A blog for all things retail and licensing.

Retail Success Still Depends on Core Principles

Guest Blog by Joel Alden and Adam Pressman

A.T. Kearney’s Achieving Excellence in Retail Operations (AERO) study uncovers insights into how retailers worldwide can improve their operations.  With more than 100 questions, the survey probes the strategy, tactics and execution of retailers in more than 20 countries.  It covers multiple sectors, including apparel, health and personal care, mass-market and hypermarket, electronics, food and grocery, and cash and carry. The framework of the study provides the means by which to look at every aspect of operations – areas that enhance store value such as store technology, operating-expense control and real estate life-cycle management; aspects that drive store value such as store business planning, channel strategy and voice of the customer; and facets that deliver core store value such as merchandising, supply chain interfaces and field leadership.

As we were setting out to do research on our 2013 study, we were aware of the huge changes that had occurred just since our previous study, in 2010. Three years ago, we did not ask retailers anything about social networking. We covered far fewer options for deploying technologies to customers—and for getting information back from them. And although we asked about multiple channels, the notion of integrated channel retailing was at best a distant mirage. But look what happened with our results in 2013: Despite the changes, the AERO study demonstrates the importance of many traditional core principles of retailing. It confirms that running a successful retail operation is all about people: employees, customers, and the interactions between them. One of the biggest secrets to success is the simple notion of engagement: listening to your staff and your customers. Another is cutting back on administrative burdens to get managers out in the field. And although the new wealth of technologies and available data is a great boon, often the most productive uses of it are in addressing familiar challenges such as managing shrink and out-of-stocks.

Sure, it is both fun and important to look at new technologies and the insights you can gain from them. Yes, there is some value in the gee-whiz imaginings of a Jetsons-like retail future. But when you dig deep into what actually generates profits for today’s most successful retail companies, it turns out that they’re simply good at what great retailers have always been good at: the nuts and bolts of operations. They identify the right metrics, analyze them appropriately, and act intelligently (Measure, Analyze and Act). They support field leadership with tools and processes to improve their decision making. They rely on, and seek insights from, front-line staff. And they view technology as neither a threat nor a toy, but as a tool that better enables them to achieve ancient ambitions such as customer insight and engagement, operations efficiency, and customer service.

One critical area where the Measure, Analyze and Act approach plays a huge role is in out-of-stock performance.  We found that leading retailers used this principal to improve operational performance, for example reducing the percentage of out-of-stocks. Respondents who set in-stock goals at the stock-keeping unit (SKU) level, rather than by store, category, or subcategory, performed 47 percent better on this key operational issue.  Why? Because they know when an important SKU is out of stock. When you aggregate out-of-stocks to the store level, you may not know that you’re missing a particularly high-volume or high-margin SKU, so your overall out-of-stock performance will seem better than it really is.  By measuring in greater detail, leaders are better able to identify and address problems.

In a sense, then, the more things change, the more they stay the same. In an information-soaked environment, amid the emergence of multiple retail channels, it’s important to understand how to take advantage of the changes. But it’s equally important to keep a hand on the pulse of core principles: people, customers, and physical store layouts.

Fifty years ago, some of today’s retail technologies would have been inconceivable. To think that most homes would have a computer through which you could search for, examine, and purchase items without ever having to go to the store… and yet similar alternatives actually did exist. Substitute the word “catalog” for “computer.” And yet over all of these years, shoppers have preferred the in-person store experience.

We can’t predict what technologies will be available in 50 years—or even five years. As options proliferate, bricks-and-mortar stores may indeed play a smaller role. But at heart, retail is a people business, with traditional principles that center on maximizing the value of human interactions. As always, retailers should seek to improve analytics to drive better performance, support field leaders to reduce their administrative burdens, highlight the value of their front-line staff, and achieve meaningful goals. Despite the latest inventions—or even because of them—the funda­mental principles represent the soundest road to success.

