Unit V

Retail audit

A retail audit is a smart checklist. It is based on a form, has points, best-practice pictures,
supporting files, conditional items, critical items and action plan recommendations. It allows
standards to be checked, deficiencies tracked, assigned and resolved when district or sales
managers visit stores. An audit allows head office to guarantee company standards, programs
and policies are deployed in full, in time, in every store.

Retail audits are used for operations, merchandising, service, loss prevention, and/or health
and safety standards. They are sometimes called “store visits” or “store walks.”

Retailers typically conduct loss prevention and health and safety audits at set times
throughout the year. Operations, service, and merchandising audits may be conducted at
regular intervals or to prepare for and support a store specific initiative or seasonal program.

Retail audits can be announced or unannounced. Audits may be conducted as a “self-audit”

by a franchisee, store manager/employee or by a district manager/field representative visiting
the store.

Importance of Retail Audit

Training is necessary, but training is not enough. The only way to know that employees
are applying their newly learned skills is to visit the store. Compliance with health and safety,
loss prevention, merchandising standards (etc.) is best achieved when everyone is aware that
standards are continually verified. Treat retail audits as an ongoing learning opportunity, a
chance to coach each store to attain greater success.

Audits engage the store. Retail audits are not a passive activity. They offer the opportunity
for members of head office to talk with store leadership and employees. Ask questions, listen,
and offer resources.

Different stores execute in different ways. Stores have diverse priorities based on their
experience. This is expected, but companies need to be certain that core programs and brand
standards are implemented in full, on time, and across all locations. The only way to know if
stores are really executing merchandising, operations, or loss prevention programs is to have
a retail audit process in place.

Each store/franchisee/CPG display is a brand ambassador. Disappoint a customer in one

location and they may stop going to all of your locations. The average grocery store has
almost 31,000 SKUs. If a product is not where the consumer expects it to be, the customer
chooses a comparable alternative.

Attractive, well run stores/displays attract customers. Companies must create exceptional
customer experiences including visually attractive displays, clear signage, easy to navigate
aisles/sections, and employees who are ready to engage and help. CPG displays should be
well stocked, well lit, and kept in top condition. This is the difference between drawing the
customer to the product or letting the customer’s eye wander to a competitor.

Beyond attracting customers, a brand committed to excellent in-store execution is a brand

that attracts potential franchisees. Potential franchisees are more likely to invest in an
operationally strong, well-run brand than one perceived to be deficient or inconsistent.

Types of Retail audit:

Types of Retail Audits

There are four types of retail audits commonly used by many organizations in the world,
including:

1. Merchandising Audits

Merchandising audit focuses on the assessment of the overall operations of the retail stores
that affect financial performance. It evaluates the product assortment, display, pricing, and
promotions performed by the retailers. Merchandising auditors will assess all of these
elements and how consistent they are implemented.

Merchandising audit is done in-house by store staff or the brand’s representatives. The main
goal of this audit is to make sure that the retailers follow their standards and support priority
initiatives consistently.

2. Loss Prevention Audits

Loss prevention audits focus on assessing how well the retailer’s performance in terms of the
process, protocol, and training to minimize theft, fraud, and shrinkage. This type of audits is
designed to minimize risk, theft, waste, and vandalism over the company’s products. It puts
the company’s polity in the center and makes a transparent process for retail stores.

Many retail experts agree that employees are the best defense. Thus, it may need employee
training to optimize loss prevention audits. Through the training, employees can ask
questions and have a good understanding that loss prevention is a company priority.

3. Health and Safety Audits

Health and safety audits assess how well the store’s performance in terms of meeting the
company’s regulations and legal guidelines, particularly in handling food products and the
employee’s work environment. Most importantly, it protects the company from lawsuits,
claims, brand tarnishing event, and other disruptions that can cost company additional capital
to spend on.

The health and safety audits are not only implemented in the foodservice fields but also other
fields, including in the pharmacy. So, pharmacies have to ensure that their medicines and
other health products are properly stored, secured and dispensed. The equipment, signage,
and barriers need to be monitored to keep the employees and public safety.

4. Competitive Analysis Audits

Competitive analysis audits are usually performed by CPG manufacturers to assess

competitors’ activities. In conducting the competitive analysis audits, it’s important to
consider the data scope that you want to collect before sending company’s representatives
into the field.

H O W T O CO NDUCT A RE T AIL AUDIT

Retail audits can be conducted by any employee within a company but generally they are
handled by a district or regional manager, a franchisee, a CPG field rep, or a mystery
shopper. Below is a summary of how to perform a retail audit.

1. Schedule the audit. If you are using retail audit software, use the built-in calendar to
choose the location and form. Some audits are announced (notification is sent to the
store manager) while others are “unannounced.” Unannounced audits allow the
district manager to gauge the store’s compliance with standards with no additional
preparation or training.

