Chapter 1

Driving Improved Store Performance

Operational performance in stores is a mixture of:

  1. Maximizing customer service
  2. Maximizing sales
  3. Minimizing expense costs, of which the biggest is store labour
  4. Maximizing asset productivity
  5. Reducing losses through bookkeeping errors, damage, and theft.

1. Maximizing Customer Service

This graphic shows many of the things that make up excellent customer service.

All of these are important but the one that matters most is being in stock. Great service is of no value if shoppers can’t get the product they want in your store. And that is all about inventory management. Much of inventory management is a Buying Office responsibility and sometimes a Supply Chain responsibility too, but stores do have a role to play.

An old survey sponsored by Proctor and Gamble showed that 45% of stockouts on shelves occurred while there was still product in the store stockrooms. Systems improvements since this survey was conducted may have reduced the percentage, but the problem still exists.

2. Maximizing Sales

The chart below shows a tried and tested retail formula. To maximize sales, we need to: 

  • Maximize the traffic into the store (or to the web site). The primary responsibility for this is shared between:
    1. Marketing, who are responsible for driving traffic into stores
    2. Buying and Merchandising, responsible for having the right products, assortments,
      pricing, and stock levels
    3. Supply Chain, for getting products to the right places on time.

But stores make their contribution through: 

  • Excellent customer service
  • Store and merchandise presentation (also referred to as visual merchandising)
  • Returns management
  • Convenience of access
  • In some cases, the intelligent use of store specific markdowns.

3. Minimizing Expense Costs

The four biggest expense costs in retail are: 

  • Payroll
  • Occupancy costs (cost of space)
  • Distribution from warehouses to stores or to customers’ homes
  • Marketing, depending on how promotion driven the retailer is.

Store Labour

Churn averages 40% a year in stores and is getting worse.

In the current market, stores can’t always recruit the staff cover they need. Of the 40%+ that leave in their first year, more than half leave in the first three months. Hence, many retailers minimize training costs as far as possible, until they know that workers will stay long enough to be worth it.

4. Maximizing Asset Productivity

Occupancy costs include all costs associated with the space, including:

  • Rent or lease costs
  • Rates (property taxes)
  • Utilities
  • Maintenance and repairs
  • Security.

These costs are controlled at headquarters by the Property or Real Estate Department. Stores are measured by the yield from that space, measured as sales per square foot and gross margin per square foot.

5. Reducing losses through bookkeeping errors, damage, and theft

The bulk of inventory management tasks are managed by the Buying and Merchandising Division. Some are managed by Warehouse Management and some by stores.

Stores are responsible for: 

  • Receiving deliveries speedily and accurately
  • Replenishing store fixtures
  • Checking fixtures regularly to see if they need topping up
  • Facing up shelves and other fixtures so the store always looks as full as possible
  • Carrying out periodic stock counts
  • Minimizing damage to product and display packs
  • Carrying out their security and loss prevention responsibilities
  • Notifying the relevant Buying Office team if they do not receive adequate replenishment.