The A.T. Kearney Achieving Excellence in Retail Operations (AERO) examines the insights from the A.T. Kearney 2013 AERO survey to show how retailers are turning great operations into profits. To download the full AERO report, go to www.atkearney.com/AERO.

Joel Alden is a partner with A.T. Kearney and is the co-leader of the AERO Study. He is based in Toronto and can be reached at joel.alden@atkearney.com. Adam Pressman is a principal with A.T. Kearney and is a co-leader of the AERO Study. He is based in Chicago and can be reached at adam.pressman@atkearney.com.

Are the Retailers Scrambling to Capture Multichannel Data Forgetting the Biggest Channel?

Guest Blog By Ralph Crabtree

Thanks to clickstream data, SMS records, social media chatter, and other “digital breadcrumbs,” today’s retailers understand a lot about the behavior of their online and mobile customers. How many people visited my website? What items did shoppers view but not buy? Which ads did they respond to? How long did they browse? Answers to questions such as these help businesses improve their marketing, pricing, promotional and customer service strategies. But in a multichannel world where a typical consumer might view shoes online, research prices on a mobile device and buy at the mall, many retailers have a huge analytic blind spot: they don’t know much about how shoppers behave when they are in an actual store.

Retailers that leave out brick and mortar behavioral intelligence do so at their own peril. According to a Forrester Research analyst recently quoted in The New York Times, “well over 90 percent of sales still happen in physical stores.” Closing the “insight gap” that exists between their brick and mortar and digital sales channels is a business imperative, but where to start? First, retailers must identify what types of in-store data need to be captured so that they can ask (and answer) the kinds of questions that are already part of routine analysis in online and mobile environments. For example: How many people came into my store? What are they doing while they shop? What products do they look at? What products do they buy? Here are four data categories absolutely critical to gaining more detailed and accurate in-store intelligence:

  • Transactional Data (Online parallel: Ecommerce Data) – In order to track sales, returns, and inventory levels, most brick and mortar retailers already have point of sale (POS) data capture systems installed at registers. These systems provide vital information about what items customers are buying, which stores are bringing in the most revenue, and more. POS data alone is not enough, however, as the picture that it delivers of a customer’s shopping experience is oftentimes incomplete. For example, POS data can tell a retailer that customer X purchased a specific style, size and brand of shoes using a credit card. It cannot reveal that the customer also looked at the Ralph Lauren display for 10 minutes and wanted to buy a pair of jeans, but didn’t because her size was out of stock. (Or that customer Y didn’t buy anything at all.)
  • Traffic Data (Online parallel: Site visits) – Keeping an accurate, ongoing, real-time count of in store traffic, also known as people counting, is essential in brick and mortar environments, for several reasons: 1) Traffic counts help retailers measure sales conversions. How many store visitors turn into buyers? 20 percent? 30 percent? How much did they buy? This is valuable insight. For example, a low conversion rate could signal that a location’s product mix, service levels or pricing need to be adjusted. 2) People counts also help retailers manage their workforce more effectively in real time. Based on the number of visitors walking through the door and average shopping time, technology can predict how many checkouts will be needed. The store manager can then beef up staff at registers or send more associates to the sales floor. 3) Finally, by analyzing store traffic against conversions over time, retailers can begin to see important patterns both within and across locations. For example: Why is the conversion rate higher in some stores as opposed to others? How are seasonal events and marketing promotions changing the patterns? Why have conversion rates gone down instead of up over the last 12 months?
  • Queue Data (Online parallel: Order Processing Data) – How many people are waiting in line at registers? How long are they waiting? How fast are sales staff processing transactions?  Today’s busy consumers hate to wait, and data related to queue times, as well as customer actions in the queue is critically important for retailers that want to optimize service (i.e., all retailers). Research studies have shown that the amount of time a customer waits in line has a lasting impact on their positive or negative perceptions of an in store shopping experience. By tracking queue data, stores can adjust staffing and speed wait times in real time, better forecast workforce needs over time, and even communicate wait time estimates to customers, who appreciate being told what to expect.
  • In-Store Behavior Data (Online parallel: Clickstream Data) – Data about what customers actually do once they pass through the front door is the Holy Grail, but it’s also the trickiest to capture in a brick and mortar environment. Retailers want to know things like how shoppers move through their store, what displays they stop at, and what items they touch and try. Online channels have an advantage here, because in the digital world, retailers can track “clicks,” collecting highly granular data about what products consumers look at, put in and then discard from their shopping carts, check back on, etc. This kind of data enables highly personal targeting—as anyone who has had an online ad for a handbag that they recently viewed on a retail site “follow” them around the Web knows. While tracking behavior in real world locations is a bit more challenging, with new technologies, it can be done. There’s no excuse for being blind when it comes to the retail world’s biggest and most profitable channel.

