The convergence of several retail patterns continues to point toward an increased need for operational labor improvements, from retail stores to distribution centers.
Retail store closings have been making headlines over the last few weeks. Macy’s, Kohl’s, Walmart, and Sears have all announced store closings. Conversely, the trend for distribution centers appears to be growth; in terms of new facilities, facility size increases, and inventory turns. This largely reflects the impact of ecommerce growth.
We also continue to read, and hear from our clients, about Millennial’s desire for experiences in stores and increased service levels. So, while the sales volume may be shifting to online transactions, there is still a demand for enhanced in-store service.
The need to increase the focus on customer service by minimizing time spent on non-service store activities/tasks (stocking, merchandizing, receiving, etc.), becomes tremendously important. Our consultants, however, continue to see high levels of non-service tasking, and inconsistent execution coming at the expense of service across most retailers.
Time spent with customers is crucial to driving conversion and higher units per transaction, and needs to be focused on heavily to maintain the correct payroll percent. This is negatively impacted if store employees are increasingly burdened with inefficient processes, or not well trained on defined best methods.
A reduction in physical store count means that the remaining stores will need to up their game operationally to meet the customer demands. The remaining stores will not receive much payroll breathing room from the closing store cost reductions, and will need to prove their worth and viability on a daily basis by extracting the highest value from the labor they have remaining across the fleet.
We have found that processes in both the distribution centers and the stores can be improved to help ensure that product is delivered efficiently, and in a way that is quickly and easily merchandised at the store level. Minimizing this type of tasking time to reduce overall payroll spend, and to refocus efforts on customer service, is essential.
The trends point to decreased physical store footprints, increased customer service levels, and increased distribution center activity. Operational processes need to be crisp, and labor needs to be balanced optimally to pull this off effectively.
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