Each year when budgets come around, brands under invest in retail excellence
The importance of rigorous and consistent execution and its impact on the customer experience has been underestimated
We've seen a shift in 2016 towards unlocking greater value from store operations driving superior customer & brand experience
Just 30% of retail labor hours are allocated to in-store customer service & sales
"Where are our store staff spending their time?"
In a 2016 study of 150 major brands and retailers, 75% listed consistent and efficient retail execution as a priority for 2016/17
Disconnection between HQ and stores can lead to variation in operational performance exacerbated by the technology used for planning, communicating, tasking & reviewing in-store execution
Technologies to enhance the communication, implementation and measurement of retail operations that drive customer experiences and ultimately sales are greatly sought after
Brands are attributing 25-35% variation in performance across their store fleet due to variations and inconsistencies
How much is retail excellence and consistency worth to your business?
Introduction and key learnings
Despite the ongoing growth of e-commerce, it seems that brick and mortar is still the “golden goose” for most retail facing brands. Industry experts suggest that physical stores account for close to 90% of total revenues for most retail facing brands and according to a recent RIS technology Study 2016, 73% of retailers state brick and mortar is their primary business model. And yet each year when budgets come around, brands under invest in retail excellence, choosing instead to pour more money into ecommerce and social media.
With an increased need to transform stores into fulfillment and experience centers that cater to the omni-channel customer, the importance of rigorous and consistent execution and its impact on the customer experience has been underestimated by retail executives in recent years.
Over the last 2-3 years, where money has been spent on stores, it has largely been focused on POS and mobile innovations, in-store customer activities and entertainment, workforce management, labor scheduling, beacon and other customer facing technologies and applications. While these are all worthwhile areas of investment, we’ve seen a shift in retailer’s behavior in 2016 towards unlocking greater value from store operations and driving superior customer and brand experience. When looking at the value retailers attribute to this investment, the justification is compelling.
Achieving consistently excellent store operations
It’s no secret amongst even the more novice retail brands, that improved store operations drives a significant return on investment, delivering sales improvements of 10% or more, according to Oliver Wyman’s “Your customers want a consistent in-store experience” report (2016).
And yet our research shows that according to spending, retailers have, historically, overlooked the importance of operational consistency and the huge impact that it has on retail and brand performance. Management teams have continued to focus their investments and attention on issues surrounding marketing and brand, network expansion and product and service offers at the expense of pursuing operational excellence.
This isn’t too surprising, given that it has been shown (according to Oliver Wyman) that retail management’s focus on consistent execution in stores naturally wanes over time, and in fact gets worse the greater the length of time since they worked on the shop floor.
Differentiation not variation
Differentiating oneself from the competition has been a much-discussed talking point this year, but achieving that differentiation through consistent execution as a way to create a truly sustainable competitive advantage, has been seemingly overlooked by many.
Even with large store networks of diverse store footprints and business models, a customer’s experience is built by the hard to see, yet many multiple touch points they experience from the time they walk through the front door to the trying on of a garment in the changing room. Each one of those touch points is conceived and labored over by multiple different departments at head office often only to be overlooked when it comes to the final execution.
As brands continue to shake up their ‘retail-footprint’ with store expansions, new global markets and strategic closures, consistent delivery of customer experience with minimal variation across a store fleet can’t be overlooked as a vital part of that strategy, especially with the fast pace of changes taking place in retail. RIS’ Next Gen Store Ops Supplement re-emphasizes how providing an engaging in-store experience is a key component of building long term, beneficial relationships with customers.
To add to the challenge of creating a consistent customer experience, the longer term ambition of turning traditional stores into fulfillment centers and places of experience, will place an added strain on associates workload. This increase in workload for store associates is one of the major obstacles to providing a consistently unique and differentiated service. In fact, just 30% of retail labor hours are allocated to in-store customer service and sales according to EKN Research’s ‘Changing the Retail Labor Model for a New Retail Environment” report. This low percentage of labor hours allocated to in-store customer service begs the question “Where are our store staff spending their time?” or “are our store staff spending too much time on other tasks due to increased responsibilities?”
