Neither tornado nor robbery nor slip-and-fall accident prevents c-store retailers from closing their appointed sale.
Staying ahead of the unexpected is simply part of the retail business. The more than two dozen attendees of CSP’s 2014 Leadership & Crisis Prevention Forum could tell you stories: tales of misbehaving customers destroying bathrooms, of natural disasters that rearranged towns, and of workers’ compensation claims that threatened to spiral out of control.
But retailers could also share how they took control of these situations, kept their businesses running and made each incident a true learning experience—all while maintaining perspective.
“My goal is to laugh out loud every day,” said Nancy Couch, loss prevention and safety director for North Salt Lake, Utah-based Maverik Inc. “And when something comes, take care of it the best you can and get on task so you’re ready for the next one.”
Topics at the 12th annual forum, which took place in May in Nashville, included the latest developments in the insurance market, how to get a handle on claims, staying on top of product recalls, and recovery from natural disasters and robbery. Read on for highlights of the presentations and discussion.
Managing and Reacting
When it comes to insurance claims, retailers often rely on service providers to keep track of trends. But as the retail business grows in complexity and the potential liabilities multiply, it could pay to take greater control of claims data.
Couch has been with Maverik for more than two decades, and she has witnessed this change firsthand.
“People are more litigious in society now,” said Couch. “The entitlement factor’s out there. [On] social media—people communicate everything. You don’t get a pass if you mess up. It’s posted out there.”
Until recently, Couch and an associate made up the entire risk-management team for the chain, which stretches across 264 stores in 10 states. “When you have more than 4,000 employees, you’re always being reactive,” she said. “We reacted to issues [employees] came in with. We had no resources to collect the data and no information to train on the relevancy.” But it quickly became clear that the department needed more help, so Couch got the go-ahead to hire Travis Goff as risk and safety supervisor, and to help her form a more robust risk-management team at Maverik.
Goff ’s background includes time as facilities and maintenance manager for Family Express Corp., a 60-store chain based in Valparaiso, Ind. His responsibilities included everything from manning the help desk to overseeing Americans with Disabilities Act (ADA) compliance efforts. “When you’re small, everyone’s a risk manager,” said Goff. At Maverik, it became clear that quantifying risk would be key to managing it at the large chain.
One of Goff’s first efforts was examining how Maverik quantified its insurance claims. At the time, it relied mostly on loss run reports from its insurance providers, its own internal reporting and safety inspections. This decentralized approach often resulted in incomplete data that didn’t show the true costs of each claim.
“The most important step in the risk management process is identification,” said Goff. “If you don’t know your true risks, if you don’t know your true costs, then how do you know what you’re doing?”
To solve this problem, Maverik created its own risk-management information system (RMIS), based in a series of Excel workbooks that catalogued claims for workers’ comp, general liability and property damage. In workers’ comp alone, it tracked more than 20 characteristics for each claim, including the area in the store where the incident occurred, employee actions at the time of the incident and the cause of injury.
In embracing such a degree of detail, the Maverik team could identify where most claims were triggered. For example, 80% of losses occurred in five spots: the parking lot, bakery, ice machine, freezer, dumpster and sales floor. Eighty percent of losses happened when employees were walking, stocking, cleaning or throwing away the trash.
This has helped the company neutralize issues. A safety analyst for Maverik’s workers’ comp provider told the retailer that, based on the growing number of laceration claims, employees clearly were not wearing their protective gloves when cutting bread at the in-store bakeries.
Based on information from the RMIS showing what was causing most of the cuts—scissors and chef knives—and the nature of the injuries, Maverik was able to determine the real issue: Employees were using the wrong implements to open packaging instead of the ergonomic tools intended for that purpose.
“We’ve been bugging [employees] for two years about wearing the gloves,” said Couch. “Now we really know where to train them so we can make a difference.” The result: a 15% drop in laceration claims.
NEXT PAGE: After a Cyber Attack
After a Cyber Attack
The average loss due to a cyber-hacking event is $3.5 million, while the cost to clean up the mess has doubled in the past few years to hit $215 per record stolen, much of which includes credit monitoring. It’s an issue that crystallized during the 2013 winter holidays, when hackers stole 40 million credit-card numbers and other customer information from Target, which may spend an estimated $100 million by the time it is done dealing with the breach.
For c-store retailers, the threat is just as real, with news of skimming at the pump becoming incredibly common. With this in mind, operators should consider insuring their business against a cyber attack such as a hack or skimming, advised Stewart Van Duzer, first vice president of Federated Insurance, Owatonna, Minn., during his insurance update.
“It’s not a matter of if they can, it’s when,” said Van Duzer. “It is one of the biggest exposures you face.”
Federated does not sell cyber liability insurance, but Van Duzer recommended retailers connect with a carrier—AIG, Chubb, Travelers or Beasley, to name a few—to secure at least $1 million in coverage. The good news, he said, is that as cyber-attack activity and costs have grown, pricing has fallen because of more insurers offering such coverage.
