EDITOR'S NOTE: Bob Vranek has been vice president of loss prevention at Belk, Inc. based in Charlotte, North Carolina, since 1992. He began his retail loss prevention career in 1972 as an investigator for Mervyn's where he worked for ten years. He moved to Maison Blanche in 1982 to serve as director of LP for ten years. Significantly, Vranek earned his bachelor's degree in business administration in 2000 while running the LP organization at Belk. He has served eighteen years on the LP advisory committee of the National Retail Federation.
EDITOR: For those people outside the Southeast, what is Belk?
VRANEK: Belk is a department store chain with 302 stores in sixteen Southern states from Maryland to Florida to Texas. We also have a very robust presence online at belk.com. Our brand is built on our new tagline—Modern. Southern. Style. About half of our stores are very similar to a full-line Macy's or Dillard's. The other half are more upscale and similar in size to a jcpenney or Kohl's.
EDITOR: You can't find Belk on the New York Stock Exchange.
VRANEK: Correct. Belk is the nation's largest privately owned mainline department store company. That gives us the flexibility to invest in the business, but holds us accountable to the same standards as a public company. The third generation of the Belk family is now running the company. They have done an incredible job of modernizing and bringing the business up to current technology and standards.
EDITOR: The history of Belk is quite fascinating, not only as a retailer, but for the family's charity and civic contributions.
VRANEK: We're celebrating our 125th anniversary next year and plan a major celebration for that. Over the years the Belk family has contributed much to the growth of Charlotte, North Carolina, and the Southeast in general. It's very common to see the Belk name attached to buildings and educational programs at major universities throughout our markets. There's even a freeway named for John Belk, a past chairman of the company who also served several terms as Charlotte mayor. Last year, the company and its associates, customers, and vendors contributed over $18.3 million to local communities, including $5.1 million to over 200 nonprofit organizations with a focus on education, breast cancer research and awareness, and community strengthening.
EDITOR: If I'm not mistaken, you have been vice president of LP at Belk for twenty years, which is a significant accomplishment. There are not many LP executives who have kept their job for that length of time. How have you managed to do that?
VRANEK: Belk has changed dramatically over the years, and the LP department has evolved dramatically with those changes. We have literally reinvented ourselves three or four different times. So, I've not been running the same program for twenty years. The program we run now looks nothing like the program we originally started with. If we hadn't changed LP as the business changed, I likely wouldn't still be running the LP organization.
EDITOR: How is LP currently organized to serve the two different types of Belk stores?
VRANEK: Our stores range from small boxes of 40,000 to 50,000 square feet up to large four-floor, full-line department store boxes of 330,000 square feet. Smaller stores have no LP staff in them. A mid-size store would start off with a single LP associate, and then move to a LP manager. Our larger stores could have an LP manager with five or six LP associates.
EDITOR: Who do the stores report to?
VRANEK: There are regional LP managers who are responsible for roughly $200 million on average or about twelve stores. These regions can vary widely based on geography and store size and volume. Next step up we have three division LP managers based in Birmingham, Atlanta, and Raleigh.
EDITOR: As an LP manager in a Belk store, what do I have to deliver to earn an outstanding review?
VRANEK: Thirty-five percent of our LP managers' review is tied to inventory shortage. There's a broad spectrum of what good performance means there, but we want them to focus on the ideas and issues that drive shortage down. We don't want to be focused on apprehensions. That certainly is part of the job, but the focus needs to be on the end result, which is profitability for the company. The key to their success is partnering with store management.
EDITOR: Shrinkage at Belk has been coming down steadily year after year, correct?
EDITOR: What do you attribute that to?
VRANEK: First and foremost, we have a great loss prevention team with very low turnover. The division LP directors are outstanding. The regional managers are experienced and very strong. We have a mix of both individuals who have been developed internally, as well as others we've brought in from the outside. It's a diverse, focused group of people who have been able to deliver results.
Second, we have had management's support to bring in new technology. Currently we are one of the leaders in remote monitoring. We were certainly one of the leaders in developing exception reporting. And we were one of the first department stores to go chain-wide with EAS. Probably because we don't have the resources that a company like a Target would have, we've been innovators in leveraging the key technologies that drive down shortage.
EDITOR: And you are doing that with a relatively small corporate staff.
