Improving Operational Performance

Here’s an example of an ABC analysis of items a retailer sells. 

This chart shows that the A items, the best sellers, account for typically 20% of all SKUs, but 65% of total sales.  B items bring the total up to 50% of SKUs accounting for 85% to 90%+ of sales. The C items, often referred to as the long tail, account for 50% of SKUs but only 5% to 10% or so of sales.

In most of the better retail systems, service levels are assigned to each category, so A items might have a 95%+ service level. This means that for every hundred times a shopper goes into a store to purchase an A item, they are successful 95% of the time. B items might have a service level of 85% say, and C items 70%.

Defining and achieving these in stock service levels is the single most important aspect of customer service.  Items in the long tail, tend to have a much higher level of substitute products than A items. Providing store staff with ready access, to substitute information to use when serving customers, is a good way to increase the level of service perceived by the customer, because they were able to complete their shopping mission.

Going back to the customer service chart seen earlier, providing a complete set of omni-channel services will also improve customer service, but also create opportunities for add on sales when a customer comes into the store to collect an online item, or stops at a kerb side pickup point. Experience shows that done well, this can be worth an extra 12% to 19% of click and collect sales value. The right level of service for collections (encouraging try on for example), can also help reduce the online return to store volume, as some items can be changed or accessorized immediately in store.

Self-service can support more personalisation if you are able to capture the right customer data.

Payroll and Labour Expenses 

As mentioned earlier, staff churn is a big issue for retailers and recruitment costs are high. Pay is obviously a factor in reducing churn, but not the only one. Others include: 

• Giving store employees more of a career path and opportunity for promotion. Provide online access to training during and outside work hours, so that those that are hoping for a career can study in their own time, initially for the job they have, and then for the job they want next. In your reporting, look for people that do some of the training in their own time and also train for the next job. In your staff development planning, give them credit for making an effort outside of work time and flag them up for further development. 
  
  
• People like to be successful. Provide them with the tools to be successful, such as access to past customer purchase history on a tablet, so they can offer the best advice. In appropriate market segments provide full clientelling tools. 
  
  
• When a product is not stocked in the store, or is out of stock, provide mobile devices or kiosks, so the salesperson can place a customer’s order with the shopper, wherever they are in the store. 
  
  
• Ensure that any store bonus scheme recognises and gives the store staff credit for online orders entered in the store.  
  
  
• You could use digital screens in store to promote C items that are not displayed in the store.   
  
  
• Use labour scheduling systems together with knowledge of staff domestic arrangements and preferences, to schedule shift patterns that work best for the biggest number of people. 
  
  
• New store staff take 3 to 6 weeks to get to full productivity. During that period, their sales performance averages 50% of what it will be when they get up to speed. The right training can cut this time in half, there by driving extra sales and potentially reducing churn as more new hires perceive themselves as successful, before disenchantment sets in. E-learning and digital performance support can help this. 
  
  
• Greater use of self-service options can reduce the number of staff hours needed and keep customers happy. For example, some retailers are implementing kiosk systems to process online orders returned to stores. Marks & Spencer in the UK is a good example. More and more retailers deploy some self-checkout systems alongside staffed checkouts. 
  
  
• Terminals or kiosks can be provided to check coupons or other incentives available from loyalty schemes, or to order in store from the extended online assortment. 
  
  
• Where affordable, use of RFID tags in stores greatly reduces stock counting hours. 
  
  
• If you have accurate traffic counters in stores, you can calculate a shopper to store associate ratio per week or month, using total store traffic in that period divided by store hours. Analysing this ratio over time allows you to improve labour scheduling by having more of the hours worked at the right times.  Analysing it across stores highlights those that perform better or worse and Area Managers can take corrective action.

It is important to use the available inventory as efficiently as possible. Doing so, will reduce inventory carrying costs, which are roughly 15% per annum of the cost value of the inventory.  

Some ways of achieving this include:

• Using hand help devices to scan inventory receipts and update store stock in real time.

• In bigger stores, or where space permits, use location control to track inventory in stock rooms, so fixtures can be replenished quickly when stock levels get low. 
  
  
• When scanning receipts, if the inventory records show the item scanned as being out of stock in the store, move it straight to the fixture, fill the fixture appropriately and take any surplus back to the stockroom. 
  
  
• For online orders returned to store, scan them in and put them back on the fixtures to be back on sale as quickly as possible. If the item is not sold in that store, scan it back in and place it on a sale rack if that is in line with company policy. If it has to go back to the warehouse, send it back when the next delivery is received. 
  
  
• Or keep it there and let the central order management system allocate it to an online customer order.  Then take it to the local post office and ship it to the customer. The cost of doing this will be a lot cheaper than the cost of an end of season markdown, if the item does not get back to the warehouse quickly.  (Some returns take up to 6 weeks to get back to the warehouse and be ready for sale again. During this period, it is effectively out of stock). 
  
  
• Depending on store size and the extent of the product range, consider using computer vision to detect gaps on fixtures and issue alerts to staff to address them. 

• Use computer vision technology to reduce inventory losses.  
  
  
• If your product margins can support the cost of RFID tags, you can save labour hours on stock counting as mentioned earlier, but you can also save shipping extra items to stores for click and collect orders, if you have the confidence that the store stock records are accurate. The speed of counting with RFID enables more frequent counts to guarantee this level of accuracy. Some fashion stores count the entire store every day using one person for 30 minutes.