New A.T. Kearney Global Retail Study Finds Increased Management Presence in Stores Increases Performance

A new study by management consulting firm A.T. Kearney, the Achieving Excellence in Retail Operations (AERO) Study, shows that when field and regional managers spend more than 75 percent of their time in the stores employee turnover falls by 10 percent and stores are more likely to conform to initiatives. 
The study also found that 88 percent of leading retailers pilot more than 50 percent  of their new initiatives, and that these leaders pilot for a much shorter duration than other retailers (typically a short burst of four weeks). Piloting more programs allows retailers to focus on implementing “high potential” initiatives. When implementing new initiatives, leaders concentrate on ensuring the correct training methods are in place and they concentrate on fewer initiatives (one to two per quarter) to ensure program execution effectiveness. Thirty-eight percent of leading retailers use an official set of pilot stores to optimize new initiatives prior to store roll-out compared to only 18 percent of other retailers.
“Store operations issues are always important, and although Middle East retailers may not have been impacted as much as global retailers by the unprecedented economic conditions experienced over the last 18 months, these issues are equally critical to the long term retail business in this region,” said Dan Starta, Managing Director and Partner, A.T. Kearney Middle East.
The AERO Study included a comprehensive survey completed by 53 leading retailers in the apparel, electronics, grocery, hard goods, do-it-yourself (DIY), drug, health and beauty, and mass market and hypermarket sectors. Retailers from around the world participated in the survey. Study areas include: voice of the customer; banner strategy and business planning; supply chain interfaces; store operations; field leadership support; real estate and facilities; operating expense control; store technology, and initiative roll-out practices. The study looked at what retailers are already doing well, and identifies considerable opportunities to achieve peak performance and lasting results.
“Up to now regional retailers have rapidly opened stores and relied on strong consumer demand. As competition and retail space increases the retail business will come under pressure and the eventual winners in the Middle East retail market will be companies that align regional consumer demand with world-class execution. The findings of the A.T. Kearney AERO study provides retailers with a blueprint for achieving an operational competitive advantage,” commented Dr. Martin Fabel, Partner, A.T. Kearney Middle East.
Other findings in the A.T. Kearney AERO Study:
• The survey found that five critical factors emerged for retailers setting in-stock goals – product gross margin, sales velocity, sales variability, product cost, and product value to customers. The study showed that retailers that consider all five factors are able to lower their out-of-stock percentage by 27 percent.
• In the area of employee satisfaction, those retailers that regularly communicate with store employees about store objectives, goals, and store performance, and those that recognize high performing employees have lower turnover rates compared to other retailers.
• The survey found that 76 percent of retailers had at least one cost overrun in the past three years in at least one of the following areas: interior décor, fixtures, construction labor or exterior construction. A strategic store planning process can reduce construction cost overruns by more than 25 percent.
The 2010 A.T. Kearney AERO study uncovered numerous other findings on customer analytics, store operating expense management, employee satisfaction, piloting and roll-out practices for store initiatives, and more.  For more information on the study and/or to download the full study, please go to www.AEROstudy.atkearney.com.