The real challenge to profitability isn’t finding good people: It is making good people more productive.
M ost store owners who are looking to grow their businesses say that they have trouble finding good people. The real challenge is not finding good people; it is making good people more productive. The time when you could grow a business just by adding more bodies is past. Today, the best retailers leverage the efforts of the people they have by using technologies already employed successfully in other industries.
“Give me a lever long enough
and I will move the world.” -Archimedes
Consider the lever. It is an effort multiplier. The longer the lever, the more it multiplies the effort applied to lift an object. All technologies have a similar effect. Using technology in our businesses at every level possible helps us meet the change we all face when it comes to finding good people.
The “technology footprint” of a retail operation is a good indicator of its ability to leverage people resources and management talent.
Historically the furniture industry has been notoriously “low-tech”. It wasn’t until 1996 that it could be said for certain that every furniture store had a fax machine and even then it wasn’t safe to assume that these stores had developed the expertise to use them.
Having technology is good, but using it effectively is a key to dramatically improving the bottom line. Retailers vary widely in their level of technology utilization. It is only after technology is integrated into clearly defined processes that it can have dramatic positive impact.
Stores often invest in technology with the best of intentions, but many run into problems with its implementation due to scarce resources or organizational roadblocks leaving these technology solutions unimplemented and unloved.
When looking at what it takes to improve the profitability of a store, the first challenge is to collect accurate information. Without appropriate data collection systems, obtaining this information becomes much more difficult. Although some of the following technologies and their implementation have been described in detail in previous issues of FURNITURE WORLD (posted to www.furninfo.com), it is helpful to consider them together so that an integrated approach to technology utilization can be formulated.
Enterprise Resource Planning (ERP)
The number one tool store owners need to be using is retail furniture industry specific software. There are a lot of software packages on the market that are designed for management, but those that are not industry specific, tend to have features designed down to the lowest common denominator of all businesses. If you just need to sell “something”, you need an accounting package. So most non-specific ERP packages tend to be accounting packages. Some also track inventory levels or have modules you can add to track inventory.
When you install an ERP package designed for the furniture industry you get a set of features designed to help you do a better job managing your inventory and generating the type of information you need to do accounting.
Traffic Counters (TC)
The most important piece of information home furnishings retailers need to gather is their traffic count. Most stores ask salespeople to count traffic. The problem with this method is that salespeople believe that it is not always in their best interest to perform an accurate count. As a result, owners generally don’t get the kind of information needed to judge advertising effectiveness. Neither do sales managers get the information required for proper floor staffing.
Automated traffic counters are accurate and objective. They provide surprisingly detailed data that takes the guesswork out of measuring how ads pull. When integrated with ERP software, this technology generates reports that allow for sophisticated analysis between traffic and sales levels. Information on traffic by month, week, day and time permit managers to make appropriate staffing decisions based on projected customer needs.
A furniture storeowner who recently described how proud he was of his sales staff’s 36% close rate, was surprised to find (when he installed an electronic traffic counter) that his actual close rate was just under 20%. Concerned that the numbers were wrong, he verified the electronic count by hiring someone to count traffic physically for one month. The physical count and traffic counter totals were out of sync by less than 2%.
Once he had a solid handle on real traffic levels, this owner increased sales force staffing to match traffic flow. The result was that his close rate shot up to a “real” 36% and his sales volume doubled.
Sales Force Automation (SFA)
How can you evaluate the level of performance of individual members of your sales team as well as the sales team as a whole? How do you know what your salespeople are doing all day? How do you know if they are doing the kinds of things that will ensure success? SFA software is designed to automate the collection of different types of information on sales process execution and time utilization needed to establish the performance level of the salesperson. It also generates the type of information sales managers need to be able to effectively work one-on-one with salespeople to improve their skills.
When SFA is integrated with ERP software, it allows owners and managers to create reports that can help them do sophisticated analysis between sales efforts and profit margins.
Delivery Scheduling Route Planning Software (DS/RPS)
Until merchandise is safely in the customer’s home, it remains a liability to the store. When you consider the costs and challenges involved in delivering merchandise, anything you can do to minimize the number of trucks and number of people involved in delivery pushes dollars straight to your bottom line.
When delivery scheduling/route planning software is integrated with ERP software, it allows the delivery process to pull data directly from the main computer system to do a better job in scheduling deliveries. The route-planning portion of the package lays out the most efficient routing for each truck based on the delivery addresses.
Stores using this software are able to reduce the number of trucks and delivery crews.
