Golf shops feeling the pinch from “shrinkage” can cut down on theft and prevent dollars from flying out the window.
During January’s PGA Merchandise Show in Orlando, Tracy Moffatt, who owns K and K Consulting and is on the Association of Golf Merchandisers Education team, provided a seminar on shrinkage – what it is and how to battle it. While the statistics she provided were U.S.-centric, her talk was applicable to golf shops in Canada as well.
Shrinkage is defined as inventory losses occurring from employee theft, shoplifting, organized retail crime, administrative error and vendor fraud. More than two per cent shrinkage is considered high in the retail industry.
Here’s an example: The plan is to have retail sales of $500,000, with a net profit of 10 per cent, or $50,000. If the shrinkage is 2.4 per cent ($12,000), the net profit would be cut 7.6 per cent (to $38,000). The profit plan was missed by 24 per cent and sales of $620,000 would be needed to make a profit after shrinkage.
“It hits the bottom line; you see it only at the end of the year on your financials,” said Moffatt. “Ultimately, it leads to an increase in prices to the consumer. Do you open every box of gloves you get in and make sure there’s 12? If there’s not, that’s shrinkage. It’s physical inventory count versus book count.”
Sometimes, the theft is unintentional.
Said Moffatt: “A guy grabs a glove and walks out the door, says: ‘Bill, this to me.’ You see the back of his grey head and it looks like 300 other grey heads; you have no idea which one it is. He didn’t mean to steal it, but it’s stolen.”
A surprising stat: Middle-aged women steal more than men.
Vendor fraud is a problem and something golf shops need to monitor. Sometimes items are invoiced, but never shipped, items are missing, or there could be incorrect or no credit for returns.
“Track it all,” said Moffatt. “When you send something back, leave it in your inventory until you get the credit. Even though it’s left your building, you still owe for it. If that box never makes it back to wherever it’s going, it’s your problem, not theirs. You still own that merchandise until you own the credit. Leave it in your inventory. It keeps you thinking about it. It’s a reminder each month: ‘I have to call about that credit again.’ “
No Merchandise should leave your shop without a written record or POS transaction.
MEMORY DOESN’T COUNT
Then there’s this: “Company reps are swapping things in and out. I want a list of what they took out and what they brought in. You have to fix it in your inventory system and it has to match to the penny. We just seem to let them do what they want. Start watching that.”
Employee theft can cut into profits. Maybe it’s refund abuse (refunds for items never purchased, refunds for more than purchase price, refunds for items not physically returned); discount abuse (more complex discounting structure makes it easier to abuse); credit card abuse (charges not actually completed or voided later); cash sales never rung through, selling gift cards without taking money, or outright stealing. Dishonest employees steal almost five times more than shoplifters.
“It’s so easy to sell the stuff on the Internet,” said Moffatt. “Before you even realize it’s stolen, it’s sold. It takes about 10 months (to figure out what happened) before someone gets caught. If you’ve got a six-month employee who’s taking stuff from Day 1, they’re gone before you realize it.”
So how do you cut down on employee theft?
“Make sure your employees know you’re watching them,” said Moffatt. “Make sure they understand what shrinkage is, and make sure they understand what your policies are. It’s really a good idea to put it into a handbook. Train them thoroughly on point of sale, make them accountable for what they do. If you can do individual sign-ins, that will help.”
She continued: “If you think you have a problem with golf balls, count the golf balls randomly at very odd times. It helps. Now everybody is aware you’re watching. Anything you can do to make your employees aware that you’re aware, that helps. Embellish it a bit. Let them think you have cameras, let them think you can track everything. Make them aware that you care about what’s going on. The cash drawer; count it every day.”
Here are some more suggestions from Moffatt:
“Keep a clean counter area; keep high-theft items behind the counter. Keep all your Pro V1s behind the counter, your Pinnacles on top.
“Think about your shop layout. Are there areas in your shop that have dark corners? Is there something like a sunglasses tower blocking your view?
“If you’re going to put something like a rangefinder on display, put the empty box out.
Keep serial numbers (especially for golf clubs). If you happen to be broken into, you’re not going to get as much money as you should if you don’t have those numbers.”
Moffat continued: “Let’s say an incorrect member account is charged. If you charge the wrong one, typically they’ll call the accounting office. In a lot of cases, the accounting office will simply credit that member and think it’s done. They’ve created shrinkage for you. You don’t have the item and you don’t have the sale. They need to send that item to the golf shop and at least give you the opportunity to find out whose item it really was.
“No merchandise should leave your shop without a written record or POS transaction. Memory doesn’t count.
“With demos, if they see how lax your controls are with demo clubs, what do you think they’re going to steal? We had such a problem at the club I worked at. Take their car keys. ‘You get your car keys when I get the demo back.’ You can charge them when they take it out, credit them when they bring it back. You have to do something that makes them want to bring the demo back.”
