Retail Efficiency: Are You Guilty of These 10 Shocking Best Practices Blunders?

Retail Assessment shock

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Updated November 12, 2023

What is the current state of the retail industry? To no one’s surprise, most retailers see customer service as their biggest challenge.

That’s because Amazon, Target, and Walmart, singularly focused on knowing their customer and going above and beyond to exceed their needs, are stealing their customers.

That got me thinking…

Has this overwhelming fear of Amazon led retailers to focus on their customers and go above and beyond to exceed their needs?

That would make sense, right?

But the results from my Retail Assessment Tool prove otherwise.  Even if you took this six months ago, you should retake it to keep a laser focus on what matters to grow your sales next year. 

No, this is not based on an exhaustive study of big box financials and forward-looking statements; it primarily comprises non-publicly owned brick-and-mortar retailers. And while the full assessment consists of about 75 retail best practices questions, we’re only looking at 10 top responses in this report.

Discover your own score by taking the
Retail Assessment Now

Financials

According to the NYU Stern Database, the average profit margin for the general retail sector is only 2.79%. For grocery and food retail, it’s only 2.2%. For balance, Walmart only made a 3.6% profit margin during the third quarter of 2020.

It’s hard to profit from reselling products in a brick-and-mortar store. Maybe that’s why…

74% of respondents indicated they are not taking money out of their business but putting it in.

And while you could look at those results positively, that it’s a good thing to invest money into your business at an exciting pace, you could worry that only about one-quarter of retailers are making money.

Operations

Knowledge is power. Online retail is obsessed with data, as anyone who sells anything should be. How many clicks did it take before someone put an item in a cart? How many abandoned the cart without purchasing? How does that affect conversion if we move a product placement on the website or change the background?

In a brick-and-mortar store, knowing your in-store analytics can help with merchandising, product mix, and evaluating your employees and their ability to sell the merchandise. As Bill McCarthy with ShopperTrak once said, “Higher traffic counts mean nothing if your conversion rates remain lackluster.” Yet...

55% of respondents said they did not know the conversion rate of shoppers to customers.

While that could mean conversion rates are often misunderstood – and could be higher –  it could also mean many retailers are not stepping up to fight online by upgrading their retail technology to assess how effectively they capture the dollars in their stores.

Physical Store

Customers have always noticed dirty stores, but the post-pandemic attention to cleanliness should remain high. The focus on presenting your products clean and dust-free should be a priority. And while the old restaurant adage that if you can lean, you can clean sounds good, employees rarely do it independently. Maybe that’s why...

56% of respondents answered they could not run a white glove across any shelf, rack, or product and not see dust on it.

Merchandising

How much profit a retailer makes is often determined by how quickly their merchandise turns. The more days it takes to sell an item, the less profit you will make as employees and customers get bored with it, and the item potentially gets dirty, shopworn, or damaged.

While sophisticated point-of-sale (POS) and Enterprise Resource Planning (ERP) systems can figure turn in real-time, the basic formula is total sales divided by inventory on hand equals your merchandise turn.

An open-to-buy plan is a system for determining how much you can buy based on how much you have sold. It also lets you see what is turning fast so you can order in a few larger quantities and avoid the many smaller shipments costing more freight.

The open-to-buy software is often baked into your back office systems, but it requires constant monitoring to keep merchandise turns high, avoid out-of-stocks, and keep overbought inventory levels low.

Too much merchandise requires discounts to move and takes up space for popular new products. Yet...

69% of respondents say they do not have an open-to-buy plan or are not using it.

Marketing

Any first-year business major can tell you there are only three ways to make more money in your business: attracting new customers, getting your customers to buy more from you, and getting those customers to return more frequently. That’s it.

When new retailers open, there is usually a fanfare of promotion, but as the months go by, that initial energy fades. There is a reason most people receive so many emails or sponsored posts on social media: marketers actively solicit you to try them instead of a competitor or incentivize you based on your previous purchases to return to their store.

To continue to attract new customers, your website and social media must be creatively updated to show you are more than just a product warehouse; you are a great resource with helpful advice and information. Yet when it came to their own website...

