Efficiency is one of the cornerstones of business success. The more efficiently you operate, the more productive you are with less input. Higher efficiency means better cost control and improved revenue opportunities. Efficiency gains therefore grow margins from both sides of the cost-revenue axis.
In customer-facing sectors like retail, there’s another reason to pay attention to efficiency – it’s what customers want and expect. In one survey, more than half of shoppers (53%) said they want a clean and easy experience in-store. Clean and easy? Yep, that sounds like an efficiently-run shop!
Not delivering against these expectations has a tangible negative impact on business performance. Four in five adults in the UK say they have walked out of a store because of a bad experience. And three-quarters of negative reviews stem from poor in-store experiences, demonstrating the wider reputational risks of disorganised or inefficient store operations.
There’s a perception, however, that many retailers have taken their eye off the ball when it comes to in-store efficiency over the past decade or so. That’s part of a wider feeling that retail has been preoccupied with the growth in ecommerce, and has rather lost sight of the fact that the majority of retail sales still happen in-store.
But in recent times, as interest in digital tech has extended to updating physical retail, that balance has begun to be redressed. Digitisation of the store experience has started to look beyond how to make the checkout experience more efficient with better POS. Integrated digital infrastructure like on-shelf sensors, cameras and displays, with POS acting as the control centre, is playing a growing role in inventory management, merchandising, pricing, even targeted advertising and promotions.
Making investments effective
What’s clear, however, is that there still remains a gap between what retailers know digital tech can do for in-store efficiency and the customer experience, and what is actually happening on the ground. In one recent survey of physical retail operations in the US, 85% of retail executives reported using modern inventory management systems, and two-thirds self-assessed themselves as ‘highly efficient’ in areas like addressing out-of-season inventory to minimize markdowns or losses, and getting stock out of the backroom to make it available for customers.
Yet despite that, only half (55%) of executives reported inventory turnover rates that met or exceeded industry standards. And a worrying two in five (41%) say they experience out-of-stock or overstock situations always or often – the very opposite of efficient inventory management, and a major cause of either lost sales (when items are out of stock) or lost margins (when stock cannot be sold, or has to be sold at a heavily reduced price for clearance).
These are figures that suggest that, despite digital systems now being commonplace to support all aspects of in-store operations, adoption is still at an immature stage as far as understanding how to reap the business benefits goes. That tells us that what is needed is not just investment in the tech itself, but investment in digital strategy for stores, investment in effective integration, investment in data analytics and AI to power smart, efficient and effective automation.
The good news? This is a great time to invest in taking your in-store efficiency to the next level. Why? Because most retailers are in the same boat. Getting ahead of the game on getting the in-store experience right ill put you ahead of the competition and in approval from customers who are actively looking for better.