Life in the Time of Coronavirus

Life seems to have paused.

Connors Group, like many small businesses across the country, has all but eliminated travel. We are fortunate enough to be able to do much of our client work remotely. But strategic consulting is ultimately at its best when conducted face-to-face. We are sitting in front of our computers, hosting remote calls and meetings, and going about the business of helping our clients, but it is most definitely not the same.

Jeff Peretin, our CEO, and I have been discussing this over the last few days, and we decided that we should put out a blog for our people, our clients and our communities about the impact of the current situation. One thing we both agreed upon was that there were two things we did NOT want to do:

  • First, we did not want to make this a sales pitch or outline all the things we can still do without travelling.
  • Second, we did not want to discuss the (obvious) negative implications to a country whose economy has largely stopped.

We already get too many of those every day. But what did want to do, was offer some examples that show the good in our society and our humanity.

The one thing we can never get enough of is optimism…

I started thinking about the conversations I had with my grandparents about the Great Depression and the sacrifices their generation made during World War II. What always struck me as we had those conversations was the lack of bitterness, they had about everything they had to forgo. If you talk to anyone who is still alive from those times, you tend to hear more about pride, and sentimentality around the good they saw during those periods. They don’t talk about going hungry or the constant fear, worry and stress (although, if pressed, they will tell you that those were ever-present conditions.) Instead, they talk about the people who went out of their way to help those around them. They talk, with a sense of pride, about how they came out as stronger people with a vastly expanded sense of perspective.

As we endure this period, which we must admit is much less horrific than either of the situations our grandparents went through, we should try to engrave in our memories the positives we can see in our predicament…

Crises are never desirable. By their very nature they are dangerous and result from things outside our control, either through accident or lack of foresight. We could argue that the present crisis has an element of both. How we respond to a crisis can, however, yield some positives. As I considered the topic, I realized that crisis drives four things: Inspiration, Innovation, Personal (and Corporate) Growth, and most importantly, Hope.

Inspiration…

People get inspired when they have an opportunity to make a difference. We see examples of the positive sides of humanity in almost every crisis. One of the more interesting things I have seen in the current crisis is the invention of the term “caremongering”. This term was coined in Canada but can be seen everywhere. It refers to people offering help or care to those that need it most. Caremongering can mean obvious contributions such as delivering supplies or meals but is intended to include broader offerings such as running errands, setting up online exercise classes, or cooking and doing chores for others. Groups are making use of social media to broadcast the concept and the ways it can help the community. For a detailed description I refer you to this article in Fox News.

Innovation…

Companies are finding and embracing innovative platforms that might have otherwise taken years to be incorporated. For example, using tools to communicate with their distributed workforces and adapt things like schedules and availabilities in a very fluid situation. Products like WorkJam that offer shift swapping, real-time availability updates and schedule changes are making it possible to keep our essential businesses operational.

 Personal and Corporate Growth…

We are seeing this in a big way in the retail industry right now, specifically in grocery and restaurants. I think it is safe to say that the forced expansion of curbside pick-up and delivery will not be temporary. CNN published a fascinating article here that illustrates how impactful this change could be. This change in consumer preference will force grocers to transform their concept of how they operate. Successful grocers will find a way to make this their “new normal”, and adapt their model appropriately, which will benefit us all.

Hope…

To me, this is illustrated through the massive acts of human kindness we are seeing all over the world. Whether it is a balcony sing-along, a free virtual concert,  or a socially-distanced birthday celebration, we see that people truly care about each other. The acts of humanity during a crisis like this give us all hope that we are going to be just fine coming out the other side, and that if we need help it is literally next door.

I’d like to encourage us to share other examples of inspiration, innovation, growth and hope. We could all use some optimism, and we should take advantage of sharing it when we can. I don’t mean to downplay the seriousness or danger of the current situation. There are established outlets that do that for us on a regular basis. Please leave a comment or respond with any examples you have seen. Who knows, it might even make it into the next version of this blog…

A Deep Dive from Grocery Dive: Grocers race to keep their front lines trained and healthy

Grocery Dive,  a leader in providing in-depth journalism and insight into the most impactful news and trends shaping the grocery industry; interviewed our very own Chris Kelly recently to garner his thoughts on how Grocers are meeting the sudden and increased need for labor, while balancing onboarding challenges with the health and safety of their […]

