Traditionally operational efficiency or associate productivity is thought of as an approach to reduce operating costs of the retail store. By enabling better processes, tools and technology, the store is able to find cost savings through reduction in number of hours of labor needed to run the store. Reducing the amount of labor needed has a direct impact on the bottom line as a result these productivity gains are a way to increase profitability. While this goal has guided the retail industry through some significant and fundamental transformation over the past several decades, the amount of operational efficiency that can be achieved for the sake of reducing labor costs to increase profitability has reached a limit of diminishing returns. While further reduction in labor is often possible, the careful balance of having the “just enough” or “bare minimum” is no longer adequate as the sole factor of consideration. The changing landscape of the shopper expectations for the in-store experience and new types of competitive channels are forcing retailers to think about operation efficiency in a different way.
The key to this shift in thinking is the focus on the customer. Traditionally, customer experience, although not a primary focus for driving operational efficiency, was impacted by changes in efficiency gains. Occasionally, customer experience and operational efficiency went hand-in-hand. For example, during the addition of bar codes to products and scanners at the point of sale (PoS), this combination expedited check-out times, provided more accurate receipts, and revolutionized inventory management. It was a significant win for the retailer in terms of efficiencies as well as for the customer. In other cases, the correlation between improving labor efficiency leading to shopper benefit has been harder to quantify.
For example, consider the situation where retailers implemented self check-out or other self-service kiosk technologies. They effectively shifted the burden of the labor required to check out onto the consumer but was a successful strategy as consumers adopted it due to the benefit of shorter checkout lines.
Finally, in the worse case the customer is negatively and sometimes severely impacted by labor efficiencies. Sometimes stores have optimized staffing levels to the point where any gain in profitability was negated by reduced sales as a result of poor customer experience. Certainly, we have all had experiences where the lack of staff in the store contributed to a poor shopping experience. Standing in a long line, looking for an associate to help, empty shelves, or getting bad information on a product are just some of poor experiences we could run into as customers. – All as a result of staffing levels optimized to the point of directly and negatively impacting the shopper. A 2012 study by Loyalty360 confirms this is a significant challenge for many retailers today - 45% of the companies surveyed acknowledged that less than 10% of their employees are focused on customer retention. This negative impact to the shopper is the vital reason for the shift in thinking about operational efficiency and what to do with the gains.
Improving customers experience has risen to the top of mind for retail executives. It’s clear with the competitive pressures and amount of change facing the industry that establishing differentiators is as important as ever. Because the fundamentals of razor thin margins and goal to improve profitability haven’t changed cleaver innovative ways to improve the shopper’s experience must be found. One such idea to accomplish this is through the combination of technology, process, and agility of workforce to keep labor budget flat but repurpose some hours to customer facing initiatives. While this approach does not add costs it does enable the store to realize improved profitability over time by growing overall shopper TLV. Retail customers are demanding improved and more connected in store experiences. It’s clear we as an industry need to keep pressing the bounds of what is possible to deliver to retail shopper’s needs.
Nathan Rowe is Director Enterprise Solutions for Motorola Solutions
Entries » Blog » A Different Way to Look at In-Store Operational Efficiency
A Different Way to Look at In-Store Operational Efficiency
Traditionally operational efficiency or associate productivity is thought of as an approach to reduce operating costs of the retail store. By enabling better processes, tools and technology, the store is able to find cost savings through reduction in number of hours of labor needed to run the store. Reducing the amount of labor needed has a direct impact on the bottom line as a result these productivity gains are a way to increase profitability. While this goal has guided the retail industry through some significant and fundamental transformation over the past several decades, the amount of operational efficiency that can be achieved for the sake of reducing labor costs to increase profitability has reached a limit of diminishing returns. While further reduction in labor is often possible, the careful balance of having the “just enough” or “bare minimum” is no longer adequate as the sole factor of consideration. The changing landscape of the shopper expectations for the in-store experience and new types of competitive channels are forcing retailers to think about operation efficiency in a different way.
The key to this shift in thinking is the focus on the customer. Traditionally, customer experience, although not a primary focus for driving operational efficiency, was impacted by changes in efficiency gains. Occasionally, customer experience and operational efficiency went hand-in-hand. For example, during the addition of bar codes to products and scanners at the point of sale (PoS), this combination expedited check-out times, provided more accurate receipts, and revolutionized inventory management. It was a significant win for the retailer in terms of efficiencies as well as for the customer. In other cases, the correlation between improving labor efficiency leading to shopper benefit has been harder to quantify.
For example, consider the situation where retailers implemented self check-out or other self-service kiosk technologies. They effectively shifted the burden of the labor required to check out onto the consumer but was a successful strategy as consumers adopted it due to the benefit of shorter checkout lines.
Finally, in the worse case the customer is negatively and sometimes severely impacted by labor efficiencies. Sometimes stores have optimized staffing levels to the point where any gain in profitability was negated by reduced sales as a result of poor customer experience. Certainly, we have all had experiences where the lack of staff in the store contributed to a poor shopping experience. Standing in a long line, looking for an associate to help, empty shelves, or getting bad information on a product are just some of poor experiences we could run into as customers. – All as a result of staffing levels optimized to the point of directly and negatively impacting the shopper. A 2012 study by Loyalty360 confirms this is a significant challenge for many retailers today - 45% of the companies surveyed acknowledged that less than 10% of their employees are focused on customer retention. This negative impact to the shopper is the vital reason for the shift in thinking about operational efficiency and what to do with the gains.
Improving customers experience has risen to the top of mind for retail executives. It’s clear with the competitive pressures and amount of change facing the industry that establishing differentiators is as important as ever. Because the fundamentals of razor thin margins and goal to improve profitability haven’t changed cleaver innovative ways to improve the shopper’s experience must be found. One such idea to accomplish this is through the combination of technology, process, and agility of workforce to keep labor budget flat but repurpose some hours to customer facing initiatives. While this approach does not add costs it does enable the store to realize improved profitability over time by growing overall shopper TLV. Retail customers are demanding improved and more connected in store experiences. It’s clear we as an industry need to keep pressing the bounds of what is possible to deliver to retail shopper’s needs.
Nathan Rowe is Director Enterprise Solutions for Motorola Solutions
Watch how Motorola Solutions Elevates Today's Retail Environment: https://www.youtube.com/watch?v=khJ7aEJBQ6o
Learn more about Retail Staff Communications technology from Motorola Solutions: http://www.motorolasolutions.com/promo/retail/staff-communications.html
Read other blogs by Nathan here: http://communities.motorolasolutions.com/community/north_america/fresh_ideas_ent erprise/blog/authors/NRowe