Maverik recently acquired a cyber insurance policy through Aegis Insurance Services. As Goff explained, selecting the right provider and policy was very complicated.
“It’s not like workers’ comp or [general liability],” he said. “When you’re going through and pricing it, it was very difficult to compare policies, because they’re very different.” The company has also hired a cyber-security coach to help create a plan for addressing a hacking event.
Van Duzer concurred about the complexity of such plans, pointing out that applications can be more than a dozen pages long and include highly specific questions.
“Every one of those answers is a driver of the premium and coverage available,” he said, citing that the c-store industry typically faces higher premiums because of its heavy use of credit cards. Other issues that increase costs: having several laptops in circulation without a remote data-wipe function.
The process also highlights the need for c-store retailers to have high standards for their internal information systems (IS) team.
“What you see happen is the smartest guy with computers [will be made] head of IS. That’s not adequate,” said Van Duzer. “You really need to find someone with the background and expertise to protect you.”
NEXT PAGE: Bracing for a Recall
Bracing for a Recall
Product recalls are another business complication that can trip up even the biggest retailers. Consider the case of Ross Stores Inc., a discount apparel retailer slapped with a $3.9 million civil penalty by the U.S. Consumer Product Safety Commission (CPSC) for continuing to distribute recalled children’s clothing after it had already been fined for it. Costs in these cases can quickly add up: Each sale of a nonconforming product can result in a significant fine, with penalties ranging from $100,000 per infraction to a maximum of $15 million.
Established in 2008, the Consumer Product Safety Improvement Act (CPSIA) has underlined the obligation retailers have to report a consumer product to the CPSC if they receive information that it creates a substantial risk of injury to consumers. And this is the easy part. The hard part? Trying to figure out the source of the item, especially because 42% of imported product comes from China.
“Everything from the insurance certificate with the name and address of the company could be a starting point, but how are you going to go through a distribution chain quickly that leads back to a Chinese manufacturer, to whom you’re not going to be able to talk?” said Steve Burkhart, vice president and general counsel for BIC Corp., Shelton, Conn. “How reliable is the information you’ll get anyway? How am I going to manage a recall?”
“Sometimes your supplier may not even be identifiable,” said Joseph Wheeler, partner in the Nashville law firm Cornelius & Cornelius, which counsels for BIC. “What documentation do we have, and how can we be more diligent in obtaining it?”
For example, if a product is imported, which is very likely in the novelty category, the importer is required to provide a certificate of compliance to the vendor, according to the CPSIA. This document includes the product description, the regulations it complies with, who is keeping records of the compliance testing results, and the importer’s contact information.
Wheeler advised retailers to ask vendors for the certificate of compliance for all imported products, including the compliance test results from the third-party independent testing agency. Megan Cardine, vice president of retail operations for Top Star Inc., Emmaus, Pa., which has 40 Top Star Express stores in Pennsylvania, said it could prove challenging, especially for smaller retailers, to get this documentation from all of their vendors. However, the process is getting easier.
“E-cigarettes have helped with this whole conversation,” she said. “More buyers are starting to ask, ‘Where are these parts made? Where am I covered and not covered?’ ”
“It’s able to be obtained,” agreed Wheeler. “It’s just requiring a little more of an ask.”
If a distributor supplied the product, this adds another layer of protection in the event of a recall, because it likely has the documentation already on file and its own recall insurance to cover the costs.
BIC shared the following best practices to follow in the event of a potential recall:
▶ If you are notified of an injury or property damage from a product you sold, investigate the claim and confirm its authenticity.
▶ Contact the manufacturer or supplier to investigate the product and confirm who is notifying the CPSC. If the manufacturer or supplier does not plan to notify the agency, then you must do so. But be careful: If you mistakenly notify CPSC and/or incorrectly conduct a recall, you may be liable for various business torts.
▶ After confirming the authenticity of the claim and that you will be notifying the agency on your own without manufacturer or supplier support, visit www.saferproducts.gov and provide the required information.
▶ For more information about recalls, including the CPSC Recall Checklist and the Recall Handbook, visit www.cpsc.gov/en/Business.
NEXT PAGE: Dealing with a Disaster
A Natural Reaction
In 2011, an EF5 tornado changed life in Joplin, Mo., within minutes, causing 158 fatalities and $2.8 billion in damages. Wallis Oil Co. considered itself relatively lucky; the Cuba, Mo.-based retailer had only a lube plant in Joplin, and it was still standing.
The chain also considered itself prepared: It had a corporate safety committee that met quarterly, centralizing safety training and procedural manuals at each store for robberies, tornadoes and other events.
