Conducting store audits should be on the to-do list of every retailer, and for good reason — retail audits help you uphold company standards, improve operations, and promote a safe in-store experience.
But what exactly are the types of audits you should conduct and how often should you do them? More importantly, how can you ensure that these audits are carried out the right way?
To answer these questions, we caught up with a couple of retail experts and asked them about store audit best practices. Have a look at what they had to say below.
Merchandising audits are conducted to ensure that product location, shelf space, displays, pricing, and promotions are executed as agreed between CPG (Consumer Packaged Good) companies and retailers.
According to Aaron Chio, Senior Manager at Clarkston Consulting, merchandising audits are implemented either by the retailers themselves or by CPGs that want to ensure their products are stocked and displayed correctly in-store. If done properly, merchandising audits – which historically have been seen as table-stake activities – can help drive differentiated approaches in a rapidly changing and ever-more competitive retail marketplace.
When retailers are conducting the audits, they’ll typically assign employees in each department throughout the store, says Chio.
“You may find department heads, e.g., somebody in center store, or around the perimeter of the store, who are in charge for making sure their store sections are in compliance. These department heads are in charge of making sure the store is up to standards, that products are in stock, that they’re maintained with proper signage, and that they adhere to the planograms.” – Aaron Chio, Senior Manager at Clarkston Consulting
CPGs, on the other hand, usually outsource audits and contract third party merchandisers to come into the stores and check if products are displayed the way they’re supposed to.
In addition, says Chio, leading retailers and brands find ways of driving this front-line merchandising audit information and use it as critical actionable insights for the organization.
Leading practices for conducting merchandising audits
When asked about best practices, Chio outlined the following steps for in-store merchandisers to help ensure their audit goes smoothly:
Perform a perimeter walk – “The first step, from a merchandiser’s perspective, is to do a perimeter walk,” he says. This is the task of doing a quick walkthrough to check if products and promotions are displayed correctly.
Assess stock levels – As the perimeter walk is conducted, merchandisers are assessing stock levels, continues Chio. At this point, merchandisers should visually assess the store shelves and displays to determine if they’re adequately stocked.
See to it that products are stocked and merchandised correctly – “The third step is to head to the back room and pull the products that have to go on the floor. Merchandisers will then walk to the sales floor, place items on the shelves and make sure the promotions and displays are merchandised correctly, based on the guidelines provided by CPGs that are, in many instances, contractual obligations between the brand and the retailer.”
Answer additional questions if necessary – According to Chio, merchandisers can add a fourth step where they’ll fill out a survey on behalf of CPGs. They’ll answer questions such as “Was this display set up properly?” or “Did we have a presence on this endcap?”
The reason, says Chio, is “there could be a contractual obligation on behalf of the retailer with the manufacturer when they’re engaging in a promotion. The survey makes sure the products are merchandised according to the brand’s standards and provides additional feedback and insight back to the manufacturers.”
For large-scaled retailers with thousands of stores, targeting is critical – How often should you conduct your audits? How do you choose which locations to evaluate, and at what level of detail? Chio says the answer to these questions depends on many factors. But his advice, especially for large-scale retailers, is to be strategic and objective when picking markets for thorough in-store audits.
“It could be your largest market or a smaller market. Or maybe you can look at your analytics and see where you’re under indexing against a particular consumer segment, or getting lower market share. It’s best to pinpoint areas of opportunity and send a focalized effort to do audits and figure out the issues.
Some retailers may even add a second layer of analytics to their efforts, trying to understand the impact that omni-channel plays in driving in-store out of stocks, which adds an added layer of complexity to the analysis.” -Aaron Chio, Senior Manager at Clarkston Consulting
Empower people on the floor– “A key mandate for leading retailers is to answer a simple question: ‘how can you empower your frontline employees to be the voice and eyes of the organization?’”
