Recovering Retail Sales and Profitability .... Early Steps to Address Sales and Margin

26th August 2020

In the last post, I stressed the importance of customer service and making the best of the inventory you already own, to get your customers back in stores. I will return to inventory again in future articles, but this time I want to focus on things you can do now if you have a customer database, either through a loyalty program or through a combination of online and store activity.

 

The chart below is an example decile analysis based on real retail data.

 

Customer spending by decile

 

The chart shows that the top 10% of customers make an average of 1.78 visits to the store every week and account for 43% of total sales.  The top 30% of your customers account for 77% of all sales.  This particular data is for supermarkets but we have done this analysis in a variety of different retail segment, for example department stores, DIY and jewellery stores, and give or take a couple of percent, the top 30% of customers account for 80% sales.  The factor that varies I the frequency of visits to the stores.

 

So given where we are all starting from now that stores have re-opened in many countries and the lockdowns taking place are mostly local in nature, focus your core energies on getting the top 30%  of customers to resume business at something approaching their normal levels.

 

There are several advantages of this approach:

  • The top 30% already like you a lot, so it is an easier group to work with.
  • They do not shop in your stores because you are the cheapest or because you run the most promotions.  They do appreciate promotions that reward their loyalty, but they are not chasing the maximum discount.
  • They value aspects of your total offer much more than shoppers in the lower deciles.
  • Very often, they will be true omni-channel shoppers and you may be able to sub-select the omni-channel shoppers in your database if you have implemented it well.

 

Recovering retail salesLook at your individual business and see what strategies you can adopt to get those customers back in store.  For example, can you open the store at certain times for “privileged customers”, so they can be assured of more individual space in store?  Department stores used to close in the early evening and open again at 6pm or 7pm for their own brand credit card holders.  These were often successful events but still crowded because of the offers being made that evening.  In the post Covid environment, numbers may need to be regulated more, so you can assure customers that their special times are more socially spaced.

 

Your Marketing team should be able to come up with incentives to attract people that do not excessively erode margins, especially if you have a lot of heavily marked down stock already as a leftover from lockdown.  Things like a fashion show, a DIY or cookery demonstration can have a high perceived value and low cost.

 

Make sure you have enough staff on hand to give personal service.  You probably already appreciate that your most loyal customers buy more full-price merchandise and often buy more items than they intended when treated with excellent service.  Equally, they leave having enjoyed the experience and are pleased that they were able to find things they liked, without having to do too much searching themselves.

 

If you are having to close stores and lay staff off, or defer opening some stores till better circumstances exist, see if you can use some of that staff capacity if you need it to achieve your goals in the stores now trading.  In other words, think hard about where layoffs will be counter productive in the next several months.

 

I said in the last article, that the customer wants to complete their shopping mission.  They do not necessarily have to take everything home with them when they leave the store. If you have the item they want, but not in their size, colour, brand or flavour, have your store staff check availability on line and give them the ability to order it for the customer there and then.   Depending on where you are with your technology deployment, you may have to use a phone to check the stock and reserve it.  That is a better option than leaving the customer without the item and you can arrange a store pick up or a shipment as appropriate.  This is extra work, but the goal is to get people back in the habit of visiting your stores and some inconvenience for store staff is worthwhile for you and for them (they are more likely to protect their jobs).

 

Another option is to offer customers individual appointments.  This can be more staff intensive, but it offers greater basket sizes and greater basket profitability.

 

Recovering retail sales after covidFor the privileged customers who also shop online, you could also offer additional incentives.  One suggestion is a promotional coupon for making a purchase in store when you shop or browse online.  If you have parking at some or all your store locations, you could offer your top customers kerbside pick up for online orders.  In the US, this is becoming known as BOPAK, buy online pick up at kerbside.

 

When you start using your decile data to attract customers back, you could phase your activities according to what you can realistically support at the time and then scale up as volume increases.  Starting with decile one will impact 10% of your customers but 43% of your sales.  Once that is operating smoothly, you could extend it to decile two and then decile three.  You can control the pace at which you adopt this type of approach.  As and when retail life gets closer to past times, you could deploy these approaches to all your store customers if you feel it appropriate.

 

At some point you will need to do something special for deciles 5, 6, and 7.  This is because you will gradually lose customers from the top three deciles for various reasons.  You may close their local store if you cannot justify the full portfolio, customers age and eventually pass way and some move to a different area, where you may not have a convenient store.  Hence in a time phased plan of your recovery, you need to think about when you should start looking at deciles 5 to 7.  These customers are typically your secondary shoppers.  The goal with these is to do the various analyses (basket mix, promotion types responded to, demographics and lifestyle segment) and identify who look like the best prospects to promote into the top 3 deciles, your primary shoppers. Then design the marketing and service strategies necessary to achieve that.

 

We will delve into more effective omni-channel retailing in a future post.  For now, think about how much stock of non-essentials (basics) you need in store and, if inventory buying is cash constrained, could you achieve better customer service with “show only” options in store and all the available for sale inventory centralised in the e-commerce warehouse?

 

Educate store leadershipDepending on where you start from, the strategies described above may create some level of stress on your store staff which you will be wise to avoid.  This will involve two further activities.  The first is to educate your store leadership from Supervisors to Regional Managers to help the store associates make the necessary changes.  This involves leadership training, coaching skills, and the like.

 

The second is to provide store associates with the skills to handle different or amended processes.

 

Martec International can support you through these changes with our store level sales and customer service programs, our manager level omni-channel retailing program and the managing people series built for retail, from our partner Upskill People. 

 

Contact me directly if you would like more information.

 

This article is the second in a series addressing the many dimensions of recovering sales and profitability.  Look out for more articles like this over the coming weeks and months.  You can download a summary of what’s coming in the rest of the series and I’m happy to answer questions clarifying anything I’ve said that’s not clear.

 

 

Brian Hume

Managing Director

Martec International Ltd

brian_hume@martec-international.com

Tel:  +44 (0)1823 333469

 

P.S. One important footnote.  Your online sales probably grew dramatically during lockdown and is still growing.  Soon we will hit the Christmas peak sales period.  Online volume is likely to shoot up even more.  This of all years, make sure your servers do not max out on capacity for order taking.  You need every online order you can get.  Speak to cloud service providers if this is a real risk to you.


0 Comments
Leave a reply

You must be logged in to leave a comment.

Back