My recent series on Quantum Retail presented the many difficult merchandise range and assortment planning issues that retailers face, and the ensuing tough decisions that they have to continually make in that regard. But a lesser-known fact is that even though retailers spend multiple billions of dollars on planning activities and supporting tools to bring customers to their stores, they only execute at about 60 percent efficiency in their stores at best, thus leaving trillions of dollars in merchandise at risk.
In other words, retailers spend millions of dollars on preventing possible out-of-stock (OOS) situations by improving and optimizing their upstream supply chain management (SCM) systems. Yet, about 40 percent of the time “stockouts” happen due to labor and priority issues at retail stores (i.e., the merchandise was still stuck in the back of the store instead of being on display for consumers).
What Doesn’t Happen in a Store, Stays in the Store
A plethora of tasks go on daily in retail stores. Generally, these fall into the following two categories:
Store maintenance tasks entail the following (often menial) tasks: cleaning, stocking shelves, pricing and marking items, receiving goods, etc. But the corporate merchandising tasks that come from the central office and require some thought are a huge issue overloading many stores. These are all the necessary actions about never-ending promotions, display set-ups and take-downs, pricing resets, planogram resets, re-facing product presentations, new product introductions, assisting consumers, etc.
An article published in Marketing Week in late 2008 stated that a massive £8 billion is spent each year in the UK on price promotions by consumer packaged goods (CPG) suppliers. What’s more, it is estimated that trade funds typically account for 20 percent of the total profit-and-loss (P&L) situation in UK CPG businesses.
One can only imagine how overwhelmed retail store associates can be under such conditions of constantly setting up displays for one group of items and dismantling displays for items that are no longer being actively promoted. These actions also come on top of more complex projects with multiple tasks that have to be executed in a certain order such as an entire seasonal campaign (e.g., Back to School, Halloween, Black Friday, etc.) with specific promotions in specific departments.
Store operations also have the responsibility to execute (and occasionally rearrange) the planogram layouts that scientifically determine how many facings of item multi-packs and flavors (say, yogurt, cereal, or pudding) there should be in rural and suburban stores serving more traditional families than in stores that serve city singles and couples without kids (so called “yuppies” that are more likely to go for, say, more chic pomegranate or acai flavors than the pedestrian vanilla or strawberry).
We must not forget here that these tasks must be done in conjunction with all of the customer-facing selling tasks. Needless to sat, selling often takes priority over execution tasks, and thus the time available for tasks can be quite constrained, especially if they are done by the same employees.
Forrester’s recent report thus cites that smart retailers are now shifting toward consumer-centric merchandising to drive merchandising decisions from market segmentation insights. Consumer-centric merchandising, with its demands for greater integration, more data-intensive analysis and optimization, and more complex execution, threatens to additionally overpower current retail IT systems.
We Get It: Retail Stores Can Hardly Keep Up!
When people talk about store task execution compliance, they are referring to complying with the aforementioned merchandizing tasks coming from the corporate offices (i.e., making sure that the stores do what the headquarters intended). This is a significant problem because the stores are overloaded with these tasks and they frequently are not done on time, if at all.
This can lead to HQ merchandising plans being much less effective than they could be. For example, Target might advertise a 30-percent-off promotion on the Coppertone sun lotion, but many of its stores may not set up the endcap displays, re-price and mark the products, or restock the shelves in time to accommodate the increased demand. Target thus loses the hundreds of thousands of dollars it expected to make on this costly promotion.
Although some folks go to retail malls with some preconceived idea about what they want to buy, about 85 percent of buying decisions consumers make are still impulsive, at the point of contact and sale. Ironically, retailers expect their overworked, largely underpaid, and unmotivated store associates to execute well, even though the turnover is rampant and one must time and again train novice store employees. Nowadays, store associates must cope with much better socially informed and connected consumers (who are in the driver’s seat), shorter product life cycles, and more complex store assortments.
According to a 2009 Nielsen Company report, over 122,00 new universal product codes (UPCs) were sold throughout the United States (US) grocery, drug, and mass merchandiser channels in 2008 (in a middle of a large economic crisis). This large figure excluded Wal-Mart product introductions. In other words, while new products are constantly coming into stores, disgruntled store associates with some knowledge and experience keep leaving.
Moreover, retailers will often take their best store associate and promote him/her to the store manager. That wretched store manager then has to spend a few hours a day to read and reply to hundreds of e-mails, and spend about an hour a day answering telephone calls. Stores often receive information from many different directions in a variety of forms, which can quietly become too much to handle. Internal analysis at some retailers have shown that on a weekly basis, the HQ staff send store managers over 2,000 pages of emails — more than half of which contains task-related information.
It takes approximately 65 hours per week for a manager to read and prioritize the weekly e-mail load, and store managers only work 42 hours a week nominally. Little value is placed, if any, to the feedback that may improve task execution compliance. Realistically, the manager drives what he/she thinks is best and the absence of structure means that he/she may be unable to react to corporate merchandizing priorities. But an even more damning statistic is that an average customer will never come back to a particular retailer’s stores after 2.3 negative experiences.
How Should Store Execution Be Done?
