One commodity retailers never seem to run out of is problems. We’ve seen no shortage of business challenges in recent years, as brick-and-mortar retailers have wrestled with overcapacity, flat same-store sales, Internet incursions, and a tepid economic recovery.
But amidst all the hand-wringing over the future of retail, it’s instructive to look at (and learn from) those who are managing to thrive: truly forward-looking explorers who are, in many ways, migrating from an old world to a new one, and finding better “trade routes” in retail markets that have become increasingly crowded and hypercompetitive. These merchants are leading the way in what I’ve begun to think of as a new “age of discovery” in retail.
Like the explorers of old, today’s smartest retailers aren’t expecting to simply stumble upon better routes to that new world. They are exploiting new and better tools, and new and better ways of navigating. That’s only part of the story. The most insightful industry leaders aren’t jumping at every new technology and trend that promises gold. Being more strategic, they recognize that discovering new opportunities usually requires being able to see their worlds anew, from a fresh perspective. And to do that, these top managers often need to first change the lenses they use to view their businesses. They pay attention to new and different kinds of data, and use the insights that result from this to make better decisions at every level of their organizations, from the CEO to the part-time associate.
No longer focusing obsessively (and exclusively) on product or price, for instance, the savviest among them have begun to look deeply at what I call Customer Engagement—how buyers interact with their brands in their stores. They’re examining metrics such as store visits and drilling down on measures of staff productivity to better engage their customers and improve their customers’ experiences. The results? Better decisions. More transactions. Larger transactions. Profits. Take the Casual Male Retail Group, a $400 million men’s clothing retailer with over 400 stores nationwide. During the recession, like most retailers, CMRG saw a drop in store traffic. In the first half of 2009, in fact, overall foot traffic fell by double digits. Comp sales stayed nearly flat, however. “With fewer buyers coming through the door, we doubled down on improving sales productivity and raising our sales conversion rates,” said COO Dennis Hernreich. “But it’s not like we put one or two fixes in place and that improved store performance across the board. We committed to a process that transformed behavior and outcomes, first in one or two areas, but eventually that process had broad impact and changed how we do business.
“It was really about simplifying at first. Retail operations are often extremely complex. There are just so many details and so many small decisions to get right. You can get lost in it all. In our case, we decided to begin by improving a single key metric—return-on customer visits—and it turned out that improvements in that arena alone had powerful and far-reaching effects on same-store sales.”
Moreover, instead of looking at store performance in a monolithic way, CMRG also began analyzing where and how each associate contributed to each store’s sales. “This changed not only how we hire and train, but how we schedule and reward our employees,” says Hernreich. CMRG now sets individualized sales goals for each associate, and empowered store teams have taken greater responsibility for individual store sales.
Three years after they began prioritizing return-on-visits and incentivizing staff for greater productivity, CMRG is growing again. The company plans to open more than 200 new stores by 2015.
Casual Male isn’t alone in seeing a pay-off by looking at their world—and their data—differently. Advance Auto Parts, a national chain with $6 billion in revenue, is taking its own approach to improving store performance, after examining certain key performance indicators in a new way. Staples, Inc. has embarked on a similar journey. I’ll be sharing insights and highlights from the odysseys of these two industry leaders in future editions of the Robin Report.
But for now, here are some key questions to think about in your own organization:
- What kind of customer experience does my brand promise? Deliver?
- Are high-sales stores always and necessarily my best-performing stores?
- Which stores are making the most of each customer visit?
- Am I positioned for success in each store each day?
The answers are not always obvious, and the corollary questions that follow vary from retailer to retailer. But asking the right questions and knowing what to do with the answers represent the first steps in that journey toward higher store performance and profitability. In our data-drowned industry, it’s worth noting that the real challenge resides not so much in capturing information. There are plenty of tools for that. And, as we know, good data doesn’t necessarily yield good decisions.
The task is really a matter of selecting the right data, interpreting it correctly and then knowing what to do with it to optimize performance at every level in the organization.
“We saw our stores in a completely new light,” noted Hernreich. “But we wondered if, in the individual stores, our staff would actually be able to use those insights to take specific actions. Would they be able to implement changes and then see measurable results?”
“Not only could they do it, they welcomed it,” says Hernreich. “Now we can’t imagine running our business any other way.”
I’ll be taking a closer look, in a series of articles, at how other savvy retailers, like Casual Male, are growing in this flat, hot, and crowded world. Though their business challenges vary, and there’s no one-size-fits-all solution, you’ll discover that these industry survivors and thrivers do hold certain traits in common: a willingness to look at their businesses—their products, customers and employees—from a fresh vantage point, and a willingness to chart a new course, that can be pursued consistently, in each store, each day.