Multi-location businesses (companies with more than one physical location) may find it difficult to keep track of their genuine bottom line or overhead relationships. This is a function of the equation stating that anything spread over a wide variety of departments automatically loses control of its centralisation. In the parlance of the times, one hand doesn’t know what the other one is doing.
In most large businesses, there’s an attrition of resource and profit through duplications of effort, and through a failure of the central brand message to get through to the worker on the shop floor. In retail this is particularly likely to happen. Compliance auditing is there to make it stop.
The basic idea behind compliance auditing is that there are a number of elements to the functioning of any retail environment, which are supposed to be the same in every location. Only the fact is that they are not.
Specific products, for example, are supposed to be given a defined quantity of shelf space, with a known area of product “face” that is, outward facing packets of the product in question. The required margin on specific items may dictate prices that are not being displayed, or the price displayed on a shelf may be different from the recommended company price of the item.
Compliance auditing aims to compile enough data on the various elements that make up a retail environment, so that the owners of that environment can regain and retain control of their shop floor. This information is broadly split into six areas – price compliance, product range, availability, placement, promotions, and overall store design.
Placement can be a key to product sales as some stores have contractual obligations with the manufacturers of specific products to display them in prominent places. Compliance auditing in this area can do more than protect the store’s performance. It can ensure that individual locations comply with contractual obligations that should be company-wide.
POS placement can also be a key to achieving the desired sales levels for different product lines. That’s why POS is installed in the first place. From shelf edging to hanging offer banners and externally delivered POS, each store should be following a set of rules laid down by the head office. These rules are designed to ensure predictable performance across all chain branches.
They are also designed so that the head office has a meaningful way of interrogating statistics derived from product sales over a promotional period.
While compliance auditing has an immediate internal usefulness, it becomes even more useful when it is combined with a similar audit of a competing business chain. If, for example, two similar brands of store (this is often particularly well used by supermarkets) compete within a close geographical area, then one store may commission not only a compliance audit of its own shop, but of its competitor. This information may then be dovetailed with known information about the competitor’s performance to identify areas in which the client store needs to improve.
Compliance auditing is potentially capable of revealing information about individual stores within a business chain, which can inform the way company-wide processes are designed.
The article is written by Ella Johnson. She writes particularly on retail merchandising services, compliance auditing, field marketing and many more.