In September, more than 100 Zebra customers and partners gathered at the Walt Disney World Swan & Dolphin Resort in Orlando, Florida, for our Prescriptive Analytics Collaborative Training (PACT) User Conference 2019. Through a series of keynote presentations, thought leadership panels and roundtable discussions, these customers – all of whom are retailers – shared how prescriptive analytics is helping to address their shared pain points and improve their profits, margins and revenue.
They spoke at length about the different ways that Zebra Prescriptive Analytics solutions, which leverage machine learning and pragmatic artificial intelligence (AI), enable them to understand:
- What is happening in their stores
- Why it happened/is happening (root cause)
- Who should respond
- How they should respond in order to positively impact revenue, now and in the future
This year, there were three key takeaways that I strongly believe every retailer should keep top of mind, whether you’re using Zebra Prescriptive Analytics solutions right now or not:
1. Worried about losses from theft and fraud? There could be a much bigger problem at hand...
Theft and fraud are certainly a major source of loss for retailers. But they may not be anywhere near your biggest sources of loss. Have you thought about how much a simple mistake at the register can affect your balance sheet? You may be envisioning a cashier giving out the wrong change, but that’s still only a sliver of loss. More likely, a bigger chunk of your losses come from transactional errors that have much broader impacts across the business.
For example, one of our customers, a mid-Atlantic grocery chain, shared a few recent issues it had discovered within its point-of-sale (POS) system. In one case, the Zebra Prescriptive Analytics solution it was using caught a change of behavior: there had been an increase of manually-keyed “NON-FOOD” returns chainwide. Since manually-keyed items allow a cashier to enter an item’s price without identifying the item, the grocer’s asset protection team followed up as soon as Zebra Prescriptive Analytics sent it a prescriptive action to investigate.
The team found that these mysterious “NON-FOOD” items were actually gift card returns. The grocer’s policy on gift cards is that once they are activated, they become the responsibility of the respective card vendors. They cannot be returned and refunded at the store of purchase, since the funds went directly to the vendors, not the grocer. However, many cashiers were unaware of the policy and carried out the refunds anyway. With no POS function to refund gift cards, the cashiers simply performed a manual item return, refunding the gift card amounts under the generic “NON-FOOD” label. This hurt the grocer in two ways: not only did it erode margins, but it also increased shrink in the NON-FOOD category, which threw off the retailer’s balance sheet. The prescriptive analytics tool caught this problem early, so major losses were avoided through speedy retraining. However, this had the potential to become a much bigger problem over time. Imagine if just three cashiers at one store wrongly refunded $100 in gift cards before you caught it. That’s $300 lost. Now, multiply that by the number of stores across your business. The losses add up quickly.
As another example of costly register mistakes, the grocer’s Director of Store Operations explained an issue that cashiers were having when ringing up produce. As best practice, cashiers enter a four-digit code called a PLU in the register to ring up produce by weight. However, many were accidentally entering that code for produce sold by the piece, such as avocados or melons. In one incident, a cashier entered the PLU code for avocados (4046) in the “quantity” field. So instead of ringing up the customer’s single avocado, he accidentally entered a quantity of 4,046 avocados! The fix was easy enough – the cashier voided it. But he made another mistake: he voided the avocados as a grocery return, not a produce return. This had two implications:
- The store’s grocery department was billed for the void, worth more than $8,000.
- The store’s produce department saw 4,046 avocados removed from its inventory sheet. The grocer’s replenishment system saw this as a shortage and placed an order for another full stock of avocados, which cost the grocer even more.
According to the Director of Store Operations, the grocer loses much more money to simple cashier errors like the above two versus theft and fraud. This is why I always tell my retail customers to pay close attention to potential training issues, especially at the register. A good prescriptive analytics solution should be able to monitor your transactional activities at all times, alerting the best responders to potential issues in near-real time.
2. Return on investment (ROI) isn’t just measured in dollars.
When you invest in any type of technology for your workforce, you’ll likely want to know about ROI. Cash savings may be one of the flashier types of ROI, but it can exist in other forms too.