VRANEK: Because our people are primarily in the field, we push a lot of the program out to the divisions and the regions. Centrally, I have two key leaders. One focuses on technology systems—everything from XBR to background screening to the 800 line. The second person focuses on the equipment, such as cameras and alarms, making sure remodels are done right, that type of thing. Also, we have a logistics team that focuses on e-commerce and the distribution centers.
EDITOR: You were one of the first to get into remote monitoring. Why did you believe remote monitoring would work for Belk, and what results have you generated?
VRANEK: When you have a big-box store with camera systems, EAS, an LP manager with several LP associates in it, the shortage focus is there. When you consider the other end of the spectrum, you have a small store with no LP team and a store manager who wears fifteen different hats, it's no wonder you can have high shortage. As we looked at that situation, we started a dialogue of what we could do short of adding LP headcount into the stores. At that point in time there were a few companies in the convenience store segment that were starting to use remote monitoring, primarily for robbery prevention and audit purposes. We thought we could build an LP program on that technology. We started with sixteen stores and have grown to 135 stores this year. We've seen a reduction of shortage in the first year of over 30 percent, and we've seen a follow up reduction the second year of about 20 percent. So, it clearly pays for itself.
EDITOR: Explain how the monitoring deters external theft.
VRANEK: In those smaller stores, we've always had management and store associates who are very interested in protecting their stores. Once we gave them a tool with a professional LP person who can assist them, they became empowered to protect their stores. In the past when they saw something suspicious, they might go up and provide customer service to the person, or they might just walk away because they knew we wouldn't allow them to make a shoplifting stop. Now, with the remote-monitoring team, they'll call in to alert the RMC to a situation, and the remote camera team will take over. They'll watch the situation all the way through and then get back to the store to say, "We saw this. We're ready to make an apprehension." Or, "we followed them and nothing happened." In either case the store now feels that they're being helped, which raises the attitude in the store that they're able to control shortage.
EDITOR: What about on the internal theft side?
VRANEK: When we started remote monitoring, there was nobody in the industry to ask about how to use the technology to impact shrink. The original thought was to leverage the building security team here to focus on shoplifting. In the first three or four months of the program, we were making the calls, touching base with the store, doing all the things we wanted, yet we were not making apprehensions. However, when the January inventory rolled around, inventory shortage in those stores plummeted. We determined it was because of the connection and communication we had with those stores. The RMC was calling a store saying, "Would you check the fitting room? We're watching your store tonight." Now, the sales associates in a small store who were used to a store manager going home at 6:00 and running their own ship until closing were now looking at the ceiling saying, "You mean somebody actually watches those cameras?" It had a tremendous impact.
EDITOR: So, the mere fact that your associates knew you were focusing on their stores made an impact.
VRANEK: Absolutely. If you think about these stores that are typically in smaller towns where everybody reads the local weekly newspaper, we run press releases about the remote-monitoring center to let customers know we have a program. We train management and associates through our awareness program to ensure that everyone knows that we're supporting them even though there is no LP person in the store. Plus, we randomly focus on stores to keep the message fresh. We talk to about a half dozen stores a day and tell them, "In your morning meeting, would you emphasize the fact that remote's focusing on your store today?" The focus may be on shoplifting, but, it also gets the message out that we really are watching the store, and it's not a good idea to steal from us.
EDITOR: What other technology initiatives have you put in place that helps drive down shrinkage?
VRANEK: Exception reporting would probably be the second one. Not to dwell on ancient history, but we were really one of the first retailers to take exception reports from a list of associates to adding some analytics behind it.
EDITOR: Who did you start working with?
VRANEK: We did it internally because back in the early 90s there were no viable vendors to outsource to. Getting back to the fact that we were a collection of both small specialty stores as well as large department stores, we tried to compare stores with 600 associates to a store with fifty. It just didn't work. We had to use statistical analysis and find ways to really make an exception report more than a list. We couldn't say, "Give me the top fifty people." We had to say, "Give me the three people that I really care about." And, when we did that, it was revolutionary. Now, of course, everybody does it—XBR, Aspect, and Retail Expert—all of the others do it. But back then, probably eighteen years ago, the vendors were sitting in the back of the room jotting notes, coming up afterwards asking us questions.
EDITOR: Fred Wilson at Circuit City is the only other company I know who was doing anything similar.
