Improving Store Labor Standards: A Key Ingredient for Successful Store Execution

While the chorus around omnichannel and digital commerce’s growing impact and the need to transform stores becomes louder every day, retailers need to account for how these changes affect the work associates perform and the store’s labor budget. The reality is that a majority of retailers are unsure of how to upgrade labor standards and labor hours for maximizing store productivity and ensuring smooth operations. Labor standards are defined as the average amount of time it takes for store associates and managers to complete customer service, sales and operational tasks in the store. Retailers use a varied set of sales, customer service and operational labor standards for day-to-day store execution. In order to achieve consistent store execution, retailers need to ensure that all these standards are always in line with constantly evolving customer expectations, labor regulations and related store labor policies/procedures. Effective labor standards and related standard operating procedures (SOPs) in the stores include accurate labor planning for all tasks, performance evaluation, insights for operational improvements and cost minimization and above all documentation of the best methods. EKN recently conducted a survey of 63 US retailers and spoke to several softlines and hardlines retail executives to understand their viewpoint on this key retail store execution area. The general consensus is that labor standards are not well documented or updated effectively within the retail organization. In fact, nearly two-thirds of retailers (64%) update labor standards and labor hour models infrequently- range from quarterly, annual or on an ad-hoc basis. Another major business pain that retailers are experiencing is the lack of proper organizational management and consensus on issues related to... read more

Lack of a Demand-Centric Pricing Strategy is a Big Stumbling Block for Retailers

Best-in-Class retailers are responding to competitors including the likes of Amazon by undertaking price changes in close to real-time by using advanced competitive pricing analytics, price elasticity analysis and in some cases even using smart shelves for real-time dynamic pricing updates. Dynamic pricing takes a consumer’s perceived ability to pay for a product. On the other end of the spectrum, most other retailers are facing the wrath of unrelenting promotional pricing pressures and sub-optimal markdowns that are hurting operating profit and margin. Lack of optimization and dynamic approaches in pricing, promotions and markdowns gets translated into loss in operating profit, gross margin and inventory turns. Despite having the knowledge that effective pricing and promotions is the key to remain competitive, both large (turnover over $1 bn.), and mid-market retailers (turnover between $100 mn. and $1 bn.), have faced challenges in such implementations. EKN surveyed 105 softlines and hardlines retailers in November 2016 of which the larger retailers highlighted the top 2 challenges as (1) lack of actionable pricing & promotion analytics to drive profitable decisions and (2) inability to measure pricing or promotion effectiveness and financial impact. For mid-market retailers, the main challenges faced are (1) increased vendor costs and ineffective vendor negotiations and (2) inability to connect pricing, promotions and markdown approach to a company strategy. It is quite evident that large and mid-market retailers are struggling to connect the dots between pricing and promotion effectiveness and profitability. Is a more dynamic pricing approach the answer to the retailers’ problems? Retailers have tried to adapt themselves in this dynamic environment by resorting to frequent in-store price-related changes which... read more

Global Sourcing Uncertainties Continue Amid Brexit, Commodities Market Slump and Currency Fluctuations, Reports CBX Q3’16 Retail Sourcing Study

The continued uncertainty in Europe over Brexit, rising wage pressures in low cost sourcing countries, low commodity prices, weak freight transit  and major currency fluctuations are shaping a rather grim sourcing and supply chain outlook, according to CBX’s Q3 2016 retail sourcing report. In fact, the aforementioned results are in line with EKN’s own Q2 2016 retail private label sourcing study that indicates significant headwinds being felt by retailers in terms lack of speed to market, global commodity price sensitivity, high merchandise unit costs, among other business pressures. While other uncertainties across economic indicators, manufacturing activity, currencies, transit and commodities are evident, CBX’s report indicates that Brexit’s true impact will play out in the next two years. It remains to be seen how Brexit will impact retailers and their trading partners that do multi-country sourcing or deal in trading with or through UK and other European countries. The report provides useful synthesis of varied economic and supply chain indicators that can impact overall retail branding and private label private sourcing. The data has some particularly useful insights and implications for apparel, fashion, specialty and other softlines companies that source products from low-cost international countries through their own buying offices or agents. Nearly 1 in 2 retailers (45%) source through their own international operations or buying agents like Li & Fung1. Among the top 8 global sourcing impact points covered in CBX’s report, most do not indicate a positive Q2 performance. Moreover the outlook towards forward looking macro-economic measures (i.e. infrastructure, labor etc.), manufacturing indices and freight demand scenarios do not seem that positive either, except for a handful of... read more

