1. Hot Product Controllers
South Africa

2. Briefing
• The Awful Truth
• The HPC Programme
• Collaborative Approach
• Recruitment /Standards
• Understanding why employees steal
• Understanding shrinkage and the effects
• Identifying your hot products
• HPC Function
• Shrinkage results
• Benefits
• Closing

3. The Awful Truth
• Pick n Pay is a general merchandise retailer
with over 775 outlets in sub Sahara Africa.
• In 2003, shrinkage was above 2% in the
Gauteng region and Store Managers began
to defensively merchandise hot product on
shelf or behind service counters.
• Shrinkage results on Mach3 blades
exceeded R800,000 (6 months).
• Pick n Pay required a solution that would
reduce loss and improve availability.

4. The HPC Programme
• In August 2003, it was agreed that a
collaborative approach was needed between
manufactures and retailers.
• The 80/20 principle was used to identify hot
products and hot stores (data mining)
• The solution was developed around improving
the handling process of hot products from
receiving to the shelf (non-malicious
shrinkage).
• The understanding was that by reducing
shrinkage we would improve product
availability and increase sales.

5. Collaborative Approach
• Pick n Pay approached certain manufactures to
participate in this trail.
• The benefit for the manufacturers was to improve on
shelf availability and reduce OOS.
• It was agreed that the retailer would pay 50% of the
cost and the manufactures would equally split 50% of
the cost
• HPC cost per store = €850.00
• Retail cost per store = €425,00
• x 10 Manufactures cost per store = €42.00

6. Understanding why people steal…
• An overwhelming 79% of workers admit they have or would
consider stealing from their employers (Kessler & Associates)
• The real reason people steal is opportunity. When companies make it
easy through lack of control, an atmosphere of theft is created.
• Employees steal to the extent management permits it. There's no
shortcut to prevent it, you have to remove the opportunity, create
awareness and achieve their support.
• The human mind is ingenious as ever when it comes to acquiring
illegitimate goods
•

7. 10-10-80 Rule
The good news is that
Employee Theft there is much a business
can do to sway this 80%
to their side.
10%
We spend 90%
10%
of our security
budget chasing Take away the opportunity -
the bad guys raise the risk
80%
You & Me Baddies Good Guys

8. Understand Shrinkage
Non Malicious Malicious
System set up errors • General Public Theft
Picking errors • Grazing
Delivery error (short or over) • Personal Use
POS Scanning errors • Theft for Resale
Pricing errors
Start first by addressing the non
• Colleague Theft
Product damage of loss
malicious causes • POS Fraud
Product out of date
• Grazing
• Refunds
Markdown
• Collusion
Transfer to other site error • Contractor Theft
Counting error • Supplier Fraud
Information misalignment

9. Shrinkage Effects

10. What We Do Know…
Shrinkage transcends departmental and company boundaries
It’s not just shoplifting
It’s not all stores
Its not all products
- 80/20 principle applies (not all products cause shrink i.e. 20% of
products cause 80% shrink).
CRAVED
(Concealable, Removable, Available, Valuable, Enjoyable and Disposable)

11. Identifying Your Hot Products
Shrinkage Overview Western Cape
EDIBLE GROCERIES G12 (1.5%)
LIQUOR G14 (1.4%)
NON EDIBLE GROCERIES G13 (0.4%)
TOILETRIES G15 (2.0%)
HARDWARE H20 (2.1%)

12. Edible Groceries G12 Shrinkage Breakdown

13. Hot Products

14. Retailers Opportunity
5%
Average
Average Retailer Margin
4% Retailer
1.84% Shrink
Margin
3%
2% Average
Retailer 4.83%
Profit 2.99%
1% Margin
0%
Current Potential

15. Solution HPC
Checks • Double Checks delivery
Delivery • Improves data accuracy
• Moves goods out of vulnerable area
Fast Tracks
• Reduces opportunities for
theft/damages
• Reduce access to hot products
Secure Storage
• One key holder / accountability
• Replenish at rate of sale
Shelf
Replenishment • Planograms maintained
• Reduce SOOS
Daily Counts • Identifies theft during & after-hours
• Improves staff awareness
Evaluation • Measures and adapts

