M. W. Long
Short Term Paper
Hollister & Co.
A200

For this assigned paper I chose to write about Hollister Co. Hollister Co., or HCO, is a California-based apparel company and subsidiary of Abercrombie & Fitch Co. established in July of 2000. I selected Hollister Co. for my report because ever since getting a job for the company in January of 2002, I have always been interested in how they have been successful with their exceedingly high level of theft (both by customers and by employees, which is often called “shrinkage”).
Hollister Co.’s competitive strategy is comprised of the in-store atmosphere that sets the “surfer mood”, or relaxed mood, for customers to feel like they are in a little slice of paradise. It is also comprised of training their associates to treat customers like close friends (speaking in a friendly manner and even sparking conversations) in order to make the customer feel more welcomed, in turn making them more willing to spend money on clothes that will make them more like the friendly, good-looking, southern California-looking associates.
Although I am not certain of it, I am almost positive that Hollister Co. uses a Just-In-Time (JIT) approach to inventory management. I am so sure of this because when working in the stockroom at a Hollister Co. store, I was taught to use a scanner. Before taking any clothes out on to the floor, I would scan their price tag, which would then send a message to headquarters saying that I was replacing an item of clothing that had been sold. After scanning so many of a certain item, headquarters would then know to send more of that specific item to the store. With goods being pulled through the system by present demand, this is a perfect example of the JIT approach to inventory management.
With this approach, Hollister Co. orders what they need at the moment they need it; not what they expect to need. By doing so, they keep their inventories low, decreasing the need for markdowns on their merchandise. This helps Hollister Co. effectively manage inventory levels and avoid carrying large amounts of stock, especially stock items that are slow-moving or obsolete (such as last-years fashions or items that have been or will be discontinued).
I believe this is a brilliant way of running a retail clothing business because it greatly reduces ordering and carrying costs while still maintaining a sufficient level of productivity. Also, Hollister Co. doesn’t have to worry too much about the quality of their products (like many JIT companies do) because of the “vintage” look of their clothes.
As for who designed this just-in-time approach, I think it was, or should have been, the corporate headquarters of Hollister Co. If they designed the system, they would be able to distribute it to each store and control the system through each store. This would lead to a greater amount of goal congruence because the goals of each store would be the same as the goals of the corporate headquarters, or the organization itself.
A short-term decision that Hollister is likely to face is what to do about their current situation with the “gold tooth gang.” Believe it or not, a number of Hollister Co.’s stores have been hit by a thieving group of ethnic-background women with one gold tooth called the “gold tooth gang.” They normally walk in the store with either a baby stroller or an aluminum-lined bag (to keep censors from going off at the front of the store) and walk around the store in a group as they steal different clothes. This is a serious issue, and does not reflect any bias but shows the difficulty when specific groups “target” a store, making it difficult for everyday customers who may casually have similar characteristics. It is not fair to the general public, and it creates an air of distrust and difficulty for the public.
Hollister Co. has made a few adjustments to solve this problem such as hiring a security guard to roam the store occasionally and educating their associates with a short informational video, but there are other alternatives to solving this problem.
First, Hollister Co. could make the security guard (dressed as a shopper) work more hours. Hollister Co. would have to pay the security guard more, but less clothes would be stolen, meaning a greater monetary value of inventory. If the guard could not work more hours, another guard could possibly be hired, which would again increase the retention rate of in-store clothing items.
Another alternative is to educate all employees more on how to deal with catching individuals stealing, and train employees of methods of theft, rather than have employees “profile” individuals. Hollister Co. currently teaches their employees using a short video that basically tells them to report anything they see to the store manager. This is somewhat ineffective because by the time an associate has searched for a manager, found a manager, and told the manager what they have seen, the accused thief may have already left with the stolen merchandise. By knowing how to confront an accused thief and deal with them until mall security arrives, any employee who spots someone stealing would be able to immediately catch the thief and deal with them in an orderly manner. Often, when prospective thieves feel they are being watched or may be confronted, they will immediately leave the premises and forget about trying to pilfer merchandise. A well-trained employee will look for signs of theft and look for signs of thieves working together, and will not attempt to illegally and unethically profile individuals or label groups of people. This is a better approach for all customers.
With the knowledge I have gained from working for Hollister Co., I would recommend educating HCO associates more on how to spot theft and how to deal with it. Upon being hired by Hollister Co. in June of 2007, I spent a little less than an hour watching informative videos and learning how the store worked. Within that first hour of working, I already knew just as much (if not more) than everyone else that was working about running the store. I believe that educating associates about theft more would not be too difficult or time consuming during their orientation. Also, it would not incur any new costs, unlike the other alternatives. This would be a way of making a short-term decision while maximizing profit simultaneously.
Since there are a number of Hollister Co. employees that have shown dysfunctional behavior, performance evaluation plays an important role in the way HCO does business. From working at a Hollister store, I have learned that an average of 100 items of clothing are stolen from each Hollister store each day. I also know that over 50 percent of this theft is internal, meaning the clothes are stolen in the stockroom and on the floor by associates. By educating employees about identifying and dealing with theft (and its consequences), this number of clothing items stolen each day should plummet dramatically, internally and externally.
As for specific aspects of performance evaluation, Hollister sends a regional manager to each one of its stores once every two weeks to check on the store’s operational activities and financial statistics. At the end of the day, the regional manager proceeds to tell the store manager/s what the store is doing well and what the store needs to improve upon.
Also, a regional stockroom manager visits each store once every month to make sure the stockroom is organized and stocked with the correct amount of clothes. At the end of the day, similar to the regional manager previously mentioned, the regional stockroom manager tells the store’s stockroom manager what they are doing well and what they need to make improvements to.
These evaluations of employees specifically involve a number of things such as if an employee is folding an item correctly, if they are putting it in the correct place, and if they are treating the customers in a “Hollister fashion” with their oh-so-clever greeting “What’s up?” In a way, the regional manager does a performance evaluation on all employees that work on the floor, and the regional stockroom manager does a performance evaluation on all employees that work in the stockroom.
With constant performance checks on all managers and employees, Hollister does an exemplary job of evaluating performance. The only weakness in this system is that the evaluation of Hollister Co. employee applicants is not tough enough. To be hired, a person has to simply fill out an online application in the store and then have a 15 minute interview with the store manager. To be honest, I could have easily put on a surfer façade, been hired to work for the store, and then stolen numerous clothing items.
My solution to this problem is to make the interviews longer, preferably at least 30 minutes, and then have the applicants attend a second round of interviews, preferably in a group setting instead of one-on-one. This way, managers will be able to know more about the applicants and see how they really react in a group setting before hiring them. Better interviews make better employees, and better employees make better companies.