The Future Of Grocery

Earlier this year, Progressive Grocer released a series of articles focused on discussing the future of the grocery industry.  Gina Acosta’s piece, entitled Workforce 2020: A Sneak Peek at the Future of Labor in the Grocery Industry is a spot-on discussion of the key challenges grocers must overcome to be successful in 2020 and beyond.  Her commentary on the importance of recruitment and training align exactly with our mindset at Connors Group and reflect similar recent blogging done by the Connors Group team.  These two areas are unfortunately often overlooked or deprioritized by many retailers (not just grocers) – yet when retailers get it right, the results can be impressive. 

To build on Gina’s commentary, there are two areas I believe grocers should focus on in 2020 and beyond to ensure a successful workforce management strategy:

1 – Machine Learning & Artificial Intelligence

Yes, I know ML/AI is this year’s latest craze in the retail industry, but unlikely many previous industry fads, ML/AI has real, tangible and immediate value for grocers in their workforce management strategy.  Anyone that has worked in the grocery business will tell you, forecasting sales (and the associated labor plan to support those sales) is one of the most important, yet challenging aspects of the business.  Store Managers, Financial Analysts and Forecasting Gurus across the grocery industry put tremendous effort into predicting store sales each week. 

All this effort (and cost) is put towards this activity for two reasons.  First, accurately predicting grocery sales is tremendously important to a company’s bottom line.  Over-forecast sales and a store will be in the red with excess labor and product wastage (shrink).  Under-forecast sales and risk not having enough product on the shelves and not enough cashiers to get customers out the door.  Neither of those scenarios is a recipe for success.  Second, it is flat out difficult to accurately predict grocery store sales and therefore the process requires a tremendous amount of effort to achieve even just a reasonable and consistent level of accuracy.  Customer shopping patterns change regularly, weekly promotional activity can swing buying patterns and external events such as weather and even sporting events can impact a sales forecast.  

So how does ML/AI help with a grocer’s workforce management strategy?  It takes an activity (sales forecasting) that is extremely important, yet difficult to get right and greatly improves upon it.

 The latest forecasting algorithms that leverage ML/AI are able make sense of those customer buying patterns by continuously improving their parameter logic and accuracy, and by evaluating enormous amounts of data and constantly identifying improvements at the most micro of levels.  Gone are the days of relying on a single forecasting methodology (Holt-Winters for example) for all variables, across all stores.  The result is a sales forecast that is more accurate, but more importantly, labor and inventory plans that are more accurate.

2 – Associate Schedule Flexibility

Gina hit on this in her article, but I want to dig a little deeper.  In the gig-economy world and a workforce that is essentially at full-employment, providing Associates schedule flexibility is becoming an increasingly important competitive advantage for attracting and retaining talent.  Schedule flexibility includes empowering Associates to clearly define (and change) when they want to work, allowing Associates to easily swap shifts with their peers and giving Associates the ability to pick-up shifts at additional store locations.  Some retail executives and industry consultants have come out against this level of Associate flexibility, arguing it risks shifts going unfilled or stores ending up with “sub-optimal” schedules, particularly in small-box retailers, with fewer employees per store. While I can understand their perspective, I disagree with that mindset overall and find the exact opposite to be true for grocers.  Given their massive employee counts and highly variable workloads, Grocers are ideal candidates to enable this level of schedule flexibility with their Associates.

Additionally, as shoppers migrate more to delivery and/or pick-up options the need for shifts to be filled at short notice and at odd hours will increase. Most grocers will struggle to do this within their current paradigm and systems. Allowing schedule flexibility might be the best way to accommodate these evolving trends.

Grocery will never go away. People need to eat. The nature of the grocery experience will, however, need to evolve. Most grocers know that they need to figure out how omni-channel fits into their world over the long term. They know that being lean in their supply chain is not a differentiator, but a competitive necessity. They need to be equally open to thinking differently about their workforce. Grocers no longer compete amongst themselves for talent; they also compete with other retailers, the service industry, and even Uber. Most importantly, they no longer compete for talent on a binary basis, but are trying to attract individual shifts. To win this war for talent, it is critical that grocers are ultra-accurate in forecasting demands and flexible in attracting the talent to fill those shifts. ML/AI and Schedule Flexibility will very quickly become competitive necessities for successful grocers in 2020 and beyond.

