StORES Magazine - August 2007 - (Page 72)

LOSS PREVENTION Keeping Score System tracks products from sales through returns BY LEN LEWIS A billion here, a billion there and pretty soon you’re talking about real money,” the late Sen. Everett Dirksen once remarked. The same philosophy might be applied to retailing: An industry under assault from thinning margins, cutthroat multichannel competition and escalating rates of organized theft can’t afford to give away billions annually in fraudulent returns. Quantifying returns is a difficult task, but industry observers put the number at about 9 percent of overall sales. That rate can jump to 10 to 15 percent on items like mp3 players, however, and as it is affecting our bottom line,” says Perrin Kaplan, Nintendo’s vice president of marketing and corporate affairs. “But when we looked closely at the returns, we realized that it was not a product quality issue. It had more to do with our retailers not having the tools to enforce return guidelines and their inability to detect fraud.” The SIRAS system was launched at Wal-Mart in 1996; it proved so successful that Sega, Nintendo’s competitor, asked if it could license it. Although it was developed to track videogames and other electronics, SIRAS quickly attracted vendors in other categories, wait until they introduce a new item.” Major retailers like Wal-Mart, Circuit City, Best Buy, Kmart, Target and Sears are using the system. “We haven’t gotten to the small 10-store chains yet, but eventually we’ll get there because SIRAS’ applications can be used for things other than returns,” Junger says. These include the ability to identify employee theft or sweetheart returns and to track stolen goods on eBay or Craigslist. Offers some flexibility Returns policies can be varied by item type within the same store, which “cuts down on the huge amount of returns,” Junger says. “Additionally, the system processes all information, so store employees don’t have to remember what the policy is for a particular item.” Flexibility is also built into the system. If an item is brought back a day after the return period expires, SIRAS “freezes the cash register and nothing can be processed until a manager intervenes in the situation,” Junger says. SIRAS does not store customer or credit card information. “We identify products, not people,” Junger says. And it’s not always about tripping people up or catching bad guys. “We provide a customer service. If someone has lost their receipt, a store can take [an item] back by scanning the bar code and immediately determining whether it was purchased from [one of] their stores.” The impact on retail sales and profits varies, but the system is designed to provide a monthly breakdown of net sales. “If you sell a hundred pieces and are taking 10 back, then you only sold 90,” Junger says. “If we reduce that by five, you’ve just increased your net sales by 5 StORES percent.” Len Lewis is a veteran retail industry journalist and commentator and the editorial director of Lewis Communications. WWW.STORES.ORG high as 20 percent on flat panel TVs. In fact, Costco’s last quarterly earnings report specifically blamed returns in electronics for flat sales and earnings. “Internal or external shrink and excessive returns can have a huge impact on profits since all costs go to the bottom line,” says Paul Junger, president of Nintendo subsidiary SIRAS, developer of a proprietary system that enables retailers to track individual products by serial numbers or bar codes on the packaging. “We were concerned about the number of products being returned and how 72 STORES / AUGUST 2007 including small appliances, sporting goods and air conditioners. “It’s for anything that has a serial number or UPC code that can be uniquely identified,” Junger says. SIRAS works best when retailers and manufacturers work together on its implementation. “Some manufacturers have to do a little tweaking to get on board, like putting the serial number on the packaging, not just the product,” Junger says. “Some vendors do a running change on an existing product, while others http://WWW.STORES.ORG

Table of Contents Feed for the Digital Edition of StORES Magazine - August 2007

Contents Executive Editor's Page President's Page Upfront NRF News Retail People Concept2Watch Supermarkets Cover Story Online Marketing In-Store Marketing RFID Data Management Payment Systems Software Loss Prevention E-Commerce Risk Management Communications Loyalty Marketing Human Resources Mobile Commerce Loeb Retail Letter Arts Update Point of View Advertising Index Retail Industry Calendar

StORES Magazine - August 2007

For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.