Category Archives: how to improve profitability in retail

Leveraging Technology to Improve Processes at Walmart

A recent SupermarketNews article said that Walmart plans to roll out warehouse automation that will improve speed and efficiency at regional distribution centers.

The plan involves activating robotics technology in 25 of Walmart’s 42 distribution centers, which will include a fleet of fully autonomous robots and proprietary software to improve throughput while boosting warehouse capacity,

“This move will fundamentally alter how products get to stores,” said Joe Metzger, executive vice president of supply chain operations at Walmart U.S.

“Right now, product arrives at one of our regional distribution centers and is either cross-docked or warehoused until we need it. The products are moved or stored manually… This system uses a complex algorithm to store cases like puzzle pieces using high-speed mobile bots, operating with a precision that speeds the intake process and increases the accuracy of freight being stored for future orders. By using dense modular storage, it also expands building capacity. And by using high-speed palletizing robotics to organize and optimize freight, it creates custom store- and aisle-ready pallets, which take the guesswork out of unloading trucks.”

Another good example of improving processes to drive the customer experience while keeping costs down!

What Supermarkets Can Learn from C-Stores

Several of our posts have focused on the importance of innovation and the customer experience, and how retailers must make continuous improvement in these areas a priority. Along those lines, a recent SupermarketNews article shared some interesting insights on the significant success the country’s 153,000+ convenience stores (c-stores) have experienced due to making ongoing improvements via “digital transformation.”

The piece quoted Scott Langdoc, a strategist specializing in the grocery chain, drug, and convenience/fuel retailing segments at Amazon Web Services, who said, “By focusing digital transformation efforts on supporting emerging customer journeys, optimizing product and service offerings, and prioritizing efficiency of retail operations, c-store retailers are working with Amazon Web Services (AWS) to double down on innovation while recovering revenue and attracting new customers.”

The article went on to explain the different product fulfillment expectations at c-stores, which include fuel fill-up, basic snack and beverage purchases, buying prepared foods like pizza or sandwiches, a quick errand for a household necessity or a combination of those scenarios.

Langdoc also noted that, more frequently, customers expect a personalized experience regardless of how or where they engage in the c-store.

Examples given included:

  • While a customer pumps fuel, they order a slice of pizza at the dispenser via a voice-activated order system and use their mobile phone to pay for both the pizza and their fuel.
  • A shopper buys a fountain drink in a store and gets a personalized discount to buy fuel as an incentive because the customer hasn’t purchased fuel at that station in the last month.
  • A customer grabs the items they want to buy at an Amazon Go store and walks out without having to stand in line to pay at a traditional cash register.

The Bottom Line
While recognizing that fuel remains the top selling c-store product category, the article concluded by suggesting, “in-store product sales and an extensive prepared food menu represent the largest overall sales growth categories, and on average, they are the biggest contributor to overall gross profit.”

Therefore, retailers should focus on capturing the broadest spectrum of transaction details possible and applying the analytics and machine learning to generate hyper-accurate predictions of future demand.

“This transaction detail can help optimize category plans, profitable private label assortments, high-selling menu offerings, and better in-store stock availability,” the article said.

Read the full article…

Necessity & Innovation

Nearly everyone we ask says that they want to be innovative — the best returns come to those who are first to market with a new product; those who innovate new and better processes can provide much better quality at much lower costs; those who can create a management system or culture that constantly is clicking on all cylinders can have a powerful advantage.

But how often do they happen, and why?

In our experience and research, we find that innovation is truly enigmatic:

  • Large organizations have more wherewithal to invest in systematic innovation, but smaller organizations seem more capable of capitalizing on innovative ideas.
  • Most innovations come not from visionaries at the top but from people closest to the work. Yet paradoxically, strong leadership and vision at the top of the organization are required to create an environment that fosters innovation and risk taking. Without strong leadership, organizations become bureaucratic and risk-averse.
  • Outsiders often have the most innovative ideas, but insiders’ know-how and buy-in are required to get them implemented.
  • And possibly most relevant during the current pandemic, adversity or “necessity” often brings about innovative solutions.

A recent SupermarketNews article notes that current world challenges have been exceptionally tough for supermarkets, and that the associated difficulties have brought about significant and innovative improvements in how stores are being run… now and possibly in the future!

“The first hint of the virus reaching our communities ignited the shock of an overwhelmed supply chain,” said Randy Evins, Senior Principal and Industry Advisor.

“A couple of weeks later, the consumer experience was further diversified with online pickup services, home delivery and special hours reserved for vulnerable shoppers. Some local grocers have also installed plexiglass protectors around their checkout stations and added floor markers to help ensure shoppers are standing six feet apart while waiting in line.

“There’s unquestionably a lot of ingenuity happening in supermarkets right now. But there is one area of the business that still requires attention — especially if grocers want to continue surviving this constantly evolving time as well as the eventual rebound to come.”

The article goes on to stress the importance of leveraging digital technology to ensure that all variables are considered in “real time” when making inventory management and ordering decisions.

“Digital strategies must go even deeper to cover the entire value chain — addressing the need for connected processes, real-time transactional data and immediate visibility into store-level inventory,” Evins said.

“Supermarkets can no longer afford to order new products and additional inventory blindly. They need to know what is available on their store shelves, store backrooms and distribution centers — by SKU and quantity and in light of forecasted demand.”

In support of this perspective, the article cites predictive data indicating that 25% to 30% of a grocer’s sales volume will consist of digital orders by 2025, compared to 6% to 10% today.

Evins went on to say that the use of technology, as described, will enable store employees to “have the visibility and insight they need to work more efficiently, safely and productively while keeping consumers happy and coming back over and over again.”

Certainly, given today’s circumstances, necessity has truly been the “mother of invention.”

Read related newsletter…

Raley’s Innovative Approach to Managing Shrink

Raley’s, a West Coast supermarket chain, has implemented Date Check Pro from Pinpoint Software Inc. to better manage shrink.

In a recent SupermarketNews article it was reported that Raley’s adopted the system after determining that a technology-based solution supporting inventory management would aid ongoing efforts to provide customers with the freshest and highest-quality products. Previously the chain took a more operational approach to flag out-of-code items by bolstering team member training and auditing processes to best manage disposal of expiring products.

Date Check Pro provides real-time updates and proactive notifications on close-dated inventory, establishing more consistency and accountability versus traditional rotation and spot-checking methods, in which out-of-date items can be missed by human error, according to Raley’s. In turn, the grocery chain said it’s able to ensure that it’s offering shoppers the freshest products and recoup savings on what would have been expired shrink

Sam Walton & the 5th “P”

In a recent article published by the International Speaker’s Bureau, author Michael Berghdahl referenced Sam Walton’s retail success, noting that Walton intuitively knew that retail marketing is all about the “4-P’s,” which are having the right products, price, placement, and promotion.

However, the article goes on to say that Sam Walton knew the “4 P’s” were not enough; that he was not satisfied to simply apply traditional methods, but rather always out to do more… to try new ideas.

“You might say he [Sam Walton] embraced change like a welcomed friend,” Berghahl wrote. “Never complacent, he sought ways to improve every aspect of the Walmart success formula each and every day.”

As part of this approach to continuous improvement, Walton figured out the key to creating a sustainable competitive advantage in the retail marketplace was by adding a “5th P” to his success formula: PEOPLE. Success required fully-engaged people working together as a high performing team, and serving his customers.

This perspective is consistent with the latest research on the critical importance and value of an engaged workforce.

But beware! Traditional efforts to engage employees have not been fruitful!!  These unsuccessful attempts have been haphazard at best, and have largely focused on trying to make employees happy.  Unfortunately, research and experience has proved that happy workers are not necessarily more productive workers.

Clearly a more strategic approach to engagement is needed, yet few retailers or organizations of any type have a formalized engagement strategy.

If you would like to create such a strategy, here are ten behaviors  you might initiate, which are based on research and experience that shows productive employees tend to be engaged employees, not the other-way-around.

Read more…