CULTURE FOR PROFIT: IT’S A MATTER OF LEADERSHIP!
In my last article, I urged retailers to invest time and energy in implementing a five part system to reduce shrink loss for whole store gross margin optimization. Now, let’s talk about creating or enhancing your culture for store operations excellence. According to Forbes “Culture is a company’s single most powerful advantage.”
HERE’S WHY:
Because creating culture happens when everyone at all levels stands together, believes and behaves together, and acts with pride in achieving the core objectives of the enterprise. Do you have strategic plan to establish a clear vision, brand, and culture? There are very few factors that contribute more to business success than culture, when everyone understands, is bought in and is operating from the same play book. It’s often difficult to clarify the concept of culture, but it directly impacts business performance and growing profitable sales. Culture is caused when you purposefully establish common beliefs, behaviors, processes, practices, operating standards and most importantly, Leadership. Simply put, companies need to take time to define and communicate their vision of a store operations excellence culture.
The 5 Laws Creating a Culture for Store Operations Excellence
Culture is created through the disciplined execution of store operations behaviors, processes, and practices of the people in your stores. For operational excellence and being the best run stores in your market, there should be no daylight between how your stores run and the personality your people project.
STEP 1 – ORDERING STANDARDS
Establish clear and easy to inspect and measure ordering standards.
STEP 2 – MEASURE YOUR SHRINK
Shrink isn’t just shrink, it’s a result of your in-store, department-by-department behaviors, processes, and practices. The rule here is if you can’t see it, see it all, and determine operationally what it’s happening, then you are doomed to pricing your way to the gross margins you want and need.
STEP 3 – SIMPLIFY
Data has helped in many cases but has complicated store operations in many others. More data is not better. Data that informs and sparks specific action by store teams is better.
STEP 4 – WHAT IS ACTIONABLE DATA?
Make data actionable, stores teams must know what actions to take.
STEP 5 – SET MEASURABLE GOALS
And hold your store team accountable to:
- Consistently execute best practices
- Achieve their goals
So, at the heart of creating a culture for whole store gross margin optimization is inventory turns. The point here is that gross margin erosion (shrink) is the result of a failure to turn. In a profitable selling culture, profit comes alive when team leaders set clear, people-centric expectations and are trained to help people understand and grow.
WHY? BECAUSE CULTURE IS 100% A PEOPLE ISSUE.
Most organizations tend to be vocal about their core values, displaying them on posters, websites and in publications such as annual reports. The unspoken assumption behind this is that employees will read them and somehow adopt them. Words and posters aren’t enough.
SO, HOW’S YOUR CULTURE? IS IT ONE FOR ALL AND ALL FOR ONE?
Is your culture one for all and all for one with a constant focus on excellent inventory turns, customer service excellence, and general merchandise optimization in all areas?
McKinsey and Co., international business optimization consultants say the smartest way to control grocery store shrink loss, better known as internal gross margin erosion, is to use a data-informed, holistic, collaborative, people-centric, store-by-store approach. We would add that recognizing that data’s purpose is to trigger specific behaviors, processes, and practices that will get you up to an 18-20% gross margin boost in just 100 days.
EVERY STORE TEAM MEMBER MUST BE TRAINED TO UNDERSTAND THE IMPORTANCE OF INVENTORY TURNS AND BE A PRODUCTIVE PART OF THE PROFIT MAKING AND SHRINK CONTROL CULTURE.
5 Root Causes of Poor Inventory
Turns that Lead to Excessive Shrink Loss
CLOSING THE LOOP TO OPTIMIZE YOUR GROSS MARGINS & SAVING LABOR
MOST COMPANIES EXPERIENCE AN AVERAGE OF 15% EXCESSIVE SHRINK RESULTING IN HIGHER PRICES TO SHOPPERS. THIS, LARGELY DUE TO FAILURE TO RECORD KNOWN SHRINK LOSS AND ACT TO PREVENT AT ITS ROOT.
ABOUT LARRY MILLER As Founder of the National Supermarket Shrink Survey, ShrinkTrax for Cashier caused Shrink Prevention, the Total Store Manager program for Operational Efectiveness, and today with ProftTrax AI. Over 17,000 managers and supervisors have taken his training to reduce shrink loss to grow sales and store proft.
Smart Retail Solutions and ProftTrax guarantee Whole Store Gross Margins Optimization and Store Operations Excellence for 15% reduction of in-store shrink loss, a 100-150 basis point boost in gross margins, 9-11% enhanced labor efciency, and 12-14% improved inventory turns all to prevent operational gross margin erosion. On average, ProftTrax users report an excellent 5:1 repeatable return on investment. He can be contacted at Larry@SmartRetailSolutions.com