VRANEK: Fred was certainly an innovator in LP and also a friend. There was a subtle rivalry to see who could get there first. Everybody was trying to find that silver bullet with exception reporting, and we all had to work through our in-house IT people, as they had the programing expertise. We used our own programs for six or seven years until the outside technology providers passed us to the point where we couldn't keep up. That's when we made the switch and leveraged our knowledge into their tools.
EDITOR: Speaking of solution providers, in the vendor world Bob Vranek has a reputation for being a challenging, demanding buyer. Having said that, what are the things that you look for from a supplier that would cause you to have discussions with them?
VRANEK: The term "solution provider" has become a buzzword, but a lot of vendors don't live up to that term. I don't necessarily care if I buy a yellow or a green tag or something with or without a wire. I have a problem I want to solve, whether it is a better way to secure handbags or sunglasses, or getting a remodeled store up and running as quickly as possible. I can buy a widget from 150 people. I need someone who can come to me and solve my shortage problems.
The second thing I need is someone who will step up and help shoulder some of the load. We're not structured to have people check boxes and manage vendors. When a vendor makes a commitment, they need to follow through. If they're going to install a camera, it needs to be installed on time and done right the first time. If we're buying a product, it needs to be delivered where and when it's supposed to be, in the condition it's supposed to be in. It needs to provide the results that were committed to in the original order.
EDITOR: Would you provide examples of what you are describing?
VRANEK: I'll mention two pretty easy ones. A few years ago we bought three-alarm handbag tags from Alpha. If you cut the wire or try to break the tag or take it out the door, it goes off. They came back to us and said, "We found out in some specific situations that the battery on these tags won't last as long as we committed to you. In others situations it will, but we're not going to take a chance. We want to replace them all." And, they did. They replaced every one of them on the off chance that some of the batteries wouldn't last as long as they had committed to. That's impressive. And we are very loyal to them because of that.
EDITOR: What's your other example of a good vendor partnership?
VRANEK: The ADT...now Tyco Integrated Solutions...team has worked with us on the remote monitoring system to get those Intellex boxes, which are networked digital recorders, to do something they really weren't designed for. Tyco's American Dynamics division has done a great job on that. They have provided engineers and development support way beyond what is expected when you buy a piece of equipment. That's what we're looking for—people who will step up and help us get things done.
EDITOR: As a veteran LP executive, what is your view of the evolution of retail loss prevention over the past ten or twenty years?
VRANEK: Certainly one of the most noticeable changes in our industry is the pure professionalism of the LP team. Everyone acknowledges that we've moved past the focus on catching shoplifters—the old cops-and-robbers mentality. We go through cycles. We'll focus on shoplifting, then it's on internal theft, then it's to ORC. In a year or two, I think we'll be talking about the omni-channel challenges that will have remade our retail operations and opened up new vulnerabilities for us to manage. The LP team we had twenty years ago couldn't handle the current challenges today. They couldn't understand the technology. They wouldn't be able to master the technology and develop the tools we would need to control losses. Not so with the people we have now. They are very professional. They understand the inventory systems. They understand the technology. I have a great deal of confidence in them dealing with unusual situations and being able to step in and drive shortage down.
EDITOR: How about from a more global standpoint?
VRANEK: There is much more diversity throughout the industry. When I started, the senior LP leaders were primarily ex-law enforcement. Now when you look at that team, it's made up of men, women, multiple races, lawyers, business people, and operators. There's an incredible diversity of experience with a wide range of ideas and thoughts that has been a tremendous benefit to building a modern loss prevention culture.
EDITOR: Those are certainly positive changes. What about the not so positive?
VRANEK: Budget pressures. It wasn't that long ago a 40,000-square-foot store would have two or three LP people in it. Now, that same store is unlikely to have any loss prevention personnel. That's the negative. The positive is we do a lot of things with technology now that we never could have done before.
EDITOR: Let's switch gears and talk a little about how you got started in loss prevention.
VRANEK: I graduated from high school and had just started at a local community college when Mervyn's was opening their ninth store in Alameda, California. I guess you can say my loss prevention career started as a men's sales associate/fitting-room checker. That was my first exposure to loss prevention. I worked at Mervyn's for nine years and rose through the ranks to become an investigator for them. Next, I moved to Maison Blanche as the director of LP in Baton Rouge, Louisiana, and eventually became the VP of asset protection for them.
