20 management lessons from 11 years in Retail...

A Retail CEO once asked me, "How can bright young people like you with top pedigree choose to work in Retail, an industry that demands a lot of (time and energy) investment for the value you create?". He signaled that there was no bang for the buck in this industry. As an ex-management consultant, I have worked in many industries and agree with this observation. Why then do so many people choose to work in this industry? I am passionate about Retail as I believe that retail, done right, can make the world a better place and provide livelihoods for millions of people while offering me a unique opportunity to learn consumer behavior.

Retail is a dynamic and challenging industry that accounts for 5-15% of a country's GDP . In this article, I share 15 lessons that I have learned from 10 years of working in retail across 4 pillars of management - People, Business, Technology & Operations. These lessons are not only applicable to retail, but also to any other industry or profession that involves interacting with people, solving problems, and creating value.

People: Absolute good or bad leaders are rare, it is their circumstances and opportunities that make them look good or bad!

#1. Not all dictators are bad, nor are empowering leaders always good => In war-time environment, when the chips are down, you need a dictator who is not shy to take hard calls and drive people hard. I have been in a situation where a well-meaning business leader, known for his exemplary people skills, let down the business by not seeing through the fraud that his team had been engaging in due to lack of audit and controls. On the contrary, I have also been in a situation where a business had 6 months to turnaround or fold and a strong leader came up with a top-down directive approach and drove rigorous execution to orchestrate a dramatic turnaround in the business.

#2. Firing people is an essential part of being a people leader and it is healthy for business as long as you do justice to the people impacted with respect and sensitivity. If you have never had to fire people, you were likely not aggressive enough in taking risks. Most people I know who got fired landed much more fulfilling opportunities and happier in their new roles. There are three contexts for firing: (i) Redundancies created by excessive hiring in expectation of high growth - in such cases, you should be explicit that this decision had nothing to do with them and offer your best support with out-placement service or other benefits, (ii) Potential related - in select cases, people are unable to adapt or grow with the evolution of their role. It is your duty, rather obligation, to be honest with the person and let them know that they would do better to find another opportunity where they can continue to grow, (iii) Performance related - in every org, there is a small minority that does not deliver, keeps complaining and spreads negativity in the org. In such cases, you need to take swift action and let them go lest you let the rest of your org down. Irrespective of the context, you need to treat people with respect and pay them a dignified severance to account for their service.

#3. Do not hold on to your best talent. When they become really good at what they do, you need to encourage your team members to find more complex opportunities. They will find their way back to you when you have the right opportunity to challenge them.

#4. As the company growth slows down, it is good to have a healthy higher attrition at the top to make way for people to grow. As you climb the corporate ladder, promotions become a function of scope and role rather than performance. You might be the best at what you do but if there isn’t sufficient scope to justify elevation to the next level, you cannot get promoted.

#5. Depth fosters quicker vertical growth while Breadth enables you to climb higher albeit slower. Most companies find it easy to acknowledge and reward talent for depth while it is rare to acknowledge and reward talent with breadth across different functions. Hence the prevalent model of growth remains vertical growth by pushing manager up/out vs. seeking horizontal jumps with a perspective to broaden expertise. In the short term, former would grow faster while in the long term, latter would ascend higher peaks in the organization due to their multi-functional exposure and ability to add value to a broader range of issues.

Business: Business troughs separate the winners from the losers. The strength and resilience of leadership is tested in a downturn!

#1. Continuous growth is not always good as it hides inefficiencies. Successive years of growth often leads to over hiring and creates unwieldy cost structure that is suddenly exposed when growth decelerates. At this point, most organizations take the easy route of not investing in future and conserving cash for their mother ship while the successful ones take hard calls to cut the flab and reduce costs in their mother ship while continuing to invest in their future bets. Strong resilient organizations are born from downturns as they provide a good opportunity to assess where you are truly generating value.

#2. The longer you stay in a business relationship, the lower your satisfaction as you tend to take the good things (learning, growth) for granted while you start to observe the negatives (expectations, constraints) more closely. Higher tenured sellers have lower NPS on marketplaces as they get exposed to operational challenges and continuous evolution of marketplace policies. Higher tenured employees have lower job satisfaction in a specific team as their learning saturates. Hence newness is essential for better satisfaction and higher engagement. A marketplace needs a healthy mix of new sellers and an org needs a healthy mix of new team members.

#3. Consumers start shopping online for the large selection and attractive prices but stay for the convenience. As deliveries get faster, online shopping gets more convenient than visiting stores. Speed is a function of order density in a geography which in turn is a function of scale. An online store would do well to have high market share in specific geographies than spread itself thin across multiple markets with low density. Despite higher online market share in more established markets like US, UK and Germany, online retail growth has been strongest in these markets as the high order density leads to faster speed and better convenience that makes online shopping attractive, increasing the customer wallet share of online shopping. In your business, you need to differentiate the customer retention drivers from the customer acquisition drivers and invest more in retention drivers as you scale.