Ralph Crabtree is CTO of Brickstream

Facebook Marketing – Striking a Balance between Quality and Quantity

Guest Blog By Mike Heffring

You can’t win if you don’t play. You miss 100 percent of the shots you don’t take…

No matter how you phrase it, this adage reigns true in all aspects of marketing, especially when talking about the ever-changing social media sphere. Many companies today still feel like social content cannot be mapped to ROI, so they don’t take the risk. But companies who have a strong grasp on what drives social success have proven that this is simply not true. Expion analyzed the Facebook strategies of 10 retailers to find out which brands are winning when it comes to the Facebook marketing game and which are sitting on the sidelines.

In the analysis we looked at a few key metrics including:

  • Total Fan Actions: This represents the total number of fan actions (the sum of comments, likes and shares) generated by each brand in Q1 to show which retailers were creating the most fan engagement in terms of sheer volume.
  • Fan Actions per Post: This shows the average number of fan actions generated by each Facebook post that the retail brands published in Q1. It demonstrates how effective each individual post.

A Quantity Approach – Walmart and Victoria’s Secret

While Burberry may have generated the most fan actions per post, it’s really Victoria’s Secret and Walmart that are winning amongst the brands measured. Each brand generated over 5 million fan actions on Facebook during Q1, which is more than double what Burberry produced,  and they won by repeating what works – over and over again. Both brands publish content on a frequent basis, and while it may seem like they are choosing quantity over quality, it’s a strategy that proves to be effective in terms of overall reach and engagement.

Victoria’s Secret published 220 posts in Q1 and found that “showing skin,” or posting pictures of their models, and featuring promotional items centered around Valentine’s Day generated the greatest engagement with their fans. Walmart published 413 posts and over 70 percent of them were timely, focusing on holidays and current events such as Dr. Seuss’s birthday, Easter, Game Day, St. Patrick’s Day and Valentine’s Day. The remainder of Walmart’s content included humorous photos of cats and dogs, a proven social winner, with engaging captions that sparked social conversations.

A Quality Approach – Zara and Burberry

Burberry and Zara have a completely different approach to Facebook engagement. They are focused on quality over quantity, and while each post is highly effective, there is a huge missed opportunity in terms of increasing their reach and frequency of engagement.

Zara posted a mere 11 times in Q1 so even though it’s individual posts are effective, and producing a healthy amount of fan actions per post, when looking at the total engagement it created on Facebook, it’s falling far behind. If Zara stepped up to bat more often and published content more frequently it could potentially capture a much higher share of voice on Facebook.

Burberry posted 54 times in Q1, which is a huge step up from Zara, but not enough to take on retail giants like Walmart and Victoria’s Secret. It has the highest number of fan actions per post, showing that the content its publishing is highly effective, but if it were to increase the frequency of posts by just a relatively small margin, it could create an incredibly powerful social voice and reach a much larger percentage of Facebook users.

