Store operational efficiency might not be the most exciting phrase in the retail world.
But in 2019, efficient store operations are critical - not only for profitability - but also for a superior customer experience.
This post will help you improve store operational efficiency and identify the biggest challenges your stores are facing on the road to operational excellence.
- Why success in retail can't exist without efficient store operations
- How operational efficiency and omnichannel are linked
- Which obstacles prevent stores from becoming operationally efficient
- Best practices for improving store operations
- How other retailers are doing it
Let's start with the basics. What is store operational efficiency?
Operational efficiency is a state of higher desired outputs while requiring less inputs to get there.
What does this mean for stores?
An operationally efficient retail store has maximized its outputs (which we’ll define as the quality of the customer experience, brand image and sales) while requiring fewer inputs (which we’ll define as people, time and money) to get there.
Why is store operational efficiency critical for success in retail?
It helps retailers:
- Reduce costs. Less money, time and staff resources are needed to achieve better results.
- Increase profits. Studies have linked operationally efficient stores to higher levels of profitability for retailers.
- Demonstrate the ROI of the physical store. Increased rents, higher wages, declining store traffic (a 3% decline every year, according to the British Retail Consortium) have put a lot of pressure on retailers to justify the continuing existence of each store in their network. Simply put, stores must do more with less.
- Make better decisions. Stores are a goldmine of invaluable data that most retailers aren’t aware of. Data from online shopping channels are analyzed extensively to help retailers make the most strategic decisions - why isn’t the same approach applied to stores?
It helps store teams:
- Improve the in-store experience. Efficiency gives store teams more time with customers, providing the human connection that makes stores so special.
- Become more autonomous. Operational efficiency refocuses store teams and store managers on decision making instead of low-value admin tasks.
- Enjoy their job more. Being micromanaged is a death sentence for your happiness as an employee. Store managers of operationally efficient stores refocus their store teams on spending time with customers and developing their skills.
It helps consumers:
- Get their expectations met and actually enjoy shopping. 30% of UK consumers surveyed last year ranked try before you buy as their biggest reason to visit a store. But the very same study found that Generation Z ranked speed as the second biggest benefit of shopping in-store. Speed can’t exist in a store without operational efficiency.
Why is store operational efficiency the key to a true omnichannel experience?
Omnichannel: retail’s fluffiest and most meaningless buzzword or what every retailer should have mastered by now?
What does it actually mean?
- According to Hubspot, “The ability to deliver a seamless and consistent experience across channels, while factoring in the different devices that consumers are using to interact with your business.”
According to a study published by MIT Sloan’s Management Review, omnichannel makes “the distinctions between physical and online vanish, turning the world into a showroom without walls”.
What's the goal of omnichannel shopping?
- To improve the shopping experience so that consumers purchase more. Omnichannel customers spend on average 4% more in-store and 10% more online than other shoppers.
- But at the end of 2017, only 8% of retailers felt confident they'd really mastered omnichannel.
Why are retailers lagging behind?
- The old-school “online vs. offline” mindset that many retailers still have, in which shopping online and in-store are viewed as competitors
- Stores lack the operational efficiency necessary to integrate with omnichannel shopping
Why is operational efficiency necessary for this integration?
- With so many outputs spread over so many channels, every backend operating system has to be efficient or the whole shopping journey collapses. Omnichannel can’t exist without operational efficiency. And if the store is part of omnichannel shopping, it can’t survive without operational efficiency either.
The truth is, stores have a lot to learn from online shopping before they can master operational efficiency.
Retailers with eCommerce platforms are constantly analyzing vast amounts of data to optimize the user experience and make the customer journey as seamless as possible. Every new innovation is correlated to a sales output - or else what would be the point?
But the approach most retailers take to optimizing the customer journey and increasing conversions in-store is a lot like throwing fistfulls of cooked spaghetti at the wall to see what sticks.
That’s why operational efficiency is so desperately needed to fully integrate stores into the omnichannel experience.
And the time to get that done was yesterday.
Why is operational efficiency a challenge for retailers?
- A lack of visibility into store operations. Running your stores efficiently without visibility into what’s going on inside them is virtually impossible.
- A lack of support for stores. This stems from a top-down approach to retail, where head office decides what happens and stores scramble to get it done. The result is a lack of cohesiveness between the different levels of the organisation - and it shows.
- Limitations in evaluating individual store performance. A 1998 study  stresses the difficulty retailers have with measuring store performance. This isn’t a new concept, but one that retailers still struggle with decades later. When a retailer can’t evaluate store performance they can’t spot efficiency problems and can’t help stores get better.
- High employee turnover. Running a retail store in the fastest, most efficient way is no easy feat in an industry with one of the highest turnover rates around. This rate has risen to 81%, according to a 2018 study.
- Manual, time-consuming daily store tasks. These tasks haven’t evolved in decades. Just like that weekly 9AM Monday meeting where no one has anything to say, but no one is brave enough to stop showing up, many store processes exist simply because they’ve always been done that way.
Best practices for improving store operational efficiency
- Change your mindset. Head office exists to support stores, not police them. Changing the way you look at stores will help you spot inefficient tasks.
- Identify inefficient tasks. Ask yourself how each procedure contributes to the in-store experience relative to the time it takes up.
- Automate. Seeing things from the store's perspective will make this easier.
- Measure and monitor store operations. Every store task is a revenue- driving activity and should be continually monitored and optimized.
- Refocus store teams on the customer experience. They'll have more time for customer service, training and development, which is far more engaging than low-value operational tasks.
- Invest in store tech that makes all of the above easier. If something's being done manually, it's definitely not being done properly.
Making these changes will help you better support your stores in their quest to master operational efficiency. And with the right support, stores will achieve a state of operational excellence.
Operational excellence simply means that maximum performance with minimum effort to get there has become the default mode of the store.
Where do I start?
Here are a few of the most inefficient store processes:
- Filling out retail store visit checklists
- Rollout of promotions, campaigns and product launches
- Reporting and resolving maintenance and facilities issues
- Product and inventory management
- Retail store communications
- Health and safety audits
While all these procedures are vital, the way they're done hasn't changed in decades. And that's what needs to change to reach a state of operational excellence.
Get inspired! Here’s how other retailers have done it
See how streamlined communications helped Lacoste perfect in-store brand image and be more reactive as a retailer:
See how efficient dealership audits helped Peugeot kick their customer experience into high gear:
See how operational efficiency supercharged leading French toy retailer King Jouet’s digitization and differentiation strategies:
If increased profits, data-driven decisions, happier employees and an improved customer experience aren't reasons enough to focus on store operational efficiency, consider that the survival of brick and mortar retail depends on its ability to seamlessly integrate with other ways of shopping.
Consumers expect a seamless shopping experience on your website, on Instagram, on Amazon, in your stores and everywhere in between. A seamless shopping experience is one that revolves around them. And if they can't get it they'll move on.
For every retailer who can't master omnichannel, there are thousands of others nailing it every day.
The survival of a retailer's physical store depends on the extent to which stores can put the customer journey first. So why not start today?
The right in-store tech can help your stores achieve operational excellence - watch this 1 minute video to see how!
 Byrnjolfsonn, Hu and Rahman. Competing in the Age of Omnichannel Retailing. MIT Sloan Management Review, May 2013.
 Thomas, Barr, Cron & Slocum. A Process for Evaluating Retail Store Efficiency: A Restricted DEA Approach. International Journal of Research in Marketing, 1998.