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Supply Chain Management Must Be Reviewed Every Six Months

Every retailer’s supply chain offers ongoing opportunities to improve operational efficiency and improve profits. Increased labour and energy costs have now made examination of retail supply chains a critical exercise for all contemporary retail operations.

In simple terms, activity in the supply chain usually increases overhead. Reducing activity in your supply chain can generate some significant savings. Many retailers have daily inventory shipments from their warehouses to their stores. However in many chains, some stores may only require shipments two or three days a week. Reducing shipments will reduce transportation costs and labour hours. Furthermore, receiving three larger shipments a week will likely increase efficiencies as opposed to five smaller weekly shipments.

Reducing supply chain activity has another benefit that can save costs. Lower levels of supply chain activity can also reduce possible costly errors. Receiving errors are a major cause of shrink in stores when receivers accept on paper, merchandise that is not physically received. If your stores receive goods directly from the vendor, be even more cautious. Studies show that shipping shortages from vendors average 2% and in some years have been as high as 4%. Being charged for these errors that accumulate year after year can be devastating to a store’s profit position. Make receiving employees also aware of the unit prices that they should be charged based on your agreement with the vendor. In many cases, vendors will agree to a specific unit price and then increase the price in small increments blamed on inflation. If they are contrary to your vendor agreement, employees that catch these increases can help you keep unit costs fixed, at least for the term of the contract.

In today’s value driven market, customers are less dazzled by vast selections of similar goods and more with lower prices. Maintaining small quantities of many different products is far less efficient than a narrower breadth of products. A narrower selection of well priced goods will also sell better and improve your supply chain turnover. Even marginal improvements in merchandise turnover can generate substantial bottom line profits for your organization.

In support of improved turnover and better profits the selection level of the entire store should be scrutinized. Every four to six months, a review of all inventory for sales and turnover should empower your sales team to decide on the elimination of slow moving items. Today, retailers need to be more ruthless and focused on increasing turnover and freeing up funds tied to slow selling merchandise. Reducing supply chain activity and increasing merchandise turns can significantly increase profits through lower costs in overhead.

Lastly, retailers should renegotiate costs with suppliers every six to twelve months with a goal to reduce unit costs or at least keep them flat to the previous year. By using multiple suppliers, you’ll have more strength to negotiate with less dependency on one source. You’ll need to calculate the benefits of the negotiating power of multiple suppliers for you versus volume discounts by using fewer vendors with larger individual orders. It’s likely you’ll fare better with the negotiating power you’ll have with multiple suppliers.

Your supply chain can be a key source of improving profits, while enhancing sales through a better line of more focused value priced merchandise to your customers.

Take Action Today:

1) Examine your inventory and eliminate slow turning merchandise. Consider a narrower product line with lower pricing.

2) Consider reducing supply chain activity so that employees are conducting fewer tasks even if they are larger in scope. Efficiencies will be realized.

3) Continually negotiate with suppliers for better pricing as a credible client of theirs. Consider multiple suppliers for more negotiating power.

4) Increase vigilance with vendor-direct shipments. Have staff scrutinize units shipped and their invoice pricing. Make sure it is consistent with your contract with the vendors.

retail, retailer, EMPLOYEES, leadership, operations, global trends, global issues, sales, purchases, supply chain, shipping, vendors
customers, consumers, teams, teamwork, human resources, motivation, loyalty, sales, engagement,

Today’s Retail Action Article, June 1st, 2011

Retailers See Renewed Interest In Locally Made Goods

Consumers See Value In Domestically Produced Merchandise

We may be on our way back to a retail landscape full of locally produced merchandise. Goods that may be manufactured again in your town by your neighbours or at least within the USA or Canada. Our love affair with cheaply priced highly disposable goods primarily from China is slowly but surely waning. Higher quality private labels appear to be the leaders in returning their operations to domestic grounds. These manufacturers see value in better quality control and simpler logistics. Very soon, many other manufacturers who migrated to Asia for cheap manufacturing will be coming back to create new manufacturing activities and jobs in our own backyard.

