Financial

The following are four retail technology strategies that I believe will give retailers the biggest benefit and maximum return on their technology investments. Your small retail operation can be just like the Big Box stores when it comes to being efficient and productive.

Point of Sale (POS), Bar Code/UPC Code Scanning 

A POS System is mandatory. A good POS system can track all your sales. It replaces your cash register and allows a multitude of features that will save you time. Bar Code and UPC Code scanning allows you to check products at the point of sale much faster and more accurately than can be done on the keyboard.  

Real Time Inventory Tracking

Inventory is your biggest asset. It generates almost all of your business’ income but also ties up a substantial amount of your cash. Inventory management is the heart and soul of retailing. Real-time inventory tracking tools enables you to know where your products are and how many are there in real-time. With such a tool, an out-of-stock situation will rarely happen at your store.  Moreover, you don’t need to overstock your inventory as you can make reordering decisions based on real-time sales reports across all stores. This tool not only reduces your inventory level but also ultimately increases your customer satisfaction.

Customer Relationship Management (CRM)  

CRM includes individual customer purchase tracking, customer group management, and loyalty/reward programs. Customer purchase tracking helps you to identify your best customers as well as understand their purchase habits, so that you can design certain programs to increase their spending and satisfaction. For those who do not visit your stores often or do not purchase much, you can use a programs such as a reward program to transform these customers into loyal ones. 

Retail Marketing Technology

Retail Marketing Technology involves e- marketing, m-marketing and in-store marketing.You need to use all possible marketing tools to get your customers involved. For example, your POS pops up a reminder to tell your cashier what to promote at the point of purchase. Another example is to download a list of customers who are most likely to buy the item which you want to promote and use e-marketing tools to inform them of this promotion.

During the checkout process, consumers often leave the store with a long paper receipt. It is inconvenient for consumers to store and manage reams of paper from different merchants. Moreover, retailers spend millions of dollars annually on ink and paper receipts, which means this process destroys countless trees every year.

Going Green: Electronic Receipt

Apple and a few other retailers have started to shorten the paper trail by encouraging consumers to have their receipt emailed to them. To take advantage of this green initiative, the cashier offers the customer the option of an electronic receipt. If the customer opts to “go green”, the cashier validates an email address on the payment terminal and the receipt is instantly transmitted to the customer.

This retail technology reduces the use of paper and saves our natural resources. This innovative and go green technology is a win-win innovation for retailers and consumers.

What went wrong in 2009?

In Aberdeen surveys in 2009, 88% of retailers surveyed reported that one of the biggest challenges in 2009 was the high cost of goods sold, and they were forced to cut payroll and other budgeted expenses.

However, these surveys also show that in 2009 the top four negative impact areas were due to these budget cuts.  The top four negative impacts are lower sales, customer service, staffing and inventory. According to the majority of retailers who provided qualitative responses, poor sales and customer service was caused by staffing and training budget cuts as well as marketing budget cuts. Non-optimized inventory was primarily due to untimely decisions. Moreover, 54% of retailers in the Aberdeen surveys clearly indicate that one of their top recession-beater strategies is to cut payroll and marketing expenses instead of realigning marketing, merchandising and consumer management strategies.

What went well in 2009?

For retailers, labor cost represents a large portion of operation cost. Operating at the critical front lines of the operation, a retailer’s employees are a crucial component of the customer’s shopping experience. Optimizing your staffing satisfies your customers and adds value to your ROI (return on investment). However, it requires careful staffing planning/adjustment and effective labor performance management.

Staffing Planning/Adjustment

Are you afraid of losing potential sales because you are understaffed during peak periods? Do you want to avoid being overstaffed?Here is a solution: Based on your sales reports by hour, calculate your labor cost budget and keep staffing levels at optimum levels.

·          Have your sales report by hour on hand.

·          Set your labor cost budget for each hour. Many large chain store managers set their labor cost budget as a percentage of sales.  You can use your industry standard as a reference, for example, 10% of your sales in the hour.

·          Then schedule your employees for each hour based on your hourly labor cost budget. Ultimately, adjust your staffing based on weekly sales reports by hour.

Performance Management

Every employee’s productivity is different. To increase your whole team’s productivity, your labor performance management needs to be effective. The first step for effective labor performance management is accurate labor performance evaluation.  You can calculate every employee’s performance ROI to evaluate his performance.  For a sales clerk, his performance ROI can be calculated by gross margin he contributes over his wage. For a store manager, his performance ROI can be calculated by gross margin at store over his salary. Then, you need to create motivation (e.g. compensation) to retain your best employees and keep their passion for your business.

Experienced retailers know that the hidden benefit of challenging economic times is the opportunity to create new, more-effective ways to compete. The following are five business and technology strategies that are designed both to meet today’s challenges and seize tomorrow’s opportunities. 

• Strategy 1: Integrate Disjointed Business Processes to Improve Business Efficiency

You probably have experienced the frustration of poor or nonexistent communication and coordination at your business. Moreover, lack of visibility across business processes can create many acute problems. To address these inefficiencies, retailers need to look at linking many disjointed business processes—from ordering to sales— integrating all onto one platform.  Integrating business processes ensures a consistent, responsive, and well-coordinated approach to the market.

• Strategy 2: Deploy a Real-Time Inventory Tracking Tool to Reduce Inventory Level

Inventory is your biggest asset. It generates almost all of your business’ income but also ties up a substantial amount of your cash. Inventory management is the heart and soul of retailing. Real-time inventory tracking tools enables you to know where your products are and how many are there in real-time. With such a tool, an out-of-stock situation will rarely happen at your store.  Moreover, you don’t need to overstock your inventory as you can make reordering decisions based on real-time sales reports across all stores. This tool not only reduces your inventory level but also ultimately increases your customer satisfaction.