EDITOR: What happened to Maison Blanche?
VRANEK: Along with many other department stores over the last few decades, they were hurt by the recession associated with the first Gulf War. They were bought by Mercantile Stores in 1992, which eventually was bought by Dillard's.
EDITOR: Did you find yourself without a job at that point?
VRANEK: I did. I was unemployed for exactly two days. I left Maison Blanche on a Friday and started at Belk on the following Monday.
EDITOR: Given so many executives go months or years without finding a new position, how were you able to accomplish that?
VRANEK: From the time we knew that the company was being sold to the point where they were going to close the offices, we had four or five months to start the process. Fortunately for me, the timing just worked out well.
EDITOR: What was your attitude when you started the process?
VRANEK: Two things that I realized when I started looking is, one, the fact that the company was going out of business was not a reflection on me personally. The second thing is don't take rejection personally when you're applying for jobs. There will be companies that just don't have a position and companies where you're not a good fit. Back then you received rejection letters; I saved them and had a stack six inches high. Now companies don't even send letters anymore. As you go out and approach companies, if you don't receive any information back or you're turned down for a job, you can't take it personally.
EDITOR: When you started at Belk on that Monday, was there an LP organization in place or did you build one?
VRANEK: There was a secretary, one assistant, and myself. That was the program. A few stores had security people, but there was no regional or divisional structure. The person who had my position prior to my arriving was the former chief of police for Charlotte, who came in and ran things for almost a year.
EDITOR: How did you start the changes?
VRANEK: We started by placing a few people centrally to prove what LP professionals could do. Then we started building a field structure, which was a real challenge because of the company structure twenty years ago. When we started, Belk was not a single corporation, but seventeen operating divisions with many separate corporations. They were truly separate companies with separate stockholders. As the company grew and merged, we built and rebuilt our structure to mirror the changes within Belk. As I mentioned in the beginning, I think the secret here has been reinvention. You can't build a program in any company and sit back on your laurels. If you aren't constantly willing to reexamine and reinvent yourself and your organization, the company will pass you by and rightly so.
EDITOR: Before we close, there are just a couple of other things I want to ask. There's been a great deal of mania over the last several years over organized retail crime with some companies setting up ORC teams. You don't have an ORC team yet your shrink continues to come down. How do you make that work?
VRANEK: We have to do everything that everybody else has to do. We just have to do it differently. In a perfect world I'd have four people here that I could dedicate to ORC, but we found another way. We will take a group of regional LP managers and put them on a task force to handle an issue, whether it's ORC or awareness or disaster recovery. These task forces will draw in resources from LP or operations or elsewhere in the company to work on these issues.
EDITOR: Speaking of disaster recovery, you walked into this interview right after a meeting related to Hurricane Isaac that had just hit New Orleans yesterday. What was your role in that area of the business?
VRANEK: We coordinate disaster preparedness and recovery for the stores. We work closely with our risk management team from the point where a tropical depression or storm forms until it passes our stores. We help track the storm and identify potential impact to stores.
Four days before landfall, we form our emergency response team, leveraging many of the corporate support area, including loss prevention, risk management, facilities, finance, logistics, and IT. Depending on the strength of the storm and damage sustained by the stores, we will draw whatever area's expertise is needed into the team, from communications to HR to merchandise replenishment. Our goal is to get the store back up and running as soon as it is safe to do so.
As the storm approaches, we begin reporting out to the key management people at corporate and the impacted divisions with storm strength, path, and potentially impacted stores. When a storm is three days out, we start conference calls with the regional store managers and store managers, beginning with store preparation, associate safety, and all the way through closing the stores. While electrical power lasts, the remote-monitoring center pulls video snapshots and emails them to the store managers, allowing them to stay safely at home with their families. On the other side of the storm, we pick up conference calls again with a focus on recovery efforts.
I think this is a great example of how loss prevention contributes in today's retail environment. We draw on expertise throughout the company to prevent loss and protect assets and end up as a strong contributor to the organization.
Editor's Note: Click below to view a video of Amber Virgillo, Contributing Editor at LP Magazine, interviewing Bob Vranek about how he rolled out the remote monitoring program.