What’s driving this new trend? Firstly, many producers are plagued by quality control issues and escalating duties and tariffs facing the wave of imports from countries like China and The Philippines. However there is more. There is a shortage in these developing countries of skilled labour. Workers are needed to be trained to run the increasingly more complex manufacturing machinery and processes needed to remain competitive in a high demand market. Now, China is facing rapid increases in labour costs to meet supply and demand issues, and in some areas is jumping by as much as 20% a year.

Analysts predict that by 2015, manufacturing labour costs in China will be on par with the U.S. The cheap labour edge that China has enjoyed over the past 20 years is eroding away. Once the labour edge is gone, there will be no reason to continue manufacturing products abroad. Making products back home will create a new opportunity to reinstate much of the manufacturing jobs we’ve lost in the past few decades with the resurrection of manufacturing jobs now lost to developing countries abroad.

Stores will progressively stock more and more “Made in America” or “Made in Canada” products and display them proudly. Consumer surveys also indicate that as the wide gap between quality domestic goods and mass produced foreign goods narrows, more and more shoppers will pay a little more for that better made American toaster. When the gap closes, the choices will be obvious.

Progressive retailers can accelerate this trend my stocking and proudly displaying domestically produced quality products. Within a few short years our retail landscape may come full circle with many more products if not the majority being produced back on our soil. That will be an exciting time with new opportunities for retailers, consumers and workers with manufacturing jobs back at home that were lost decades ago.

Take Action Today:

1) Use the internet, manufacturing reps and similar channels to source out the emerging array of domestically produced merchandise. Add as much as you can to your merchandise line in your stores.

2) Proudly display and use signs to advertise the source where these quality goods have come from. Ask staff to promote your domestically made products.

retail, retailer, EMPLOYEES, leadership, operations, global trends, global issues, sales, purchases
customers, consumers, teams, teamwork, human resources, motivation, loyalty, sales, engagement

 Consumers Are Expecting A Connection And Authoritative Advice When Making A Buying Decision

Poor customer service and tight pocketbooks have made most of our consumers into ROBOSHOPPERS. They Research on line then buy off line. In other words, they do their own homework on the internet and get all the facts about the product they wish to buy. By the time they get to the store, it’s a matter of simply placing an order.

Why have consumers become Roboshoppers? It’s because they’re not getting the service or level of product knowledge anymore at the stores when they visit. The store employees they have been encountered for the past few years have little experience, product knowledge or confidence in demonstrating and recommending products with authority. In many retail organizations turnover is as high as 65%. It’s little wonder why customers have lost faith in the in-store customer experience.

This ritual of order taking in the stores after the consumer has done all the work to facilitate the sale is starting to backfire. Consumers who are working harder than ever for their money are feeling shortchanged by this dismal approach by retailers and a mediocre buying experience.

Customers are now waking up and expecting an engaging experience on the sales floor with someone who knows all about the products they sell, and can even share their own personal experiences with the products. Customers expect salespeople to get to know them, their needs and buying habits. They now expect demonstrations and recommendations from sharp knowledgeable staff who are in tune with the customer and who they are. More than that, the customer expects an engaging experience that is also very interactive. Even a great one way demonstration of a product for a customer just isn’t enough. The sales person needs to then put the product in the hands of the customer such as a camera or power tool and ask them to get the feel of it and even perhaps master one aspect of the product. A customer who has a shopping trip like this is totally engaged in the experience and even subconsciously envisions owning the product themselves.

The customer experience I’ve portrayed is a far cry from the lonely ritual of Internet research and then placing an order with an ill-informed and indifferent sales clerk. Customers will insist on engagement, interaction and authority from their sales people in the future. Rightly so, it makes sense, it works and it makes sales!

Just imagine how much more business you can add to your stores and the loyalty you’ll build when you differentiate yourselves from your lackluster competitors. However. they’ll eventually wake up to this new trend soon, so it’s critical that your organization is first in delivering the new customer experience.

