Retail Audit

Value

Value from suppliers Value to customers Value to retail….

What’s retail audit?

Systematically examining and evaluating a firm’s total retailing effort or specific aspect of it.

Purpose

To study 1. what a retailer is presently doing 2. appraise performance 3.make recommendations for the future.

What does a good audit include? Regular audits In-depth analysis Systematic analysis of data Unbiased perspective Willingness to uncover weakness Strengths that can be exploited

How to perform a Retail Audit? To perform a retail audit the marketer should keep the

following views in mind. Psychographics of consumers- To Draft Retail value

chain Brand Portfolio –To fill retail value chain  draft with

brands and products Retail Format- To fill the retail value chain draft with

resources. Service blue prints- Connect the resources and

brand/products in a retail value chain.

Psychographic of Consumers

What is life style of your consumers? How much time they plan for shopping? What is the key driver for shopping (passing

time, Money)? What is their disposable income? Are they brand, Price or value conscious or a

subset of it (BPV Analysis)?

Brand Portfolio

It defines the brand /product span that we have to click the consumers.

Every retail product line must have a combination of products for serving the two basic strategic purposes.

  Penetration builders Profit builders  

Retail Format

The main objective of retail format should be to make consumers’ process of shopping very cozy.

The factors which affect the process are:   People   involved System Involved Infrastructure (Show Room space, Parking

space, interiors, sitting arrangement)

Service Blue Prints

It connects the brand or product with the resources for accessibility to consumers.

Service is not only inside the show room but also outside (parking facilitating and others).

Retail Audit Process

Retail Audit ProcessDetermination of

who does the audit

Company specialists

Department

managers

Outside auditors

End of

Fiscal Year

When Under taking

Physical Inventory

Horizontal

End of

Calendar Year

Vertical

When Audit is Conducted

Areas to be Audited

Development of Audit Forms

Conducting the Audit

How long should audit

take?

Should employee’s be notified in advance?

Is audit to be disguised

or non disguised?

Should audit occur while retailer is open or closed?

How is the final report

to be prepared?

Reporting the results of audit to management

Managements response to the audit

Who does the audit

Internal audit

company audit specialist

company department manager External audit

Auditing time and frequency

Logical timing : End of the calendar year End of the retailer’s annual reporting year When physical inventory is conducted

Same period (s)- so that comparison can be easy

Areas to be audited

Strategy Operations Identifying strengths and weakness

Types of audits

Horizontal retail audit :

Overall performance ie goals, customer satisfaction, retail strategy mix, implementation

Vertical retail audit :

firm’s performance in one area – credit function, customer service, merchandise assortment, interior displays

Audit Forms

Planning

1. Have you thought about the long-term direction of your business?

2. Have you developed a realistic set of plans for the year’s operations?

3. Do your plans provide methods to deal with competition?

4. Is there a system for auditing your objectives?

Customer Analysis (who are your target customers and what are they seeking from you?)

1. Have you profiled your customers by age, income, education, occupation, etc.?

2. Are you aware of the reasons why customers shop with you?

3. Do you ask your customers for suggestions on ways to improve your operation?

4. Do you know that goods and services your customers most prefer?

Organization and Human Resources1. Are job descriptions and authority for

responsibilities clearly stated?

2. Have you an effective system for communication with employees?

3. Do you have a formal program for motivating employees?

4. Have you taken steps to minimize shoplifting and internal theft?

Operations and Special Services1. Do you monitor every facet of your

operations in terms of specific goals?

2. Do you provide time-saving services for greater customer convenience?

3. Do you have policy for handling merchandise returned by customers?

4. Do you get feedback through customer surveys?

Financial Analysis and Control Do your financial records give you the

information to make sound decisions? Can sales be broken down by department? Do you understand the pros and cons of the

retail method of accounting? Have you taken steps to minimize shoplifting

and internal theft?

Buying

1. Do you have a merchandise budget (planned purchases) for each season that is broken down by the department and merchandise classification?

