Strategic and Operational Leadership in Retail: Don’t Forget the Store
The day Amazon announced its acquisition of Whole Foods, I penned my initial reflections on the meaning and magnitude of this watershed event. Since then, the retail apocalypse chorus has chimed in full gale as others have come to accuse that group of being Chicken Little. While the future may vindicate one or the other camp, reality is more likely to unfold somewhere in between. What we can be reasonably certain of is that Jeff Bezos’ remarkable move will change the retail value chain, and more immediately the food retailing segment, as we know it. The move also validates the crucial importance of infusing local physical customer touchpoints in any retail network as a value add in this massive move to a global digital economy.
Guiding strategy and major investment decisions, these are grand yet necessary narratives that guide and transform whole industries. The trouble is that they tend to take the board and c-suite executive’s attention away from the mundane yet persistent operational issues that plague the customer experience. We get enamored with the shiny objects. The key is to be able to juggle both aspects of the business: the visionary and the operational. Although my story is in the grocery industry, it can easily apply to nearly any consumer-facing industry where operational procedures are stuck in legacy systems more suited for an analog world populated with outdated core systems and outmoded processes that predate the smartphone.
A Shopping Experience
Most of you have probably experienced taking care of a toddler with a diaper rash. As you know it’s visibly painful for the toddler and you have to stay on top of applying the zinc oxide paste to give relief and speed the healing. But, somehow between mom and dad you run out of the magic paste and have to rush to the neighborhood grocery store or drugstore to buy a new tube of the medicine. It’s mid-morning on a weekday, so it’s easy to imagine the grocery store visit to be an easy, quick in-and-out for one item. That’s where imagination begins to fail us.
I walked into a major grocery chain and headed directly to the baby aisle. A minute later, I found the right shelf and can see plenty of inventory. Luckily, I located the exact product I’m looking for and discovered that it’s on sale at a 50% discount. Great! This is where the fun ends and agony begins. I begin my walk to the checkout lanes. I scan for a self-checkout option, but none exist. Out of ten checkout lanes, I spot two lanes open which include the “express” lane. Unfortunately, one shopper with a near full cart is already unloading in that lane and the other one is three deep. I get in queue and finally make it to the head of the line five minutes later.
After exchanging pleasantries with the cashier, she rings up the full price of the item. The point of sale terminal did not recognize the 50% off discount marked at the shelf. There were no baggers in sight, so the cashier picked up a handset and requested a price check. Silence. She shouts again into the handset without a response. As more shoppers queue up, she decides to do the price check herself and sprints to the baby aisle. She returns with the price tag in hand and whips out her smartphone to calculate the correct price and taxes. The numbers don’t add up properly and my attempt to clarify the tax calculation just add to the confusion. She decides to get the manager’s override key to adjust the transaction. The manager’s keys are not readily available, so another shout into the handset for a manager override. More minutes pass and no manager is in sight. Somehow she cancels the transaction and rings it up again as a generic grocery item at the correct price but without charging any tax.
The initial pleasantries had become a distant memory – the cashier was unhappy, I was disappointed with the experience, the growing number of customers queued up in the lane waiting to checkout were visibly grumpy. Throughout this entire episode, no attempts to open another register were made. It took me one minute to find the item I needed and nearly 15 minutes for me to give the store my money.
- Give me reasons to come back not ones to stay away
- Make your stores easier to shop for your customers
Systems and Data:
- Fix the discrepancies between point-of-sale systems, inventory, and pricing data
- Eliminate data silos in your IT landscape
- Use data to change the conversations you have with your customers
- Proper and flexible store staffing is a must
- Empower your people with the data and tools they need to make customer-centric decisions
Layout and Processes:
- Rethink the checkout process from A to Z
- Realize that in a self-service store, the customer has done all the work: parked and walked inside the store; collected all the items they want to purchase into a cart or basket; stood in line to give you their money; unloaded their items on the belt; reloaded the bagged items into a cart before finally bringing them to their car
- Make the store easier to scan by your employees – so they can spot bottlenecks and identify opportunities to interact with customers
Moments of Impact:
- Keep your shelves well stocked and with accurate price tags
- The checkout moment, especially in food retailing, is THE store branding moment – the cashier, systems, and operational processes come together to finalize the customer experience by either building it up or breaking it down
- Stop thinking of stores as transaction points – consumers today have near infinite purchase options for the products you’re selling
Create The Future Now
In closing, food retailing is a razor thin margin business. Operational excellence is necessary to ensure profitability. At the same time, the industry, along with all of retail and consumer products, are feeling the business model disruption and the need to undertake a digital transformation journey. So, here’s the rub: you have to execute flawlessly in the stores while you expand your business model to embrace more online commerce and a new way to engage, satisfy, and keep your customer base. It’s not a simple matter of applying new technology to existing processes; it’s much more about the need to reinvent existing processes given the new possibilities that technology affords. It’s a sea change in mindset.
In a high volume business like grocery, what has worked in the past is to continuously tweak existing processes for higher productivity and outputs. While that is fine and good by itself, it doesn’t work in a fast changing market disrupted by the smartphone and all that it represents. The future winners will be those that can shift to a digital core to run the business with highest levels of consistency, predictability, and operational flexibility while simultaneously giving the retailers a growth platform for innovation at the edge. Organizing around the needs of your customers can help redefine the store experience and how to bring new value through integration of online and physical presence.
Consider joining an exclusive group of thought leaders at the upcoming SAP Retail Executive Forum in New York on October 17-18 to learn how to transform your entire customer experience.