TAKE ACTION TODAY

1) Evaluate the knowledge and skills level of your employees. Can they demonstrate and discuss products with confidence and authority?

2) Do employees understand the concept of customer engagement?

3) Are sales demonstrations interactive?

retail, sales, customers, service, engagement, consumers

 Shoppers Are Doing Their Homework Before They Shop But Insist On A Connection When They Buy

For some time now, disillusioned shoppers have been researching what they wish to buy on line to ensure they’re making the right buying decisions. They examine product reviews, opinions of other customers and even technical comparisons between products. They’ll compare warranties, durability and the track record of the manufacturer as well as the retailer they will select for the purchase.

All of this self-research activity has spawned from a notable gap in service levels at many of the stores, particularly the big box ones with minimal customer service. A customer who is interested in buying something in a store that offers little customer service will have little confidence in making a buying decision without authoritative recommendations from the employees. Not surprisingly, the larger and more expensive the item, the more the service gap will exist. Purchases of large ticket items will warrant extensive research on the net before a customer decides to buy. Usually when they arrive at the store to make a purchase it’s really a matter of just placing an order with minimal interaction with the sales clerk.

How long can consumers who are working harder than ever these days for their money accept the dismal customer service at the stores? Customers are beginning to realize that they’re now doing the work of the sales employee in the store. All the research they do to make an intelligent buying decision should be offered by the store employee, but it isn’t happening.

Consumers are now waking up and there’s an emerging backlash on the horizon. Consumers want a return to great customer service, and beyond that, they seen something new: Customer Engagement. Simply put, there’s no customer service like we see today, there’s good old fashioned customer service of yesteryear and now there’s customer engagement that takes the buying experience to a new level.

What’s the difference between great customer service and customer engagement? Great customer service offers great product knowledge, demonstrations and recommendations with knowledge and authority from the store employee. Customer engagement includes all of this plus an in-depth understanding of what the customer needs as well as establishing a long term relationship with the customer. An employee who uses customer engagement will not only get to know the employee intimately well, but look for the future needs of the customer and offer solutions. For example, today’s engaged customer who buys a new SLR camera concludes with the sales person that they’ll be buying an add-on lens kit as soon as they understand the nuances of their new camera. The sales person knows all about the needs and buying habits of their customer and has established a solid relationship. Through customer engagement, they also understand the future buying aspirations of the customer and will follow-up and be there when they make their next purchase.

Customer engagement makes the customer feel connected to your store and forgets about your competition. Customer engagement will dramatically differentiate you from your competitors and pave the way for future sales.

In my next article, I’ll talk about what customer engagement involves on the sales floor.

TAKE ACTION TODAY

1) Develop a new approach to customer service for your team. Think about what actions you’ll use on the sales floor that through customer engagement makes the customer connect to your store.

2) Discuss with sales employees how customer engagement creates loyalty and long term sales.

retail, retailer, website, shipping, merchandise, customers, service

 Shoppers Are Becoming Discount Weary and Expect a More Customer-Centric Experience

It’s of little surprise that in these challenging times, consumers have made pricing their top priority in making their buying decisions. Many retailers have in response to this, created the perpetual discount price point. Week after week sales go on until after a couple of years of this strategy, customers have become wary of the perpetual sale in so many stores. They wonder whether they’re really getting a bargain after all.

A recent survey in Australia revealed that the perpetual sale mode of so many stores in the market have made almost half of the customers cynical about the whole concept. They’re so “on sale” conditioned that getting a bargain no longer dazzles or delights them on their own. To them, the so-called “big sale” is just a standard way of doing business. If price remains as the top priority in a consumer buying decision, how does today’s retailer reach the customer?

In several earlier articles I predicted that customers will migrate towards a resurrection of a customer service focus. If “great pricing” is now the norm, customers now expect real added value through stellar service and a return to the good old days where store employees spoke with knowledge and authority about the products they sold. Today’s great bargains need to be presented by employees who understand customer engagement. The big box self-serve retail model is slowly losing its luster. Successful retailers who aspire to build long term loyalty must train their employees to deliver a highly personalized experience where professional recommendations and product demonstrations give customers to buy from your store in a market where price alone no longer draws the customers.