Key Trends & Challenges Impacting Private Label Retail

Retailers who sell private label products as part of their assortment-mix today have a reason to fear Amazon’s entry into private label assortments or collections. It has increased the threat of further online competition. EKN’s 2016 Private Label Sourcing survey (in partnership with CBX) of 50 North American retailers has revealed that compared to 2014 or prior, retailers are giving higher importance to private label brands for their top line and bottom line net earnings. Taking into account the threat from the likes of Amazon and an already high forecast growth within eCommerce and mobile channels till 2018 (14.5% & 29.4% CAGR, respectively¹), omnichannel operations is the top trend shaping the state of private label brands especially in the area of strategic private label sourcing and product development. Private label is no longer a store phenomenon and moving forward retailers fully expect private label categories to grow in the physical-digital domain. The second biggest trend impacting private label brands, sourcing and development is new consumer demand. These new consumer demand patterns are as much about growing private label demand as it is about growth in main street retail, subscription retail and food retailing in formerly non-food stores (i.e. drug). Price sensitivity is definitely increasing as there is an increase in off-price stores emerging in luxury categories. Retailers are well aware that the price sensitive consumer cares a lot about private label or store brands. Within private label, sales reached $118.4 billion in 2015, an all-time record and an increase of +$2.2 billion over the previous year. In the past two years alone, annual sales are up by +5%, or +$5.4... read more

Toshiba’s Bigger and Better User Show in 2016

This year’s ‘Toshiba Connect’ was held in Las Vegas and dare I say what happens in Vegas stays in Vegas! In fact, it will be quite the opposite for Toshiba and its customers in 2016 as there are a slew of new strategies and capabilities that are waiting to make their mark in retail and other industries. Store and point-of-sale (POS) re-investments, customer personalization, digital consumer experiences, payments and evolution of omnichannel were the main strategy areas and collaborative themes led by Toshiba, retailers, media and analysts that spurred discussion and discourse during the conference. Toshiba executives Scott Maccabe, Bill Melo, Michael Griffiths and a few others laid out the key mission focusing on Enriched Shopping, Actionable Insights and Frictionless Checkout, as well as the strategy and solution roadmap for Toshiba Global Commerce Solutions in the aforementioned areas. Customer executives from Safeway, Kroger, Brookstone, PVH and other retailers provided a promising view of their retail growth and customer experience innovation taking place today. However, large U.S. retail executives also went on the record discussing their challenges in meeting the October 2015 EMV deadline. A number of retailers spoke at length about the lack of clarity around industry standards for seamless ‘chip & signature’ POS pin-pad migrations. Retailers have experienced various concerns related to customer experience issues, 30%-50% longer transaction time, deployment delays, system testing, continued data security concerns and store employee training complexities. EKN’s February 2015 POS Blueprint study showed that 7 out of 10 retailers were ill-equipped to roll out chip & signature-ready terminals by the October 2015. The Toshiba partner ecosystem also had a lot more depth... read more

Retail Enterprise Agility: A Necessary Step for Future of Retail

Within most softlines, grocery and hardlines retail segments, the need for enterprise agility and speed to market has often been talked about in terms of response time of store, headquarter or supply chain teams to align with current and emerging market and consumer trends. Agility in retail can translate into initiatives including but not limited to rolling out new channels/stores, new product introduction, marketing, content and technology innovation that improves customer experience or operational efficiencies. Retail enterprise agility is not just about quick decision-making and resource allocation but also enabling improved sales, cash-to-cash cycle time and product lead time attainment. It requires collaboration and common workflows at the product and customer-programs level between stores, digital teams, merchandise planning, sourcing, product development, marketing, IT, business intelligence and supply chain visibility and collaboration. While agility in the product value chain must conform to seamless movement of product from concept-shelf, creating deeper customer connectivity, engagement and personalization during the customer path-to-purchase journey, requires retailers to demonstrate consistent dedication, commitment and a steady flow of investments in ensuring customer-facing digital transformation. Digital thinking, data insights and customer science is inherent in such a transformation and no department or channel in retail can be devoid of essential building blocks such as access to real-time digital data, digital device-based insights & accessibility and workflows enabled on digital assets. The simplest example of the ROI waiting to be gained from such a transformation is in the ease of doing day-to-day business in a store. Retail store associates or managers should not have to pace back-and-forth between the back office and the customer front-end every time they... read more

How to Re-Activate Current Loyalty Programs to Bring Alive Loyalty

In this age of well-informed, technology-savvy, connected consumer, is customer loyalty dead? An EKN survey (EKN 2014 Next Generation Shopper Experience: A Millennial Consumer Perspective) shows that the customers, especially the millennials, are willing to spend additionally upto 30% over the same period in case they get a great shopping experience. EKN’s analysis shows that the same customers sometimes defect their loyal brand in search of better prices and convenience. Retention had never been so difficult. So how exactly then a retailer claims to retain a loyal customer base when the customer’s behavior suggests otherwise. One needs to figure out the good that the existing retail loyalty programs are doing for the business except for providing a momentarily transaction-based attraction for customers. It is interesting to find that many retailers run these contests amongst their employees in store in return of incentives, to get the maximum no. of registrations for their loyalty program. Does the buck stop here? No, we believe, it is equally critical for retailers to ensure the subscribed customers make use of the program consistently and this can only happen when customers realize the associated far-reaching rewards than mere transactional benefits. This notion ties back to the concept of customer lifecycle value, one of those metrics which has seen most retailers struggling with. Measuring customer’s lifecycle value considers into account a more holistic view of the value derived from the customers over the period and thus challenges the retailers’ myopic view in executing a transactional loyalty program. The concern mentioned above is applicable to most retailers irrespective of their format, segment and size. Key issues that... read more

Unified Commerce: A System or Process Change?

