps, loyalty incentives and many other sales driven statistics. Make sure they hear about loss prevention topics/priorities as well. If it's not your priority, it won't be theirs.