Leading retailers use data to to adapt to the fast-changing, technology-driven market.
Leading retailers are much better than other tenants at collecting data, measuring activities, acting on their insights and measuring again to see the results, according to A.T. Kearney’s 2013 Achieving Excellence in Retail Operations (AERO) study. A.T. Kearney refers to this principal as measure, analyze and act. Leading retailers encourage measurement of the right data, invest in the skills to gain insights from that data and use those insights effectively to frame future actions.
The study is a research initiative that looks at how companies approach store operations and provides retail executives with tools to better adapt to the fast-changing, technology-driven market. With more than 100 questions, the survey probes the strategy, tactics and execution of retailers in more than 20 countries. The study, based on A.T. Kearney’s Store Operations Framework, which was also used to pioneer the 2010 study, breaks operations into categories that set strategic direction, deliver core value, optimize expenses and drive lasting change.
Another insight from the study was that even with the proliferation of technology and vast quantities of store and customer data, retailers also need to focus on the core principles of retailing – employees, customers and the interactions among them. The study found that retailers that most actively engaged their employees and customers were the most successful.
The study also focused on how retailers were managing the multichannel environment. Leading retailers excel at managing their stores and channels with strong operational and employee metrics. As customers use multiple channels and bricks-and-mortar store revenues decline, most retailers have correctly identified that they must move beyond multi-channel retailing and begin integrating those channels. But our study finds that few retailers have achieved real integration.
Many services that a genuinely integrated multi-channel retailer would offer, such as the ability to buy a product online and pick it up in-store, or visibility into inventories from other channels, are offered by less than half of the retailers in our study.
A big problem is that although we live in a cross-channel world, few retailers have access to cross-channel metrics. With the voice of the customer, the big issue is analyzing and acting on a wealth of data; in store and channel management, the key is having the right data in the first place.
For example, consider employee incentives. Many managers have studied the same metrics, such as revenue or gross margin generated at POS, for 20 years. But an integrated channel environment requires new employee behaviors not reflected in these metrics, such as supporting a customer in ordering an out-of-stock item through a different channel. When employees are rarely measured on the success of non-store channels, they have little incentive to encourage their growth. Encouraging new employee behaviors requires new incentives, based on new metrics. In short, as strategies change, metrics must change with them. Again, the focus needs to be on measure, analyze and act — all three effectively.
With all of the moving parts, retail leaders must dedicate resources to effectively drive and manage change. This includes focused and measured pilot efforts, tailored communications and communication channels based on messages and employee groups, and a focus on continuous improvement, not just one-and-done mandates.
We can’t predict what technologies will be available in 50 years — or even five years. As options proliferate, bricks-and-mortar stores may indeed play a smaller role. But at heart, retail is a people business, with traditional principles that center on maximizing the value of human interactions.
As always, retailers should seek to improve analytics to drive better performance, support field leaders to reduce their administrative burdens, highlight the value of their front-line staff, and achieve meaningful goals. Despite the latest inventions — or even because of them — the fundamental principles represent the soundest road to success.
To access the full report go to www.atkearney.com/AERO
— Joel Alden is a partner with A.T. Kearney and is a co-leader of the AERO Study. He is based in Toronto and can be reached at joel.alden@atkearney.com. Adam Pressman is a principal with A.T. Kearney and is a co-leader of the AERO Study. He is based in Chicago and can be reached at adam.pressman@atkearney.com