As consumers continue to trim spending and shift their shopping to the Internet, two significant retail store trends have emerged. Bigbox retailers are moving to smaller formats to reduce under-utilized space and stay profitable. Also, consumers are treating retail stores as showrooms, testing merchandise before making a purchase. While the testing may lead to an in-store purchase, shoppers increasingly are purchasing items online at lower prices, or turning to their mobile devices to seek a better price elsewhere.
These trends are driven not only by today’s volatile economy, but by the growing influence of tech-savvy consumers known as Generation C. (The “C” stands for connected, content-centric, communicating, computerized, community oriented and always clicking). Generation C — born between 1990 and 2000 — represents a community of digitally connected consumers willing to partner with brands, retailers and other customers to review, produce and consume content and experiences in real time.
Generation C consumers are not the passive promotional recipients of the past, but active participants in the shopping process, heavily invested in online information gathering and sharing. They willingly ― and publicly ― discuss their shopping experiences, both good and bad. They frequently use their mobile devices at all points of the purchase process: searching for products, reading reviews, comparing prices, checking product availability and ultimately making purchases. When retailers are improperly equipped to satisfy tangible consumer needs in the store and at the shelf, they miss opportunities to deliver the kind of value that will be appreciated and shared between Generation C consumers.
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To remain relevant and competitive, retailers must examine their brick-and-mortar operations to ensure they are addressing these new challenges and the opportunity they present to strengthen customer relationships through an enhanced in-store experience. There is tremendous opportunity in many areas of store operations, and JDA recommends the following to help attract shopper attention, grow shopper loyalty and secure more in-store sales:
Inventory Management
Geographic variability,demand, volatility, assortment localization, shopper insights and other variables must be considered in order to maintain and improve customer loyalty by having the right item in the right store at the right time. The trend toward retail locations as showrooms requires retailers to feature the optimal localized assortment range and maintain appropriate stock quantities for each store. To improve inventory management, retailers should consider:
- Adapting inventory policies and stocking strategies to address changing market conditions, business objectives, supply chain constraints, customer segmentation and buying behavior;
- Providing a superior customer experience by ensuring that “available to promise” meets the demand and geographic location of the customer, no matter how or where they ultimately buy the merchandise; and
- Deploying network inventory strategies that optimize stocking policies and maximize the availability merchandise. The goal is to reduce stock-outs and eliminate excess inventory in a forward looking time phased methodology that is combined with guided exceptions and early warning signals to support root cause analysis.
Space Planning
Spurred by changing consumer behavior and multi-channel selling models, retailers are shifting toward reduced store footprints. The decrease in retail floor space increases the need for more targeted inventory management, making space planning an area of opportunity. To successfully tackle this challenge, retailers should employ these tactics:
- Review original architectural drawings that formed the basis for overall layout, flow and category positions. These plans can help an organization rationalize category adjacencies and provide valuable input about new store layout designs and traffic flow;
- Exercise due diligence in the placement of products into logical yet simple to navigate groups or categories such as destination, routine or “workhorse,” convenience and seasonal that enable an optimized in-store experience for the time starved shopper; and
- Perform an in-depth macro space productivity analysis of natural shopping traffic patterns. Combine collaborative insights from manufacturers, suppliers and store staff, all of which play a valuable role in strategic floor planning and product placement.
Assortment Optimization
Balancing product breadth and depth to create successful store-level assortments is key to satisfying and retaining shoppers for maximum sales and profitability. When the retail location is viewed as a showroom, it is critical that consumer-centric assortments are segmented by localized preferences so that a sale is not missed should the customer decide to purchase onsite. For retailers, better assortment management includes:
- Integrating various data including spatial constraints to optimize the category mix in a configurable, reusable process with true space awareness;
- Assessing a category and determining its potential by drilling through hierarchies and analyzing data to drive insights and understanding into how the category performs down to the store shelf; and
- Using scorecards to identify areas in the assortment that highlight opportunities up and down the shopper decision tree.
Workforce Management
Staffing stores with unique and knowledgeable individuals provides a consistent cross channel shopping experience and becomes critical to improving in-store shopper conversion. This is especially true when dealing with the Generation C consumer, who often looks into many informational and social sources before making a final purchase. Becoming a trusted advisor in the store can help keep the sale onsite. Additionally, retailers can do the following to make the retail workforce a competitive differentiator:
- Streamline the labor scheduling process to match budgeted forecasted hours with employee skill sets, legal requirements, availability and preferences;
- Address local and seasonal shopper characteristics by staffing appropriately skilled associates to enhance store productivity and customer service; and
- Standardize employee best practices to increase conversion rates or sales-per-square-foot across departments to maximize the return on special assets in smaller store formats.
To drive more in-store sales, retailers must first understand that the path to purchase has become unlimited. Consumers can make purchases inside a brick-and-mortar store or e-store, and use online retailers such as Amazon or social media sites like Facebook. This places considerable pressure on store operations to connect with and influence their customers on-site to ensure a differentiated shopping experience supported by the right items at the right store at the right time.
Scott Welty is the Global Vice President of Retail Industry Strategy at JDA Software. His responsibilities include strengthening executive level relationships with JDA’s retail customers and key prospects. With widespread experience within the retail industry, Scott has held several leadership roles at JDA Software including vice president of planning, allocation and category management. With a core focus on business process optimization, Scott has helped hundreds of retail companies select the proper solutions to attain increased revenues, profits and efficiencies.
