Controlling the Controllables

Many retailers have regrouped following the calamity of the Christmas shopping season, bringing managers together to talk about the continuing economic maelstrom and their plans for the year.

I was fortunate to be invited to one such gathering, a kickoff for a specialty retailer’s upcoming year, and was very taken by the message presented by this company’s CEO. A key component of the message involved the expression: “controlling the controllables.” Both the expression and the rationale behind it resonated with me.

It’s a strong concept, especially given the overwhelming perception these days that we are merely victims of a far greater force over which we are powerless. The data does not support this perception – exactly.

It’s a fact that, on a comparative basis, retail is off by a devastating margin: No amount of happy talk or positive mental attitude can contradict this inescapable fact. Within the larger story, however, is a detail that provides encouragement and an important message for retailers everywhere.

This specialty retailer discussed statistics pervasive within its segment. In this case, about 66 percent of visitors to its mall locations do not make a purchase, compared with half of visitors to its stand-alone locations. Let’s think about this: nearly seven in 10 customers did not buy. This in itself is a significant opportunity.

This statistic was amplified by some remarkable data that showed that the average transaction value is greatly impacted by the customer experience provided. Based on exit data, a baseline transaction value was determined for the average “untreated” customer — one who was not greeted, acknowledged or assisted in any way — who didn’t leave the store empty-handed. That transaction volume doubled if the customer received only an acknowledgment or smile and tripled if she actually experienced true customer service, with the associate assisting her in finding the item that prompted the visit.

Customer experience
This message had quite an impact on the audience that evening. It was a reminder that the one thing we can control – the customer experience – continues to have enormous bearing on our overall success. Not only is there an opportunity to convert one of those six customers, but the act of engaging with a customer, in and of itself, has the potential to triple the value of a single transaction. Drink enough of this Kool-Aid and soon retailers will be revising sales plans upwardly.

But it’s not Kool-Aid — it’s the real thing. The market data is telling us this is happening. We all see the ShopperTrak statistics indicating that, while mall traffic is off anywhere from 20 to 25 percent, in many cases actual sales are only off 7 to 8 percent. Obviously, the experience taking place on an individual, customer-by-customer basis accounts for the difference.

The customer experience is a people experience that is impacted by every retailer’s largest controllable expense – its workforce.

Two critical factors
We’re changing our whole approach in this economy. In the past, we’ve taken a two-dimensional view of the workforce: schedule the qualified and cut the unqualified staff, continuously paring a retailer’s payroll in 15-minute increments. Now, in addition to this, our work with retailers is being driven by two critical factors that move the needle: average transaction value and conversion rate.

For specialty retailers, in particular, these two elements drive enormous outcomes. Technology comes into play in this process by making sure the retailer has the best-qualified sales associates on location at the right time. This is not a natural phenomenon — it’s something that must be pro-actively managed.

Advanced, automated forecasting and labor scheduling is the key to driving this outcome, the results of which prove the point that retailers are not completely helpless in this historically upside-down economy. It all comes down to controlling the controllables.