Store Operations and Job Knowledge

Unit 15

Unit 15

Store Audit

Structure
15.1

Introduction
Objectives

15.2

Concept of Store Audit

15.3

Importance of Store Audit

15.4

Parameters for Store Audit

Storefront appearance
In-store presentation
Customer service
Storage
Housekeeping

15.5

Summary

15.6

Glossary

15.7

Terminal Questions

15.8

Answers

15.9

Case Study: Store Audit to Minimise Incurring Costs

15.1 Introduction
In the previous unit, you studied that shoplifting and pilferage are the major
threats in retail stores. In this unit, let us focus on how stores evaluate and
enhance their performance level by conducting a structured auditing
process.
Store audit is a process of inspecting the stores sales volume, brand sales
trends, store stock levels, customer service and effectiveness of
merchandise display. The main objective of store audit is to improve the
operational efficiency of a store by identifying the strengths and weaknesses
of store operations. Store audit can be performed internally or externally,
depending on the requirements of a store.
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In this unit, you will study the concept of store audit in detail. Next, you will
study about the importance of store audit. In the end, you will study about
various parameters that an auditing team considers while conducting store
audit.

Objectives
After studying this unit, you will be able to:

explain the concept of store audit

discuss the importance of store audit

describe various parameters considered by an auditing team

15.2

Concept of Store Audit

Audit is an official, unbiased inspection of an organisations accounts,

usually by an autonomous organisation. However, in retail, store audit is all
about gathering information on a stores sales volume, brand sales trends,
store stock levels, customer service and effectiveness of merchandise
display. It also reflects the effectiveness of promotional efforts taken by the
store.
The store audit is a vital function that differs from one store to another on
the basis of specific store audit policies. The main objective of any store
audit is to improve overall store performance, rather than to find faults. Store
audit can either be performed internally by store staff or externally by an
autonomous organisation. The date of audit can be announced in advance
to store staff or it may be kept secret to determine the real condition of the
store. In India, Bata is one of the oldest organisations, which manages its
store efficiency through regular audits by its district managers. The
frequency of such audits depends on the financial performance of the store.
Higher the performance, the higher is the frequency of audit.
Usually, the date of audit is announced in advance in case it is conducted
internally. On the other hand, external audit is performed without any prior
announcement. Thus, external audit is also known as mystery audit. In
internal audit, stores are well prepared for the auditing process and the
auditors are aware of the basic operations of stores. Therefore, in internal
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audit, it becomes easier for auditors to provide necessary and appropriate

solutions in a precise timeframe. On the contrary, in external audit, mystery
auditors go to stores like common shoppers and take a complete overview
of store operations. In order to check the operational efficiency of a store,
the auditors may visit the store as anonymous or responsive customers, buy
merchandise and check out through cash counters. Meanwhile, they take
note of all the processes that are being performed in the store. External
auditing gives a real picture of store problems, thereby enabling auditors to
provide solutions with sound reasons.
An auditor, be it internal or external, should never accuse an employee for
any wrongdoing that is happening in the store. His/her job is simply to
review store systems and not to confront employees. It is the responsibility
of store administration to take corrective actions. The store staff should
consider audit as an opportunity to correct their course of action in order to
improve the overall operational efficiency of the store.
Self Assessment Questions:
1.

__________is an official, unbiased inspection of an organisations

accounts, usually by an autonomous organisation or individual.

2.

In retail, store audit is all about gathering information on stores sales

volume, brand sales trends, store stock levels, customer service and
effectiveness of merchandise display. (True/False)

3.

The store audit is a vital function that differs from one store to another
on the basis of specific store audit________.

4.

The main objective of any store audit is to improve overall store

_________rather than to find faults.

5.

Usually, the date of audit is announced in advance in case it is

conducted_________.

6.

Internal audit is performed without any prior announcement.

(True/False)

7.

External audit is also known as _________audit.

8.

In external audit, it becomes easier for auditors to provide necessary

and apt solutions in a precise timeframe. (True/False)

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In external audit, mystery auditors go to stores like common shoppers

and take a complete overview of store operations. (True/False)

10. The store staff should consider audit as an opportunity to correct their
course of action in order to improve the overall operational efficiency
of the store. (True/False)
Activity 1:
Assume that you are an external auditor of an organisation, and you are
required to perform a mystery audit of an apparel store. Make a checklist
that you would follow for auditing the store.

