Retail: then and now
Back when tigers used to smoke, managing a retail store was relatively much simpler than what it is today. The inventory used to be limited. There were fewer brands. The markets were smaller and geographically compact. Customers got what they wanted within the city limits. Demand was as predictable as the rising of the sun. The channels of distribution were limited too with only a handful of suppliers. Neither the customers nor the retailers even bothered to bother that they were dependent on one another; retailers for business and customers for better choices. Many even knew each other by name.
With the passage of time, the retail business went through many transformative changes. These changes arose from increases in population, the arrival of new products, developments in transportation, increased number of retail businesses, access to information, more aggressive marketing and promotional strategies by brands, better organisation of the industry itself, etc. All these changes had an impact on how retail businesses function and flourish. For instance, earlier customers had limited choices in terms of the product, brand, price, or shop. Today, customers have multiple options. If the right shoe size is not available in one store, they will buy it from another one. If one brand unreasonably hikes the prices of its products, customers will shift to a more economical brand. Continued industrial and technological developments combined with the emergence of eCommerce further stirred up the retail landscape.
In this blog, we shall focus on the challenges faced by retail businesses and expert solutions for superior retail operations management in today’s world.
Challenges in Retail Store Operations
Demand Forecasting and Merchandising
In retail, it is very important to keep up with customers’ needs and wants and the market trends. When customers know that they will get what they want in a store, it increases their chances of visiting and revisiting that store. From a retailer’s perspective, predicting and merchandising the right products is not always an easy task. It takes some experience to gauge the requirements of a market. Storing up everything that sounds good is not a good strategy.
Delay in Restocking and Stock Arrival
Many retailers often cite the excuse of unavailability of goods due to delayed deliveries by distributors and companies. The justification might work for some time or some products. But if it keeps on happening to a lot of customers for a lot of their demand, they eventually move to another store. Retailers need to reconsider their internal processes and the performance of the distributors and brands that they deal with.
Managing Omnichannel Operations
As retail businesses turn omnichannel, it also opens for them a plethora of challenges of managing multiple channels simultaneously. Omnichannel is not an addition to the existing channel of distribution. It is a synchronisation of multiple channels. If it is seen and treated as an addition, it puts undue and unplanned pressure on the existing infrastructure and resources.
Managing Cash Flow
Not accounting for operating expenses could cause problems. A retail store has to incur many operational expenses like payment to distributors and suppliers, payment of utility bills, payment of salaries, charges for repair and maintenance of assets, etc. It is important to plan for these expenses to avoid financially undesirable situations. For example, if a business defaults on the interests payable to banks, it may have to pay penalties. That penalty is an avoidable expense.
Because of a large number of competitors in retail, the demand for skilled and experienced employees always remains high. At the same time, the intensity of competition enhances the willingness of retail businesses to pay higher salaries once they find the right talent. The job requirements also do not vary for the same positions because of which employees can shift jobs more easily and with meagre training. All these factors combined make employee retention an uphill task in retail.
Defective Products and Product Returns
Defective products become a burden on the inventory. And if somehow such products got unintentionally sold, it brings a bad name to the business. The need is to ward off defective products in the gate. Without the right QA and QC policies and practices in place, it is difficult for retailers to deal with incoming defective products. The problem is more acute for small retailers who have to heavily rely on distributors and companies for the replacement of faulty or defective products.
How to manage retail store operations
Standard Operating Procedures – SOPs
A huge majority of challenges and problems related to retail store operations gets resolved when SOPs are implemented. With SOPs, nothing is left to chance or random decision-making. There are defined procedures to be followed and standards of performance to be maintained in the execution of business processes and operations. For example, purchase decisions are initiated on time when employees follow planned SOPs that define when to do it. When this decision is taken on time, it is an important step towards ensuring that inventory levels are maintained in the store. SOPs can be also defined to follow up with distributors and logistics partners in keeping track of the consignments.
Automation and Digitisation
By adopting the best-fit automation and digitisation solutions, retail businesses become capable of improving their retail store operations and its management. For instance, simply by adding digital payment options, retail businesses are able to reduce their cash handling activities. Or by using barcode scanners, the billing process gets automated and much quicker and contributes to making the checkout process shorter. The same principle applies to other business processes and operations. Digitisation and automation lend efficiency and effectiveness to retail store operations and makes the day easier for employees. It gives retailers the resourcefulness to handle higher volumes of business. Because technology is an intricate subject, many retailers turn to professional retail store consultants to identify best-fit IT strategies and solutions for the business.
Strong Middle-level Management
A strong middle-level management, in any business, helps keep the operations in check. This goes for retail businesses as well. At the store level, the managers play the vital role of supervising the store operations. There may be exceptional situations but the owner cannot afford to interfere in the routine affairs on an everyday basis. If there are no managers in the store or they exhibit poor leadership qualities, the performance of employees will go down causing to deteriorate the store operations.
If the business is small, it does not mean HRM is not required. Even if there are only two or three employees, certain essential HR practices have to be followed. In retail stores, important HR activities are assessing manpower requirements, writing down the job descriptions, identifying the sources for hiring, adherence to applicable laws, providing training, HR policies for employees, salary administration, performance monitoring, etc. If the HRM planning cannot be done internally, then there is no harm in taking external assistance of any veteran retail management consultant specialising in HR services for retail enterprises.
Cash Handling and Cash Flow Management
Cash handling is a very important activity in retail stores. How a business manages its day-to-day cash flow affects its ability to maintain the desired liquidity to meet the operating expenses. Strong policies and procedures are critical to avoid any possible scope for embezzlement. And most importantly, cash flow measures revenue and contributes to measuring profitability. Cash flow management also includes digital receipts and payments.
Focus on Customer Experience
Sometimes retail businesses get so engrossed with their operations that they tend to ignore customers and customer experience. Any experienced retail business consultant could tell that even in many branded retail outlets, sometimes customers find themselves lurking for some assistance. Many retail stores have great marketing and footfall but their layout planning and visual merchandising are in a state of mess. This is common with busy departmental stores and supermarkets. Adherence to planogram and visual merchandising is important for better CX. It would be naïve for retailers to take customers for granted. Business strategies that are working for them today might falter tomorrow when a competitor with similar value-offering edges them out with a superior customer experience.
Efficiency in Inventory Management
With proper inventory management, retail businesses can ensure that their merchandising strategies are implemented on time and the inventory levels are also consistently maintained. As retail store consultants, we know very well that from ascertaining what to order and fixing when to order to restocking the shelves, every activity in inventory management can be planned. This also includes payment to suppliers on time, physical verification of inventory, appropriate internal and external paperwork, proper utilisation of warehousing and stocking areas, implementation of quality control and quality assurance measures, etc.
Zero-tolerance in Maintaining Safety and Security Measures
Being in the field of retail operations consulting, we consistently witness that failing to maintain the required safety and security standards and practices could not only displease customers but also bring the ire of regulatory authorities. The ultimate loss has to be borne by the business. Safety and security measures do not directly contribute to sales but these act like a safety net against internal malpractices, accidents, thefts, shoplifting, etc. Delinquency in this area could hamper retail store operations in the event of any unwanted situation.
Retail is no longer what it used to be a few decades back. In the face of new opportunities and challenges, retail operations management also needs to be treated by its contemporary requirements – in a more professional manner and with higher expertise.
We are retail business consultants with over 12 years of experience in serving 500+ clients across multiple industries. We offer retail operations consulting services for retail and eCommerce businesses. For service design and delivery, we have a team of expert retail management consultants who work in close coordination with our clients for creating precise solutions.