New Overtime Eligibility Threshold Warrants Discussion

Overtime is tricky…To prove that an employee is exempt from overtime, companies must prove several thresholds.

In an article released in the Wall Street Journal on December 28 titled “More Workers Eligible for Overtime Pay in 2020”, Sarah Chaney and Eric Morath correctly point out that one of the tests that apply to overtime eligibility is pay. Anyone falling below the federal pay cap is automatically eligible for overtime, no matter what they are doing. As the article points out, the Labor Department just increased that limit by roughly 50%. That may seem exorbitant, but it hasn’t been adjusted since 2004, so it’s a very modest 2-3% annual cost of living increase over that time. The knock-on impact of this is that several states have higher thresholds, which will likely follow suit. At the end of the day, this means that companies need to be aware that millions of workers will now be overtime eligible… But the danger lies in thinking that simply meeting the salary threshold is enough to avoid overtime.

The world changed in 1999. In the landmark case Ramirez v. Yosemite Water Co., the California Supreme Court created a new cottage industry for class actions lawyers by ruling that employees were only exempt from overtime pay if employers could prove that more than 50% of their time was spent performing exempt tasks. While this specific case was pertaining to outside sales people, it was quickly applied to retail and hospitality settings where “managers” often switched frequently between exempt tasks and non-exempt tasks. It was no longer enough to say someone was in a management role, but companies now had to prove it. The lawsuits have been flowing since then, beginning in California but quickly spreading across the nation. It is now critically important that employers know not only how many hours a person is working and how much they are being paid, but also that the nature of those hours is also understood.

The introduction of Obamacare on March 23, 2010 further compounds the importance of knowing how many hours a person is working. The IRS defines a full-time employee as:

For purposes of the employer shared responsibility provisions, a full-time employee is, for a calendar month, an employee employed on average at least 30 hours of service per week, or 130 hours of service per month.

The measurement period for this is at least 3 months but not longer than 12 months. Employees identified as full-time are then “locked in” to full-time status for at least 6 months after testing, or a time period equivalent to the measurement period chosen, whichever is longer. Most companies choose an annual measurement to facilitate administration. It is deceptively easy for someone who is considered part-time to exceed the threshold for full-time eligibility.

So, what should employers do to guard against paying unintended premiums?

  1. Most employers, especially large retailers, have already moved most management positions below store manager to an hourly rate and have proactively made the positions non-exempt. If your company still has positions in stores below the store manager who are considered exempt, it is critical to be vigilant on the number and type of hours they are working.
  2. Diligent scheduling practices are a key preventative measure. This means that employers should be aware of the workload in the stores and ensure that it is allocated appropriately to employees depending on their status (exempt/non-exempt, full-time/part-time). Best-in-class practices also provide a buffer against the thresholds. For instance, if the exempt threshold is 50% of hours performing exempt duties, schedule 75%. If the threshold for part-time is 30 hours, schedule 24. In the real-world things go wrong, and scheduling with a buffer allows managers the flexibility to respond without worrying about unintentionally exceeding limits. The use of an automated scheduling tool like Kronos or Reflexis can help facilitate this chore. As these systems become more sophisticated and integrate AI and machine learning principles, the task becomes even easier, but they do not replace the need for accurate inputs and deliberate decision-making.
  3. Regular reporting on variances and outliers is vital. Make no mistake, sometimes overtime is the best option. However, regular use of overtime may indicate an underlying condition. If a location, like a store, is regularly using overtime, it is likely that the store manager is working more than 40 hours and is likely “chipping in” with non-exempt tasks. This can quickly add up to exceed the 50% threshold. Similarly, monitoring the number of hours worked by part-time employees is important, especially in highly seasonal or variable environments. Moving a part-time retail employee to a 40 hours schedule during the holiday crush is often the best answer for the employer, the employee and the customer. However, it is important that post-holiday the hours revert so that the average during the measurement period is below the 30 hours threshold.
  4. An engineered labor model can be the foundation for good decisions. Detailed understanding of the nature of the work required facilitates good scheduling and reporting. It is important that companies balance the level of detail engineered into the model with the maintenance and applicability of that detail. To borrow an adage, “80% accuracy with 100% applicability trumps 95% accuracy with only 90% applicability.” Engineering a labor model with the proper balance of detail, application, communication and training can help employers ensure that they do not inadvertently expose themselves to legal risk.

