Three Right Things

"Americans always do the right thing," said Winston Churchill, "after they have exhausted the alternatives." I know many retailers that fall into the good American category, and instead of investing in initiatives to improve their business models they find reasons to exhaust the alternatives.

Here are three investment ideas that can generate hard-dollar returns to recoup initial costs and pay dividends for years to come.

1. Reduce energy consumption. This is a no brainer. And I wouldn't even mention it except that I know most retailers have yet to seize this cash-saving opportunity.

You cut energy bills, you reduce costs. What am I missing? However, findings from recent RIS studies show energy-reduction initiatives, like other sustainability projects, have dropped off radar screens during the recession.

2. Reduce shrink. Retail shrink rose to $36.5 billion or 1.52 percent of retail sales in a recent study done by the University of Florida. Advanced loss-prevention tools are available that can reduce shrink in card-not-present fraud, administrative error, employee theft, returns fraud and supplier error.

But RIS studies show that retailers are almost exclusively focused on shoplifting and employee theft. The good news is they can make some gains here using CCTV and POS audits, especially in reducing employee theft. The bad news is they are largely ignoring other good weapons in their arsenals.

3. Reduce Out-of-Stocks. The industry average for out-of-stocks for the past 15 years has held steady at eight percent and double that figure during promotions. With sharp cutbacks in inventory occurring this year it is likely these numbers will rise, especially during the holidays.

Advanced fulfillment and execution management tools are available to help retailers beat the industry average for out-of-stocks, and at the same time enable them to sell more products and satisfy more shoppers.

Sure, I understand that capital investment is required for infrastructure and governance tools to make these strategies work, but maintaining a cash-draining status quo seems out of touch in an era where running a lean and efficient enterprise is necessary to preserve scarce consumer dollars. The alternatives have been exhausted.