The Retail Afterparty
The sun has risen, the birds are chirping, and the house is a mess. The afterparty is nearly over.
It’s been a few years since I’ve been to an afterparty, but what comes after is a commercial reality facing many retailers.
Earlier this week, Australian department store chain David Jones announced they were getting in front of this new reality by overhauling their store operations and redeploying 100 staff (roughly 3 team members per store) as technology presented opportunities to streamline operations and replace manual tasks that weren’t focused on selling or service.
Let's assume “the technology” costs at most 25-33% of those 100 salaries, and doesn’t require superannuation (i.e. 401k), payroll taxes, eight weeks of annual leave, sick leave, and works 24x7. Said another way: a no-brainer.
Employee re-deployment or separation is not trivial; it’s a difficult and painful experience for those involved, but today's risk of not tackling inefficiencies - which (IMO) have never been greater (relative to current technological capability)- will be a far more painful experience. Both of these things can be true at the same time.
Retail is under pressure from all sides. From organized retail crime targeting all segments of the supply chain to consumers emergency tapping 401ks, and carrying credit debt that has topped $1 trillion - the sun has risen, the birds are chirping, the house is a mess; the afterparty is concluding.
The afterparty has been a most interesting period where a once-in-a-lifetime pandemic has waned, stimmy cash has dried up, interest rates have skyrocketed, supposed retail emperors have no clothes (which was forecasted in 2019), and a thin degree of reality and expectation for fundamentals has returned, but for many retailers, the house is still the same.
But what does the house look like? I look at a lot of retail houses daily. The symptoms are plenty; the root causes few:
Retailers with a multi-site support structure that could generously accommodate 30 stores when they have 8.
Why so top-heavy? In one such example, the retailer had title debt with their first VP Retail, and continued to pad this individual with more support as stores opened. We've had a generation of multi-site leaders "grow up" without the pre-requisite know-how to effectively drive change through store leaders, and to develop new ones. ??????
Retailers with a .5 - 1.0 ratio for HR & TA employees to Store Managers.
What is so inefficient in their hiring, HR, and/or training processes that require this level headcount? How are the root causes of these store-level fires being extinguished? Combine a lack of ATS, manual onboarding, and ineffective + redundant training efforts that were woeful at creating consistency, but great at creating additional cost and risk.
Retailers that require their in-store teams to:
?? If your head hurts after reading that, it’s okay; it should. How many hours per week per store does this cost? Out of curiosity what is the total cost of ownership (e.g. maintenance/hosting) on the archaic intranet solution? Our company collaborated on the business case; it was Bentley Bentayga bucks. Imagine taking $200k, stacking it neatly in front of the cash wrap, inviting your executive leadership team, board, and shareholders- then ceremoniously lighting it on fire.
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The retailer(s) that runs 20 hours per week of Zoom training intakes for new hires.
What is the aggregate payroll spend? What degree of retention occurs at the conclusion of the 20 hours? How can the attendees revisit the material? How do you assess participation and comprehension? With the material being identical each week for new hires, what value is in the facilitation redundancy? To remove any doubt regarding the answers to these questions, ask the attendees.
These are small potatoes from retailers of all sizes, but as many know, retail is detail and a game of inches. As I killed time enjoying mozzarella sticks and a tequila soda in Chicago’s West Town neighborhood at Roots Pizza for Mr. Havanese’s grooming to conclude, I noticed my receipt indicated an automatic 3% charge for using my credit card. Fair to assume the super-majority of their revenue comes from credit cards. Let’s say they do $5MM a year in credit card revenue- that’s a cool $150k to the bottom line. Play on playa; it pays for their GM! It's a game of inches.
In the past month since we’ve launched Penny, our retail AI sidekick, I’ve enjoyed being an observer as retailers (and myself!) grapple with a novel technology, its use cases, implications, and more.
Hearing operators firsthand voice what it will do for them, and what it will do for their teams has been validating, but the conversation to consider is: “How will this impact our organizational structure? What roles do we need, need to expand or repurpose, and in some cases no longer need?”
Six and a half years ago I wrote about one of my most-hated words: omnichannel. My feelings remain unchanged, but what is important to note about that “era” is the resulting (it did take a while) structural changes to the organization from the implementation of commerce-layer technologies that are ubiquitous today.
Retail Operations took on new meaning. Store Manager took on new meaning.
As *practical* AI infiltrates the retail tech stack, it will also bring about structural changes, but enterprise-wide and deep. Retail Operations, Store Management, Human Resources, L&D, Visual Merchandising, Marketing, IT, and so many more will take on new meaning.
And if it isn't clear already- this is desperately needed. There is still so much inefficiency and waste.
Like anything, some organizations are in a great position to execute on this change and reap the benefits: unlocking incremental profit while also being on the right side of employee enablement and satisfaction.?
However so many will struggle, cycling through numerous people, wasting time, and burning precious resources. And some of course- simply won’t shift, and will continue to experience daily increasing pressure at both ends of the retail value chain, AND in the middle: their precious labor will eventually look elsewhere.
Curious where your org sits, and how to unlock these efficiencies faster? Well, it's my next writing assignment. For now, let's leave the afterparty, get some rest, and hit the gym when we wake.
Ray Riley is the CEO of Progress Retail, a single platform for retail operations and learning. Leveraged by retailers such as Le Creuset and EssilorLuxottica, retailers decrease employee turnover, drive average transaction values, and save hours per week per store by streamlining store operations and elevating training.
Ray, thanks for sharing!
Founder - Kings Of Neon?- As seen on Shark Tank ??
1 年Nice read. It certainly is going to be an interesting 24 months with AI, speed to react will be imperative.