Technology

Are PEOPLE Going To Be Replaced By ROBOTS?

The Robin Report - Yacobian GroupI was asked to sit on a panel in May for The Robin Report and Fashion Group International to comment on whether robots will replace sales associates in “Our Brave New Hi-Tech, Low Touch World”…needless to say, it has been on my mind. Robots? How can a robot replace the human element, the interaction – the energy OF people and BETWEEN people… that feeling we all so desire when we go out to stores? Apple, Starbucks, Nordstrom… they always deliver. So why don’t more retailers do this? Why ARE some retailers actually replacing store staffs with kiosks and self-check-out devices? Why don’t more retail executives understand “people economics?” Can’t they see that robots are driving customers away from stores? They must not have adequate facts.

In brick-and-mortar retail, the single most valuable element, from the customer’s perspective, is the HUMAN INTERACTION. And the store team IS the force that delivers that energy. The people in the stores are the representatives of the brand, and they can either deliver a positive, or not so positive, experience during a visit. Consistently bad experiences in stores drive more customers to the web away from brick-and-mortar. Think about the places you enjoy shopping and of the people who work there: Are they efficient? Are they knowledgeable? Do they make you feel good to be there? It’s these people who are a reflection of the brand and of the leader’s priorities. This is abundantly clear when we think of Nordstrom. Their leaders value people – people as in both their customers AND their employees. They always seem to have the right number of sales associates on the floor, there is always a manager present to oversee the experience. The teams are coordinated and each individual is skilled at interacting and knowledgeable about the product. Apple is the same. In every store I visit they have the right number of staff aligned to the peaks of the customer traffic patterns so that the customer experience is consistently high. The staff is enthusiastic to help and solution-oriented in their expertise. It goes without saying that both brands are high performers in their categories, that their employees are hugely loyal, and that customer satisfaction is through the roof.

For most other retailers, the current store model is under delivering — customer traffic is declining, and the prospect for comp-store-growth is bleak. So why aren’t more retailers seeing this and rethinking their “people model?” Are the leaders up at night thinking about how they can enable store talent to deliver a new service model? Are they questioning their decades of embedded beliefs and pursuing new methods of operating stores? Actually, some are. Advance Auto Parts is seeing their huge workforce in a whole new light through an entirely differently lens. As a result of implementing new metrics embedded in an enterprise-wide “Big Data Platform,” 50,000 store employees (who are located in 3,600 stores, by the way) can see how well they performed yesterday and more importantly each person can see ‘why.’ The data tells each of them in the most granular way what they did well and where they have opportunity to improve. Each individual feels empowered to actively participate in the primary brand strategy to deliver the Brand Promise — “Service Is Our Best Part.” In the past, the organization was untenable to manage huge amounts of granular data and then organize that data into a framework that made it usable and furthermore made it actionable by store employees. Today this in now possible; even for a minimum-wage part-timer. It should feel empowering and exciting for retail leaders to be at the precipice of this new opportunity. For additional examples on how “big data” is powering the new world of retail, see Deloitte’s recent study: The Next Evolution: Store 3.0. The study makes a compelling case that retailers can gain a competitive advantage by building smart and knowledgeable store teams.

But this is not an easy transition. While our industry has always known it needs people to run stores, over the past 20 years the “people element” has dramatically shifted and very few retailers make it a core centerpiece of their strategy. Why? I think it’s because staff and labor hours are a big line item and one that is perceived as expendable … the (mistaken) belief that “if we cut labor it won’t impact sales.” With this thinking, labor hours become a cost to be minimized. This is one of those retail beliefs that with granular data you realize it is untrue. Staff productivity is a direct contributor to store productivity. Today most retail leaders do not have the facts around their current labor model and how much it is actually costing them in terms of missed sales. M.I.T. professor Zaynep Ton provided a powerful argument in “The Hidden Risk in Cutting Retail Payroll,” for increasing payroll investments to combat declining same store sales.

With big data, we have the ability see every store individually and see it for every day, down to the hour of the day. Yet millions of dollars are missed every single day because no one is looking. I call this the BIG loss prevention issue. Things are changing though, and some progressive brands are testing new ways to uncover this opportunity and are beginning the journey of cultural change to move their organizations from a strictly product/operational focus to more of a customer-centric focus. Staples is one of them. They have recently adopted a new metric called “Return On Visit” and have deployed it through a new platform to every level of their large organization – an $8B US retail channel operating 1,600 stores and managing 40,000 associates. The US Retail President, Demos Parnaros, calls “ROV” the single unifying metric to focus everyone on the customer in our stores, helping each of us deliver more value while customers are there. He says “it is the most powerful initiative I have seen in a very long time”.

So what is this new concept — “Big Data Meets People” – redefining people as customers AND employees? If we knew more specific facts about both our customers (why are they buying and not buying) and our employees (why are they are more or less productive) we would make better decisions about how we invest in them; what we should expect for returns on them; and how we can forecast our business to be more predictable. Using new granular metrics to change the behaviors in stores, and throughout the entire organization, is an exciting new horizon and one that retailers should investigate as they think about their options to engage customers and grow their businesses.

What does my term of “People Economics” mean for retail? If a store manager is able to grow her store’s sales to twice the revenue of a similar store, she is providing a huge ROI for the retailer. Same is true for salespeople. If one sales associate is producing at $200 sales per hour and a similarly staffed associate is producing $100 sales per hour, what are they doing differently? How much more value is the higher performer generating? People Economics. If we could replicate the action from the first associate and duplicate the result in the second associate, all else being equal, we would want to do that, right? If we could make this scalable and sustainable across the entire retail organization, we’d have a huge, exciting new growth engine.

Technology is not going to replace people in stores. It IS going to make ‘people’ more valuable and transform ‘people’ from being seen as a ‘cost to be minimized’ into the biggest asset brick-and-mortar retail has to grow their top line and the bottom line. The technology that is about to become available in the marketplace will transform how retail leaders see the” people side” of retail – both their store employees and the consumer visiting their stores.

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