Achieving Excellence in Retail Operations
Like the skilled carpenters who build durable structures through meticulous planning, finely honed tools and careful measurement, top retailers can sharpen their tools to produce superior results with minimal waste.
Determining what retailers are doing well and how they can improve to achieve peak performance is the core of A.T. Kearney's 2010 Achieving Excellence in Retail Operations (AERO) study. The study queried executives at 53 leading companies in the United States in more than a dozen retail categories. Among the key findings:
Customer insights can set the right direction. The vast majority of respondents say that tracking transaction data is important. However, far fewer track customer-behavior metrics, such as how much time shoppers spend in a store and the time between visits to a store (see figure). Loyalty programs offer an untapped opportunity for tracking customer behavior. Of the 60 percent of retailers that have loyalty programs, we found that 40 percent review the data once a year or less.
Inventory and staffing are crucial to store success. Retailers can reduce out-of-stocks by nearly one-third by considering the costs and gross margins of their products, the sales velocity and variability, and by stocking products that customers truly value. Also, winning stores have three things in common: They staff properly, measure employee performance regularly and exhibit solid leadership.
Cost overruns are inevitable, but new approaches can save money. More than three-quarters of retailers have had at least one cost overrun in the past three years in areas of interior decor, fixtures, construction labor or exterior construction. A bottom-up approach to estimating costs and planning projects, and tying results to team-performance metrics can cut costs and avoid remodeling and construction headaches.
The Learning Store is good for testing and fine tuning. A Learning Store concept uses pilots to test new programs before rollout. Representative stores are selected to implement a new program, changes are made and measured for impact, and then lessons are applied to the wider rollout. AERO found that leading retailers test more initiatives than followers—88 percent of leaders test at least half of their initiatives before implementation.
Unfinished Business
Retail leaders understand that their work is never done. They gather all the information they need, select the best tools and constantly test their prototypes. When they implement a program, they do it wisely and strategically, always seeking ways to improve performance. They have what everyone wants—the confidence that comes from experience.
For the complete study findings, see "Measure Twice, Cut Once: Planning, Attention to Detail, and Tested Programs Build Excellence in Retail Operations" at www.atkearney.com or contact
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