After meticulous planning of strategically important marketing campaigns, retailers do not need to gamble on their execution at stores. They should streamline communications and improve visibility to store execution status and issues.
Many different retailing silos (i.e., the design, supply chain, allocation, merchandising, finance, and operations departments) need to coordinate their actions to execute properly at stores. This can be done by establishing communications clarity and by prioritizing store activities. Corporate merchandisers should have visibility to each store’s capacity to execute tasks, so they can both prioritize and reschedule tasks to best maximize potential returns. Some refer to this activity as workload planning.
A retailer’s corporate communications can optimize store workload so that each store is doing exactly what it should on any given day. When corporate merchandising workflows are optimized for store-level execution, the correct tasks will be sent to the right department every time. This consistent centralized communication should eliminate the guesswork and duplicate (or conflicting) messages in managing the network of stores, no matter how small or how big the retailer is.
In this situation, store managers should know consistently what is coming down, and are organized to execute. For their part, vendors can set up displays and dress the store in a timely manner to assist store-level execution, while store associates should know better what customers may need to help execute the strategy.
In an improved scenario, after seeing an advertisement that her favorite product is on sale (a $20 skirt), a shopper will go to a nearby store. A sign with an eye-catching design will point out the aisle where the product is on display, but the customer might not still be able to find one. A nearby store associate can then help and also perhaps suggest another $10 item to go with (e.g., a t-shirt).
The customer might take both items to the cashier stand where she will be quickly checked out. As customer drives away, he/she makes a mental note to shop at this store more often. And the department store has just rung up $30 in sales, which is 50 percent more than what the customer had originally planned to spend.
Additionally, store managers, regional managers, and corporate should benefit from instant feedback, which can be used to improve performance the next time a task is launched. Astute software tools surveys, which are typically painstakingly created by the people in the HQ office, can be built from scratch by power users (and even end-users can build them using templates as required).
The surveys are generally completed by regional and store managers but can be answered by department managers too or by whoever else the company wants. The surveys can be about anything the retailer cares about, such as compliance with safety rules, store appearance, loss prevention policies, etc.
Real-time visibility into who has (and has not) completed markdowns, floor moves, and other corporate-driven tasks can save store managers several hours a week that would have otherwise been spent on the phone or in e-mails getting updates. In the case of dreaded product recalls, condemned merchandise can be pulled off the shelves within hours nationwide (rather than in days or weeks).
Finally, district and regional managers can better lead stores and assist execution, since a relevant key performance indicator (KPI) system can institutionalize execution. Via actionable metrics (rather than a stack of static reports after the fact), district managers can now manage by exception and focus on critical areas while selectively canvassing their regions and meeting face to face with regional teams.
Rather than expending their precious time by physically walking the store and reviewing everything, they can now turn their attention to the critical few task metrics, which they have preferably been alerted to on their mobile devices. In other words, improved efficiency for managers in the field can come from walkthroughs now being done virtually (on mobile devices instead of on paper) and from walkthrough tasks being prioritized a week or two ahead of time.
A Dearth of Retail Execution Systems
Research shows that poor store-level execution of corporate strategy costs retailers between two to five percent of their annual revenues. Still, retailers spend only about one percent of their humongous IT investments on store-level execution systems. One reason for this situation is the lack of adequate task execution software.
There are indeed a dozen or so retail workforce management (WFM) software vendors, such as Kronos, SAP, Oracle, Infor Workbrain, CyberShift, Tomax Corporation, JDA Software, WorkPlace Systems, etc., but not many of these can take care of actual work management in the store. An easier option for these vendors was to deal with workforce management in terms of more long-term and aggregate planning. In other words, retail WFM systems are good at time and attendance (T&A) data collection, labor forecasting and scheduling, absence management, hiring/recruiting, human resources (HR) administration, labor analysis, talent management/recruiting, and payroll processing applications.
But these systems are often not well-suited for more granular task management and store-level execution in near-real time. Labor schedules in these systems do not factor in the workloads needed to complete corporate-driven store tasks such as setting up new promotions, new product introductions, and other ad hoc tasks. The analogy is similar to enterprise resource planning (ERP) systems that are good at mid- and long-term planning and sending orders to the shop floor, but it takes good advanced planning & scheduling (APS) systems to optimize the individual orders and tasks on the floor as well as manufacturing execution systems (MES) to report the state of affairs of each order and task on the floor.
RedPrairie’s well-rounded Enterprise Workforce Management suite also offers a strong task execution capabilities, as a result of the mid-2000’s acquisition of StorePerform and BlueCube (for more information, see my previous article). Another WFM vendor with a notable task management capabilities is Reflexis Systems, and look to future articles on this offering.
On a personal note, from now on I will have much more respect and empathy for retail store associates and managers. Especially for those that manage to be kind and helpful, while also being able to utter a smile and patience for my unruly 3.5-year-old daughter who is playing havoc with their aisles.
Dear readers, what are your opinions in regard of retail store operations? How do you decide and make sense of retail WFM players when they say they do task management and, conversely, of task execution specialist vendors when they say that they do WFM? Across the board, do they all offer some benefit to your store staff and operations irrespective of their heritage?