The devastation that Hurricanes Katrina, Rita and Wilma have visited provides a real learning opportunity. By examining what retailers have done-or not-to prepare, others can better decide how to formulate plans for future natural or man-made disasters.
Those retailers who had a game plan have one thing in common: they were primarily concerned with the welfare of their employees. The thinking is that nothing can stop Mother Nature, and all you can do is take the precautions of boarding up stores. Beyond that, insurance will take care of lost or damaged stock. But you can't replace your employees, and you have to do what you can to protect them and help them get back on their feet in the event that they're affected by the storm.
People First
A national drug retailer (the company has requested that it remain anonymous) with stores in New Orleans did the best it could when the warnings about Katrina were announced. After safeguarding the stores as well as possible, the loss prevention staff turned their attentions to their employees. LP people from surrounding regions were summoned to nearby areas, and the company set up shelters for all employees and their families from the affected areas. After the hurricane, old stores that were no longer in use but still available to the company were outfitted with beds and showers, and the company had meals catered.
Over, at the three-hundred-store Mattress Firm chain, which is headquartered in Houston, executives had a slilghtly different approach. The company has retail outlets and a distribution center in New Orleans and Baton Rouge. The Labor Day holiday weekend is the largest sale period of the year, so company decision-makers dreaded the thought that the storm might affect them then.
But according to Director of Loss Prevention Maurice Edwards, the employees at the retail level were shaken and terrified after the storm as they faced an environment of closed businesses, widespread reports of looting and violence, flooded homes and broken infrastructure. The company responded by flying employees in the affected areas to stores in different regions and putting them to work there.
Some employees of both companies were in the worst hit areas and lost everything. The drugstore chain set up a priority assistance program to help them back on their feet.
Mattress Firm set up an assistance program that was funded by donated commissions. Employees in the non-affected areas gave $100,000 in Labor Day weekend commissions to their counterparts who suffered from the storm. They also responded with offers of housing and other assistance. Edwards says that he was surprised and touched to learn how caring the company's employees are.
Carrying on with Business
As the city flooded, looters broke into some of the New Orleans stores of the national drugstore chain. Looters didn't just take food and water, items which many thought would be understandable, but they also set fires and completely destroyed some locations.
However, the company's LP director said that the lawlessness wasn't pervasive. Some citizens even called the company's toll-free number and reported incidents of people breaking into the stores.
According to the LP director, the drugstore chain's biggest priority, once the storm passed, was to become ready to serve its customers. With some stores suffering too much damage to reopen, the company set up trailers next to the store buildings and opened for business. The company's LP director explained that the idea wasn't to open because profits were being lost, but that people needed their medications, and that it was the company's duty to be there for the customers with medical needs.
Putting a trailer online wasn't as simple as putting cash in the register. This particular drugstore chain runs its IT system via satellite connectivity, so it had to treat the trailers as though they were new store locations and put up satellites to get the system up and running again.
Over at the Mattress Firm, Rita forced the company to completely revise its contingency plans. The corporate headquarters in Houston also houses the company's servers, which are crucial for the real-time POS information necessary to run the business effectively.
The CFO and directors of operations, sales, IT and LP contemplated the chance that the storm could knock out all connectivity. They formulated a back-up plan to implement manual sales and daily inventory at every location so that business interruption would be minimized. They also decided that the executive staff would temporarily relocate to the Dallas regional office if they could not work out of Houston.
Lessons Learned
What the drugstore company took from its experiences with the recent natural disasters was the reinforcement of an idea they held before the storms: that the employees come first.
"Make sure you take care of your employees," says the national drugstore chain's LP director. "Know where they are and that they're safe. The employees and the customers come before the business."
Mattress Firm, likewise, learned lessons from Katrina that it applied to Rita and then again Wilma. The company, which had four stores in the New Orleans area, recognized that a contingency plan to protect employees and assets must take into account the worst-case scenario.
As a result, Edwards says, "The lines of communication were way more open after Katrina, and we had a better plan."
By the time Wilma threatened the Florida locations, Mattress Firm executives could do the planning almost by rote. They conferenced by phone to fine-tune their strategies for coping with the storm and issued evacuation plans.
Looking Forward
Mattress Firm is now expanding its planning to encompass tactics for dealing with a man-made disaster, should something like 9/11 affect its stores. Edwards says that if the business prepares for the worst-case scenario, everyone will know what to do, even if the situation is minor.
"Making the plan is the most important part," he says. "You have to make sure everyone is on the same page and that they all agree with the contingency plan."
He adds that after recognizing the magnitude of the threat that a disaster can pose to the chain's lifeblood-its POS system-he has developed a new appreciation for the IT side of the business.
"I've never really been interested in the IT side," Edwards admits. "But it has become very important on my list of things to learn as the director of LP."
About the author: Liz Martinez is the author of "The Retail Manager's Guide to Crime and Loss Prevention: Protecting Your Business from Theft, Fraud and Violence" (2004, Looseleaf Law), and is a retail security/loss prevention consultant and an instructor at Interboro Institute in New York City. Liz can be reached through her website at www.retailmanagersguide.com or via email at [email protected].