Using management technology as a lever allows store owners and managers to do more on a daily basis with less effort. The combination of these different software packages can help store owners and managers do incredible things when it comes to managing a retail store. One client told me things had gotten so efficient the place was boring. He was faced with a difficult choice. He either had to lay off four people or buy another store. Which option did he pick? You guessed it... he bought another store.
These are technologies that leverage management efforts. There are also technologies that can be used to leverage individual efforts.
TECHNOLOGIES THAT LEVERAGE INDIVIDUAL EFFORTS
Some of the biggest challenges storeowners face have a root cause in poor internal communication. Every store should have internal email and voice mail for all employees. This leverages one of the most valuable assets a storeowner has…TIME!
Electronic Communication Systems (ECS)
Voice mail and email system help owners streamline their workflow by maximizing the effectiveness of their communications with employees in several ways. First of all you can deliver detailed messages when the thought occurs to you without having to write yourself a note.
Second, many times when you deliver a message in person, it is not always the best time for your employees to break away from what they are doing to completely focus on your message. When they are in the middle of dealing with a problem, and you want to tell them something - they may hear you, but there is no guarantee that they will remember what they heard.
One storeowner has had such success using voice mail and email; he never gives instructions in person anymore. When he talks to his employees his message is social or motivational. When it comes to instructions voicemail or email are used.
He explained his experience in this way. “In person, if they don’t understand me, they are reluctant to show it. If they didn’t hear me, they are reluctant to ask me to repeat myself. With email they can read it until they understand what I am requesting of them. If they don’t understand, they can print the message and have someone else take a look at it. With voice mail, if they don’t understand they can replay it until they do, or have someone else listen to it without losing face in front of the boss.”
One of the most important features is the audit trail these technologies provide. Email and voice mail create built- in audit trails that let you know a message has been received. Once such a system is in place, your people can no longer claim that they never got the message.
Another advantage is time savings. You no longer have to waste valuable time trying to find employees to give them a message.
These technologies all assist the sales force in extending their ability to work beyond regular hours. Most salespeople have stories about sales that fell through because they never received an important message from a customer. With voice mail and email, those stories will quickly become ancient history.
Video Cataloging Systems (VCS)
Selling tools have improved dramatically over the years and video catalogs used properly can shorten the selling cycle out on your sales floor. They can foster dramatic improvements in special order sales while minimizing errors. These systems can also be used to create virtual warehouses to sell inventory or frame and fabric combinations that are not shown on the sales floor.
Computer Assisted Design (CAD)
The manual preparation of client presentations by in store designers can be time consuming and limit the productivity of these employees. A store I recently visited had six staff designers who claimed to invest 12 to 18 hours in each presentation they prepared.
At Wal-Mart I bought a $9.99 room design package and opened it for the first time in front of these designers. Learning how to use the software as I demonstrated, a room layout was created and furnished from the sample video catalog included with the disk showing three different room treatments complete with three furnishing treatments in less than one hour.
The presentation quality was equal to or better than the presentations prepared by some of the designers. There are many additional functions in the software that can take presentations to a higher level than those prepared manually.
If you can help designers on your staff to become more efficient, they will be free to work with more customers. This will result in huge dollars being driven to your bottom line.
We in the furnishing industry need to know how to use general tools like these (or more sophisticated professional time saving design templates and tools available to industry professionals). If our customers can get better, more timely and more professional design results without us, they will certainly avoid paying for and using our specialized services.
Personal Communication Devices (PCD)
One of the biggest time wasting activities in retail stores is the sometimes-difficult task of locating specific employees. If James is walking through your showroom or warehouse looking for Rebecca to answer a specific question or perform a necessary duty, then he can’t be selling, prospecting for customers or handling customer service problems. If employees spend even part of their day walking around looking for someone else, then you are losing productivity.
Retailers like Target, Wal-Mart, and Home Depot actually costed out the timesavings ROI and went on to make huge investments into PCD’s. The timesavings alone are driving impressive dollars to their bottom lines and they will in your store as well.
The time has come for retail furniture stores to embrace technology. By incorporating technology into everyday operations and into as many processes as possible, you begin to establish a support system that will allow you to grow your business without having to add employees to support incremental increase in revenues.
John Egger, CEO of Profitability, Inc., helps retailers refocus their marketing strategies from the current M.A.D. (Mutually Assured profit Destruction) policy trend, to compete against other industries and stores based on value. Inquires can be sent to John care of FURNITURE WORLD at firstname.lastname@example.org.