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PULSO ESTRATÉGICO 2014


How to maximize results

Preventing losses in the digital channel

Overview

Achieving expected business results requires, on the one hand, taking advantage of opportunities and market trends, and on the other, ensuring that operations are designed so as to minimize risks and losses. Finding this balance is a constant challenge.

Retail companies that embark on the development of digital channels should have a model that allows them to take advantage of the trend in the market, while also allowing them to manage and control the new dynamics of these channels.

CUSTOMER EVOLUTION AND THEIR INTERACTION WITH DIFFERENT SALES CHANNELS

Consumers are interacting with different channels more and more. The big challenge we face is managing the experience and value they offer. The evolution and growing use of electronic media and different devices is creating new forms of interaction, not only on an interpersonal level but also a business one. The development and use of digital media is increasingly generating new consumption dynamics.

The use of digital media is now not only a means of increasing orders; today it is more common to observe consumer interaction across different channels during the process of their deciding on and making a purchase. As such, the role of each of them becomes multidimensional. Consumers can obtain information via the digital channel and make their purchase through the physical one, or vice versa (omni-channel). Additionally, parameters such as purchase frequency, the size of this, and even the purchase of new categories in specific groups are starting to show changes, mainly derived from the way in which the desired product is accessed. Some examples of this can be seen in services offered for purchasing the basic shopping basket (24/7 services or those aligned with lifestyles).

These changes not only impact on business architecture with regard to the customer, but also on the operational challenges in carrying them out. One of them is the loss-prevention model needed for managing the new offer to the consumer.

THE REDUCTION PHENOMENON IN MEXICO

Reduction is one of the main factors in profitability erosion for the retail industry, in both the physical and digital channel. According to the 18th Reduction Census from the National Association of Supermarkets and Department Stores (ANTAD), developed by Accenture, the estimate of the reduction in the industry reaches 22.447 million pesos, which is equivalent to 2.0% of sales recorded.

THE NEED FOR A LOSS-PREVENTION FOCUS

The losses generated aren’t limited to the operation of physical channels: we also find them in digital sales channels. This year the census is including the first assessment of the reduction behavior in them.

The survey reveals that the percentage of sales reduction reaches 0.9%, almost half of that seen in the total TVTTT. While this is the first time that said indicator has been analyzed, and it is necessary to assess its behavior in future censuses, it may seem high, especially when these operations tend to have processes which are more controlled. Like in physical channels, one of the main challenges in the digital channel is achieving the right balance between prevention methods and the ability to maintain high sales. It is possible to set up control points and locks, which can prevent reduction. However, such measures may affect the consumer’s shopping experience or delivery time.

The right combination of prevention measures gives the necessary protection while also making a proper purchase experience possible. Based on responses from the census, we identified that in Mexico there are still opportunities according to the level of adoption we found, especially when a better shopping experience is created, such as the use of “white lists” to make shopping easier and faster for customers.

Digital sales channels will continue to grow in Mexico. Achieving proper development will require aligning the offer to the customer with operating processes, while at the same time finding processes that allow the expected return to be maintained.

The correct selection and execution of loss-prevention measures will not only allow retail chains to avoid reduction, it will also support the shopping experience.

LOSS-PREVENTION MEASURES

  • Limiting transactions: determining the number of purchases a customer can make within a specific period of time. This indicator allows parameters to be set that can be considered irregular.

  • White list: creating a list of frequent or regular consumers based on behavior and results of transactions, marking those with low-risk profiles in order to minimize necessary verification.

  • Blacklist: creating a list that allows users who have registered inappropriate behavior to be identified, so that purchasing can be limited or prohibited

  • Monitoring: creating schemes for monitoring indicators related to frequency, amounts, types of items and/or payment methods related to the consumer base so that risk trends can be identified.

  • Ordering rules: establishing rules according to the profile of the consumer, product category and/or purchasing frequency which create different validation processes, minimizing them for lower-risk consumers.

  • Address verification: generating verification that allows behavior from past transactions that generated losses related to a specific address to be assessed.

  • Order verification: establishing order verification directly with the customer in order to confirm the authenticity and risk of orders.

READ MORE [PDF, 24.64 MB]

ROBERTO ARIAS - VIDEO

By Roberto Arias
Managing Director, Retail Industry
Accenture México

Achieving the balance between marketing actions which maximize sales and minimize possible losses from reduction is an ongoing task. This challenge will be no different in the integration and development of new digital channels.

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