If great pricing is now the norm and engagement is the key strategy for customer service in this evolving market, what’s next? Indeed, big box stores with racks and racks of product in a massive array of choices no longer impress today’s consumer. That’s because customers have become more frugal and calculated with their hard earned money and look to buy more on a needs-based level than a wants-based one. Massive selection is not going to impress customers when they believe they don’t need most of what you offer in your store.

This change in buying mentality indicates an evolution towards customer-centric inventory mixes. Sales will be driven by a customer-pull model as opposed to a retailer’s old product push approach. What does this imply in simple terms? Track very carefully what customers buy or ask for and make sure you offer it at great prices. Ensure that your sales team can deliver a stellar buying experience focused on knowledgeable demonstrations and recommendations and an effort to really get to know the customer. Loading up your store with massive levels of merchandise in hopes of “dazzling” your customers will likely fail as they tell you that most of the goods you are trying to push on them, the just don’t need and won’t buy!

In my next article, I’ll portray in detail exactly what customer engagement means and how your employees can rise to the challenge.

Take Action Today:

1) Start detailing what your team believes is an engaging experience for the consumer.

2) Review your retail merchandise mix. What message do you portray to the consumer? Are you a product push or a customer-pull retailer?

3) Consider more scrutiny and selectivity when it comes to sale pricing in your store. If sales become a selective occasion in your store, customers will begin to put some credibility back into discounts and sales again.

 Multi Store Locations Across the Country, Throughout Regions and Even In Cities Can Increase On-Line Sales and Keep Freight Costs Low

Recently, some retail chains have offered on-line sales through their websites with the option of picking up the merchandise at one of their store locations. They’ve made special deals and arrangements with selected courier companies to forward bulk shipments of multiple orders to a specific store at low cost. Multiple shipments and prearranged deals with freight companies dramatically reduces the shipping costs that often makes “one-of” shipments direct to the customer unprofitable.

As E-Commerce matures, we find that more and more customers cross shop between our websites and their bricks and mortar counterparts. Customers that shop through both distribution channels appear to be more loyal to your organization too.

Another great advantage to offering store pick-ups for online purchases is the inducement to get your customers back in your store! What a great opportunity to meet face to face again with your customer. You may exchange dialogue that further builds loyalty, or you may be able to make an additional in-store sale.

Bulk shipments to the store may also open new possibilities to offer prohibitively larger items on your site that cannot be shipped as a single order to the customer. One retailer is now adopting this concept and enables customers to actually buy a whole garden gazebo on line for store pick up. The garden gazebo in this case is too large to stock in all the stores and just could not be shipped to a customer’s house at a profit. However, this massive product can be ordered on line and is forwarded to the nearest store to the customer for pickup in ten easy to handle boxes that easily fit into the rear of a van or pickup truck. This retailer used to offer this item in only a handful of their larger stores. Today, through the website, any customer in the chain can see detailed pictures of the gazebo and order it at a competitive cost. In some cases, if a corporate truck makes frequent deliveries to your stores, you can piggy back these bulk shipments with standard inventory shipments and eliminate the need to use a third party carrier altogether.

This concept can enhance sales and open new possibilities even if you just have a handful of stores spanning one city. Through lower freight costs (or even free if you piggy back your standard shipments in your own vehicle…), you can entice and motivate your customers to buy on line with in-store pick ups. They save money and you have an opportunity to enhance profits while building loyalty too!

Take Action Today:

1) Consider using your in-house freight system or arrange a deal with a third party carrier to offer in-store pickups on your website.

2) Review what products can be offered for in store pickup and give the customer a shipping discount (or free shipping) if they select this shipping option.