Finding the Perfect Balance

While quality control is huge, as no one wants to be spammed by a brand, there is something to be said about creating a strong and impactful brand voice in the social media sphere. After analyzing these 10 different retailers we found that the brands who are taking a more subtle approach are missing the opportunity to capture the attention of Facebook users. Retail brands that want to implement a sound Facebook strategy need to find a balance between quality and quantity.  Victoria’s Secret is closest to this as they’ve created a balance between frequency and fan actions per post.

You don’t want to strike out, but you’ll never hit a home run unless you step up to the plate.

Mike Heffring is CMO at Expion

The High Price of Downtime to Retailers

Guest Blog By Matt Ferrari

No business can afford system downtime. One minute lost can equal loss of revenue, customers and more. For retailers, downtime is particularly troublesome – especially considering the importance of e-commerce, which requires round-the-clock uptime in today’s global economy.

Global management consulting firm A.T. Kearney estimates global e-commerce has grown 13 percent annually over the past five years. According to a new report from the Interactive Media in Retail Group (IMRG), a U.K. online retail trade organization, global business-to-consumer e-commerce sales will top $1.25 trillion in 2013. On 2012’s Cyber Monday alone, online shoppers spent $1.465 billion. Mobile commerce, and the proliferation of smartphones and tablets adds new pressures to retailers’ need for an always-on business. Many smartphones are able to scan barcodes and QR codes, adding another feature to multi-channel shopping. In a study on the U.S. smartphone shopping behavior, ComScore found that 4 in every 5 smartphone users – 85.9 million in total – accessed retail content on their device during July 2012.

Perhaps the most obvious and damaging, cost of downtime to retailers is lost revenue associated with customer’s inability to transact during an outage. Target for example, has experienced multiple outages. The first crash was related to a huge surge in traffic when introducing the Missoni for Target apparel line. There were also at least two outages during last year’s holiday season, one of which (according to Rigor) lasted for about two and a half hours. The company used its Uptime Percentage Calculator (located on the Rigor homepage) to determine the outage represented a loss to Target of about $464,000.

It’s not just sales lost. While existing customers might be forgiving and wait for an outage to sort itself out, new customers are less patient. Outages impact brand perception as well, and retailers need all the help they can get to build and sustain their brands in competitive online space.

Today’s IT environments leverage virtualized infrastructures and cloud computing via private, public and hybrid models, making business continuity more complex, because applications and compute power are more fluid and dynamic. Any cloud model that’s not managed within a retailer’s own four walls is susceptible to the practices of a third party, lessening a retailer’s control over IT operations. This leads to missed opportunities in design, planning, testing and deployment of IT initiatives.

Another common misstep is implementing unique infrastructure for each application. This undermines efficiencies and increases the risk of failure and outage. Instead, companies need to take advantage of opportunities for repeatable infrastructure to drive economies of scale. Another point of failure is that for many organizations, planning and execution is non-iterative. IT must engage all stakeholders throughout the process and not just at the beginning, because requirements and expectations change. Retailers can minimize the impact of an outage through a solid disaster recovery plan. Too often, disaster recovery is an afterthought. Any time an application is built, IT departments should plan and build for that app’s disaster recovery by anticipating scenarios and defining requirements.

Many outages could be prevented with the adoption of an Always-On Design Framework, which improves availability and reliability. This framework is premised on three key tenets: reusable components that are easy to deploy and support, interactivity with stakeholders to significantly reduce the risk of project failure, and architecting application infrastructure assuming a failure will occur. It closes the gap between application design and users’ needs. With an Always-On architecture, retailers can take advantage of reusable IT components in a service catalog that can be quickly provisioned. With faster delivery of services, enterprises can focus on other business strategies. They save weeks of time in development, provisioning and training, which boosts agility, cuts operational costs and achieves greater ROI.  The framework also promotes regular evaluation, validation and prioritization of applications and services. That, in turn, aligns expectations and capabilities early in the design process.

