The Time for Business Intelligence is Now

March 29, 2011

Steve Rowen

A few weeks ago, I took the opportunity to talk about the new roadblocks that many retailers’ loss prevention departments are reporting as the US economy normalizes. The net of that piece, derived from our most recent loss prevention report, was that it is becoming harder to prove the ROI for new initiatives designed to prevent retail shrink as theft in stores appears to be happening less frequently than it was just a few months ago.

However, as more retailers are reporting an LP model that is fundamentally broken (planned well, but executed poorly), the overarching problems facing today’s retailer are not solely driven by shifts in the economy: they are systemic to a culture whose adoption of new technologies has far outstripped its willingness to adopt the necessary resources to leverage the true value of those technologies.

Too much data without the proper staff or technologies to review it has created a significant need for enhanced business analytics (56%, Figure 1).

Figure 1: Retailers Need More Tools and Staff to Get the Job Done

Source: RSR Research, February 201

Digital video surveillance tools are no doubt both saint and sinner in this new conundrum. Past years’ research has shown that almost every major retailer has adopted the hardware components (cameras and to a lesser degree, networks), required to have a DVS LP solution. The question remains what to do with them now.

Granted, the sophistication these technologies have given retailers provides a better opportunity to react to in-store crime than retailers have ever had before. But even now, beyond their use in forensic investigation to flagged events, most retailers continue to struggle with practical ways to make day-to-day sense of the overwhelming amount of data these tools create. As reports pile up, all members of the enterprise — from those choosing which products to order, to those choosing where those products should be placed in store, and all the way to those trying to make sure those products aren’t stolen — everyone stands to gain profoundly from smarter, less labor-intensive intelligence software; none more so than those in the LP department. The time to take advantage of next-gen analytics is at hand.

Time to Get it Right

Also, our respondents in this year’s report increasingly think LP reports up the wrong executive. But who is that Executive, and more importantly, who should it be? (Figure 2)

Figure 2: A Still-Broken Model

Source: RSR Research, February 2011

The answer may not be so difficult to find. For starters, more respondents reported LP reporting up to the CEO/COO than ever before (39% this year, 26% last). At the same time, the number of those reporting to the CFO dropped significantly (38% last year vs. 23% this year). And throughout our years of study, RSR has always maintained the LP department should not be reporting to Store Operations — such a hierarchy is like having a fox in charge of guarding the henhouse.

With more LP departments feeling the crunch of being understaffed and reporting a harder time getting the BI tools needed to perform their tasks properly, it would seem a logical conclusion that LP is a most appropriate direct-report to the CFO. Retail Winners and larger retailers agree:

  • Fewer Winners (34%) have their LP departments report to the CEO/COO than average and lagging performers (44%);
  • Only 17% of Winners’ LP departments report to Store Operations, vs. 34% of all other performers;
  • Mega-retailers’ ($5 billion plus) number one choice to oversee Loss Prevention is the CFO (35%); only 18% entrust that functionality to Store Operations.

We invite all RPW subscribers to read the full report, Loss Prevention in a Post-Recession World.

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