According to EKN’s research, the strain caused by a retail management’s greater demands on store associates to deliver a better shopping experience is one of the biggest contributing factors for increasing the efficiency of their field and store labor.
In a Concrete administered 2016 study of 150 major brands and retailers, 75% listed consistent and efficient retail execution as a priority for 2016/2017. Consistent retail and brand execution across a brand’s store fleet is finally moving up the priority list for many brands. Over half expressed a shared desire to achieve differentiated, consistent customer experiences across their fleet whilst buying back some of the 70% of store labor time not currently spent on in-store customer service.
The disconnect between head office and stores
More must be done to ensure HQ teams have visibility into their store fleet operations without impeding on the store teams’ ability to serve and sell to customers. 60% of the respondents to our survey acknowledged that a disconnection between HQ and stores can lead to variation in operational performance and this is exacerbated by the technology used for planning, communicating, tasking and reviewing in-store execution.
Brands like Tiffany, J Crew, Marks & Spencer have expressed that many departments at HQ need greater visibility into stores without having to increase their store visits. They need ways of measuring performance of the day-to-day and ad-hoc, often time sensitive, processes and tasks that create consistent experiences across their fleets and markets – without having to increase their travel. Where many brands originally made investments in intranets to connect stores with head office teams, a significantly greater ROI has come from improved two-way communications with stores, granting HQ greater visibility into stores – not the other way around, as is the case with an intranet. Store Operations, Visual Merchandising, Marketing and Brand need to “be available and accessible across the fleet”.
Technology has been described as the enabler of experiences, according to Bob Hetu - Research Director with Gartner’s retail industry services team. While other commentators focus on customer facing and in-store technology (like iPads etc), more brands this year are focusing on technology to be used between their HQ teams (VM, Retail Ops, Marketing & Brand) and their field and store teams. Technologies to enhance the, communication, implementation and measurement of retail operations that drive customer experiences and ultimately sales are greatly sought after.
What is the cost of inconsistency?
Brands are attributing 25-35% variation in performance across their store fleet due to variations and inconsistencies in customer experience, retail operations, visual merchandising and in-store marketing activities. For international brands working with Franchise and License Partners, the percentage in performance variation can be far greater. The devil truly is in the detail, where consistency creates sustained, profitable long term growth.
Is consistency a challenge for you and your stores?
Do any of these statements sound familiar:
- “I can’t keep track all of the requests & emails from head office”
- “Onboarding new staff takes me too long”
- “Keeping track of plan changes and updates from the brand team is confusing and time consuming”
- “I’m spending too much time off the shop floor”
- “Why is that store consistently underperforming?”
- “How do we create consistency across our stores regardless of geography?”
- “Why are we using outdated / expired marketing materials in this store (which I will have to pay a fine for!)”
- “I’m never 100% sure if this window set is up to scratch / correct”
- “I spend too much time searching for information and reporting to HQ, instead of time with customers”
- “My windows never look as instructed when I visit my stores. And those are just the stores I visited!”
- “It takes me days / weeks to see if stores have set the new windows”
The role of technology in bricks and mortars
Technology can enable the efficient and consistent production and measurement of retail and brand operations across store fleets. Fortunately there are sophisticated replacements to email and intranets, that continue to drive a high return on investment.
90% of brands surveyed said they experience the highest rate of variation between their best and worst performing stores when using Intranet portals and email as their primary methods of working across head office departments and crucially with their field and store teams.
75% listed consistent and efficient retail execution as a priority for 2016/2017 and one that they were planning on investing in.
If you are one of those brands that is interested in making that investment in 2016/17 then we’d love to share with you why some of the world’s most innovative retail brands chose to make that investment with Concrete and the results they’ve achieved so far.