A major topic of discussion at this year’s PACT was around risk mitigation, especially around non-compliance. Risk exists across every retail business in one form or another. It’s a major concern of loss prevention and asset protection teams. Mitigating risk is an activity that doesn’t necessarily result in hard-dollar savings, but still plays a role in ROI. Just one incident of non-compliance can have a ripple effect throughout the business, with much more severe losses than just cash.
One general-retail customer shared its experience battling non-compliance at the store level. This retailer sells controlled substances such as alcohol and tobacco in most of its stores. Its cashiers are required to check a customer’s ID and enter the customer’s birthday to verify age for every such purchase. Yet somehow, minors were still purchasing alcohol and tobacco.
This type of risk holds financial and legal ramifications, so the customer approached Zebra to see if we could help. We set them up with a pattern (an algorithm that looks for specific behaviors in data) to monitor the birthdays that cashiers enter. It flags cashiers who enter the same birthday multiple times per day. It is likely that this repetitive date is a generic one the cashier is entering to save time. Hundreds of cashiers have already been caught selling alcohol and tobacco to minors, and the retailer has a no-tolerance policy in place. Any cashier who knowingly sells to a minor is subject to instant termination. Some of the false dates were found to be the result of a training gap while other cashiers wrongly believed that skipping the ID check would save time at checkout. The cashiers involved in these instances were simply warned and given retraining.
Because every controlled-substance sale to a minor results in a hefty fine for the retailer, improving compliance through risk mitigation was essential. Its results were just as impactful as any hard-dollar savings.
Even better, we learned that the retailer was able to get some of the fines against it dismissed. How? Because it showed the prescriptive analytics solution to the courts, proving that it was doing everything in its power to keep controlled substances out of the wrong hands, such as monitoring the birthday entries. It also demonstrated its reverse logistics process for toxic materials. As a result, the courts showed leniency.
3. Asset protection is a team sport.
As an asset protection executive for a hardlines customer reminded us, retailers share the “common goal of reducing total retail loss, shrink mitigation/reduction, driving accuracy through theft identification, prosecution and operational process improvement.” But the retailer’s investigative team, which at the time was referred to as the “loss prevention” team, came to realize that it could not handle all asset protection-related activities in-house or effectively do its job by working in a silo. Achieving the aforementioned goal required cooperation with multiple parties, including local law enforcement, the Zebra Customer Success team and other divisions within the organization. Ultimately, the retailer’s team implemented what it called a “toolkit”: cameras, personnel, prescriptive analytics, inventory tags and more, all working together to identify how to improve the retailer’s profits, margins and revenue. Realizing how collaborative and expansive the “investigative” team had become with the Zebra Predictive Analytics solution and other tools, the retailer decided to changed the Loss Prevention department’s name to Asset Protection.
In other words:
- It’s not enough to simply analyze your data and extract insights on what’s happening in your organization. You must act on those insights to see real ROI, with the help of a prescriptive analytics solution.
- Ensuring employee compliance with policies may seem challenging. But it’s a challenge worth taking on, as a single incident of non-compliance can impact the business on a much larger scale.
- Asset protection requires a concerted effort by your internal teams, technology solution providers, supply chain partners and community partners.
- Understanding total retail loss is critical to the retail organization. The concept must be explained to the C-suite, after which it should be addressed by cross-functional teams throughout the organization. Each function on these teams should own the aspect of total retail loss that they are best-qualified to address.
Other News Shared at PACT 2019
The Zebra team also took the stage throughout the conference to share some exciting news and updates. For example, I provided an update on the transformation of the Zebra Predictive Analytics solution since the Profitect acquisition along with key retail opportunities that we plan to pursue. Zebra CEO Anders Gustafsson then introduced the audience to some of Zebra’s other solutions. CTO Tom Bianculli shared insights on Zebra’s strategy and vision around the acquisition and also demonstrated Zebra Predictive Analytics on Zebra’s new EC30 device. Both leaders emphasized how the Zebra Predictive Analytics solution will benefit and transform results for retailers at the edge. Watch this video for my 2-minute recap: