By Brian Kilcourse, Managing Partner
9/29/2009
At a technology event last week, one “retail focused” CIO panel discussed advances in retail BI, and as usual the conversation was about empowering merchandise planners, financial analysts, and other “home office” types to gain visibility into the farthest reaches of retail operations. But when the CIOs were asked about making “actionable information” available in something approaching “real time” to store managers, the CIOs were in agreement; to paraphrase the collective sentiment, “We don’t want the store manager to get distracted from his job on the sales floor.”
But what precisely is that job? There can be no question that in the past 30 years, the role of the store manager as merchant has been minimized; retail companies sought to gain economies of scale and, as a result, developed centralized product-oriented strategies. For many retailers, this meant dumbing down the store manager function to the tasks of managing the workforce and executing the merchandising plan “just like the picture.” As one 2004 study found, “Top performing store managers are more precise, conscientious, disciplined, risk-averse, well organized, and ‘by-the-book’.” [1] By the 1990’s, the age of the store-manager-as-entrepreneur was well and truly over.
It might seem like hubris on the part of the home office set to want the store manager to stay focused on what they think is important. After all, the track record for average and under-performing retailers in executing the centralized model isn’t exactly heartening. For example, fractured planning processes are a perennial top challenge identified in every merchandising study RSR has run since our inception – and that is a home office issue. The good news is that the needle is moving in the right direction. In RSR’s just released study Retail Merchandising – Buckling Down In A Tough Economy, we note that “While it <fractured planning> remains the number one merchandising business challenge, for the first time since RSR began tracking this metric, less than 50% of aggregate respondents selected it as one of their top]three.” [2] But the report goes on to note that “the best merchandise planners and optimizers cannot be successful unless support functions like supply chain and store operations bring the right product into the customers’ hands.” That’s where the store manager comes back into the picture.
Further, as RSR noted in its June 2009 study, Walking the Razor’s Edge: Managing the Store Experience in an Economic Singularity[3], “…in today’s world, retailers want to emphasize the local relevance of their products and services as a way of winning customer loyalty. The store manager becomes the local customer satisfaction manager in this new environment. To that end, retailers see ‘more specific/localized direction to store managers’ and ‘improve(d) performance reporting to store management’ as important opportunities. We see a 20+% delta between the importance Winners and laggards place on these factors and how laggards see the opportunity (43% vs. 34% to both questions).” It’s worth noting, however, that a majority of even Retail Winners don’t see the opportunity. Why not? As one technology vendor commented to us, “We have case studies to show that delivering KPI’s to store managers so that they can react quickly delivers real benefits, but for every retailer who is doing it, there are five more who don’t think it’s important.”
RSR published a case study report in early 2009[4] that highlighted how two retailers get those real benefits. One of those retailers, Haggen Food & Drug of Bellingham, WA, sees opportunity in delivering performance metrics to store operators in near real-time. “You won’t hear the word ‘reports’ much at Haggen,” says Haggen’s CIO Harrison Lewis, “what you will hear is ‘KPI’. The only way a key performance indicator can exist is if it has controls. It has to have a reason to exist. What’s its purpose? What is it measuring? Who are the recipients? How often do they look at it? What are they looking for and what actions are they to take?” These questions get to the heart of what operationalized business intelligence is: actionable information. According to the CIO, “When I think of ‘business intelligence’, I think of it as the tools that provide the business with visibility to those indicators that help us manage performance.”
As noted earlier, a lot of retailers (although not a majority) see “more specific/localized direction to store managers” and “improve(d) performance reporting to store management” as important opportunities. As the CIOs in the BI panel discussion alluded, the problem is that store managers shouldn’t be tied to a computer in the back office. That’s where mobile devices could come in handy, and as one might expect, the importance of delivering real time business intelligence to managers in the form of KPIs and alerts via mobile devices has definitely risen in importance (in RSR’s 2009 store study, overall responses rate “KPIs and alerts to store managers on mobile devices” as “very valuable” 31%, up from 22% in 2008). But this enabler has a long way to go to gain favor. It’s clear that retailers have yet to grasp the importance of the empowered store manager.
The most forward looking retailers understand that “driving the business through the rear view mirror” just isn’t good enough, and so they are changing behaviors at the point of execution with actionable information. And that changes the role of the store manager to being the one person to manage the flow of actionable information on the sales floor to ensure an effective response to conditions as they are happening.
[1] Predictive Index Job Validity Study For 100 Retail Store Managers, by Todd Harris, Ph.D., PI Worldwide, June 2004
[2] Retail Merchandising – Buckling Down In A Tough Economy – Benchmark 2009, September 2009, © RSR Research LLC
[3] Walking the Razor’s Edge: Managing the Store Experience in an Economic Singularity – Benchmark 2009, June 2009, © RSR Research LLC
[4] Improving Retailer Responsiveness with Real-time Business Intelligence Case Studies: 2008-2009, December 2008, © RSR Research LLC
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