The Power of Direct Observation in Retail

All to often people make changes based on data without taking the time to observe what is really happening.  This can lead to decisions that are not in the best interest of the business.

Recently, in our retail shop the data showed that we had some product that was not selling.  If we would have gone strictly with the data, we would probably clearance out the product and not carry it anymore.  But, we believed the product was something that people truly wanted.

Instead, we observed people as they perused the shop.  What we saw was people weren’t even seeing the product with the way they were shopping the store.

We decided to re-merchandise the store and almost instantly, as in the next day, we had sales on the product that wasn’t selling.

Data didn’t tell us the problem, but it did point us in the direction of a problem.  That is were data is very helpful, but the power came in observation.  Observation helped us see what the problem truly was so we could take appropriate action.

Do you take the time to observe the problem?  Or do you just manage by data?

Advertisement

Open for Business

I have had a hard time keeping up with the blog this year for a very good reason.  Regular readers may know that my wife has had an online business selling handmade soaps and bath and body products that she makes.  Over the last 4 years revenue has continued to grow at an incredible rate.  So much so, that we out grew out house a year ago and have been searching for a space outside the house to make the products.

Everything finally fell into place.  On Saturday, July 5th, 2014; Crimson Hill Soapworks and Gift Market retail soap opened for business.

It took almost a year and a half to find a place, negotiate the build out and rent, get the work done to the space and then set up the retail space and the kitchen.  The opening went better than we could have hoped for and now we are fully open for business.

Are we using lean in the business?  You bet.  We aren’t perfect and we have a long way to go, but we have always applied the biggest tenant of lean from the start.  Focus on value for the customer.  We believe the customer sets the market price for the product and our profit is that price minus our cost without suffering quality.

We know our target market and that is who we aim to please.  Our products may not be for everyone but for our target market we want to drive a high value proposition.

Here’s to new adventures!

Visual Management in Retail

I want to thank Ann Mazzoli for sending a couple examples of visual management that was used out in the retail environment.

The examples are from a dressing room.

This first example is very clear and can be understood as to how it could help the shopping experience.  When trying on clothes, I always separate them into two piles after I have tried it on.  No/Maybe and Yes.  This shows clearly a place to hang the clothes to make it easier.

The second example…not so clear

I have no idea what “Tomorrow” would mean for a dressing room experience.  Do you know what it could mean?

Visual management and labeling is great, but it has to be clear and understandable by the people that will use it.

Ann, thanks for sharing.

If anyone else has any examples please feel free to share them.

Small Buisnesses Are The Backbone To Our Country

There are many small start-up companies out there that create quality products and are trying to survive and flourish.  Some are making new and innovative products while others are trying to fill a need that they see in the marketplace. The former describes my wife’s small business Crimson Hill Soaps and Scents.

My wife started the company because our kids and I are very sensitive to the detergents and chemicals that are in mass produced soap sold in stores. Following the suggestion of a fellow soap maker, we tried all-natural soap and were amazed at how quickly it helped our skin and we were hooked.  After months of research and meeting many people, especially children, who were dealing with similar sensitive skin issues, my wife knew she had found a niche in the market that was untapped.

After months of trial and error and refining recipes, Crimson Hill Soaps & Scents was born. My wife has a complete line of natural adult soaps as well as soaps just for kids. My wife is very entrepreneurial, so she created her own website and online store and also started promoting online. She attracted local customers by attending handmade craft shows on the weekends. The soap business grew and, before she knew it, the soap was selling consistently and most importantly, she was passionate about what she was making and selling.

Isn’t this how all companies start off? A need, a passion, and a ton of hard work. From there some businesses stay small while others grow into giant companies like Apple or Microsoft. For instance, one of the suppliers my wife buys her materials from started with one woman making soap in her home to gain extra income to help support her disabled child. Her vision has grown into a multi-million dollar corporation that still has the best interest of the small businesses at heart.

There are people making incredible products that are affordable and very high quality. These are two concepts we talk about from a lean perspective. Managing cash flow is another metric we use in lean but it also applies to the small business owner too. Getting cash into their hands as quick as possible and not tied up in inventory is not easy for the small business owner, as it takes time to understand the marketplace and product demand. Now that we know the amount of effort that goes into running a successful small business, my wife and I find ourselves supporting small businesses whenever possible by buying unique items as gifts or for ourselves.

With the holiday gift-giving season quickly approaching, I encourage you to shop online at Etsy and ArtFire.  These are great websites that allow small businesses to sell their handmade products to the world with ease.  These websites started because of the vision, creativity and need of small business entrepreneurs. Who knows….one of these people could become the next Warren Buffet.

Walmart Changing Transportation Strategy

Walmart has decided to breakdown some of the orthodoxies that it has always had when it comes to shipping product (article here).  No longer will they wait for the supplier to deliver the product to their distribution warehouses.  Now Kelly Abney says,

“…it’s all about squeezing out costs by keeping Wal-Mart’s own trucks busy and by accepting delivery of merchandise at the supplier’s loading dock instead of at a Wal-Mart distribution center.”

This seems like the right thing to do.  Distribution centers are non-value added for the consumer which means they are nothing but a cost (or waste) for Walmart.  Does this mean they won’t have any distribution centers?  The article does not say what it means for the DCs.  My thoughts are there would still be DCs but maybe they need to be smaller because less is going through them saving on equipment, manpower, land, etc…  Also, what is mentioned but now focused on, is Walmart is trying to utilize its resources and not just source out everything and let their resources have waste in their processes.