#4. C-Returns is often cited as the bane of online shopping yet it is the biggest trust builder that cements online shopping as a habit. Online return rates vary from as low as 3% to as high as 70%. This is explained by 3 factors: 1) Price-value perception (higher the perceived gap in price and quality of product, higher the return rate). This is why high-priced and unbranded products have higher return rate, 2) Familiarity with brand (offline retailers tend to have lowest online return rates as customers have tried their products in stores and know what to expect) 3) Consumer behavior – some customers are more inclined to return items than others and interestingly the most engaged, highest value customers also tend to have higher return rate. As a business leader, you should be able to separate the essential banes from non-essential.

#5. There is a fine line between fairness and simplicity. In trying to be fair and avoid cross-subsidization, marketplaces charge very granular fees aligned with their cost structure. To the extent sellers understand this and adapt their operations, this is productive. Beyond a point, sellers won’t be able to understand how fees are being charged and stop adapting their behavior. It is your job to determine where the line is drawn in your business.

Technology: 50% of all code ever written is wasted. It is only in hindsight that you know which 50% was wasted. Be judicious in writing code and when you do, make it work!

#1. A product leader’s judgment on when to have a lovable product vs. viable product is critical. Certain products are like one-way doors where the customer would not give you a second chance and hence it is critical to have a minimum lovable product (MLP) though there are also instances where you have the luxury of a managed roll-out and can test the product with select customers where a minimum viable product (MVP) can often help garner the learnings you need to build the MLP.

#2. Most product organizations keep best in class user experience as the north star though friction in user experience is not always bad. At times, it is critical to create intentional friction to pre-empt bad actors or create a level-playing field for local players. A good product leader recognizes when to introduce friction and a great product leader figures out how to introduce friction that is invisible for good actors while being a hurdle for bad actors.

#3. Optimizing for usability and adoption is as important as the quality of the product itself. Product teams consider user requirements gathering, solution design and building as their core role while assuming that if the product is built well, it will achieve high organic adoption. However good the product is, it is critical to have an adoption plan not just to drive awareness and adoption but also capture user feedback on top adoption barriers to refine the product.

#4. Policies become an effective tool to drive adoption of high-friction products. There are products that benefit the end customer while adding cost / friction for the user. In such cases, traditional awareness and education methods may not be sufficient to drive adoption.

#5. Deprecation of products is difficult yet important especially when maintenance of systems require bandwidth that is not justified by adoption. Product teams are often biased in favor of incremental improvements in existing product vs. rethinking the product when faced with an adoption hurdle. A change of guard is helpful in such situations to facilitate dispassionate decision-making.

Operations: Do this right and you may never worry about competition!

#1. Good companies make the right tradeoffs. Great companies do not accept tradeoffs => When you are pressed against the wall with rising costs due to bloated infrastructure, you could either reduce cost the easy way by scaling back the infrastructure or you could leverage it in ways that enhance the customer experience while reducing another cost. For example when you have excessive warehousing, you could use it to spread your inventory closer to customers thus reducing the last mile cost to compensate for the higher fixed cost and at the same time, improve customer experience through higher speed and convenience. Such operational decisions are tougher to make and requires leadership conviction to execute.

#2. Contrary to popular belief, Operations Excellence enabled by technology is a far more powerful moat than the technology itself as the former requires capital expenditure and a lot of time to build. Retail operations is the backbone that enables availability of right products at the right time to the right customers in the right geography. This becomes a highly complex task when operating with millions of products across diverse categories and geographies.

#3. In an operations-heavy business, Operations strategy should not just reflect Business strategy but also drive business innovation. An example is the emergence of quick commerce in India. 10 min delivery was an operations innovation that enabled a new business model centered around extreme convenience

#4. The flexibility to execute operational pilots without impacting operations efficiency is an underrated competitive advantage - In lieu of this, companies tend to write code and enable the tech before validating whether the idea is relevant to be commercialized. Enabling tech for each and every idea you want to test would not just be expensive but also slow you down and limit room for experimentation.

#5. Variability is the biggest enemy of operations efficiency. However reducing variability often results in lower customer responsiveness. As an operations leader, you need to advise business leadership and advocate for the right line between operations efficiency and customer responsiveness lest business leaders may over index on customer responsiveness.

If you found value in this article, I would request you to re-post this and share with your network as I am sharing these insights and experiences to inspire and help others who are either interested in or working in retail and it would matter a lot to me if you cared enough to share with a wider audience. Thank you!