This framework will help retailers reduce outages and mitigate damage. The Always On Design Framework is detailed in HOSTING’s publication, the  “essential Guide to Disaster Recovery & Business Continuity.” The free publication can be downloaded from the Website: www.hosting.com. There is no question that retailers should be investing in online channels as eCommerce and mobile commerce continues its exponential growth. But these channels require highly-available, reliable IT systems. Outages of any length immediately affect the bottom line. Architecting with this proven framework can help plan and deliver an IT foundation that keeps retail always on.

Matt Ferrari, CTO at HOSTING

Shedding Light on Opposite Ends of the Retail Supply Chain

Guest Blog by Bryan Nella

On May 1, 2013, the Wall Street Journal published an article titled “Retailers Seek Plan to Prevent Disasters,” following the collapse of the Rana Plaza building in Bangladesh that killed more than 400 inside. The article described a meeting in Eschborn, Germany that drew representatives from Wal-Mart, Gap, H&M and 30 other retailers and government agencies to develop a plan to prevent a repeat of the Bangladesh disaster. Separately, the European Union is also discussing bringing forth a trade action against Bangladesh and installing new measures to pressure local authorities to enforce stricter labor standards.

Another article in the Wall Street Journal showed protesters marching in the Bangladesh streets to demand the death sentence of the owner of the collapsed garment factory. Two very different worlds – the West and East – are reacting to the same challenge and although their perspectives may be diametrically different, the culprit in both instances may be the same.

In the West, brands and retailers race to meet consumer demand for fashionable yet inexpensive clothing. They turn to countries like Bangladesh that can provide them with low cost labor and a fast- growing garment workforce to fulfill orders rapidly. The goods are sufficient quality, the cost is low, and the speed of delivery works. The downside to sourcing here is the sometimes questionable workplace conditions and factory standards. Thousands of miles and the inability to walk the factory floor clouds the view of production.

In the East, in Bangladesh specifically, the garment industry has blossomed in recent years to become the number two worldwide exporter only trailing China. Because of the availability of jobs and the growing economy, Bangladesh has become a global supply chain hot spot. But with Bangladesh’s high ranking comes intense pressure to meet tight deadlines and keep cost levels down. In turn, safety and other standards can sometimes become secondary concerns. The view from the West is clouded: a brand places an order and after a number of weeks, the goods are shipped and arrive on store shelves, giving brands little insight into the reality of how the goods passed through in the production lifecycle.

However, factory workers expect more — they expect safe working conditions and standards to be upheld. At the same time, retailers share these expectations. The problem is the lack of visibility or accountability in the production lifecycle. Without visibility, no one can be held accountable to the sub-par safety and standards and enforcement cannot take place. Years ago, a retail executive could walk the floors of its factories to ensure practices were up to par, but this is no longer practical as factories are typically thousands of miles away, separating the retail executive by an ocean. With no eyes or ears on the ground, both ends of the supply chain suffer.

The culprit here is the lack of visibility and perhaps that’s where the solution begins. In today’s connected world where we can view satellite images or live streams of local highway traffic by logging onto the web, we should be able to turn the lights on in the global supply chain. Picture a retailer placing an order in an electronic portal that requires the supplier to include images of the fire escapes in all factories. Or a consumer goods company that uses an online platform to electronically monitor every party in the supply chain against denied party lists or unsafe factory databases to prevent unethical production. While today’s complex supply chains create challenges for ensuring safe and responsible production, technology can be the equalizer.

Cloud technology can put every factory anywhere on the planet on the grid. This means the retail executive can gain real-time visibility into the cutting, dying, sewing, packing and shipping processes happening at their factory across the ocean. This knowledge can prevent disasters like the Rana Plaza building collapse from happening. For trading partners in Bangladesh, this exposes their workplaces and holds them to higher standards. Cloud can allow everyone visibility into the working conditions taking place across the supply chain and nobody is kept in the dark.

Bryan Nella is Director of Corporate Communications at GT Nexus