EKN’s 2016 Digital and Omnichannel survey indicates that re-investments in eCommerce/mobile in shaping up retailers’ future strategies is of considerable importance as the expected CAGR in eCommerce and mobile commerce is expected to be 14.5% and 29.4% by 2018. At the same time, EKN’s 2015 POS Blueprint Study highlights the fact that for 7 in 10 retailers store POS transaction volume accounts for more than 70% of total retail volume. For sometime now, store transactions are no longer considered pure store purchases and over the last few years offline-online basket or shopping cart integration is widespread as customers want to merge pure store POS transactions and digital transactions into a singular store experience. Despite the need for integrated offline and digital transaction experience for customer convenience at check out, retailers are using separate systems or browser windows within the existing POS system. This creates higher waiting time and inefficiencies as associates, managers and eventually customers experience a rather odd and time-consuming toggle back-and-forth between the store POS user experience and online/eCommerce transaction interfaces. With the average age of a fully deployed POS system at 7 years (EKN’s 2015 POS Blueprint Study), unified commerce solutions can take over where legacy POS systems have created gaping opportunities in operational and customer service space. The cumbersome user experience, lack of ease of access to customer information and difficulty in creating unified shopping carts which combine online/catalog orders with in-store purchases, are only some of the challenges faced by over a third of retailers.  Seamless shopping behavior can be triggered via a unified commerce platform. Such platforms have the ability to combine omnichannel... read more

Soon to be Unveiled: A New Customer Service Model for Retail Stores

For a majority of retailers, more often than not, the words associated with retail store managers and associates point to a strong affinity towards words like ‘productivity’, ‘asset’ and/or ‘empowerment’. However, in reality, 1 in 2 retailers rate themselves at par or behind their competitors in terms of two critical store execution yardsticks – customer engagement/sales and product knowledge of store staff (source: EKN’s Next Gen Retail Employee Engagement & Empowerment study). The obvious question: Why are the top of mind values and beliefs associated with store staff and execution in the store so difficult to pair together for consistent results? Retailers are well aware of the fact that developing the right labor budgets, effective staffing models and relevant task lists can only go so far to solve customer experience problems in the store. At best, most retailers are able to provide a working model for the store staff that is barely enough to get by, yet cannot solve the continued customer-centricity, inventory and store-presentation related problems. The key to a successful store execution model lies in the three practical concepts of business execution outlined below. Let’s review each of these concepts one-by-one. Develop a blueprint for profitable store execution by disrupting current staffing, merchandising, location-messaging and execution models in the store with new customer service, store staff reward and recognition models. Retailers that operate different store formats including flagship, outlet, big-box and express stores need to ask a simple question to their financial and store operations teams: Based on the business forecasting models, do you believe that a majority of our stores will be in business in 5... read more

The Greatest Impact on Customer Experience is by Building a Key Operational Capability

Retailers must focus their business transformation efforts and limited IT budgets on strengthening operational capabilities which in turn would have a great impact on their customer experience strategy. Some of the must-dos include point-to-point fulfillment, inventory visibility and unified order management. The #1 omnichannel operational challenge that retailers have to overcome is to address the customer’s need for shipping-speed and velocity of orders. Same-day and next-day shipping is where most of the operational innovation will take place for these companies. This is especially true when it comes to the increased need for a robust order management and fulfillment infrastructure that enables ship from DC, supplier direct drop shipment, click and collect, smart locker shipment and ship from store. The relationships such as of a supplier, 3rd party fulfillment partners and on-demand fulfillment services partner are also going to be crucial for first-time right orders and on-time order delivery. Legacy enterprise resource planning (ERP), point-of-service (POS) and warehouse management systems (WMS) cause significant delays in upgrading unified distributed order management visibility, accuracy and execution. While retailers will have to continue to invest in upgrading their omnichannel supply chain for order visibility and agility such as integrated DCs, cross-dock, split order and other related processes, the role played by stores will become even more critical in months and years to come. EKN’s 3rd Annual Stores Benchmark report indicates that 8 in 10 retailers anticipate an increase in fulfillment of online orders from store. Additionally, 32% of retailers are going to offer same-day shipping in the next 12 months, totaling close to 75% by the end of 2016. Stores need to be spruced up... read more