3) Consider offering items for in store pickup only that you would like to sell on line, but cannot ship competitively through individual customer shipments.

retail, retailer, website, shipping, merchandise, customers, service

 Updating Store Layouts Can Quickly Add To Sales

When was the last time you looked at store layouts? So often we get caught up in day to day activities and problems neglect to examine our merchandising plans often enough. In fact even if we create a Spring and Winter merchandise plan, we may find that week after week, our plan gets compromised though makeshift changes. Merchandise receipts and shipments of new goods not accounted for in your plan can often be factors that create detours from a well designed merchandise program.

Although this article is not meant to cover all the aspects of merchandising, here are several recommendations that can be implemented quickly to boost sales between merchandise makeovers:

1. Exploit how customers travel through your store: People need to be able to see into your stores as they approach the door. Entering a mysterious black box can cause anxiety. Also, customers tend to veer to the left as they enter, because right handed people tend to walk in counterclockwise circles if left with no particular points of reference. Your latest merchandise with the best margins should be on the left side of your main aisle to create an exciting first impression. High profile sales should therefore be placed on the right side of the main aisle that the customers will see afterwards.

2. Make it Visually Consistent: Limit sign colors to a maximum of three and be consistent through the store. This offers a feeling of credibility and stability. This feeling of confidence spills over to the customer and supports a positive buying decision.

3. Make a cohesive display. Merchandise should support a flowing pattern though the store. Customers expect complimentary and logical combinations of merchandise. This strategy also supports greater multiple sales and boost profits.

4. Take steps to maximize multiple sales. What opportunities are there to suggest add on sales? Wall sections, end caps and by all means the cash desk area are perfect for making recommendations to customers and boost sales. Simple signs reminding customers about buying batteries for new electronic items or toys creates a one stop shopping experience.

5. Merchandise goods to reduce the risk of theft: Keep high demand, high risk items near the cash desk. This not only deters theft but gives the ideal opportunity for employees to show, demonstrate and interact with customers and boost sales.

Take Action Today:

1) Follow this checklist every three months between total merchandise plan changes.

2) Get employee feedback for creative ideas that follow and enhance these recommendations.

learn more about retail merchandising at www.retailinstitute.ca

Engaged Employees Keep Retailers In A Leadership Position

Many large and impersonal retailers believe that a paycheck is all employees expect from their jobs.
Studies demonstrate time and again that employees who feel a connection to the organization will
rise to the challenges we face in tougher times. Smaller retailers can create an engaged work environment where employees feel a greater sense of belonging and commitment to the company and their peers.

This sense of commitment motivates employees to go the extra mile to keep retailers prospering even
when their competitors lose market share. How can we earn top loyalty from our employees? It goes far beyond what we pay them. Consider these best practices to create an engaged environment for your team:

Make employees part of the decision process. Many decisions within the organization may be positively
influenced with meaningful feedback from your team on the sales floor. Their interaction on a day to day basis with customers offers the best source of information in regards to what customers want from your organization.

Solicit opinions and feedback on issues that directly affect employees and their job parameters. Let them feel ownership to decisions made about their schedules, benefits, work shifts etc.

Good work should be recognized and praised. All companies that have a culture of connected employees
formally reward those that excel at their jobs.

Encourage a culture of recognition amongst peers. Create a co-supportive environment where employees
can come forward to praise their own coworkers.

Make sure that decisions made within the organization are promptly shared with the employees. Engaged employees should always be the first to know what is evolving in the company. Often, employees hear from outside sources or read developments in the newspaper about their company and feel demoralized that they weren’t informed by their corporate leaders.

Develop well defined career paths for employees from entry level through to senior management. Offer
personal mentoring to all employees on training, personal growth and career timelines.

Offer frequent job rotation schedules whenever possible. This is one of the best strategies to build job enrichment and loyalty. Employees who are exposed to all duties within their level of the company see the big picture and feel a high degree of ownership and engagement.

Continually offer increased responsibility to employees who demonstrate initiative and wish to learn more
about the business.

Offer a feedback program where employees can voice their opinions and concerns and receive formal feedback of the outcomes.

