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Why measuring stores solely on sales could be inaccurate

The following post casts light on the need to re-evaluate store performance metrics in light of evolving retail industry landscape in an omni-channel era


Shopper Experience Scenarios

1. Online Purchase / Offline Pickup

Purchased a phone with few taps on the retailer’s eStore App whilst sipping my espresso @ 6am… BUT… chose in-store pickup… same-day pickup benefit vs. 2 day doorstep delivery

2. Offline browsing / Online Pickup

Stumbled upon a furniture item during a weekend ‘shop-hopping‘ excursion… instead of picking it up in-store, preferred to use the retailer’s eStore App to have it delivered the next day (most likely from same store’s inventory)


Retail landscape shifting – ‘channel correction’ well underway

The broader retail industry has entered a phase of ‘channel correction’ – where yesteryear’s (physical) storefront opening craze is ‘ being corrected’ to better fit in an omni-channel era

Retailers bidding goodbye, store closures, declining same store sales, diminishing profits, retail instability… and of course… Amazon are some of the key retail buzzwords dominating our news feeds, pundit analyses & investor notes alike

Changing consumer demographics / segmentation / sentiments, domicile density shifts (urban vs. suburban), social media & ‘App-fronts’ too are enabling the rapid changing in retail landscape within hyper-emerged markets such as U.S (elsewhere on the planet, physical retail still remains the dominant channel… in many cases… the only channel!)

By varying estimates; there is no doubt that online shopping is rapidly growing Y-o-Y… BUT… according to recent retail transaction stats from U.S DoC… still only accounted for less than 10% of total retail transactions in Q1’17


In omni-channel era… physical & online are inter-reliant more than ever

Yes, the way people purchase different products is changing, but that doesn’t mean online is supplanting bricks-n-mortar channel entirely

In fact… online needs brick-n-mortar channels just as much as the other way aroundsuffice to say they are becoming more inter-reliant than ever before

– Amazon’s impending purchase of WholeFoods (& it’s Go Store concept) is as much about gaining foothold in offline as much as it is about innovation

– Walmart’s purchase of Jet.com & myriad of other traditional brick-n-mortar retailers’ expansion into online storefronts says the same story

In fact, in a previous post, I’ve outlined how in an omni-channel era, brick-n-mortar channel could actually leverage show-rooming to the retailer’s advantage


Re-evaluating (physical) store productivity measures in an omni-channel era

During the yesteryear’s phase of (physical) retail store hyper-expansions, these broad-range sales metrics served the KPI purpose well (for obvious reasons such as footprint investment)

…but in an ever evolving omni-channelera, it may not be optimal in measuring the (physical) stores’ productivity on traditional sales KPIs; particularly in isolation to the support they lend to the retailer’s online channel

So how could a store’s productivity be measured (KPI) in an omni-channel era?

customer-satisfaction-button.jpeg

Retailer’s physical stores will transform to take on myriad of dutiesNo One Size (performance measure) Will Fit All

– For destination store formats that exist to predominantly provide Consumer Experience… the KPIs could tilt towards experiential metrics – combination of Customer satisfaction (tracked by Smiley face buttons, NPS, post-sale survey, etc.), Omni-conversion / up-sell / x-sell (tracked either through unique loyalty membership / channel survey @ POS) and foot traffic (camera-based tracking, beacons, etc.)

– For store formats that assume more of a distribution center (DC format) rolethe KPIs could tilt towards supply chain metrics – combination of inventory-on-hand, consensus forecast, demand planning, on-time delivery, etc.

– For traditional medium format storesthe KPIs could continue to tilt towards traditional sales/sq.ft metric.. perhaps not compared to other stores in the portfolio… but rather to assess the feasibility of that particular format in the vicinity along with customer service & experience metrics – in turn supported by ongoing segmentation / demographic research

– For dense-urban grab-n-go stores… the KPIs could tilt towards ‘category management’ metrics – combination of product management, supply chain & traditional profitability/brand (Rent $ vs. Product margin $ vs. Market share)


So…

In both aforementioned scenarios the (physical) storefront itself didn’t win my business (if measured by in-store financial transaction) but played a key role in winning the it for the retailer

Whilst metrics such as Gross Margin, Units / Transaction & Y-o-Y sales will continue to remain the mainstay KPIs of the industry… as (physical) stores evolve to play various roles in the overall omni-channel paradigmso too must their KPIs to better reflect the task they predominantly serve not just ‘hard sales’

Stores will continue to augment online channels with experiential & customer service factors (for select product categories) and as such would require corresponding KPIs to measure their performance

No one size will ever fit all when it comes to retail strategy or their associated KPIs… but what is certain is that (based on the type of product/service sold), physical stores will remain a key component of any omni-channel value chain in any market (emerging, emerged or hyper-emerged)

After all… there is still that >90% share of transactions that still flow through them

In forthcoming posts, I’ll cast some light around store formats, in-store experiential range & significance of blockchain in supporting an omni-channel operation

Stay tuned!