64% admitted they do not include how-to-articles or creative tips on their website.

To get your current customers to return to you more often, you need to communicate with them regularly. One of the best ways to do that is with a newsletter where you push your information into their inbox. Yet…

60% of respondents do not send a newsletter to their list at least once a month.

If your employees have mastered engaging with strangers and built enough trust so your sales are up, then as an innovative retailer, you want to ensure your employees continue to develop those relationships and not drop the ball. Yet…

62% answered their employees do not regularly follow up with their customers to get them back into their store through texts, emails, or calls.

Most retail stores haven’t been trained to create an exceptional experience where the customer is glad to hear from them.

That, of course, leads to…

Training Retail Selling Skills

The great fallacy of working retail is that anyone can do it.

No, not anyone can do it.

Anyone can collect a paycheck, but to work the retail job and help you move the merchandise for full price takes training. It takes hiring the right, trainable person and giving them a straightforward, concise sales process, followed by a reward.

Simple, right? Do the job, and you get rewarded. Yet...

53% of retailers do not have a formalized method for hiring employees.

This could mean that they have one. It’s just not written down. But more likely, it means hiring someone who can fill the shift or hiring whoever has previous experience at a competitor.

Training is something you do; it is ongoing. Training is not something you did once. That takes time and money.

I shouldn’t be surprised that…

76% do not pay for outside retail sales training of their employees.

Many retailers still see training as an expense, not an investment.

But without training, you settle for crumbs when you could have had the whole feast. You never want employees to ask Anything else? at the close of the sale, but 57% of respondents don’t train that.

Which figures when...

53% of respondents said they do not have a retail sales process written down and followed by all employees.

Here’s just one example of why it is so important to train everyone...

Nowadays, when people run into each other, they start talking; they don’t give a salutation.

And while that’s fine if you are buds at a pub, it’s deadly in a retail store.

That’s because when an associate greets a shopper correctly, it triggers the shopper’s ears to stop and pay attention. Without that, they brush right past you and treat you like someone to be avoided.

That’s why retail sales training is so necessary; you will lose more sales than it costs you when you don’t train the soft skills of engaging a stranger.

When there is no standard retail sales training, your employees will ask every customer ineffectually, Can I help you? Catch-as-catch-can customer experience comprised of whatever a distracted employee can serve up.

No wonder many shoppers look at going to stores as work – because many employees are never challenged and trained on what exceptional looks like in a world of half-price, this-weekend-only sales at the mall.

And when those employees who follow the training are rewarded, they do even better. Yet…

63% do not connect sales performance directly to wages..

It should be no surprise then that...

Only 30% of respondents use outside mystery shoppers to check their customer service regularly.  

One could say those remaining 70% don’t see the value in it or that since they don’t have training, they don’t want to hear why shoppers aren’t returning – they don’t want the experience you’re offering.

See also, 5 Retail Management Practices That Can Bring A Customer First Focus To Your Store

In Sum

A Microsoft/McKinsey report entitled Class Of 2030 said today's children need strong social and emotional skills to succeed in the fourth Industrial Revolution economy. “These same human attributes are also two times as predictive of a student's academic success.”

To succeed against online competitors, brick and mortar stores need strong social and emotional skills from all their employees..all the time. 

That’s the only way stores will thrive.

Without it, you’re just a warehouse for other people’s stuff.

New brick-and-mortar stores are coming to market without the baggage many legacy retailers have. The future is bright for them because they understand that data, training, and implementation will help them grow, adapt, and compete. 

When the fundamentals are in place, intelligent retailers will track in-store purchases, online browsing, and online purchasing to trace all the actions that led up to a sale. That will become table stakes for all retailers, no matter their size.

It’s easy to blame online retailers for destroying what may have been generations of stability for all kinds of retailers. Yet, as the Retail Assessment has shown, many of the tools retailers already have that could enable them to know their customers better, market to them better and sell to them better aren’t being used.

Together, let's adapt for the age of the buyer.

To compete with Amazon, you must leverage your fear of them and increase your efforts to hold yourself accountable to grow your retail sales.