15.3

Importance of Store Audit

Audit not only helps retailers to carry out successful operations but also
enables store staff to perform their duties correctly. For example, a store
head may perform his/her duties honestly but incorrectly. In such a case,
audit gives him/her the right direction of doing things, with proper knowledge
of management controls and systems.
Store audit not only involves analysing the financial accounts/records of the
store but also includes examining store operational/merchandising
procedures by a qualified auditor. Apart from this, it also helps retailers in
preventing any kind of scams. Most importantly such audits help the store to
make the right kind of resource investments. The following are a few key
points that explain the importance of store auditing:

Gaining strong knowledge of internal control of store operations and

actual happenings, as against planned activities/ norms.

Assessing the KPI (Key performance indicators) levels.

Establishing new KPIs.

Identifying key areas for performance improvement.

Rewarding/recognising outstanding performers.

Recognising the major areas of weaknesses/opportunities.

Offering remedies to overcome the concerned weaknesses.

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Assessing the performance of new technologies that can be applied in

the store.

Evaluating various external threats, economic conditions, operational

efficiency and quality of work.

Identifying fraudulent acts in store operations and preventing them in the

future.

Determining the financial status and merchandising strength of the store.

Finding the strong and positive aspects of business that can provide a
competitive advantage.

Evaluating the performance of store staff and identifying training needs

for them.

Self Assessment Questions:

11. Audit not only helps retailers to carry out successful operations but
also enables _____________to perform their duties correctly.
12. Audit helps retailers in preventing any kind of_________.
13. Audit does not involve evaluating external threats, economic
conditions, operational efficiency and quality of work. (True/False)
14. Audit helps in finding the strong and positive aspects of business that
can provide a competitive advantage. (True/False)
15. Audit helps in recognising the major areas of weaknesses/
opportunities. (True/False)
Activity 2:
Make a group and discuss the importance and role of financial auditing in
a retail store.

15.4

Parameters for Store Audit

An audit is a systematic process that initiates with the issuance of a written

authorisation to the auditing team (internal or external) by the management
of a retail organisation. There are also organisations that have set internal
audit parameters for their stores. Implementing these parameters is added
in job descriptions of area and regional managers. These managers visit
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stores regularly or through surprise visits and conduct the audit, take action
and report to top management. Thus, the top management gets an idea of
the prevailing situation of each store of the organisation. Most of the time,
the internal audit reports are discussed at the store level by the auditing
person or team by setting targets for improvement and corrections. The
good points of the store are appreciated in such reports and shared with
other stores for setting their benchmark.
In case, audit is conducted by an external individual or team, the purpose
and objective parameters of conducting the store audit have to be properly
documented. In order to perform store audit, the external auditing team
needs information (preferably store operation manual) related to store
operations, sales volume and financial statements. The auditing team can
conduct the audit by handing over the letter of authorisation of the top
management to the store management. Depending on the situation, the
audit report is sometimes not shared at store level and sent directly to the
head office. Many a times, these audit reports are discussed point by point
with the store head and a copy of it is also handed over to the store head.
The auditing team tries to judge the store from an improvement perspective
by understanding the gaps. It provides suggestions to store staff about how
they can improve their performance at the workplace. To perform store
audit, the auditing team follows certain parameters, which are shown in
Figure 15.1:

Figure 15.1: Auditing Parameters

Let us discuss these parameters in detail.

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15.4.1 Storefront appearance

It is well said that the first impression is the last impression. As a
customer, you may not want to visit a store that does not have effective
storefront appearance. Keeping this in mind, store auditors try to find the
answers to the following questions while judging the effectiveness of
storefront appearance:

How does the store look like to customers?

Does it appear dull and monotonous or appear fresh, attractive and

appealing to customers?

Is it appealing enough for the customers to visit and shop?

To answer the aforementioned questions, the store auditing team considers

a few components that collectively create the appearance of any store.
These components are shown in Figure 15.2:

Figure 15.2: Storefront Components

Let us now discuss these components in detail:

Signage: Generally, the condition of external signage maintenance gives
the auditing team an idea about what is to be expected inside the store. The
auditing team checks the following points while determining the
effectiveness of signage:

Is the signage clean and bright? Is it damage free?