1. Prepare for the audit. Review the location’s last audit for performance. Make sure
you know the names of the current management and owners at the location. Compile
any remarks or questions. These notes can be entered into the general comments of
the scheduled audit so you can refer to them when you arrive.
2. Conduct the audit: Take the point of view of your customer, starting with the
exterior and working your way in and through the interior. It is a best practice to
design your form according to the natural flow of the store. While retail audit
software will allow you to jump easily around between sections, setting up the form
according to the location’s natural flow saves time and is more intuitive.
 Think about who uses the form in the store. District managers will have priorities
that differ from a Consumer Packaged Goods (CPGs) field representative. Design
your form and items (questions) accordingly.
 4. Switch devices if necessary. Whether you prefer to work on mobile, PC, or tablet,
choose a retail audit software that is device-agnostic. This means you should be able
to start, resume, and finish the audit on the device most comfortable for you without
issue or delay.
5. Include photos and notes. Most people respond strongly to visuals. Photos provide
unmistakable evidence of success and deficiencies.
6. Create an action plan to assign and resolve problems. An action plan is a
continuation of the audit focused on resolving non-compliant issues. Action plans pull
together all non-compliant items and assign them to a specific person with a specific
due date for resolution.
 Action plans are a prime way to save time and money in your company. In
Compliantia, action plans eliminate the time-consuming, ad-hoc communication
between store and head office.
 Action plans empower district managers/field reps to work collaboratively with
stores by sharing notes and picture verification. Compliantia enables head office
to track action plan resolution in real time and make resolution recommendations.
7. Get the store’s buy-in. Once the audit is complete, ask the store to “acknowledge”
the audit. Acknowledgment is an electronic signature and allows the store to accept
accountability for the audit’s results. Acknowledgment also offers an opportunity for
the store to comment about the audit. This ensures a flow of communication from the
store up to head office.
8. Share your results. It should be easy to share results with the store, head office, and
any other relevant stakeholders. Retail audit software allows all stakeholders with
security permission to view, interact with, and run reports for the audit.
9. Follow-up on the action plan. You could follow-up by phone or email. However,
with retail audit software you can save considerable time with automated reminder
communication and reports that allow you to track completed, late, and outstanding
action plans with one click.
10. Plan your next audit. Repeat the cycle. Regular visits to stores promote head office
standards and improve operations and merchandising execution. This results in
improved customer satisfaction and increased sales.

H O W T O CAL IB RAT E A R E T AIL AUDIT PRO GRA M

A thought-out, field-tested form is at the center of any successful retail audit program. The
store data you want to gather will determine the scope of the form (operational standards,
seasonal programs, health and safety, execution of POP displays, etc.).

When launching your retail audit program or a new form, it is important to take the time to
vet or calibrate the form with a sample group of users and locations prior to the general
launch. Doing so before you launch your form across all locations saves time, money, and
frustration later.

CAL I B RAT E T H E FO RM

1. Begin with a key segment of users and locations. The form should provide coverage
for all areas of interest to the business and be laid out in such a manner as to optimize
the district manager’s/field rep’s time during the visit.
2. Use the form in the field. Head office may think the form’s wording and layout are
fine but actual use in a location is the best way to identify inadequacies:
  Unclear language
 Layout requires too much jumping around for the auditor
 Need for additional best practice photos or supporting documents
 Scoring does not make sense to the store/rep
 All sections/questions are not applicable to all locations/users

3. Solicit feedback and adjust the form.

CAL I B RAT E T H E T E AM
The judgment of district managers/field reps is extremely important to the success of any
audit program. However, consistency in rating and resolving issues are equally impactful for
program success. Consistency develops the store’s trust in the overall score. Consistency also
lends itself to better reporting and comparisons across locations and users.

Calibrating the teams involves training personnel on company standards and expectations for
handling and rating non-compliance. District managers/field reps need to be prepared to deal
with sometimes sensitive and confidential personal and business issues.

Retail audit software can help reinforce training with supporting documents attached to forms
at the section or item (question) level and make action plan recommendations.

H O W T O MANAG E RE T AIL AUDIT E XPE CT AT IO NS

Most managers/franchisees are proud of their work and do their best to execute brand
standards. Receiving a low score for a retail audit can be a lot to deal with and elicit strong
emotions.

Helping a location manage expectations begins before the audit even takes place. It is up to
head office to set the tone for and communicate the purpose of the audit program.

A retail audit program is not about achieving perfection. Human error occurs, turnover
happens, and unexpected changes need attention. It is not uncommon for even the best
managers/franchisees to drop a ball or two occasionally.

The purpose of an operations, loss prevention, or merchandising audit program is not to

achieve a high score, it is to improve execution of brand standards which results in improved
sales and a boost to the bottom line.

Treating retail audits as “big brother” checking in is not helpful. Instead, clearly state that
retail audits represent an opportunity to learn, to develop, to ask questions about and clarify
standards, and improve the store.

To ensure consistency in rating and promote trust in the audit process, be as clear as possible
as to how form items should be scored. It is not a best practice to ask, “On a scale of 1 – 5, is
the store clean?” Instead, include best practice documentation and recommendations as to
exactly what a score of 1 looks like vs. a score of 5.
Even better, ask specific questions: “Was the store vacuumed before opening and after
closing?” “Are shelf wobblers free from tears, bends, and peeling?” “Did the sales associate
thank the customer for their purchase and invite them to return?”

H O W T O H EL P S T O RE S P RO CE S S A L O W S CO RE

It is not unusual for a low score to elicit strong emotions. To help stores process a low score
change the conversation from one about failure to one about opportunity.

1. Do not obsess about the score. Perfection is elusive in life and in retail. The retail
audit process is not about achieving a perfect score the first time or every time.
Remind stores that a retail audit program focuses on improvement and growth.
2. Do not waste the opportunity. After a low score, the district manager can coach the
store, implement additional training, and help the store improve.
Managers/franchisees have the opportunity to recalibrate and make branding,
execution, and leading by example when it comes to standards a priority. Store
employees can get involved, grow professionally by taking on responsibility, and take
pride in improving the store.