It’s a common misconception—even among the best-intentioned employees and customers — that giving away free merchandise is a good way to build business. In fact, except under limited circumstances (such as company-sponsored giveaways for a charitable purpose) it's a terrible practice; likely to benefit no one but the recipients and, possibly, the employees bestowing the largess. It rarely works to attract new, paying customers, or cement the loyalty of existing clients. In fact, giveaways may simply attract freeloaders (at best) or provide another avenue for employee theft.
If you've seen even a few unapproved giveaways in your establishment, you've probably seen only the tip of the iceberg—and that means you're losing big money from this practice. When one employee sees another employee give away something, they're likely to think: "Well, it was okay for Joe to give away a free tie to the customer who bought the expensive suit. Why shouldn't I give this bracelet to my friend buying a blouse?"
The problem is, little things add up. And once you allow one employee to do it — even for a good reason — you've opened the door to an avalanche. Giveaways will eat your profits alive. They also send a very bad message to paying customers, who may resent paying for what others get for free. Giveaways can devalue your merchandise and perhaps even your "brand."
Giveaways can add up, too. Consider this: if just one employee gives away a single $5 item a day, the annual tab is a staggering $1500 for one employee alone. And, after a while, it begins to look more like employee theft than employee giveaways.
Once you realize what a mistake allowing giveaways is, what can you do to monitor employees to ensure it isn't happening behind your back?
Have a clear policy: Don't assume that employees know it's not okay to give away things. Your policy should be explicit — and should apply to everyone equally. It should be covered and explained thoroughly on the first day of employee training, and repeated periodically at staff meetings and reviews. Then enforce the policy to the hilt. Here are a few tips on how to manage your inventory:
Camera Systems Work, But Not The Way You Think:
It takes someone three hours to wind and rewind a one-hour videotape in order to see everything. Do you have time for that? And if you're thinking of hiring someone to do it, you'd better watch them, too!
Here's a better idea: Buy a cheap camera system that you never watch. Your employees will think you're monitoring them and may stick to the rules.
Be Mindful Of Your Inventory Costs:
It's stunning how few managers pay attention to this at all! (Some don't even track it.)
Take your cost of inventory and apply your average target mark-up. If your goal is a mark-up of 100 percent, then compare your sales to the cost of inventory to determine how close you're coming to this target. There may be many reasons why you're not reaching the target mark-up, but you won't know how legitimate they are until you start insisting on good recordkeeping.
Make sure that employees understand they must record EVERYTHING that leaves the store, paid for or not. If something is broken or damaged, it still needs to be logged. Employees often discover that by damaging something in a way that's easy to repair, they may be able to justify "discarding" it — right into their own or a friend's shopping bag. It then is simply another form of employee theft and a major drain to your bottom line.
Use A Mystery Shopper If You Have A Concern:
Is your business activity way up—but your profits don't seem to be following? You may need to have a mystery shopper help determine what's going on. Mystery shoppers can fly under the radar to get a candid look at how your employees behave when you're not there.
For example, maybe you have one employee who seems to be incredibly popular, but his sales don't match up to what you'd expect. Customers even ask for him by name. What you might not know is that he's slipping 10 items a day to his best customers, or saving "damaged" items to sell at deep discounts.
You can't watch them all the time, but a secret shopper can help identify whether merchandise is walking out of the store without a receipt—or cash is being pocketed when you aren't looking.
Trust But Verify!
The typical objection to the above recommendations is, "I trust my employees and don't want to create that type of environment in my store." Of course it's about trust! But trust is earned, and it's also promoted by creating an environment where clear, fair policies are observed.
When employees think rules are meaningless or unfairly applied, they don't trust their employers, either. And even customers can be offended when they see some people getting giveaways while they're paying.
You'll be doing yourself and everyone else a favor to eliminate this bottom-line-buster.
Mercantile Systems offers a range of services to help your company manage employee theft issues and improve your bottom line results: Mercantile System's Employee Theft Programs.
I am also happy to discuss possible solutions with you directly, contact me at 888-222-8301 or email us at info@mercsystems.com