Are all lights inside the sign board working properly?

Is every portion of flex/acrylic intact?

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Do all internal signage provide correct information?

Are all signage kept in a position to be visible to all from a distance?

Does the signage follow the organisations corporate colour scheme?

Is the signage provided with a timer for glowing in the night? Is that timer
working?

Entrance and Doors: The entrance of any store says a lot about the
efficiency of stores housekeeping staff. The auditing team checks whether
the store entrance is properly cleaned. In case of supermarkets, auditors
also check whether all the trollies/shopping bags/baskets are clean and
arranged properly outside the store. They also check the condition of
trolleys. The auditing team also checks the cleanliness of the parking area.
In addition, the team ensures whether the vehicles in the parking area are
properly arranged.
Customers often tend to open doors by pushing them with their hands,
which leave finger imprints on the doors. The auditing team, before entering
the store, would observe from a distance, to ascertain if the door man is
helpful to the customer or standing indifferently with thoughts elsewhere.
The auditing team checks whether store doors and handles are properly
cleaned and without any imprints. The team also ensures that all
promotional posters are hung /fixed properly at their assigned places. They
will also check if the current promotional materials are visible in the right
places. The auditing team will verify to detect if any old promotional
materials are still hanging around. Apart from this, the auditing team checks
the following aspects in order to evaluate the store front appearance:

Does the paint look dull and old?

Is the entrance of the premise clean?

Is the entrance lighting bright and attractive?

Does the entrance of the store have a soothing fragrance?

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Window Display: It is one of the major factors that attract customers

towards the store and helps to improve the number of footfalls. While
checking window display arrangements, the auditing team checks the
following aspects:

Are the windows clean?

Are the displays engaging the customers attention?

Are the display clothes clean, new and trendy with price tickets?

Are mannequins appropriately selected, having good looks and properly

kept with garments/shoes of correct size?

Is there proper lighting to emphasise the display?

Do the displays appear fresh, innovative and professional looking?

In case of a footwear store, are all shoes well-polished and laced up

appropriately?

Is the merchandise mix properly displayed at the store?

Is the window displaying its promotional materials to the customer?

Is there any faded or damaged merchandise in the window?

Is the window display attractive?

Are all the lights switched on inside the window and is the intensity of
the light right?

Are there any cobwebs near the window corners?

Are there any damp walls inside the window?

15.4.2 In-store presentation

When customers walk into a store, they form an impression in their minds
by looking at the total in-store presentation. An auditor judges all the
components that create the ambience of any store through effective
presentation. These components are shown in Figure 15.3:

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Figure 15.3: In-Store Components

Staff Grooming: You have already studied about various grooming

standards and their importance in the store. The auditors evaluate staff
grooming standards to check how the staff members present themselves to
customers. This is important as groomed staff, and their smart appearance
influences the buying decisions of customers.
Staff Availability: The auditing team also checks whether the store has an
adequate number of employees to carry out store operations. If the store
does not have a sufficient number of employees, it may become difficult to
serve customers effectively. By being present in extra numbers, it will
impose an additional cost on the store and deprive other stores where they
are needed. The auditing team compares the number of staff members that
are supposed to be present, as per the daily roster, with that of members
currently present at the store. The team also goes through the attendance
register to understand the absenteeism rate in the store, the pattern of
absenteeism and the habitual and chronic absentees. There are also staff
members who are very regular. These members should be appreciated and
recognised as regulars.

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Stock Level Audit: The auditing team also checks whether the store has
an optimum level of stock to fulfil the requirements of consumers. The stock
level gives a fair idea about how much the store invests in maintaining
stock. If the stock level is too high, it incurs huge costs, whereas too low
level of stock may create shortage. Every store has well-defined stock turn
objectives which are different for different categories as per the speed of
stock movement. The auditing team must verify the actual levels of stock in
those categories against estimated levels of stock standards. The auditing
team must check which of the categories are turning well and which are not.
Stock turn is a major contributor for cash flow and profit.
Each store also has a budget for liquidation of old merchandise; the auditing
team has to verify the actual level of expenditure and see the variation as on
that date.
Store managers are supposed to return defective and returned merchandise
from customers to the vendor/production unit within a specified period. The
auditing team should check whether the defective merchandise is returned
safely to the vendor/production unit.
Every store has been provided with an estimated average unit sales price.
In case there is any variation in the average unit sales price, the auditing
team should find reasons for the shortfall in achieving the average sales
price.
The auditing team must assess the level of Slow Moving Inventories (SMIs)
and compare with bench marks. Also, the team should ascertain the causes
behind such high SMIs. These causes can be wrong ordering, wrong
supplies and less competence of staff members. The auditing team should
also verify vendor details of SMIs and prepare a report accordingly.
Management Information System (MIS): The auditing team must find out
if all MIS activities are being carried out properly in the store. Without a
proper and timely MIS, it is difficult to manage the modern day store with
varying complexities.
Many staff members are hesitant to use modern information systems. In
such a case, the auditing team should identify the reasons for such
hesitation of employees and mention training needs in its report.