Encourage employees to submit business improvement ideas and reward employees who have offered concepts that were successfully implemented.

Offer profit sharing to employees so that they see a personal link to their prosperity and the company’s
growth.

Take Action Today:

1) Review these strategies and implement as many of them that your company can support.

2) Inform employees through formal meetings of your programs and encourage their participation.

3) Make your engaged work environment and its features part of new employee orientation.

 Get The Best Employees For Your Store By Following These Golden Rules

One retailer I recently spoke to lamented about how hard it was to find the right candidate to hire. Lots of applicants, nobody with that “spark” they were looking for. Smaller retailers want someone who is mature, intelligent, enthusiastic and with a spirit of service.

Take Action Today:

1) Before you put the Help Wanted sign in the window, make a written list of the qualities you seek in a potential candidate based on the above criteria. This is your basis for conducting one or more employment interviews and does not replace your formal job interview process. It will enhance your decision making methodology.

2) Keep an open mind to hiring an excellent applicant even if you do not have a position open. If your wage budget can accommodate them, consider bring them on part time and evaluating what productivity they can offer your store. A good candidate who produces extra sales will quickly pay for the added wage expense.

3) Build your sales team through evaluation, training and promotion of part time employees who started with you by demonstrating the special qualities in this article.

retail, retailer, leadership, operations, sales, merchandise, global trends, global issues, customers, consumers, merchandise, selection, location, traffic. employees, hiring

Retailers Looking For Potential Locations Face New Rules

Customer Travel Habits Have Changed and Affect Where You Should Locate

Today, consumer buying behavior has changed. It’s largely driven by the return of time-starved families and a more prudent approach to travel or commuting. High fuel costs have forced consumers to adopt new money saving strategies that strongly influence where they’ll shop:

1) Many consumers will now limit shopping between where they live and where they work. They’ll do the majority of their shopping on the way home to break up the commute, and thus will refrain from taking large detours. If your shop or considered location is situated on main commuter routes, you’ll capture solid traffic based on this new buying pattern.

2) The high cost of parking, particularly in larger municipalities has turned off many consumers. Often, shopping where free parking is offered becomes the sole factor in their buying behavior and the locations they select to shop in.

3) Elements as simple as barriers to access can become the deciding factor in selecting a shopping location. Difficult to navigate parking lots, left hand turns at busy intersections and even the typical distance a customer needs to walk to the doors will affect which locations they’ll shop at.

4) Stores located near noisy freeways, railroad tracks or run down neighborhoods also become deterrents to shoppers. If you decide to locate a store around these elements, you may face traffic obstacles from the first day. Customers that need to cross railroad tracks to get to your store who get stuck waiting for a crossing train may abandon your store as a shopping option in the future.

5) Many corner locations offer access from multiple directions, great visibility and easy street parking. Consider a corner storefront if you are considering a street location.

6) Time starved customers today prefer to shop at multiple locations located in proximity to one another. This cuts down on travel time and fuel costs. In fact, today’s consumers expect your store to be located near your competition so they can comparison shop efficiently as well.

7) Stores situated on cottage bound routes are typically strong locations. Consumers will often buy on the way to the cottage or vacation destination but are not inclined to buy on the return trip. Being on the right side of the road is critical for capturing this valuable traffic.

Today’s price-driven consumer needs to accomplish their needs-based buying trips within a minimum amount of time and fuel costs. Your existing and future locations must support these new buying patterns. The notion of destination shopping for today’s consumer is becoming a dwindling concept.

Take Action Today:

1) Conduct an Audit of your existing or future locations and understand how they fit into these new elements of buying.

2) Consider solutions to overcome access obstacles in existing locations. Mall merchants can pool resources to hire a police officer to help direct customers into busy entrances for example.

3) Determine if you have captive commuter traffic and target your marketing to this group.

retail, retailer, leadership, operations, sales, merchandise, global trends, global issues
customers, consumers, merchandise, selection, location, traffic