• Strategy 3: Unlock Customer Data—Understand Your Best Customers and Transform the Others into Loyal Buyers

Retailers are well aware of how crucial understanding customer data is to their success.  Customer purchase reports can help you to identify your best customers as well as understand their purchase habits, so that you can design certain promotions and rewards to increase their spending and satisfaction. For those who do not visit your stores often or do not purchase much, you can use some programs such as a reward program to transform these customers into loyal ones.

• Strategy 4: Bring Technology to Your Marketing

You should use all possible communication tools to get your customers involved. For example, your POS can pop up a reminder to tell your cashier what to promote at the point of purchase. Another example is to download a list of customers who are most likely to buy a certain item and use email marketing to send them a coupon on that item.

• Strategy 5:  Concentrate on Your Core Task and Use a Retail Management System to Handle Other Tasks

It is true that your core task (selling products) generates most of your revenue, and other tasks (e.g. processing transactions, balancing inventory, calculating payroll or processing purchase orders ) do not directly contribute to your ROI (Return on Investment). However, these other tasks are essential if you want to keep your business running.

The question here is, do you want to spend 80% of your time on context tasks and 20% on core tasks, or 80% on core tasks and 20% on context ones?  The answer is clear. The smart strategy is to keep the core task to yourself and to use a retail management system to handle the other tasks.

Given the short-term market uncertainty, growth investments are still going to be difficult to justify. Here are some tips for retailers to drive profitability and cost efficiency:

1. Customer Centric Merchandising:

• The key to driving profitability as well as minimizing cost is to invest in products that would be of most interest to your customers.  Here are the steps for accomplishing this goal: read your customers’ recent buying history, find out what products or what attributes of products are popular, assort your merchandise based on these trends.  Remember, always start with low inventory, and adjust the quantity based on your short-term sales.

2. Dynamic Pricing:

• You should look at your most profitable products. What was the initial retail price? How much was the markdown percentage or discount rate that increased the margin earned? Why not try to use a similar pricing strategy for other products?
• Every customer’s sensitivity to pricing is different. Some people are willing to pay more than others for the same product. If you own stores at different locations, you can set up different pricing for the same products to maximize your profit. 

3. Store Workforce Management:

• Planning your workforce based on your sales by hour or by day is cost effective and efficient. You should schedule more people during the peak time and less in other time. In order to continue labor cost minimization, you should adjust your workforce based on your daily or weekly sales reports.

Careful planning and swift adjustments to changes are very important to your business. In this dynamic economic environment, they can help you sustain and ultimately thrive.

Almost every retailer is migrating from being simply multi-channel to becoming a true cross-channel enterprise. Cross-channel is the strategy of sharing and selling product across different channels through to the same customer. In addition, cross-channel involves a unified customer experience across channel.  

However, retailers face many challenges while maximizing their customers’ cross-channel experience.

The Challenge to Share Information about Inventory Availability. Even in some large chain stores, salesmen can not provide customers the information of product availability at other locations. If a product is out-of-stock at one location, the only thing salesmen can do is to suggest customers go to other locations nearby and check out.     

The Challenge to Make Ordering and Distributing Decisions. If you still use old inventory management tactics while expanding your locations or e-commerce, you will find that balancing inventory for all stores is time consuming, out of stock situations are more likely to happen, making order decisions to maintain efficient inventory levels can be quite complicated.

An efficient solution for these challenges is to integrate inventory management across all stores. Technology is a must in cross-channel inventory management. Do not let your out-of-date IT tools inhibit the growth of your business.  

In recent conversations with some merchants, when we asked what some of their top business priorities were, their answers were “customer retention”, “employee retention” and so on. We almost never heard “inventory management”.

When merchants think about inventory management, they agree that it is a headache when it comes to doing an inventory count; or sometimes, they try their best to avoid out of stock scenarios.  Some merchants think that these are the whole content of inventory management. 

However, do you realize that inventory is your biggest investment? According to Mark Steven, carrying inefficient inventory can eat up 20%-30% of your profits!

If you can reduce this investment and still keep your current sales, or if you can make this investment more efficient, you will be able to save or make more money!

Here are some tips to keep inventory lean and efficient:

Quick response: this helps you keep your inventory lean.  Quick response is to order minimum quantities of inventory in the beginning, and then to replenish the inventory based on your daily sales report.

Concentrate on core product lines: you can not be everything to every customer. Invest in your hot product lines (20/80 rules, 20% of your inventory generates 80% of your sales). Read your sales report to figure out what are your popular products and popular product lines.

Carefully test new product lines: from your sales report, you are not only able to identify your hot products, but are also able to know the attributions of these products. What color is selling? What styles are in demand? Based on these attributions, you can order new products and test the demand for these new products.

At your store, in order to increase customer spending, you can display and sell “Packages”. Selling a “package” means that you sell two or more products together.

For example, in order to motive customers to buy a slow turnover cap with a price of $80, you package a $150 shirt (best seller) with the cap, and sell this package for a lower total price, say of $ 215.

You should not have too many packages at your store at the same time, because it will probably lower your store brand value in customers’ mind. Displaying one or two “packages” will be ideal, and you can sell different “packages” from time to time.

There are several ways to “package” products:  

“Package” hot products with slower moving ones:  we have already mentioned this way above. If you want slow turnover products to move faster, this is a good way to try.  

“Package” frequently bought together items: based on your experience or transaction history, you can pick up frequently bought together items, and form some “packages”. Then, you can display these “packages” at your store.         

“Package” related items: another way is to “package” related items based on your own intuition. For example, you can try to “package” two caps together in order to sell them faster.           

Caution: you should “package” items from the same category or from similar categories. “Packaging” a bottle of coke with a cap does not make much sense!