Overtime is a complicated subject that goes well beyond the increasing salary threshold. There are armies of class action law firms who would love nothing more than to find a large employer who does not have tools and systems in place to apply overtime eligibility rules. The penalty for not accurately applying full-time status is $2500 per employee. For large employers, this can quickly push into the millions. The issues are complex and require sophisticated solutions. It is highly recommended that large employers consult experts in order to avoid risk.

Creating Business Impact Through Technology Enabled Innovation

Retailers are facing ever-increasing pressure to improve performance against a backdrop of YOY traffic declines, increasing competition and increasing wages. Specifically, we are seeing 5 areas where the burden is the highest:

  1. Increasing yields from each customer visit is critical.
    •  This includes increasing conversion, adding items or services to each in-store or on-line transaction, or driving a customer to a premium offering.
  2. Exceeding customer experience expectations.
    • While sales and gross margin dollars are the end goal, measuring and continually improving “Net Promoter” and “Likelihood to Recommend” scores is critical. Have you noticed the recent increase in survey activities on nearly every in-store or on-line interaction in your life as a consumer?
  3. Improving productivity on each payroll hour invested.
    •  Most retailers allocate very specific amounts of payroll for each store task that needs to be completed in a time period based on how long they think it takes. If that allocation isn’t adequate, or if the store teams don’t use proper methods, the work takes longer pulling from the payroll allocated for customer service. Have you wondered why you can’t find someone to help you in some stores?
  4. Effectively measuring and driving execution to the plan at retail.
    • As mentioned above, if stores can’t (hiring, training, equipment, conditions) or won’t (supervision) execute the plan, customer experience and associate experience will suffer.
  5. Building associate engagement in a challenging labor market.
    • Many new technologies in retail today are associate facing to enable individuals to manage their relationship with their employer (or employers). By providing tools to associates to allow them to manage their availability, swap shifts, manage benefits, etc., retailers can attract or retain the associates they need.

The reality is that in recent years, countless technical solutions have emerged to help. Whether mobile tools, point solutions, enterprise platforms, and/or data services, there seems to be a service or technology offering reprieve from the stressors of these demands.

And although many of these solutions hold great promise, we’ve been finding that too many retailers inadequately test or ineffectively deploy technologies and they fall short of potential and expectations. At that point, the retailer often becomes frustrated and gives up. This challenge is compounded by the rate of updates, versions and enhancements introduced by providers and vendors every year as they respond to market conditions.

Even though it’s difficult to take the time to ramp up on the knowledge and/or realize the full potential of these new solutions, we’ve suggested to our clients that it is imperative to include stakeholders from across the organization, including Operations, Field, IT and Product Teams, Finance, HR…as well as individuals from all aspects of the field and stores. And, depending on the situation, we have seen situations where changes in organizational structure, communication, KPIs, and even compensation structure were required to drive meaningful business impact.

Aligning these stakeholders on philosophy and creating the environment to support a proof of concept, let alone a meaningful test, pilot or successful rollout, requires steady focus from leadership, investment and a very deliberate multi-phase process.

Following this deliberate process can pay off, however. Given the new competitive environment between retail and eCommerce, projected wage rate increases in coming years, and the impact delighting customers has on your business, it’s worth the effort. Finding and effectively deploying tools and technology-enabled processes that can help with the challenges outlined above can have a direct impact on your organization’s ability to unlock payroll hours and focus them on customer service.

To prove the point, we see again and again that providing meaningful service to customers typically increases conversion by 2X to 5X, depending on the business segment, while it can ALSO impact units per transaction. The definition of service, of course, varies from segment to segment, but we always see a significant impact when our clients focus and get it right.

The sky’s the limit for retailers embracing new technologies and leveraging technologies as enablers to drive focus on what “moves the needle” in retail today.

Invest in your Supervisors if you want true Employee Engagement

Our clients frequently approach us for guidance on how to address the current challenges of the qualified labor shortage.

This has been a reoccurring problem throughout the country; companies are struggling to retain current staff and compete for new employees…and this problem is especially exasperating in peak season. 

