Retail is a complex and challenging business, posing problems ranging from inventory management to theft prevention. When coupled with falling prices inspired by major retailers, like Amazon, and the rising costs of labor, there are a variety of pitfalls facing modern retail businesses.
With so many ins and outs to consider, now more than ever, effective management plays a critical role in retail success.
In this two-part blog series, we reveal the core principles and techniques you should apply to manage a store successfully.
Streamline In-Store Operations
Whether you know it or not, many of the day-to-day tasks that dominate small retail operations are based on old-school styles and strategies, like counting inventory by hand, creating manual schedules, and entering sales transactions one by one into bookkeeping software. While these methods can be useful, they cost you time that could be invested elsewhere.
Instead of letting cumbersome techniques compromise your productivity, take steps to streamline your operations and make the best use of your time.
- Create to-do and task lists: There are two types of people in the world: those who make lists and those who are continually struggling to keep up with tasks because they don’t. Since the capacity of our working memory is limited, as a manager, to-do lists are your lifeboat. Instead of planning out things to take care of and hoping in vain that you can remember them, make to-do lists your new best friend. The lists you utilize can be as intricate as necessary, documenting all opening, daily, and closing procedures as well as hour-by-hour tasks like organizing shelves and overseeing employees. Your team members can use lists, too; this can help ensure all necessary employee tasks are managed accordingly.
- Utilize automated tools: Automation is a huge benefit for businesses of all kinds, and retail is no exception. Virtually all aspects of the business can be streamlined using automated technology, including inventory management, staff scheduling, sales tracking, and report generation. With the right POS system, it's possible to optimize all of these tasks, putting a full suite of management tools at your fingertips.
- Maintain a store clock: Do you know what you're doing every moment of every day in advance? If not, you should. A store clock is an hour-by-hour schedule that dictates what's happening at your store. For example, at 9 a.m., you may be entering the store, turning on lights, cleaning up, and making sure your store is ready to go. At 10 a.m., maybe you unlock the doors, ensure your employees are in place to assist customers, and then go to the back to work on administrative tasks.
Employ Lean Techniques
In business, the term “lean” refers to the strategies and processes that minimize waste and maximize efficiencies to increase your bottom line. While this terminology is most commonly applied to manufacturing and production applications, many lean principles that can be applied to your retail business.
For example, consider store schedules. If you're like many store owners, you probably have the same number of people working at the same times, every day you're open. Maybe you have a few more people on the schedule on weekends or shopping-heavy holidays, but otherwise, scheduling is relatively routine. Utilizing lean tactics to revamp scheduling, retailers can use data trends provided by their retail management systems to determine exactly when the store is busiest – and when fewer staff members are required for successful operations. Cutting just a few team members from the floor when they're unneeded can result in thousands of dollars in savings each week.
How you employ lean retailing will ultimately depend on how your store currently functions and the pain points you're experiencing, but many retail stores can benefit from:
- Store organization based on the popularity of products.
- A floor plan redesign pairing like items together.
- Updated checkout strategies to minimize time waiting in line and at the register.
- Aisle alignment to maximize the flow of cart traffic.
- Intuitive utilization of the storage room based on store layout.
- Optimization of administrative processes, like accounting and payroll obligations.
Utilize Key Performance Indicators
More commonly known as KPIs, key performance indicators can provide insight into your business you didn't know you needed. These metrics can be an important part of essentially grading your business, indicating what you are doing well and what you aren't. KPIs can relate to financial metrics, like gross sales, or other areas of your business, like inventory turnover.
While KPIs can exist in many capacities, some of the most important stats in a small retail operation include:
- Gross profit margin: Calculated by dividing gross profit by revenue, this figure can tell you more about the actual profit you are making on your sales.
- Customer retention: How many customers come back? By tracking repeat sales, you can learn more about how much your customers like what you have to offer.
- Inventory turnover: Knowing how often you have to turn over your inventory can be an essential part of seeing how your sales trend over time. First, pick a period like 30 days and calculate the cost of goods sold over this period. Then, divide this figure by your average inventory in that period.
- Sales by category: Some product categories may do better than others. Evaluating which types are the most successful can help you learn to prioritize your inventory.
- Sales by square foot: By dividing your sales by the square footage in your store, you can see how efficient your use of space is and the effectiveness of your staff members, particularly in comparison to competitors and over time.
- Average customer spend: If your average customer is only spending $15 with you rather than $150, you may want to consider increasing your efforts to drive sales in current shoppers. This figure can be found by dividing the total sales over a period by the total transactions.
- Year-over-year variances: Are your sales declining year-over-year, or are your profit margins rising? By monitoring statistics from one year to another, you can track growth rates and understand how your business is changing over time.
KPI evaluations aren't just for your reference. Track KPIs on a monthly or weekly basis to monitor trends and issues that otherwise wouldn’t be immediately noticeable. It also helps to share these figures with management and key employees regularly during team meetings.
Retailing today is at an interesting crossroads. As big-box retailers continue to undercut small retailers on price, adopting strong management practices becomes more and more crucial for growing brick-and-mortars.
Read part 2 about four additional practices store managers should adopt to improve business performance.