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Store Expenditure: As you know, every store prepares a budget whereby

funds are allocated for each operation. The auditing team should verify
whether all the expenditure of the store is as per the given budget. This is
because if expenditure is beyond the budget, and not controlled, it can lead
to losses. Each store manager is given a monthly budget of expenses under
different heads, which are:

Electricity, phone, internet, mobile, postage

Stationery, computer related, general

Packing material, cleaning material

Conveyance/travelling

Staff welfare/entertainment

BTL expenditures (Below the Line Advertisements at store level)

Shelf Arrangement: The shelf arrangement not only includes

arranging/filling the shelves with stock but also involves its management as
per the planogram. The store auditing team checks the shelf arrangement of
the store in order to ensure that there are no deviations in the arrangement
of the given plan. Shelves are also checked for cleanliness and usage of
appropriate shelf talkers, stickers, price tickets, etc.
Staff Competence: The audit team observes each staff member, his/her
level of grooming, body language, and his/her approach and interaction with
customers from the beginning till he/she concludes his/her sales and wishes
goodbye to the customers. Staff members are evaluated during this process
through a proper format and their strengths and weaknesses are
determined. This also helps in deciding training requirements.
The audit team questions the staff members in order to know their product
and operating knowledge and familiarity with the organisation. In addition,
the team checks the awareness level of the staff members about the current
market trends, store performance and the products that they are selling.
This is done to evaluate the staff members effort to gain more knowledge
about retail store operations. To check the staffs competence, the team
creates some difficult situations for the staff members and asks them to
resolve such situations, in order to evaluate their competence.

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Staff members are also audited to measure their skills of lateral interaction
with other colleagues, teamwork, etc. They are also observed to check how
they respect their superiors and take instructions. Their attitude is also
audited well, since it helps in identifying future leaders for the organisation.
Pricing: The audit team checks the pricing of merchandise to see whether it
is updated or not. It also ensures that all the merchandise bears proper
price tags. To do so, merchandise is picked randomly and their prices are
checked to ensure correct information is provided to customers about
merchandise value. This kind of audit also helps in identifying any
malpractice like price manipulations taking place in the store.
Checking the pricing labels is important because non-display of price on any
packaged product is an offence under the Weights and Measures Act,
leading to heavy financial penalty, leading to economic loss for the store.
Stock Audit: In case of announced/internal audit, the auditing team must
be provided with the last physical count of the stock along with all
subsequent supply details of the store and details of stock received from the
warehouse. Apart from this, the team should also be provided with the
current sales figure, as well as the figures mentioned in the previous audit
report. The auditing team should also take the physical count of stock and
ensure whether it matches with the reported count.
Weight Check: Apart from complying with the Weights and Measures Act,
the auditing team should check the shrinkage loss levels due to loss of
weight of some products, such as fruits and vegetables, which lose weight
upon physical shrinkage. Certain allowances are given by the management
to cover these losses. The auditing team must verify the allowances and
observe misuse.
Offer Display: The auditing team also observes whether all promotional
schemes and offers are implemented by the store, as per the head office
guidelines. It also checks whether promotional schemes that are being
communicated through the in-store audio/video system are effective.