As a result, we are seeing many companies invest millions of dollars in programs and technology to address this challenge.

For example:

  • Labor Management Programs are being implemented to recognize achievement   and to reward top performers. They are also being used to proactively coach and support others to achieve success in a positive environment. 
  • Both monetary and non-monetary incentive plans are being employed to provide added motivation above hourly base wages.
  • Workforce Management Systems are being implemented to optimize shift schedules and provide flexibility for employees.
  • Facility enhancements and perks, such as gyms, high-end cafeterias and break rooms with team and culture building games like cornhole and ping-pong aim to create a better work environment.
  • Employee engagement programs and digital workplace apps that specialize in employee communication, open shift marketplaces, shift swapping and gamified reward programs. 

While these initiatives help drive employee engagement, a major factor that is  often forgotten is the inclusion and investment in the front-line supervisors…These are the men and women that have the most one-on-one interaction with hourly associates and can single handedly either create a positive or negative work environment.

Everyone has heard of the phrase, people don’t quit a job, they quit a boss.  The big question is…What tools, training and investments are being made in Supervisors to become better leaders and coaches that will in turn foster a positive work environment?    

Front line supervisors are truly caught between a rock and a hard place.  On the employee side, they are asked to manage and motivate a highly diverse workforce in the most competitive job market of our lifetime.  On the company side, they are pushed to achieve the ever-increasing productivity and service levels expectations of the digital economy.

For example, we’re asking Supervisors to:

  • Understand technology platforms, warehouse control systems, troubleshoot automation, reduce downtime and increase overall utilization. 
  • Identify lean concepts, waste in the system and drive process improvements. 
  • Analyze labor management reports, business intelligent analytics and identify trends in performance and utilization data to root cause the issue.  
  • Become coaches and motivators and drive performance excellence. 
  • Have tough conversations with their associates about performance and show empathy for personal problems that show up at work. 
  • Take complete ownership of their department and stay within their budget.
  • And moreover, whatever happens, don’t miss a cutoff time or shipment! 

In short, we’re asking Supervisors to do everything! 

Many times, they have not had the type of training to be successful. Many companies don’t even have the right span of control (i.e.  number of supervisors to hourly associates) and they are stretched so thin that they can’t possibly be effective. And finally, Supervisors wage rates and compensation packages are often misaligned for the skills and job requirements they are being asked to complete, which drives turnover at a position where companies can least afford it. 

 Conversations around employee engagement are still very important and should always be top-of-mind; especially in this highly competitive job market. But perhaps it’s time to consider starting the conversation on leader engagement for the front-line Supervisors.

Labor Budgeting and Labor Standards

I recently had a client whose procurement team requested that we decrease our travel cost estimate because it exceeded their percentage to services target.  This was a challenge because the project required a great deal of travel to their remote sites.  Since we had little control over travel costs, the natural question was to ask which sites were they willing to cut from the travel list. 

This made me think of a similar correlation…

Many retailers will reduce labor when sales are lower than expected. This will help maintain a % target, but it will come at a cost. If the labor model is correct, the work is still there; so, what tasks are the associates not going to do because the labor was reduced?  From experience, most of the time it’s customer service. Associates will always do the tasking work that is required of them, but the soft stuff – the less tangible service, is going to drop.

Finance isn’t going to migrate away from % of sales budgeting any time soon. However, with a labor standards-based model in place, the improvement in operations will help reduce the negative impacts of budget decreases. 

To that end, we typically see our clients experience three common challenges:

  1. Operational inefficiencies leading to wasteful labor hours
  2. Inconsistent processes from store to store which impacts labor required
  3. Imbalance in labor hours across stores (some too many, others too few)

All these problems are addressed when an organization builds a labor standards-based model.  Once adopted, the impacts from budget constraints are typically minimized.  Additionally, the new labor model provides insights into what tasks can be postponed or require modification to accommodate the constraints from the finance team.

NRF 2020 – “Store Manager Walk”

I’ve been told I walk too fast. I learned this trait running multiple stores over the course of my life. My friends who’ve worked in the trenches of retail call it the “Store Manager Walk”. I walk fast because in a store I had a job to do that required me to be present quickly. I could be helping a customer, cleaning a mess or listening to a teammates concerns. All of it required speed and presence in that moment.

