Lean Retail: Are You Hurting Your Business?

Mastering the customer experience is a fine art. Many retailers understand its importance but fail to take action towards meeting and exceeding increasing expectations to create memorable customer experiences.

At the same time, retailers also face endless waves of uncertainty from the political, financial and social environment. In order to survive, businesses must remain lean and aim to minimise their operation costs. A common approach is to cut human resources and condense product offerings. However retailers beware; carry out these actions with caution because as traditional brands like American Apparel, Abercrombie & Fitch and Macy’s has shown us, cutting costs in one area may lead to unforeseen business costs elsewhere.

For example, reducing manpower not only leads to an overbearing workload on others, but also prolongs day-to-day operations and increases exposure to inventory shrinkage. In addition, limiting product offerings may result in lost sales and a lower customer retention rate, obstructing frontline ability to provide great service.

Although these practices may seem like the most logical approach to achieving cost reduction, results of the execution may lead to unwanted repercussions. This includes lower brand satisfaction and engendered negative brand sentiments from their customers, because they feel like they’re being pushed away by the brand.

While many retailers are currently investing in technology and digitally transforming their business, they should also consider the following three simple business countermeasures to curb the damages triggered by cost reduction.

 

Boundless Access to Information


There is an inverse relationship between product transparency and perceived risk. So when a considering a product, the more information a customer is provided with, the more their perceived risk diminishes. In turn, they begin to develop trust and credibility for a brand.

Retailers can assist their store associates in building this relationship with their customers by providing them with access to the relevant information. This may include product details, inventory availability, customer reviews, product launches, as well as other brand activities. 

To ensure maximum impact on every engagement, retailers need to keep staff up to date through daily digests into the business, team meetings and make the most of the tools and technologies they are provided with.

 

Personal Communication with Customers


Research by Smart Insights revealed that personal recommendations increase conversions by 24%. Retailers can leverage this point by enabling store associates to provide an individually personalised service through texts or emails to customers to notify them of new products, promotions, restocks or even casual greetings to maintain the relationship.

This can be facilitated through customer relationship management tools such as emailing accounts, direct contact cards and tailored customer info capturing programs.

Having a tailored information capturing program allows businesses to efficiently and cleverly collect usable data from their customers.

For example, instead of asking customers for their home address, make more direct inquiries related to buying behaviours, habits and daily routines. Using such data collected from customer, businesses can coordinate a more effective marketing campaign and create more intimate communication such as birthday messages or celebration offers.

 

Open Internal Communication


According to a recent 
study, Fortune 500 companies lose around $31.5 billion per year by failing to share knowledge. Therefore, it is important to allow teams to easily collaborate and share knowledge through a well designed internal communication platform. This fosters a culture of transparency and trust where employees can openly post, comment or ask questions.

As businesses get larger and busier, it becomes increasingly difficult for employees to communicate with management. Goals and expectations may not be easy to understand for line staff while management may not see the reality of how the business is running on the store floor.


For example, fast-fashion retailer Hennes & Mauritz uses an integrated communication system, where every employee within the company, from frontline to executive, has access to analysis, regional operational information, weekly figures or updates from both regional and the global headquarters. Furthermore, each employee is equipped with an email account where management or colleagues can contact each other to ensure instructions or information has been followed to standards. This also very simply allows them to send comments and concerns to their respective managers or teams.

This communication platform bridges the gap of communication and allows frontline associates easy access to rich media content, such as planograms and merchandising directives. Alternatively, this also can be achieved by more simple methods, such as keeping room doors open (at the office) or being visible on the shop-floor (if applicable).

For businesses to remain competitive and sustainable in the future, optimising costs and being more lean is essential but may have some consequences. By increasing transparency and allowing store associates to not only conveniently access and share information, but also empower them to use this knowledge appropriately to build a connection with customers, retailers can minimise the side-effects that lean business initiatives have on the customer experience; all the while maintaining employees motivation and morale.