Why do customers visit brick-and-mortar stores when it is often easier and cheaper to buy online?
It’s obvious…because consumers want to see and touch the product, experience the brand, interact with people with the hope of solving a problem, or simply to feel better. For brick-and-mortar retailers, this in-store customer experience IS the competitive advantage. So why don’t front-line employees seem to know this? Why don’t they have the urgency and skills to make shopping experiences consistently good? Creating a consistent ‘performance improvement culture’ IS within the reach of most retailers…IF they take the right steps!
From my perspective, answering these questions starts at the top. Progressive retail executives realize it is no longer enough for store employees to simply complete tasks and operate stores. They know they need to get more from their large annual labor investments. They know it is no longer enough if employees only ‘fluff and puff’…they must also interact with customers to positively impact the in-store experience and drive sales. But how?
In fact, many executives wonder ‘is this even possible?’ Store employees often make only $8 to $10 per hour. There is very high annual turnover. There is huge scale …often tens of thousands of employees geographically dispersed across hundreds or thousands of stores. I often get the impression that executives are thinking, “It’s safer and more profitable to cut labor costs rather than to expect more.” I know that in today’s world it CAN’T be one or the other…retailers need to do BOTH at the same time.
I also know it can be done. And it begins with CEO and senior leadership mindshare and direct involvement. You don’t need to do everything at once. You do need to ‘get going’ or it won’t happen. And the answers can be found in a three-step process.
- First, there needs to be a clear vision of what ‘right’ looks like and how to measure it. When a customer enters one of your stores, what should a ‘quality brand experience’ look like? All retail executives know what a well-merchandised store looks like, but I’ve met very few who can tell me what a quality brand interaction looks like, and how their employees are expected to deliver it (while also handling all the required operational tasks). If we, as senior executives, are unclear as to what ‘right’ looks like, how can tens of thousands of employees consistently deliver brand experiences each day? This strategic design phase is critical.
- Second, we have to make it ‘fair’ to effectively hold store employees accountable for delivering brand experiences. Making it ‘fair’ includes providing accurate and appropriate measurement, easy-to-use execution tools, and access to learning that explains what is expected and how to do it. Again, most retailers are very good at providing store teams with the tools they need to meet merchandising standards. I know the same can be done for brand interaction standards.
- Finally, and most importantly, these additional standards need to become part of what is managed on a daily basis at each level of the organization. Store managers need to hold their team members accountable during each shift, every day. District managers need to know how to reward and recognize top performing stores and take timely action to improve performance in underperforming stores. RVPs must have actionable insights into their ‘exceptions stores’ – both good and bad – in order to ‘inspect what they expect’ from their DMs. But none of this will happen consistently over time unless the CEO and other executives commit to making it part of how they operate their store’s organization. And over time, with senior leadership’s guidance, each functional area will better align its contributions to this overall effort.
To illustrate how large retailers can ‘get going’, let’s take a closer look at how two of Yacobian’s clients began their journey.
For one big-box specialty retailer facing significant industry headwinds – including competitive intrusion (Costco, Walmart, Amazon), industry consolidation, and declining customer traffic, improving conversion became a strategic imperative. Recognizing the financial benefit of improved conversion – where each percentage point of improvement drives $150M in additional sales each year – this retailer focused on components of The Yacobian Group’s Blueday system that systematically improves conversion rates. The components included:
- Redefined expectations for store performance, including branded customer interactions
- Net sales goals with individualized conversion targets set on store-by-store basis
- Automated daily tools for improving hourly conversion by department by associate
- Communication and learning tools for every level of the field organization
The initial results have been very strong. In the first year, overall conversion increased by over 200 basis points, adding over $300 million of incremental annual sales. More importantly, this improved conversion trend continues.
Increase Basket Size
Another client – a specialty hard-goods retailer with over 3,600 stores – faced a different set of challenges. With average basket size several dollars below its leading competitors, this client wanted to focus on improving transaction size through stronger attachment rates and a higher mix of premium products. Closing this competitive gap – worth $800M annually – quickly became a strategic priority. Using Blueday tools, this client is now able to evaluate transaction size and product mix for each individual associate (over 50,000 people) and identify actionable improvement opportunities by specific product category. Through targeted coaching on product knowledge and customer interaction behaviors, managers are able to systematically increase basket size in each store through every associate.
A typical situation illustrates this approach. In one store, a manager knew she had a full-time associate, Jimmy, who was adept at selling technically complex, high-performance products. Using the Blueday tools, however, this manager immediately had new insight into something she didn’t know… Jimmy wasn’t selling any premium products. After, a simple coaching conversation where the manager explained the opportunity and discussed the benefits about why customers might prefer the premium products, this problem was solved. The following week, Jimmy went from selling 0% to 50% premium products, adding over $200 in sales. Multiply $200 by the 50 weeks that Jimmy works and 50,000 associates, and we are driving significant upside in a single product category.
Following initial implementation, basket size was up +2%, which translates to over $100M annually in increased sales. Management’s desired culture of heightened accountability for increasing basket size is just beginning to take hold and they are already closing the competitive gap.
In today’s retail environment, empowering store teams to drive sales is essential not just for growth, but for survival. With the proper tools, the stores organization can do much more, and should be expected to do much more, to improve performance. Developing a performance improvement culture is not just a ‘nice to have,’ but is a strategic imperative for the future success of brick-and-mortar.