The future of the store: fusing the physical with the digital.
Omnichannel has been an unavoidable word in retail. But how do retailers need to shift their measurement criteria for this new way of operating?
Back only in January of this year – a time in the annals of history 2 months B.C (Before Covid) – one might recall that one of the key themes at NRF was “Experiential Retail”. 2020 was to be the year of the re-imagined store: the great incumbent media device retailers had to build their brand loyalty and acquire customers.
Today, the more pressing question is if stores will actually ever reopen in the same way. Texas has paved the way on state reopening in the US by allowing retailers to operate with curbside delivery only. Top retailers are also already responding rapidly. Best Buy has moved to curbside pick up only. Kroger is trialing this model in its Cincinnati store.
Social distancing is not going away anytime soon. These alternative store models are likely to be with us for a while given retailers have a duty both to keep customers and their employees safe.
Such moves clearly throw retailers’ business models totally up in the air. In store experiences become irrelevant when there is no one to see them. Convenience, especially in the fulfillment of curb-side and delivery, have become essential. Although curb-side and delivery is nothing new, the sheer volume of orders is unprecedented.
As retail finds a way to excel in these areas, the good news is that there is a cousin industry that has been consistently refining and becoming experts in fast and accurate service for the last century, Quick Service Restaurants. QSRs are not only heavily used to “curb-side” with 70% of sales coming through their roadside drive-throughs but also have been early movers in digital adoption and delivery.
At Quorso, we have the great benefit of working with both retail and QSR companies, so what can retail learn from QSR in this new environment?
QSR are some of the most operationally rigorous companies out there. The general mantra is that by improving the operational processes, reducing wait times, increasing order accuracy, improving customer satisfaction the financial results will come.
Seconds matter, the current anecdotal evidence is of massive wait times at the large retailers for pick up and delivery times. In QSR’s the average time from order to pick-up in a drive through is 255 seconds with an order accuracy of close to 90%. Driving greater fulfillment of orders is the primary route of building brand loyalty, customer satisfaction, and subsequently maintaining revenue.
Retailers will need to start focusing on the right metrics and quickly start finding the inefficiencies in their stores to bring wait times down quickly and accurately.
In QSR there is a constant debate around what the optimal menu size is. Customers love variety but a more complex menu can increase wait times and reduce accuracy. Simple menu chain brands can create 2.7x the throughput of more complex ones. This is a bad stat for retailers who have seen an ever-increasing amount of SKUs in-store as increased consumer choice has become vogue over the last three decades. Grocers hold 40,000 more SKUs than they did in the 1990s.
Retailers will have to weigh customer choice versus an efficient scalable fulfillment strategy and focus on the most appropriate SKUs.
It is no secret that many retailers, especially grocers, have found it difficult to get the delivery model to work profitably. The QSR response to this has been a new sub-industry, dark kitchens. These are spaces set up with a more efficient order-based kitchen, located optimally for the last mile delivery costs.
Retailers, who are on even slimmer margins than QSR, will have to think about equivalent models to make sure they optimize their delivery model.
Training is a fundamental aspect of QSR, getting people up to speed with the right training on executing the right processes has taken 100 years of refinement since Kirby’s opened the first drive through in 1921. Drive-throughs are a Fordist production line of different tasks where each employee is there to maximize the efficiency of the process.
Retail has historically been about maximizing inventory revenue within the square footage available. If the near future is going to be more about fulfillment, the mentality of retail managers will need to shift and employee roles will need to shift accordingly. Those who create the most convenient experience for customers through the most seamless fulfillment experience will win. The scale at which they do this is, however, new. Watching the data, assessing the actions stores are taking, and seeing which are proving successful to scale will be key. As always, there is the one retailer who is ahead of the curve in many of these areas except for physical presence.
Everything is changing and the ones who respond quickest will be the ones who emerge and thrive out of Covid.