This week at NRF I found myself walking faster than most. As I walked to and from the conference I would weave in and out between people to get where I needed. Once in the conference it was much of the same. It was a steady reminder of those store manager days.

In the world of retail speed is everything. Speed to market, speed to shelf, speedy checkouts. This world is moving at such a fast pace. Even methods of planning and analysis need to be done quickly. 

At NRF I counted more than 900 vendors all promising they can help retailers find that speed to win in the market. It is fun to see all the innovation and capabilities coming.

I saw virtual reality devices to train associates and help with customer experience, even better holograms. They had wearables to free your associates hands to work while they receive automated communication through a headset or wristband, Artificial intelligence to help guide or even make decisions for the store. There were cameras galore showing how they monitor and gather data. Robots in every aisle automating processes once done by human hands.

It’s always a really cool show. At times you wonder if some of these things will ever become mainstream or a differentiator in business. 

It’s difficult to know who will even be here in the coming years as some markets seem so saturated. I had a fun time asking vendors how their product is better than the 32 other vendors in their category. 

I remember reading a Harvard Business article comparing two vendors claiming one had more staying power. Where is that vendor today, not there but the other one remains.

To me the ones that shined were the ones that know that “Store Manager Walk”. They understand the trenches of retail and what it takes to get work done. They know what stores need in order to make their lives and business better. Unfortunately as I weaved through slowly moving vendors and watched tons of demos many didn’t illustrate their knowledge of stores and with it maybe the possibility of selling their products to them.

It is a crazy space with lots of promise. I love being in retail and helping clients figure out which of these products have the ability to make a difference and their business better.

Focal Systems and Connors Group Announce Partnership to Transform Retail Operations

We’ve all been there – you head to the grocery store to pick-up a couple of items and that one item you REALLY wanted isn’t on the shelf.  In the list of frustrations that pain grocery shoppers the most, out-of-stock items is always at the very top.  For grocery retailers, they feel this pain nearly as much as consumers do.  Recent studies show that grocery on-shelf product availability continues to hover in the low 90%’s.  This represents a multi-billion dollar opportunity to the entire grocery industry – the retailers, distributors and manufacturers would all benefit greatly by improving on-shelf product availability.  Even grocers with best-in-class supply chains, workforce scheduling practices, employee training and inventory management systems find themselves battling against on-shelf availability.  Despite all of this technical and analytical horsepower, most grocers can’t crack the on-shelf availability code and the reason for that is simple – grocers don’t know what is actually sitting on their shelves in real-time.  And it is for that reason that we at Connors Group are partnering with Focal Systems and leveraging their focalOS technology to help our grocery customers significantly improve on-shelf availability. 

Read the Press Release here: https://www.businesswire.com/news/home/20200112005042/en/

Conversion – The KPI for the New Retail World

The traditional retail performance metric of comp store sales (year over year results for stores open at least one year) may no longer be the best metric to measure store performance. Customers increasingly shop across channels and embrace online shopping. Store closings compress sales into a smaller population of stores. “Comp sales” is, at best, irrelevant and, at worst, completely misleading. It is time to consider a different metric to measure store performance.

For example,

A Store Manager and team may have limited impact on how many potential customers walk through their doors on a given day, but they certainly have tremendous impact on the shopping experience. Ultimately this experience should convert those shoppers into buyers. (Refer to the articles by my colleague Andrew Taylor here for more detail on the “New Reality” for retail.) To maintain performance when store traffic is down, conversion must increase!

Even in 2019, many large-scale retailers don’t consistently track conversion. And if they do, many don’t build performance metrics and strategies for improvement around the findings. I’ve worked with many retailers who say “oh yes, we know what our traffic is…” only to discover they are using transactions and equating that to traffic. Transactions tell the actual number of customers who made a purchase, while traffic presents the total opportunity for converting a shopper into a buyer. Assuming that conversion is irrelevant because you are a “destination shop” is also dangerous. Even a destination shop can “walk” traffic without the right disciplines in place to deliver on the customer experience.

To calculate conversion, you must first capture traffic, and this requires devices. There are many traffic capturing device options in the market; but for the purpose of this discussion we will not discuss the pros of cons of each, just that devices are required for determining traffic. Once you have traffic counts, the conversion formula is simple:

Once the baseline conversion rate has been calculated, it is easy to derive the potential sales lift that can be realized by an increase in the conversion rate. For large-scale retailers, even a 1 percentage point increase can translate into hundreds of millions of dollars of top-line impact.