“Our first reaction as a company was [that] we got really lucky,” said Tracey Hughes, vice president of strategic planning for the 34-store retailer and fuel distributor. “But then all of these business problems started creeping up that weren’t addressed in our continuity plan. They weren’t things we ever thought about as a possibility to happen.”
After the tornado hit Joplin on an early Sunday evening, it was not until mid-Monday morning that Wallis was able to verify that all of its employees in town survived because cellphones had been knocked out. Luckily, no employees died, and their immediate families were spared. But three workers at the 15-employee plant lost their homes, and two key customers—car dealerships—were completely wiped out.
When Wallis began fuel deliveries to customers in the area, one driver—a lifelong Joplin resident—returned after only an hour because he couldn’t find his way. All of the identifying landmarks, such as street signs, trees and buildings, were gone.
Despite this literally lost business, Wallis was not kept idle.
“Our business really started to amp up in an unexpected way,” said Hughes. The local hospital asked Wallis to keep its generators fueled, which required an employee on site 24 hours a day. And as rebuilding began, utilities and contractors from out of town asked Wallis to sell fuel and lube, on credit. Typically, credit approval takes three to five days.
“That didn’t cut it,” said Hughes. “We threw all of our credit rules out the window and started supplying anyone who came in, and that was scary, but it was the right thing to do.
“Sometimes when you’re responding to a natural disaster, you can’t go by the protocol you have in place, and it doesn’t matter how much you practice doing these things and study these plans,” she continued. “Things are going to come up that are completely out of the ordinary, and someone needs to make a judgment call.”
Fortunately, Wallis made the right call. Sixty percent of the businesses it supplied during rebuilding are still customers today.
The company also saw employees rise to the challenge, with associates organizing two collection drives for Joplin, delivering and distributing the supplies themselves, without a corporate directive.
“Even when the worst happens to our communities,” said Hughes, “the best comes out in our teams.”
Reacting to a Robbery
After an armed robbery at one of its stores, Ricker Oil Co., Anderson, Ind., upgraded its already considerable safety program. Karen Mitchener, director of human resources, suggested other retailers consider the following steps:
▶ Provide robbery training in additional languages if the store is in an area where English is a second language.
▶ After incidents involving a gun, add armed security to guard the store for a period of time to provide peace of mind to employees and to customers.
▶ In high-risk areas, install magnetic locks on doors so customers cannot enter without employees unlocking them from the inside. Put up signage on the front door requiring removal of hats, hoods and sunglasses before entry. Install panic buttons.
▶ Establish close relationships with law enforcement. “If you don’t have contacts at the local police department, create those relationships. They pay off, time and again,” said Mitchener.
▶ Perform a post-incident security audit to review the adequacy of security procedures and reveal weak spots.
NEXT PAGE: Singing the Convenience-Store Blues
Risky Singers
At the Leadership & Crisis Prevention Forum, attendees wrote and recorded a song with accomplished country singer/ songwriter James Dean Hicks. What follows are lyrics of the final piece; click here to hear the studio recording.
“Convenience Store Blues”
Some drive through the front windows
To steal a six-pack of beer
Some drive off with the nozzle
It’s gonna cost you dear
[Chorus]
Life happens
That’s all we can say
Life happens
At convenience stores every day
Some leave the cooler door open
Some try to sleep in there
Some use the sink as a toilet
After corn dogs at the county fair
[Repeat chorus]
You can get doughnuts and coffee
24 hours a day
Buy a winning lotto ticket
And you can own this joint some day
[Repeat chorus]
All across the USA
Participants in CSP’s Eighth Annual Leadership & Crisis Prevention Forum, held May 14-16 in Nashville, Tenn.:
| Retailers | |
| The Cigarette Store Corp. | Ken Kramer |
| Circle K Stores Inc. | Doryce Norwood |
| Kwik Trip Inc. | Stephanie Thompson |
| Martin & Bayley Inc. (Huck’s) | Sheri Stevens |
| Maverik Inc. | Nancy Couch, Travis Goff |
| QuickChek Corp. | Suzanne DelVecchio |
| RaceTrac Petroleum Inc. | Leslie Williams |
| Ricker Oil Co. Inc., dba Ricker’s | Karen Mitchener |
| Stinker Stores | Sandy Bolinske |
| Susser Holdings Corp. | Patty Scalise |
| Top Star Express | Megan Cardine |
| Tri Star Energy LLC | Steven Hostetter, Jeff Williams |
| Wallis Oil Co. Inc. | Tracey Hughes |
| Wayne Oil Co. Inc. | Pamela Kienast |
| Suppliers | |
| BIC Corp. | Steve Burkhart, Carol Cleveland, Sandy Conlan, Patrick Cordle, Ryan Sullivan |
| Cornelius & Collins LLP | Joseph R. Wheeler |
| Federated Insurance | Dave Anthes, Stewart Van Duzer |
| Kohler Generators | Dan Giampetroni |
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