15.4.3 Customer service

After checking the internal and external appearance of a store, the auditing
team focuses on the level of service that the retail store provides to its
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customers. As you know retailers, are striving very hard to provide a rich
shopping experience to customers in order to build long-term relationships
with them.
Before reaching the store, the auditor should call the customer care number
of the store pretending to be a customer and see if the response comes
within the first 3 rings. Followed by this, the auditor should take note of the
politeness of the customer care executive and his/her telephone manners.
Next, the auditor should visit the store as a mystery shopper and assess the
staff level, service, politeness, product knowledge, attitude, etc. The auditor
should browse through the visitors' book or customer complaint book to see
the history of positive and negative feedback given by customers. This gives
an insight of stores image to the auditing team. In case there is any
unsettled complaint, the auditing team must probe to get more details and
see the causes. This will also help the team to find more about staff
behaviour.
Once the auditing team reveals its identity to the store head, it should go
through the administrative file of the store where written complaints of
customers are filed with replies sent, etc. If there is any long-standing
unsettled complaint, it should be investigated with reasons for noncompliance and for not notifying the head office about the complaint.
The auditing team thoroughly checks the level of service provided by the
store to its customers. It checks whether the services provided by the store
increases customers convenience or not. It also visits competitors stores in
the neighbourhood to see what services they are offering. This is included in
the audit report.
In order to determine the level of customer service, the auditing team
collects and analyses information related to the stores target audience, their
needs and lifestyles. The auditing team also correlates customers profiles
with that of the existing staff members to highlight parity in staff selection.
For example, a denim store usually has young staff members, which
matches with the age of the stores target audience.
To check the level of service provided by a store to customers, the auditing
team considers various factors, which are shown in Figure 15.4:

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Figure 15.4: Factors Determining Store Customer Service Level

Let us now discuss the major points that an auditor checks while auditing a
retail store:
Availability of Staff Members at the Customer Service Desk: The
auditing team inspects whether the store has a sufficient number of staff
members present at customer service desk. It also checks the presentation
of staff members at the customer service desk. Usually, the auditing team
makes a casual visit to the desk and observes how the processes are being
followed there. Apart from this, the seating arrangements and facilities
available at the customer service desk are also evaluated by the team.
Availability of Shopping Baskets and Trolleys: Shopping baskets and
trolleys are the first thing that customers pick up when they enter a store.
The auditing team checks whether the store has ample shopping baskets
and trolleys available at the store. In addition, it checks the cleanliness of
shopping baskets/trolleys and their accessibility at apt places.
Cash and Checkout Process: Effective customer service depends a lot on
the cash and checkout process of the store. Slow and faulty cash and
checkout process makes unnecessary delays, which irritates customers and
results in the wastage of their precious time. The auditing team closely
watches how the activities are performed at the cash counter. It is expected
from a cashier to pack the purchased merchandise properly so that
customers could easily carry them. Besides, the auditing team also checks
how the sales staff and security in-charge behave with customers when they
leave the store.

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15.4.4 Storage
Storage is another aspect that is considered by the auditing team in order to
evaluate the performance of a store. The auditing team thoroughly checks
how the merchandise is stored in the stockroom within the store. It checks
whether the quality and expiry dates of merchandise are properly tracked by
the store staff. Apart from this, the team also ensures that the timely
replenishment of the expired merchandise or empty shelves is done by the
store.
The auditing team also evaluates whether the merchandise is placed in a
manner so that it does not easily fall from shelves. Moreover, it verifies if
every gondola and rack bears proper signage about merchandise
information. The team also checks that the store floor is not overstocked
with merchandise, which prevents customers from finding the desired
merchandise.
In addition to floor merchandise stocking, the auditing team checks how the
store manages its back storage area. For example, a store is expected to
manage a register for tracking the stock movement between the store and
the distribution centre. The auditing team checks that register while
conducting store audit to know the number of products that have been sent
to the store and returned to the distribution centre. Auditors will also
ascertain if the store is sending or receiving goods without invoice/challans.

15.4.5 Housekeeping
In the previous units, you have studied that housekeeping is of paramount
importance for any retail store. This is done because an untidy store leaves
a bad impression in the minds of customers. The auditing team checks
whether the store is following cleanliness and hygiene norms as per its
schedule. In order to evaluate the housekeeping and hygiene of the store,
the auditing team considers the following aspects:

Is the store cleaning schedule followed regularly at prescribed intervals?

Are all the shopping bags and baskets properly cleaned?

Are all the trolleys cleaned?

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Are the store floor, walls, shelves, mirrors, trail rooms and decorative
items cleaned?