2. Does it take into consideration planned sales, planned gross margin, planned inventory turnover, and planned markdowns?

3. Do you plan exclusive or private brand programs?

4. Do you take advantage of cash discounts and allowances offered by your vendor/supplier?

Pricing

1. Have you determined whether to price below, at, or above the market?

2. Do you set specific markups for each product category?

3. Do you know which products are

slow-movers and which are fast?

4. Have you developed a markdown policy?

Atmospherics

1. Are the unique appeals of your business reflected in your image?

2. Have you figured out the best locations for displays?

3. Do you know which items are brought on “impulse”?

4. Do you use signs to aid your customers in shopping?

Promotion

1. Are you familiar with the strengths and weaknesses of various promotional methods?

2. Do you participate in cooperative advertising?

3. Do you ask customers to refer your business to friends and relatives?

4. Do you make use of the community projects or publicity?

Audit of EnvironmentalIssues – Is the store recycling plastics and non-

contaminated cardboard? – Does the store sell reusable shopping bags? – Does the store have receptacles for the

Customer to recycle bags and batteries?

Conducting the audit

How long to conduct the audit? Should they inform their employees ?

- disguised audit

- non disguised audit

When to audit?

- when the retail is open?

- when the retail is closed?

Reporting Audit findings & Recommendations to Mngt Audit report – formal/informal, brief/long,

oral/written Mngt should treat each and every point of the

audit result seriously.

Type of reports

– Top Finding Reports – Score by question – Score by section (Cash, Front-end, Food

Safety)

Responding to an Audit

Strengths – capitalise on them Weakness – revise the strategies to

overcome this

Constraints in conducting an Audit Costly Quite time-consuming Employees may feel threatened & may not co

operate Incorrect data/Insufficient data Management – not responsive to the findings

Example

EPICOR RETAIL - AOM

AOM processes transactional data to enterprise system

AOM gives control over all operations and enhances business decision

AOM is designed to meet challenges in multichannel retail chains

100 retailers- 20,000 stores and $50 billion annual transactions

Data solution for retail environment Integrity of data flowing to an enterprise Improve accuracy of all applications Strengthen company’s bottom line profitability Monitor store operations

Data Management Applications Sales audit Loss prevention Voucher management Employee productivity and commission Credit settlement

Video Case

Retail Dashboard

MetricStream

Benefits of the MetricStream Solution Recent regulations and growing losses due to

shrinkage and other operational inefficiencies have placed dependable audit program as a key component in a business’ success.

The MetricStream solution enhances existing audit process by providing capabilities that cater to the present day retail challenges such as real time monitoring and access to actionable data, increased frequency and accuracy of audits making it a best in class solution.

Features…

Automatic: Data is entered in web-page audit forms minimizing the scope of error. These audit forms are automatically synced up with the centralized audit database to maintain a repository of findings and results.

Connectivity: Data captured off-line can be automatically uploaded into the audit system when the auditors connect to the network.

Reports and Metrics: Analytical reports and metrics like Audit Summary Report, Audit Detail Report and Audit Scorecard are available to the managers with the provision of generating reports in MS Word.

Features…

Cost Effective: More accurate and frequent audits are conducted with same resources.

Security: All the data transmission, storage and login process is encrypted limiting the user access to authorized resources.

Alerts: Detects errors and deviations, and alerts mangers in case of excessive loss including shrink%. It has integrated corrective action and incident tracking system with automatic alerts.

Features…

Data Repository: Audit database records all historical analytics, trend-analysis, and root cause analysis on inventory losses, safety and quality incidents.

Real-time Access: Access to actionable information in real time helps reduce losses and implement corrective and preventive actions.

Standardized Process: The solution can be used at multiple sites simultaneously, standardizing the audit process across various branches of the chain.

Work by….

Nivethitha.N Narmadha.N Dinesh.J Subjith Dash Vijaya Kumar.P Ganesh Vidhya.R Somasundaram