Abney also says it allows suppliers to,

“focus on what they do best, manufacturing products for us.”

The main reason for this change is Walmart is having a big enough problem with receiving errors at the distribution centers.  Errors like:

“…missing pallets or delayed shipments.”

How does Walmart picking up the goods at the suppliers’ dock help?

“…when a Wal-Mart driver picks up a load at a supplier’s loading dock that same driver will have to scan each pallet’s RFID tag as it’s loaded. The driver will then transmit the data so it can be matched up in real-time with EDI documents that specify what’s in the shipment. Sending that data ahead doesn’t just give Wal-Mart the inventory information a few hours earlier. It gives the retailer the chance to have unpleasant inventory surprises corrected in minutes at the supplier’s loading dock, not days later.”

I like the concept.  Quicker feedback into the loop.  I still have a lot of questions though.  It is great that the problem is identified right away, but what if they don’t have the correct product or remaining amount available?  Is the data collected by the driver given to the supplier after every pickup so the supplier can track trends in types of errors in order to problem solve?

Once the pallets are on the truck, Wal-Mart also gains complete control over when that truck will arrive at the distribution center. Such knowledge creates much more predictability for arrival times, which in turn produces better scheduling options for the loading dock. It also means faster turnaround times. And, stores will know what they’re getting, and when.

Predictability is something that lean organizations strive for.  It creates less waste in resource availability.  Once this is accomplished, Walmart could take the next step in leveling the flow of trucks throughout the network.  I would bet by owning their own trucking and creating predictability they will create more savings then they even realize.

Zappos – Lean Like?

The lean philosophy starts and ends with the customer.  If we are not adding value for the customer then we will not be around for very long.  I have worked in several industries and every where I have been the companies talk stress being customer focused.  Unfortunately, in every case it is just lip service.  As soon as push comes to shove, the focus is on what is best for my world or silo and we quit talking about the customer.  It can get frustrating, because there are companies that are focused on the customer and drive it as their core business value.

Zappos is one company that focuses on the customer experience.  There is a great interview with their CEO Tony Hsieh (an 18 minute video of the interview too that is worth watching).  Tony Hsieh states:

“….the ultimate aim of the Zappos brand is to be the very best when it comes to customer service and consumer experience.”

Tony goes on to say:

“In the long run, customer service is just good business,” he says. “The problem, however, is that the payoff is usually two or three years down the line.”

That sounds great.  I have heard it all before, but what actions are they taking that makes this come to life and stick to the long-term thinking?  From the article:

• The company provides free shipping both ways
• Zappos has a 365 day return policy
• Only products available in the warehouse are placed on the site
• The warehouse is open 24 hours a day
• The company is contactable 24 hours a day, 7 days a week
• The 1800 contact number is prominently placed on every page of the site
• The company trusts in its reps; sales staff don’t have scripts
• If products are unavailable, sales staff direct customers to competitors

As an online consumer, I really like the things listed above because they get to the heart of some of the issues I have had purchasing online.  There were two bullet points that caught my attention the most.  The first was “The warehouse is open 24 hours a day”.  In the video, Tony Hsieh talks about this in more detail.  They understand running a warehouse 24/7 may not be the most efficient way to run a warehouse, but it drives quicker turn around of a customer order and increasing the customer experience.  Tony talks about automatically upgrading the shipping of repeat customers.  Some orders are placed at midnight and could be received 8 hrs later.  8 hrs later!  I have never received anything in less than 24 hrs and that is after paying an arm and a leg to upgrade to overnight shipping.

The second bullet point that caught my eye was “If products are unavailable, sales staff direct customers to competitors”.  If you are concentrating on delivering the best customer experience and not driving sales this makes sense.  The customer is looking for something now or maybe it is something Zappos will never carry so direct them to where they can get it.  This thought is, by doing this the customer remembers how much of a help it was for them and they come back later, building a loyal satisfied customer based.  How many of our companies would drive a customer to a competitor if we didn’t have what they wanted?

How does Zappos drive this behavior in it’s employees?

Ultimately, Hsieh believes that every company needs to determine its core values, and rather than have a vague sense of what those ideas should be, he insists it is important to select ‘committable’ core values.

So what are the values?

1. Deliver WOW Through Service

2. Embrace and Drive Change

3. Create Fun and A Little Weirdness

4. Be Adventurous, Creative, and Open-Minded

5. Pursue Growth and Learning

6. Build Open and Honest Relationships With Communication

7. Build a Positive Team and Family Spirit

8. Do More With Less

9. Be Passionate and Determined

10. Be Humble

Doesn’t a lot of this seem very lean like?  #1 is customer focus.  #4 sounds like “creativity over capital”.  #5 is continuous learning.  #6 is respect for people.  The similarities are there.  Tony Hsieh does not claim that Zappos is a lean company.  It just seems like what we look for as lean leaders though.  Zappos has taken on trying to teach their culture to others.  There is a great blog about it and how you have to relate this to your company, not just copy and paste, which is what we have seen people do over the years from 5S to andon lights and so on.

So why hasn’t everyone heard of Zappos if they have such great customer service? In the video, Tony Hsieh mentions Zappos does not advertise much if any.  They are very reliant on word of mouth based on the customer experience.

I hope to help my company be so customer focused.  What about you?