In-Store Execution – Three Key Foundations to Driving Higher Retail Margins

By Alex McKeown, Senior Vice President, Hilco Global

Over the past 30 years, we have worked with over 500 retailers, from mom & pop to Fortune 50, and monetized or valued over $150B in inventory. That experience has unearthed some surprising findings. While management teams spend countless hours and dollars investing in systems and teams to assess their markets, understand customer behaviors, track and manage their inventory, sales goals, and define retail margin targets – the ultimate customer experience (CX) in stores is left completely analog and anecdotal.

This is somewhat surprising, considering that ~80% of sales still go through the brick-and-mortar channel, which also happens to be the highest average retail margin channel. With that said, gross margins are compressing with most retailers today due to enhanced promotional activity. Since inventory is more abundant than two years ago and customers are more discerning, it’s important to have the right product in the right place at the right time so that sales and margin assumptions are met. When one of those factors falters, stores lose sales, and lost sales result in further promotional activity, which in turn reduces gross retail margins. In-store execution is critical.

How to Increase Profit Margin In Retail

Executing in-store sales plans goes beyond how well pricing has been negotiated, inventory quality, or setting the right price. Achieving in-store execution to increase retail margins requires daily focus and attention on:

• Effectively managing in-stock/out-of-stock inventory levels
• Consistent merchandising and recovery
• Effectively promoting your promotions

‍Step 1: Effectively managing in-stock/out-of-stock

It is universally accepted that a positive in-store customer experience requires getting the right products clearly displayed in a manner that encourages the customer to build a basket and buy. When that doesn’t happen, customers cannot make a purchase because the inventory isn’t displayed for them. Surprisingly, empty shelf space is often the result of stores not replenishing inventory on the sales floor – explicitly a store execution problem. Enhancing a retailer’s ability to ensure this is happening, above and beyond monthly District Manager visits, is one way to protect store sales plans and consistently execute.

Step 2: Consistent merchandising and recovery

Top retailers not only have compelling merchandising schemes that draw customers in and encourage them to build a basket, but also discipline in recovering their store to ensure those merchandising schemes remain compelling throughout the day. This includes returning merchandise left in changing rooms, behind the sales counter, and across departments back to their proper location. It also requires the replacement of sold merchandise so shelves are full and properly set. The customer looking for a size Medium will not be able to buy it if it isn’t presented. Recovery needs to be a continuous process performed throughout the day. Staff must be informed of expectations and have the means to execute them. Corporate, on the other hand, has deep-seated interests in ensuring that expectations are not only being met, but have the capability to influence better outcomes and identify key learnings. There are better ways to achieve this than relying on monthly DM visits and anecdotal or analog evidence.

Step 3: Promote your promotions

Promotions, marketing, and signage are designed to drive traffic into your stores, show value, and grab your customer’s attention. Instore signage also provides customers with a roadmap to finding the goods they want. Effective promotional messaging and signing can make or break store sales. When an in-store promotion isn’t properly set up, customers have a difficult time understanding value or finding and identifying goods, retailers not only risk losing a sale, but they also risk alienating customers and eroding goodwill.

With retail staff levels and experience at their lowest point in many years, it’s difficult for retailers to manage all three of these steps. My customers are relying on in-store execution technology – Hilco’s ReStore for Retail application – along with Hilco’s retail expertise and human capital to overcome each of these challenges. With ReStore for Retail, corporate and regional teams can efficiently use a data-centric and visual model to monitor what’s happening in store in real-time to help problem solve and ensure that stores are executing in a manner that will support meeting their sales and margin goals while also making life easier for associates. Importantly ReStore for Retail crowdsources and aggregates difficult to collect in-store data. This data allows corporate to dissect in-store execution and discover where and how on-the-floor operations are meeting or not meeting standards.

Remember, brick-and-mortar is the highest margin channel and supports about 80% of sales for most retailers. Not having real-time data and visual support to monitor and improve store execution is simply a mistake retailers can no longer afford.

ReStore for Retail is an independent operating unit of Hilco Global, one of the world’s leading retail authorities. To learn more about how ReStore for Retail’s tech-enabled solutions and proven playbooks can rejuvenate brick-and-mortar operations and maximize sales and margin opportunities, please visit www.restoreforretail.com.