Is equipment like the POS machine cleaned?

Are freezers, refrigerators and trays cleaned?

Are all washrooms cleaned?

Are there sufficient tissue papers and hand wash in the washroom?

Are drinking water machines, air conditioners and fans cleaned?

Is the store stock maintenance area cleaned?

Are the room fresheners sprayed in the store at regular intervals?

Are all dustbins cleaned?

Self Assessment Questions:

16. An audit is a systematic process that initiates with the issuance of a
written document to the auditing team (internal or external) by the
_____________ of a retail store.
17. The auditing team tries to judge the store from _____________
perspective.
18. __________ is written information that gives the auditing team an
idea about what is to be expected inside the store.
19. The entrance of any store explains a lot about the efficiency of stores
housekeeping staff. (True/False)
20. When customers walk into a store, they form an impression in their
minds about _____________.
21. The auditors evaluate staff grooming standards to check how the staff
members present themselves to customers. (True/False)
22. The auditing team compares the number of staff members that are
supposed to be present as per the __________with that of members
present currently at the store.
23. The shelf arrangement not only includes arranging/filling the shelves
with stock but also involves its management as per the___________.

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24. In order to determine the level of customer service, the auditing team
collects and analyses information related to the stores target
audience, their needs and lifestyles. (True/False)
25. Slow and faulty ___________ process makes unnecessary delays,
which irritates customers and results in the wastage of their precious
time.
Activity 3:
Suppose you are an auditor of an autonomous auditing organisation. How
will you plan your approach to audit a store?

15.5

Summary

In this unit, you have studied about the concept of store audit.
The store audit is a vital function that differs from one store to another on
the basis of specific store audit policies. The main objective of any store
audit is to improve overall store performance rather than to find faults.
Store audit can either be performed internally by store staff or externally by
an autonomous organisation. In internal audit, stores are well prepared for
the auditing process and the auditors are aware of the basic operations of
stores. Usually, the date of audit is announced in advance in case it is
conducted internally. On the other hand, external audit or mystery audit is
performed without any prior announcement.
An auditor, be it internal or external, should never accuse an employee for
any wrongdoing that is happening in the store. His/her job is simply to
review store systems and not to confront employees.
The store staff should consider audit as an opportunity to correct their
course of actions in order to improve the overall operational efficiency of the
store.
Store audit not only involves analysing the financial accounts/records of the
store but also includes examining store operational/merchandising
procedures by a qualified auditor.

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Store auditing is important as it helps in gaining strong knowledge of internal

control of store operations and actual happenings as against planned
activities/norms, assessing the KPI (Key performance indicators) levels,
establishing new KPIs, and identifying key areas for performance
improvement.
An audit is a systematic process that initiates with issuing written
authorisation to the auditing team (internal or external) by the management
of a retail organisation.
The auditing team tries to judge the store from improvement perspective, by
understanding the gaps. It provides suggestions to store staff about how
they can improve their performance at their workplace.
To perform store audit, the auditing team follows certain parameters, which
include storefront appearance, in-store presentation, customer service,
storage and housekeeping.
While judging the effectiveness of storefront appearance, the store auditing
team considers a few components, such as signage, entrance and doors
and window display that collectively create the appearance of any store.
While judging the effectiveness of in-store presentation, an auditor judges
various components that create the ambience of any store through effective
presentation. These components include staff grooming, staff availability,
stock level audit, management information system (MIS), store expenditure,
shelf arrangement, staff competence, pricing, stock audit, weight check and
offer display.
After checking the internal and external appearance of a store, the auditing
team focuses on the level of service that the retail store provides to its
customers. It checks whether the services provided by the store increases
customers convenience or not.
To check the level of service provided by a store to customers, the auditing
team considers various factors, which include availability of staff members
at the customer service desk, availability of shopping baskets and trolleys
and the efficiency of cash and checkout process.

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The auditing team thoroughly checks how the merchandise is stored in the
stockroom within the store. It checks whether the quality and expiry dates of
merchandise are properly tracked by the store staff.
The auditing team checks whether the store is following cleanliness and
hygiene norms as per its schedule.

15.6

Glossary

Let us have an overview of the important terms mentioned in the unit:

Store Audit: A review of retail store operations and processes like store
appearance, cash handling and cleanliness. It is performed to increase the
efficacy of store performance.
Storefront: The faade area of the store that is visible from the street or
passage.
Customer Service Desk: It is a centre that intends to connect customers
with the store services by resolving problems that customers face during
their shopping in the store.

