As a small retailer, how do you limit risk and make sure you are offering something the local community wants, needs and will pay for – before you overinvest your limited time and resources? This question is at the very core of the lean retail approach to running a business.
Many of you can remember the first day your store opened to the public. The nerves you felt when you turned the closed/open sign around and unlocked the front door. Being the savvy small business owner, we know you are; you probably invested countless hours and months ensuring you were completely prepared. But even the most meticulous small business owner still can’t help but think- ‘what if nobody comes in? What if the hours and days go by, and I sell not one bottle of wine? How would I explain it to my friends and family? How would I deal with it financially?’
Look at you now. As it turns out, your fears were unfounded (and dare we say it, a little over the top). Nevertheless, it doesn’t’ hurt to analyze and understand the specific reasons why we some businesses skyrocket while others sink faster than an anchor. As technology, real estate, and other factors continue to change the retail environment, today’s small business owner must be willing to ‘Build-Measure-Learn’ if they hope to succeed without stretching their wallets.
Build-Measure-Learn is a business methodology designed to help today’s entrepreneurs think differently about their business. It fundamentally changes the goal of a small business owner from being all about the immediate pursuit of rock star growth to being about ‘validated learning’, i.e. a data-based understanding of the real effects of your business innovations.
When seeking to make lean improvements in your business, it helps to approach the decision-making process from the customer’s point of view. What improvements can you make in-store and in your day-to-day operations that can contribute to improving the customer experience?
Here are a few ways you can start applying this approach to your business today:
1.Track the Flow of Goods
Tracking the flow of goods in your business goes beyond the point of sale. You want to understand what items are selling and how often you’re selling them, but it’s also important to understand customer behavior and how your suppliers are impacting your profits. Map out your customer journey. Start with the customer and work your way all the way back to your suppliers.
2. Gather Customer Data
In today’s local retail environment data is the basis for every successful business decision. Retailers should do their best to account for all of the ways their customers are making purchases as well as the logic behind their decision-making process. Consider some of the following ways you can facilitate the collection of data to test new ideas in your business:
- Surveillance cameras aren’t just an anti-theft tool. Your store’s video footage is goldmine filled with valuable customer data. Place video cameras in critical areas within your business location to observe customer traffic and behavior.
- Gather customer information like email and telephone number upon checkout and use a tool like Facebook’s Audience Insights to learn about your ideal customer’s lifestyle, spending methods, purchase behavior and more.
- Make sure you’re using a point of sale system that provides you access to real-time business intelligence on sales and inventory.
- Monitor, aggregate, and analyze social media feedback about your store and competing local businesses.
3. Compete on Quality, Not Cost
A fundamental tenet of ‘Lean Thinking’ is to provide ‘value’ to the customer… based on how the customer defines ‘value’. A fancy way of saying, you won’t get far if you only focus on competing with local merchants by offering the ‘lowest price.’ As the old saying goes, time is money, and customers often value their time more than saving an additional buck or two. Focus on adding value by improving your customers purchasing experience. This can be as simple as offering reducing wait time by adopting mobile point of sale technology or creating personalized services and offers that your customers can’t find anywhere else.
Lean Retail makes it faster, easier, and less expensive to provide your customers with products and services. The job of an entrepreneur is to treat their business as a series of assumptions that must be proven or disproven scientifically. You must identify business assumptions, design and ‘build’ experiments to test these assumptions, ‘measure’ the results and allow all decision making to be guided by what is ‘learned’. It’s also important to complete this process repeatedly and iteratively, making the incremental improvements that create a successful business. If you’d like to know how to put this theory into practice, make sure to sign up for the Lean Retail 101 email course.