“Leading organizations aren’t just checking if the products are in stock and compliant. They’re also empowering those eyes and feet on the ground to feed insights back to corporate so that the company can take action. Frontline employees are a critical competitive advantage that leading retailers leverage in the right way. Treating employees as a critical, differentiated asset is what distinguishes good from great retailers”
“Instead of just ticking a box on a checklist, leading retailers and brands figure out how can they leverage that frontline information to drive innovation, product development, and customer relationships.” – Aaron Chio, Senior Manager at Clarkston Consulting
Health and Safety Audits
Conducting health and safety audits not only keeps you compliant and protects you from claims, lawsuits, and other headaches, but as Gary Johnson, Senior Consultant at Prevention Advisors, notes, it also encourages your staff to act appropriately.
A health and safety audit “can really change employee behavior. Everyone knows what’s expected. It supports operational excellence and training, which in turn leads to the right behaviors.”
“The audit process itself becomes a driver for people to not only comply, but to actually have the right behaviors and be able to work safely and respond to things correctly.” – Gary Johnson, Senior Consultant at Prevention Advisors
Best practices for conducting health and safety audits
Johnson offered several tips when conducting health and safety audits. They include:
Perform health and safety audits at least once a quarter – Health and safety audits should be conducted every quarter, says Johnson. You should even consider doing them more often if your business has complex safety and health issues, such as having hazardous materials, dangerous equipment, or high shelving in your stores.
Be honest with your audits – “Audits should call out compliance versus non-compliance, and whether something works or doesn’t,” he adds. “This is a time to be honest and have the audit reflect what’s really happening so you can fix it.”
Consider forming a safety committee – “Have a safety committee that is accountable for auditing the safety program and alerting management,” mentions Johnson. This committee should be comprised of people with various roles in the business. For instance, you can include someone in management, someone who works in the back, etc.
He adds that forming a safety committee communicates the message that health and safety is a shared responsibility, and not just a management responsibility. “It keeps everyone involved, from a peer pressure standpoint. When they see a coworker exhibiting bad behavior, they can self-police that themselves.”
Loss Prevention Audits
Loss prevention audits can help minimize theft, fraud and administrative issues that lead to shrinkage. Here are some of Johnson’s recommendations for conducting successful loss prevention audits.
Best practices for conducting loss prevention audits
Be transparent – “Successful retailers are moving the audits out into the open and are making the process transparent,” says Johnson.
“The goal is not to catch someone doing something wrong, but rather, ensure the store personnel are executing the procedures, are trained, and are driving in-store efficiencies.” – Gary Johnson, Senior Consultant at Prevention Advisors
Create a resource center – Retailers must “have a centralized place where employees can find answers to their questions and get references for training,” he says. “Today, an online reference portal is extremely valuable in driving consistency, streamlining training, and reducing costs.”
Make sure your audit focuses on the most important loss prevention factors – “Build your audit process off your existing procedures and be thoughtful,” advises Johnson. “Focus on the most important things. What controls are essential for the business? What actions prevent loss? What behaviors strengthen your brand and the customer experience? This is not the time to nit-pick on the minutia.”
View the audit from your customer’s perspective – Johnson also recommends that retailers “use the audit to view the store ‘like a customer does’ and review all facets of the customer touch points.”
With that in mind, you can begin the audit outside the store to assess the parking lot, lighting, signage and window display. Then — just like how a customer would — work your way in and evaluate housekeeping, merchandising and customer service (i.e. greeting, service, checkout speed, accuracy).
Focus not on the audit score, but on the next steps – Got your audit results? Remember that “it has to be more than about ‘the score’ or documenting non-compliance,” Johnson says.
“The tipping point is actually using the findings to identify execution shortcomings and working quickly to fix them and setting a course to drive consistency.” – Gary Johnson, Senior Consultant at Prevention Advisors
Depending on where you are with your business, you should evaluate your audit process to see if there are any shortcomings. Perhaps your company could benefit from establishing a health and safety committee. Or maybe it’s a matter of empowering your staff to be more proactive with obtaining insights from the sales floor.
Whatever the case, be honest and transparent with your findings and use the information to improve your store audits and business overall.
About the author:
The Definitive Guide to Retail Audits
This comprehensive guide to retail audits is for multi-unit retailers in industries like restaurants, convenience stores, pharmacies, spas and clinics, telecommunications, and alcohol retailers. This guide also helps parking operators and manufacturers or distributors of consumer packaged goods.
If you need to collect or validate data in stores, this definitive guide to retail audits is for you!