16. Checking Delivery
• Must be present for all hot product
deliveries
• The HPC must be called to receiving as soon
as the delivery truck arrives
• Must be present when the delivery is off-
loaded from the truck
• Ensure that delivered goods are off-loaded
to your satisfaction (invoice sequence)
• Use the copy of the delivery invoice to
independently check the quantities and
ensure that the goods are accurately
received
• Check the delivery with the Receiving
Manager (not after)

17. When Checking the Invoice
• Ensure the delivery address is correct with the correct store code
• Invoice must be checked top to bottom or vice versa
• When checking each line, check that product description, unit of
sale, quantity and packaging are correct
• Ensure that delivered quantities match what is recorded on the invoice
• All hot product boxes must be opened and packs individually counted
• Accuracy is more important than speed – do not be intimidated or rushed
whilst counting
• Check for dummy packing
• Check for damages or tampered boxes
• Check for short deliveries

18. Fast Tracking
• The receiving area is busy with staff and product movement
• The receiving area is usually congested with stock
• It’s a vulnerable area
• Its not a good place to leave hot products
• The HPC must immediately move all Hot Products away from the receiving
area to the Hot Product Locker
• No other staff member or merchandiser should be allowed to handle hot
products.

19. Secure Storage
• All hot products must be secured in a separate locker facility within the
store
• Ensure that the locker door is secured and that the key cannot be
duplicated
• The HPC is the primary key holder – the Store Manager or other designated
manager may handle the locker key
• Spare locker keys must be sealed (float bag) and secured in the cash office
safe
• Staff members or designated merchandisers are only allowed access to the
locker under supervision from the HPC
• Locker keys must be signed in/out the store OB book under supervision
from the Store / Assistant Manager
• Check your locker daily for any possible holes in the fencing or open ceiling
boards.

20. Shelf Replenishment
• Too little stock on display leads to
out-of-stocks and frustrates
shoppers resulting in lost sales.
• Too many products on display
attract thieves and results in stock
loss.
• Replenish at rate of sale – little but
often as follows:

21. Daily Stock Counts
• What is measured is managed
• Helps you to identify shrinkage, sales and
OOS issues
• Improves staff awareness
• Allows you to measure and adapt
• Use the stock count system to do daily
counts on all hot products both at opening
and closing times.
• Count products on the sales floor (front)
and in the locker (back)
• Obtain daily sales data for each hot product
• Measure and adapt

22. Measure & Adapt
• Identify shoplifting activity
• Identify theft from display / locker afterhours
• Identify poor shelf availability
• Identify out-of-stocks
• Report all shrinkage issues to the relevant Store Manager
• Send OOS Alerts to the relevant manufacturers
• Send planogram alerts to the relevant manufactures

23. HPC Results
HEALTH FOOD
200,000.00
180,000.00
160,000.00
HPC VARIANCE
140,000.00
120,000.00
100,000.00
80,000.00
60,000.00
40,000.00
20,000.00
0.00
-20,000.00
Feb-04 Aug-04 Feb-05 Aug-05 Feb-06 Aug-06 Feb-07 Aug-07 Feb-08 Aug-08 Feb-09
Series1 156,432.0 169,489.0 11,772.00 6,806.00 12,518.00 4,384.00 4,950.00 1,368.05 5,068.00 17,312.00 4,908.00
ASSESSMENT CYCLES

24. HPC Results
ELECTRICAL
400,000.00
350,000.00
HPC VARIANCE
300,000.00
250,000.00
200,000.00
150,000.00
100,000.00
50,000.00
0.00
Feb-04 Aug-04 Feb-05 Aug-05 Feb-06 Aug-06 Feb-07 Aug-07 Feb-08 Aug-08 Feb-09
Series1 357,223.00 192,989.00 51,326.00 29,276.00 67,274.00 36,924.00 11,974.00 21,183.52 11,974.00 29,586.00 44,398.00
ASSESSMENT CYCLES