15.7

Terminal Questions

1.

Explain the concept of store audit.

2.

Describe the importance of store auditing.

3.

List the various parameters for store audit.

4.

Write a short note on storefront appearance as an auditing parameter.

5.

How is in-store presentation is checked in the auditing process?

6.

Discuss the role of customer service in the auditing process.

7.

Explain how storage is an important parameter for auditing process.

8.

Discuss cleanliness as an auditing parameter.

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Answers

Self Assessment Questions

1.

Audit

2.

True

3.

policies

4.

performance

5.

internally

6.

False

7.

mystery

8.

False

9.

True

10. True
11. store staff
12. scams
13. False
14. True
15. True
16. management
17. improvement
18. Internal signage
19. True
20. in-store presentation
21. True
22. daily roster
23. planogram
24. True
25. cash and checkout
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Terminal Questions
1.

Refer section 15.2 Concept of Store Audit that explains the concept of
store audit.

2.

Refer section 15.3 Importance of Store Audit that elaborates on the

importance of store auditing.

3.

Refer section 15.4 Parameters for Store Audit that lists various
parameters for store audit.

4.

Refer section 15.4.1 Storefront appearance that explains storefront

appearance as an auditing parameter.

5.

Refer section 15.4.2 In-store presentation that discusses how in-store

presentation is checked in the auditing process.

6.

Refer section 15.4.3 Customer service that explains the role of

customer service in the auditing process.

7.

Refer section 15.4.4 Storage that describes how storage is an

important parameter for auditing process.

8.

Refer section 15.4.5 Housekeeping that explains cleanliness as an

auditing parameter.

15.9

Case Study: Store Audit to Minimise Incurring Costs

Electro is a New Delhi-based retail store that sells cooling appliances like air
conditioners, refrigerators and water coolers. For quite some time, the store
was incurring huge operational costs. Considering the on-going situation,
the store administration directed its internal audit team to carry out a store

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audit. The auditing team was told to find out the reasons behind huge
operational costs.
Based on the given circumstances, the internal audit team chalked out an
audit program. A flowchart was prepared representing the stores activities.
In addition, a detailed control checklist was also prepared for meeting the
auditing objectives.
The auditing team came out with the following weaknesses of the store that
can be overcome in order to minimise the operational costs:

30 per cent merchandise of the total inventory was non-moving, which

was generating unnecessary costs for the store. The store was ordering
and storing merchandise that was not required for sales purpose.

The store had the merchandise worth ` 9 lacs, which was ordered on an
emergency purchase basis but not used yet.

Due to improper understanding of stock valuation system, the store was

operating with wrong MIS reports.

The auditing team mentioned all these problems in its report. The store
administration warned the store staff that such deviant behaviour would not
be tolerated any more. It instructed the staff to avoid unnecessary costs
incurred on systems and procedures. The store tried to bring the cash back
into the system by selling the excess non-movable merchandise and
avoiding overstocking. Thereby, it managed to reduce costs by rationalising
systems and procedures based on the guidelines of the auditing team.
Questions:
1.

According to you, what could be the other problems that led to huge
operational costs for the store?

2.

Suggest some remedies to overcome the weaknesses of Electro retail

store. How can the store avoid incurring the huge operational costs?

References and Suggested Readings

Segel, R. (2008). Retail business kit for dummies. Hoboken, N.J: Wiley.

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E-References

Small Business - Chron.com (2002). The Importance of an Audit System

to Companies. [online] Retrieved from:
http://smallbusiness.chron.com/importance-audit-system-companies14705.html

Cooperativegrocer.coop (2006). Store Audits Reveal Benefits of Peer

Review | Cooperative Grocer Network. [online] Retrieved from:
http://www.cooperativegrocer.coop/articles/2009-01-20/store-auditsreveal-benefits-peer-review

Checkpointsystems.com (n.d.). Retail Audit | Retail Auditing | Retail

Store Audit | Checkpoint Systems, Inc.. [online] Retrieved from:
http://www.checkpointsystems.com/en/products-services/CheckProShrink-Management-Software/CheckPro-Auditor.aspx

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