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Swarovski Finds a Jewel in Loss Prevention Support

Swarovski Case Study

 

...The Challenge

In 1997, Swarovski launched a few high-end boutique stores throughout the United States. The retail business found success quickly, and in less than 2 years, Swarovski had opened 47 stores nationwide.

In recognition of the need to dramatically scale its loss prevention infrastructure to support its rapid growth, Swarovski began to investigate options to build out its loss prevention program. "Our sales did not justify the build-out of the type of internal team that we needed; however, as we added more stores, we needed to have a consistent LP presence" said Mike Alsfeld, Manager of Loss Prevention and Corporate Security, Swarovski. "We did consider outsourcing as a viable option, but only as long as the partner could demonstrate that they embraced our corporate culture and our dedication to our brand integrity."


...The Solution

In 1999, Swarovski partnered with LP Innovations to develop and deploy loss prevention services for all of its locations. "It was difficult to find an outsourced partner that provided both the nationwide coverage that we needed, as well as one that could demonstrate a clear understanding of our business," said Alsfeld. "We brought over 100 years collectively of LP experience on board when we retained LP Innovations. Not only that, but their understanding of specialty retail - which presents a vastly different challenge than big box - was second to none."

LP Innovations immediately worked with Swarovski to design a customized loss prevention program, which included Control & Compliance Audits, Strategic Resolution Services, Exception-Based Reporting & Analysis, Employee Training & Awareness Materials, and more. Throughout the following years, Alsfeld and LPI successfully built a loss prevention program infrastructure that could scale and mature according to business needs.

"We recognized that as our business and number of retail locations grew, the loss prevention program would have to mature to anticipate those changing needs," said Alsfeld. "2006 to 2008 have been the years we marked that we would start enacting key shifts in our program."

Together with LPI, Alsfeld first tackled his audit program. Prior to 2008, Control & Compliance Audits were conducted twice a year per store. LPI and Alsfeld created a Focus Store Program which used six Key Performance Indicators (KPIs) to evaluate whether a store should be placed in the Bronze, Silver or Gold level. After an initial evaluation, it was found that 15% of their stores would be placed in the Bronze category, which addressed 49% of their overall shrink. Those stores in the Bronze category would be audited on a quarterly basis, while the remaining categories would be audited bi-annually.

"We have 16 District Managers for all of our stores nationwide, and we require them to visit each of their stores monthly," said Alsfeld. "This is a lot of travel, and details that are critical to loss prevention could get lost in the visit. To help our District Managers be successful and effective in their visits, LPI built a program that offers tips and tools to evaluate their stores, and would therefore help move their stores out of the bronze or silver categories and into the gold."

LPI also provided another layer of visibility into store locations through store security visits. In 2007, 377 store security visits were conducted, and 53% of those were conducted in the fourth quarter. "46% of our annual business is done during the last three months of the year," said Alsfeld. "We wanted to maintain a LP presence in the stores, but did not want to take the managers off the floor any longer than necessary. The store security visits provided the quick hits that we wanted, while at the same time effectively managed the store's time."

Another key shift in the program was the integration and deployment of an Exception-Based Reporting (EBR) & Analysis solution. "Prior to our integration of an exception-based reporting system, our LP investigations were driven by people, such as calls to the business abuse line, reports to our DMs or LPI's Regional Loss Prevention Managers. We didn't have the level of visibility we wanted into high-risk transactions through our POS system."

Once deployed, Alsfeld used LPI's in-house team of EBR analysts to search for high-interest refunds, returns, no-sales, post voids, and more. Almost immediately, the amount of 'no sales' triggered interest with LPI. "We had an exceptionally high number of 'no sales' being reported," said Alsfeld. "With a little more digging, we found out we had an operational issue with associate training. In response, we developed an updated, rock-solid operations manual and circulated it to all of our stores. Once that was done, the amount of 'no sales' went down significantly."

While Alsfeld still considers the EBR program in its infancy stage, the value of the program and its opportunity to grow have already been seen. "Before, we had no real LP visibility into our transactions. In 2007 alone, 11 of our LP investigations stemmed from exceptions found by LPI," said Alsfeld. In preparation for further development of the EBR program, Alsfeld is also expanding his internal team to include an LP specialist, whose primary responsibility will be to interface with the LPI EBR analyst team.


...Results

Due to the heightened presence in all 192 retail locations, as well as specific projects such as EBR analysis, store security visits, awareness materials, and more, Swarovski reported a 417% increase in the amount of loss prevention-related investigations in 2007. "We're a company driven by integrity," said Alsfeld. "As we mature as an organization in retail, we realize that caustic stores do not work. Therefore, the more that LPI is in our stores, the more communication we have with our associates. It's not uncommon for an LPI representative or myself to be pulled aside during an audit or a training meeting to discuss a potential case that they saw in their stores."

LPI has also paved the way for Alsfeld to build onto his internal team while continuing to maintain a steady presence in the field. "In order to continue to support the growth of our retail stores, we need to scale our infrastructure accordingly," said Alsfeld. "With LPI's help, I've been able to build an internal team of LP specialists and coordinators who will be able to support our growing program."

LPI also helped Alsfeld to build an internal loss prevention committee, which brings together the decision makers from retail operations, human resources, finance, sales and loss prevention. "Our founder strongly believed in the term 'productive discourse,' and this committee is an embodiment of that term," said Alsfeld. "By bringing together different areas of the company, we no longer make decisions in silos - we all understand how our departmental policies and decisions impact all areas of the business. This allows us to take a balanced approach to our business as a whole."

"We retained LPI because it made financial sense. We kept them as a partner because of their people and their results," said Alsfeld. "Swarovski has a close relationship with LPI's field team. They act as extensions of ourselves, and we trust them to maintain and protect the integrity of our brand."

"People understand that loss prevention is a positive part of the company, and that it's about protecting both our profitability and the integrity of our brand," he continued. "We've earned that perception because we've proven ourselves time and time again, and have worked to integrate loss prevention into every part of the organization, from the bottom up."

 

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Swarovski is the leading designer and producer of fine-cut crystal products, including jewelery, stemware, home accessories and more.


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