25. HPC Results
DENTAL CARE
160,000.00
140,000.00
HPC VARIANCES
120,000.00
100,000.00
80,000.00
60,000.00
40,000.00
20,000.00
0.00
-20,000.00
Feb-04 Aug-04 Feb-05 Aug-05 Feb-06 Aug-06 Feb-07 Aug-07 Feb-08 Aug-08 Feb-09
Series1 139,405.0 130,734.0 12,874.00 6,176.00 8,031.00 -1,672.00 560.00 926.40 560.00 3,953.00 -2,245.00
ASSESSMENT CYCLES

26. HPC Results
MEDICINE / AGEST
120,000.00
100,000.00
80,000.00
60,000.00
40,000.00
20,000.00
0.00
-20,000.00
-40,000.00
-60,000.00
-80,000.00
-100,000.00
Feb-04 Aug-04 Feb-05 Aug-05 Feb-06 Aug-06 Feb-07 Aug-07 Feb-08 Aug-08 Feb-09
Series1 91,827.00 30,502.00 -78,258.00 2,930.00 11,957.00 40,363.00 1,112.00 3,819.96 0.00 7,319.00 8,454.00

27. HPC Results
RAZORS & BLADES
140,000.00
120,000.00
100,000.00
80,000.00
60,000.00
40,000.00
20,000.00
0.00
Feb-04 Aug-04 Feb-05 Aug-05 Feb-06 Aug-06 Feb-07 Aug-07 Feb-08 Aug-08 Feb-09
Series1 130,576.00 104,168.00 44,450.00 55,042.00 81,790.00 46,501.00 19,736.00 44,077.39 19,736.00 21,147.00 35,699.00

28. HPC Results
SKIN CARE
400,000.00
350,000.00
300,000.00
250,000.00
200,000.00
150,000.00
100,000.00
50,000.00
0.00
Feb-04 Aug-04 Feb-05 Aug-05 Feb-06 Aug-06 Feb-07 Aug-07 Feb-08 Aug-08 Feb-09
Series1 341,461.0 253,913.0 36,083.00 39,066.00 32,372.00 19,868.00 18,006.00 23,814.31 18,006.00 42,514.50 15,872.00

29. HPC Results
LADIES TOILETRIES
120,000.00
100,000.00
80,000.00
60,000.00
40,000.00
20,000.00
0.00
-20,000.00
Feb-04 Aug-04 Feb-05 Aug-05 Feb-06 Aug-06 Feb-07 Aug-07 Feb-08 Aug-08 Feb-09
Series1 108,684.0 100,252.0 5,797.00 -298.00 8,170.00 -717.00 2,015.00 3,218.45 2,015.00 -1,844.00 -1,630.00

30. HPC Results
CONSOLIDATED SUMMARY 14 STORES
1,600,000.00
1,400,000.00
1,200,000.00
1,000,000.00
800,000.00
600,000.00
400,000.00
200,000.00
0.00
Feb-04 Aug-04 Feb-05 Aug-05 Feb-06 Aug-06 Feb-07 Aug-07 Feb-08 Aug-08 Feb-09
Series1 1,338,226.0 1,049,542.0 84,044.00 138,998.00 222,112.00 145,651.00 58,353.00 98,408.08 57,359.00 119,987.50 105,456.00

31. Benefits
WIN
WIN
• Lower Costs
Retailer • Lower Out Of Stocks
• Higher Brand Loyalty • More Open Merchandising
• Better planning & execution • Lower Costs • Greater Choice
• Increased Sales • Higher Store Loyalty / • Consumer Satisfaction
• Increased Profits Penetration • More convenience
• Efficient Replenishment
• Increased Sales
• Increased Profits
Manufacturer Consumer
WIN
• Manufactures can increase sales by 78% if products are moved from defensive to open sale
• Retail profits could be 30% higher if shrinkage is reduced by 50%

32. “If it works in South Africa it will work anywhere”
Thank You