Spies in the Aisles

Mystery shopping helps businesses keep an eye on service

The Charlotte Observer, October 10, 2004. By Leigh Dyer

A few years ago, top executives at Charlotte-based Belk, Inc. debated how to enforce one of their store policies: Every customer who enters a Belk department store should be approached and offered help within 60 seconds.

They found their answer in mystery shopping.

Up to 20,000 times a year, undercover customers enter Belk stores to check how often the goal is met. The results are tracked. Store managers' annual bonuses are tied to the findings.

Belk is among thousands of retailers, restaurants, hotels, movie theaters, banks and other public-serving businesses that use secret shopping to monitor their customer service. Mystery shopping has experienced explosive growth in recent years, topping $600 million in annual revenue. And thanks to improvements in technology, companies have grown more sophisticated in what they can accomplish.

The industry's growth is a reflection of the increasing importance of objectively measuring customer service. Retailers and service businesses struggle to distinguish themselves in increasingly competitive industries.

Since Belk started its program, the company has added more measurements to its mystery shopping: how often employees thank customers by name after purchases, and how often they suggest additional pairs of shoes while waiting on customers in the shoe department.

“We were interested in statistically valid observations,” said company spokesman Steve Pernotto. The fact that it was an objective method of measuring public service helped employees embrace the idea, he said.

When stores meet goals, such as employees making the 60-second approach on 85 percent of mystery shopping visits, a manager can get up to 5 percent added to his or her annual bonus, Pernotto said.

Since the program began, Belk's sales have outperformed many of the company's competitors in the department store industry. Pernotto said the privately held company invests “six figures” annually in the program.

Mystery shopping started about 50 years ago as a way for banks to catch embezzling employees. In the era of paper receipts, it sometimes took spies to catch tellers skimming cash.

In the last decade, the Internet has allowed companies to recruit secret shoppers, make assignments and take reports online, making the analyzing of information faster and cheaper.

In the last few years, new software has broadened the ways companies can use the feedback – they can break out results for older shoppers, for example, or for Spanish-speaking shoppers.

“Interest in mystery shopping overall has really picked up in the last five years,” said Kevin Bray of Clemson, S.C.-based Sparks Research, which has a database of more than 20,000 mystery shoppers and counts Belk among its clients.

The Mystery Shopping Provider Association, a leading trade group, has about 150 members. But the actual tally of mystery shopping companies is probably closer to 1,000, industry insiders say. When a retailer hires a shopping provider, the provider generally charges around $100 for each mystery shopping report, with prices varying to the complexity of what is being tracked.

Undercover customers

Mystery shoppers work as independent contractors, earning fees that range from $7 to $30 per visit. They often get perks such as free meals, merchandise, luxury hotel stays or movie tickets, depending on which business they visit. But filling out reports can take hours, and few mystery shoppers find it lucrative enough to make a living.

Last week, the Mystery Shopping Provider Association Web site had 115 available mystery shopping assignments in North Carolina and 58 assignments in South Carolina.

For Bryan Chun of Charlotte, it's just a way to earn extra dollars for home improvements on top of his three other jobs. He mystery shops about 10 times a month.

On a recent mystery shopping visit, Chun went to a Charlotte-area location of a coffeehouse chain on a Tuesday afternoon. (The Observer agreed to withhold the business's name.) He noted unswept cigarette butts outside the shop.

Once Chun was inside, the barista immediately greeted him, unknowingly earning a positive score. Chun timed how long it took to prepare his drink.

He stopped inside the restroom – all was clean. Then, he performed a final test: wandering to the merchandise section to see if an employee offered help within the required three minutes. The barista offered help right away.

A positive 20-minute shop, though Chun said he has met friendlier employees. Filling out the computerized 58-question report would take about 45 minutes.

“It's just like school – I'm not giving everybody A's,” said Chun.

He recognizes the importance of encouraging good customer service, he said.

“My wife says I do this too much and should cut back. I just do it because I believe in it.”

The results

Businesses that use mystery shopping often experience increases in sales and profits, said Steven Maskell, director of sales and marketing for Atlanta-based Shop ‘n Chek, Inc. One telecommunications client reported a 44 percent sales increase in the six months following changes instituted as a result of mystery shopping findings, he said.

Examples of mystery shopping results: One fast-food chain noticed mystery shoppers reporting a pattern of yucky lettuce in sandwiches, and was able to trace it to a particular farm supplier, Maskell said. And a telecommunications retailer discovered it wasn't meeting its goal of always having a Spanish-speaking employee on hand. Mystery shoppers found Spanish-speakers weren't assigned to every shift, so the company revamped its scheduling system, Maskell said.

Shop ‘n Chek has 282 mystery shoppers registered in Charlotte, more than double the number it had five years ago, he said.

Each of Cato Corp.'s 500-plus clothing stores is visited by a mystery shopper a minimum of three times a year, said John Cato, CEO of the Charlotte-based company. Cato incorporates mystery shopping into employee performance evaluations, he said.

Matthews-based Harris Teeter regularly uses mystery shopping in its grocery stores, checking on factors such as whether enough registers are open to avoid long lines. Mystery shopping research was behind the company's decision to implement free carry-out grocery service, said spokeswoman Jennifer Panetta.

And Charlotte-based Wachovia Corp. occasionally uses mystery shoppers to supplement customer surveys. Often, it's used after the bank launches a new product to make sure employees are giving the right answers to questions, said Kelly McSwain-Campbell, director of customer satisfaction research.

Not every company is a fan of mystery shopping. Matthews-based Family Dollar Stores Inc. does not use mystery shopping because the company feels it gets enough feedback through methods such as surveys, focus groups and customer intercepts in stores, said company spokesman George Mahoney.

Historically, some employees haven't liked the practice. To some, it carries an image of Big Brother ready to punish.

But those in the industry see mystery shopping as a useful tool. Instead of punishment, it can be used as a way to devise new types of training, said David Lipton, president of Canada-based mystery shopping provider SQM. The company recruits shoppers around the U.S. and counts 139 active shoppers in Charlotte.

Some companies have begun using mystery shoppers to present a certificate or other award to a top-notch employee immediately after the shopping assignment is completed.

Said Lipton: “Companies are using it more for development rather than discipline.”

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