Conversion Levers

To achieve even a modest sales lift, understanding the levers that impact conversion is imperative. The levers you pull should revolve around the customer value proposition for your stores. Wal-Mart has a very different value prop than Nordstrom, but both should be concerned with converting traffic into sales.Four broad levers that influence turning a shopper into a buyer are:

  1. Maximize Product Availability
    1. Is the product the customer wants to purchase available in the store?

Depending on the type of retailer, this means even down to the size and color level. When an item is not available, the chance of converting that shopper into a buyer significantly decreases.  In addition to a lost sale, the customer has also had a negative shopping experience. Simply having the product in the store is not enough. The product must be available to the customer. Having twenty of a SKU in the backroom doesn’t matter if the shelf is empty. In-store disciplines and processes should ensure that the number of “perceived out-of-stocks” (POOS) are minimized. Typically, for most retailers, a 3-4% improvement in POOS will drive a 1% sales lift.

  • “Save the Sale”
    • Offer alternative fulfillment options. If the item a customer wants is not available in the store, what options does a sales associate have?

Best practices would drive a series of actions to execute when this occurs. Typically, the first may be to offer an in-store alternative. Do you have the same item in a different color? Is there a similar item you can show to the customer? The goal is the save the sale by selling what is available.

Best-in-class retailers offer the option to fulfill through omni-channel and have it delivered to the customer’s home, sometimes even same-day!

The final step in the “save the sale” process is to offer to find the item in another store. Best practice is for your sales associate to have inventory visibility to see what store(s) have the item and then offer options that best suit the needs of the customer. They could go to another store and purchase the item, or another store could send the item to your store or another store could ship the item directly to the customer’s home.

Most retailers have processes like the ones mentioned above, but normally lack visibility to how often those options are being offered to their customers. Failing to measure the delta in conversion when these actions do and do not occur risks failing to drive behaviors that will ultimately delight the customer and save the sale.

  • Drive Customer Engagement
    • If your retail model is built on differentiating your brand based on service, it is paramount that your sales team effectively engage as many customers as possible.

Many retailers do not track and know how often their customers receive service experience. The difference in conversion when this occurs is significant compared to when it does not. Even a behavior as simple as greeting a customer has proven to have an impact on conversion, yet when measured most retailers are surprised by how many customers are not even being greeted.

Depending on the type of retailer, studies have shown a dramatic increase in conversion when your sales associates can get a customer to interact with the product. This can be as simple as getting the customer into a fitting room or to try on a pair of shoes. Why do we think Costco has so many sampling stations? In our experience, this is a behavior that is best achieved organically by first engaging with the customer. Once again, how are you measuring how often this occurs?

  • Enable Scheduling Effectiveness
    • To enable the store to execute on the behaviors described above you must create effective schedules.
  • The goal of scheduling is to get the right employee scheduled in the right place at the right time. Best practice is to leverage technology, along with a great process, to create a schedule based on analytics that matches labor to workload in the store. If your store is under-staffed during peak selling days or peak times of the day, conversion will be negatively impacted.  In addition to poor conversion, you will also be providing a sub-optimal shopping experience. Conversely, this often leads to over-staffing during slower periods of the week thus bleeding payroll.

A final note of caution is that focusing singularly on conversion can have unintended consequences as well. Conversion is that act of turning a shopper into a buyer. Stores must also pay attention to what the customer buys, not just whether they buy. Cross-selling and upselling are critical to making sure the customer gets the solution they need, not just what they ask for. Again, this could range anywhere from getting signage and pricing right, to having fully trained specialists available for the customer. Conversion is necessary, but not enough to win the retail game in the new reality.

In summary…

To compete and win in the new retail era, new strategies must be developed and executed.

These strategies need to include:

  1. Track conversion and use as a key performance management metric
  2. Identify the levers that drive conversion
  3. Quantify your baseline execution of these levers and their impacts on conversion
  4. Design and implement a plan to improve metrics that impact conversion

All the above will ultimately result in improving the success rate of converting your shoppers into satisfied buyer, but ultimately an effective performance management program is crucial to drive sustainable results. More on that in a later blog…