Operations Excellence in Retail Stores is a much-talked-about topic. We find loads of articles on the subject in blogs and online/offline magazines. A close look at them will reveal that they are either from technology vendors that are keen on pushing some technology or talk about the ever-so-buzzing omnichannel challenges. The fact is that whether it is the US/UK markets or the more traditional markets of India/Indonesia, most offline retailers are far removed from omnichannel, as are their customers. (Not because they don’t have an online presence, but because they are not significant enough to pose “omnichannel” problems.) Yet, it is the offline retail sector that receives the least attention of experts.
In this piece, I take a fresh look at Operations Excellence in this sector. Let me know what you think…
I believe any good study needs to start with a basic structure that covers the entire space. A lot is then revealed by studying the components of this structure. As I see it, offline retail is best studied under six simple elements. I believe these six elements cover the entire retail space and give us a framework to study and understand all the dimensions of off-line retail. Importantly, they also enable Management to assign roles and responsibilities clearly for achieving excellence. These are:
- Society, or S-0
- Shopper, S-1
- Staff, S-2
- Stocks/Assets, S-3 and
- Space, S-4.
- Strategy, S-5
I am hard put to come up with anything of major concern beyond these six… and the dozens of Retailer CXOs I have met with so far seem to agree.
S-0, or Society, represents the larger community the store is trying to address; it’s target or catchment area. This is largely a function of the location of the store. In cases where the store is inside a Mall or a Shopping Area, we have two layers within Society. The larger Society and then the Mall or Shopping Area immediately outside the store.
The Store needs to actively draw the community/traffic into the store. This may consist of mailers and leaflets, local advertisements or social media. An increasingly popular tactic is to organise engaging events around topics of interest to the community, such as festivals, cleanliness, etc.
Where the location is subsequently discovered to be different from the one intended, we are left with limited options such as downsizing or even closing. However, large retailing groups that use multiple formats / or sub-brands have access to one other tool: this is to change the branding or format of the store to suit the segment of society it serves. For example, many stores today have “Express” sub-brands that cater to a more “convenience” led layouts that are smaller in size. A similar sub-branding can be done to address “mass” versus “premium” market segments.
S-1, the Shopper, is every non-staff human who walks into the store – also called Walk-ins, Headcount or Footfall. The Retailer’s task here is to convert the traffic outside the store to Shoppers. Retailers use well-known tools to achieve this. An attractive storefront, the ambience, signages, assigning staff to stand out and welcome people in or give handouts, etc. are some of the oft-used tactics.
S-2 or Staff are the Customer Service and Sales Staff inside the store. Once the Shopper enters the Store, the next task is to “convert” the Shoppers to Customers., i.e., entice them to make purchases. How long is the Shopper allowed to remain unattended? When is the right time to approach a shopper without appearing intrusive? What is the best way to engage the shopper? How to observe the shoppers’ behaviour and conversation to guide them to the right category, or even cross-sell or upsell? These are the questions this Store must wrestle with.
S-3 covers Stocks as well as Assets. Stocks refer to the merchandise in the store. The questions addressed here are: Are the shelves well stocked? Are they replenished in time? In cases of branded products, are they placed with the brand facing the front? Do they comply with the planogram?
Assets refer to the shelves, the type of storage and display utilised (e.g. shelves, hangers, tables, end caps, etc.) In the case of restaurants and service retailers, Assets also cover the seating arrangements made, the tables, their sizes and locations, counter space, location, etc. All these go into the overall shopper experience and determine whether it was enjoyable or a chore. In turn, they build loyalty for the store and develop repeat customers.
Finally, S-4 or Space refers to the overall layout and design of the store. How spacious is it? Is it built for customer convenience, or retailer’s efficiency and cost-reduction? Does it allow the free use of shopping carts, do the queues at the payment counters hinder shopper movement?
The final S, S-5 is Strategy. This covers the non-visible policies and practices such as pricing, loyalty programs, values, a mix of merchandise, shopping hours and the like.
Do note that while the last element may be S-5, the framework has six components, as it begins with S-0. I felt it was important to capture the location of the store as S-0, both to recognise the primacy of location for any retail presence as also to enable ongoing focus on S-1 to S-5, once the location is determined. Another aspect to be noted is that S-5, Strategy, is not “visible” and is more to be inferred from the results or possibly deeper analysis, while S-1 to S-4 is what the Store Manager must focus on every day.
In future posts, I will be expanding on this basic framework and will demonstrate how this can be used to study and analyse the performance of a retail store.