In the present climate it is essential that retailers sharpen up their operations to run stores as leanly as possible. But the customer-facing end of the retail operation is also one of the areas of the business where cost-cutting must be handled very delicately. Cutting corners too drastically in stores risks alarming shoppers, affecting service and hitting sales.
Boots UK head of retail operations Steve Leach says: “Truly understand what your customers’ key requirements are and ensure these are protected at all times. It’s all about great leadership – the best managers can deliver savings that are invisible to their customers.”
He believes it is about ensuring store managers have the right mindset. “Getting store managers to truly adopt the approach of managing their store as if it were their own business is crucial,” he explains. Fred Perry store operations consultant Dexter Kirk says retailers must also maintain a careful balance. “Efficiency is the focus. Brutally going in and cutting costs isn’t going to be productive,” he says.
A new way of thinking
One of the biggest controllable costs is staffing and for many retailers a knee-jerk reaction to saving cash has been simply to slash staffing hours. Envision Retail managing director Jason Kemp says this is a dangerous tactic. “Some retailers are just hacking staff hours. Others are saying we need to find when and where we need people. If you take a more pragmatic approach you can actually improve morale, performance and service,” he says.
Retailers need to understand how to get maximum return from existing budgets. Leach says that adjusting an existing salary budget to ensure staff are available at peak times to deal with customers may seem like an obvious strategy but can result in marked differences to levels of service.
Kirk agrees. “You need to look at footflow and match that to staffing. If someone just goes in with a big axe and cuts, that’s pretty dangerous.
You have got to measure what each person is producing,” he says.
Part of the problem is often that store managers are given a cost-saving goal – for instance that they need to save 10 per cent – and yet they don’t necessarily have the know-how to best do that. Many store managers need more support. Now is also a good time to assess some of the administrative tasks assigned to store managers, and either improve those processes, remove them, or hand them on to another colleague.
Blackwell head of sales David Prescott says that in the past 12 months the bookseller has introduced a model whereby store managers have more flexibility over their costs. New job descriptions and contracts were introduced and hours adjusted accordingly. For instance, staff who were working Monday and Tuesday 9am to 5pm may now be working Monday to Friday 11am to 3pm.
Prescott says: “This has not been detrimental at all to customers and we now have more people on the trading floor during peak trading hours. We reduced payroll by 16 per cent but it’s a positive thing because we have increased the number of people on the shopfloor during the customer facing hours.”
Go Outdoors retail operations director Lee Bagnall says that in addition to using a rota tool that ensures optimum staffing levels according to footfall, the retailer uses other staff management tools. “We also manage our holidays and absence really well, which means that we don’t bring extra staff in to cover gaps as often as most.
“All this means better service and better service drives sales, which in turn ensures reduced cost of sales figures and improved efficiencies. It sometimes doesn’t mean cutting staff, just using them more efficiently,” he says.
Even for a retailer that has closely matched its staffing to trading patterns, there will inevitably be spare resources throughout a working day. Key to running stores more efficiently, though, is to ensure that people’s time is better utilised. Kemp advises that retailers focus on aspects such as replenishment, store presentation, correct ticket labels and general shopkeeping disciplines – all of which will trigger business improvements.
Every little helps
There are countless other in-store cost-saving tactics. Bagnall says: “Quickest wins are to ensure you manage all your controllable lines within the P&L.”
He says this could be as simple as turning lights off or, as Go Outdoors has done, proposing a new lighting scheme that will reduce energy bills. “The cost is very tax efficient and the payback is 18 months,” he says.
In the past year Blackwell has moved production of its point-of-sale material from central operations to individual stores. It has introduced Netprint – a point-of-sale system that allows every store to produce its own point of sale in the quantities it needs when and where they want it, rather than it being sent out in centralised, standardised quantities. Blackwell director Sue Townsend says the savings have been huge.
“We have reduced the point-of-sale budget by 42 per cent and reduced wastage,” she says.
Simplicity is often the key when looking at innovative cost-saving methods. Bagnall says: “Things that often get overlooked are regular costs such as waste collection, window cleaning and so on. The contracts are often set up to do these things in a cycle but pushing these things by several days here and there can reduce costs dramatically.”
However, retailers must be careful that such cost cutting doesn’t become glaringly obvious to customers. As Bagnall says: “You need to ensure you don’t squeeze too much. The last thing you want is to have dirty windows or overflowing skips.”
Kemp adds that retailers must consider the consequences of their cost-cutting directives. “There are some stupid examples where retailers are saying don’t put the lights on until the store opens, but then have people running around replenishing in the dark, which affects productivity and accuracy. You have to think about cost management, but do it sensibly,” he says.
Often, it is the simplest of cost-cutting measures that can work the best. Bagnall recalls a measure implemented across stores when he was operations director at Bensons for Beds. “We managed the petty cash at 230 sites down by £10 – mainly by managing the tea and coffee budget – the result was a £2,300-a-week saving.”
Everyone should be involved in devising innovative ways to save cash. Often, the best ideas are the most obvious ones and encouraging entire teams to put their heads together can often get the fastest rewards.
Importantly, store managers and their teams need support. Leach says there should be a consistent approach to develop such collaboration in stores and create a sense of teamwork across the store and support office teams. “There should be clear, concise and targeted communication with levels of recognition and reward for exemplars who achieve outstanding results.”
He adds that there should also be a “constant sharing of great ideas and best practice, and easily accessible management reporting so teams can see how they are doing”.
Bagnall agrees. “Store support or head offices can help by providing easy-to-understand management information to the store manager and store teams, but also showing where the hard work is paying off. It’s great to see when the effort has delivered results.”
Done well, huge savings can be made in stores without it becoming obvious either to the customer or adversely affecting store staff. When such cost-cutting measures may prove crucial in ensuring that a retailer stays in business, it really is vital that everyone recognises the part that they can play.
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