Productivity Evolution and Harnessing Every Dollar

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Brandon Wetzstein

Lead Business Partner- Order Pickup Planning and

Implementation

~20 Years in Retail

Target

Best Buy

Audio King

Improviser

Beginning blacksmith?

Linkedin.com/brandonwetzstein

Twitter @curiousbrando

1950’s – Post WWII – increased specialization and DIY- Home Improvement centers-auto parts and tire stores- expansion and growth of the supermarket- Notably the TV Dinner

1960’s – Apparel rebellion (think tie-dye), Big Box hit’s the scene, Discounting becomes a thing.

1970’s-Office Retailers, Restaurant growth, Discounting theme continues, discount clubs

1980’s- Rise in fashion and designer styles, Brand names, more office services and discount clubs. Home shopping network (new channel) – computer use start to lend efficiencies- Hardware growth, Decade of the chicken wing, fast casual born, premium grocery

1990’s- Internet retailers, comfortable casual, prescription filling computer system, Growing fast casual and gourmet coffee, grocery mergers and superstore

2000’s- Fashion all over the place (crocs), tech disruption, organic healthy and on te go. Grocery merges

Today: Tech everywhere, omni-channel flexibility, personalization, Save time, recommendation engines.

2From Chain Store Guide's "Through the Ages” series.

Basic measurement- very similar to ROI

In retail, expressed in sales dollar per labor hour (or employee in a sales role)

Ideally, should increase over time

Store labor is largest component of SG&A Expense (For Big Box Retail)

To oversimplify- Footsteps and Touches (Maximize here!)

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3 Steps

1.5 Seconds each way

5 pots/day

$8/hr

$12.17/yr

7-Eleven

8273 stores

Coffee Filter

Fetching Cost = $100,654

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Assortment Complexity (Specialization & Localization)

Shortened product lifecycle (technology, seasonal, trend)

Product touches

Footsteps

Wage Rate (increases over next 5 yrs)

Inventory & Supply Chain

Accuracy

Availability

Turn

Fulfillment

Cube (holding)

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Increased selection

Localized product

Immense variety

Decreased product lifecycle time

Technology

Increased trends in non traditional trend areas

Sriracha Ketchup?

Cannibalization of the core

More products = more facings = more touches

Increased inventory risk

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Omni-channel fulfillment

Inventory accuracy is key- but challenging

Stores as fulfillment centers

Shipping from stores

Shop online- pick up in store

Buy online- ship to store (expanded assortment)

Hard to find items (clothing – jorts)

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Expected spikes in minimum wage rate over the next 5-10 years

Some Retailers have already expanded wages

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19.1%18.9%

19.2% 19.2%

20.1%

18.0%

18.5%

19.0%

19.5%

20.0%

20.5%

21.0%

21.5%

22.0%

22.5%

23.0%

0

100

200

300

400

500

600

2012 2013 2014 2015 2016

Walmart

Rev SG&A Percent

20.1%20.3%

20.2%

19.8%

19.5%

18.0%

18.5%

19.0%

19.5%

20.0%

20.5%

21.0%

21.5%

22.0%

22.5%

23.0%

0

10

20

30

40

50

60

70

80

2012 2013 2014 2015 2016

TGT

Rev SG&A Percent

20.2%

21.1%

19.7%

18.8%

19.3%

18.0%

18.5%

19.0%

19.5%

20.0%

20.5%

21.0%

21.5%

22.0%

22.5%

23.0%

0

10

20

30

40

50

60

2012 2013 2014 2015 2016

BBY

Rev SG&A Percent

22.7%

22.1%

21.1%

20.2%

18.8%

18.0%

18.5%

19.0%

19.5%

20.0%

20.5%

21.0%

21.5%

22.0%

22.5%

23.0%

0

10

20

30

40

50

60

70

80

90

100

2012 2013 2014 2015 2016

Home Depot

Rev SG&A Percent

Source: Marketwatch.com

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Technology- RFID, ESL, Self Checkout

Localized predictive analytics (Machine learning)

Precise allocation of resources based on Return on Labor (ROL)

Knowledge sharing and interdepartmental cooperation

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RFID- Inventory Accuracy, Location accuracy

ESL- quick price change ability (dynamic, accurate pricing)

Self Checkout

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Combine location with historical sales and promotional info

Dive into location events, news, weather (open data)

Football games

Political rally’s

Delegate/plan labor appropriately-

Plan smart localized promotions

Machine learning to truly understand variable impact

Combine with qualitative EXPERTISE!

Crowdsourced employee info?

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Not quite productivity- but valuation on ROI by labor dept

Minimum bases that need to be covered- Cashier,

Customer Service

Putting product away,

Open and close the doors

After base levels are met, determine best ROI per labor dollar spent by store Assortment changes

Promotion management

Clearance price management

Example: $100 of labor to spend in a day-

$60 is table stakes, where does the remaining $40 go? The same place as last year?

Divided by department?

OR does it go to the best possible resource available?

In December, service in electronics yields the best return

In June, It should be applied to assortment change

In February, it should be applied to additional clearance markdowns16

Connecting usually unrelated departments to find internal synergies

Marketing and operations?

Call center and product development?

Synergies exist, they just need to be found.

Example?

Cartwheel

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