Podcast - Retail Occupancy with Greg Tanaka of Percolata

Blog Retail Occupancy with Greg Tanaka of Percolata

December 15, 2015


Joyce: Hello and thank you for joining us today on Workforce Institute radio. I am Joyce Maroney- Director of the Workforce Institute at Kronos. Today we are tackling a completely new topic for our readers and listeners called retail occupancy. Our retailers have long relied on traffic methods to manage their business provide better forecasting and schedule their staff according to labor demand. But as the retail business and customer expectations are changing, our Workforce Institute board member Mark Wales proposed this podcast to discuss new metrics that he and his colleagues across retail management are considering adding to their arsenal and especially around store occupancy. In essence it’s not only important that customers enter your store but that they stay and browse and buy and that’s where the workforce can make a real difference. With that let me first introduce our first board member Mark Wales. Mark Wales has been on the workforce board for several years and has provided invaluable insight built from his 30+ years of experience leading workforce management initiative across the globe for some of the world’s largest retailers. Mark it’s great to hear your voice this morning…

Mark: Thanks Joyce. It's good to be back on the radio and I’m looking forward to a good discussion today.

Joyce: Thank you. Mark has also been kind enough to introduce us to two great leaders from the top of retail occupancy. First we have Brian Field who is the senior director of advisory services for Shoppertrak a global leader in providing consumer behavior insight and location based analytics to help retailers’, malls and entertainment venues, learn who is coming in their doors, where they are going and how to make the most of that information. Brian oversees the company’s solution application where they help the customers get the most out of their data. Brian welcome to Workforce Institute Radio.

Brian: Thanks Joyce. We are really excited to be a part of this conversation.

Joyce: Thanks. And our final panelist is Greg Tanaka who is CEO and founder of Percolata- a Silicon Valley-based organization that helps retailer’s measure customer occupancy in their stores using plug in place counters. This data is then used to help shape the customer experience by ensuring that the best employees in the right number are staffed to serve customers at the best times. Greg is also Chair of the Palo Alto Planning and Transportation Commission and he is a Caltech and UC Berkeley alumni. Thanks for joining us Greg.

Greg: Thanks Joyce I’m really excited to be here, thank you so much.

Joyce: All right. Let’s get to it. Mark, my first question is for you. Can you describe how the retail business is changing and why you believe new methods are necessary?

Mark: I think we have seen for quite a while a rising complexity, disruption in the retail market and you see rapidly changing customer expectations. If I think of same day delivery, retailers such as Amazon are beginning to look differently at their stores. IKEA is a great example, where they are really now beginning to encourage people not only to shop in their stores but actually buy online while in store. So we have heard about retailers beginning to question the old metrics of sales per square foot and say: is it outdated and is it better measure experience per square foot , because they are really looking at what is the customer experience. Because as we reassess the traditional metrics, it is about time that we look at the industry standard which is traffic, which is used to calculate conversion. Is that really the right metrics that we should look at? Is it the one we should be scheduling to? That’s what I am hoping will come out of this discussion today.

Joyce: Okay. So let’s dig into that. Historically retailers have relied heavily on traffic metrics to inform their schedule planning. Brian, how do traffic metrics help retailers build accurately per schedule?

Brian: Simply put, traffic data ensures that the associates are there when the customers are there. Whether you are using traffic in counts to schedule associates, times when shoppers first entered the store for better customer engagement or using traffic out counts to assess how well store teams provide services to shoppers, the insights that traffic pattern provide are an essential part of baseline scheduling practices. Some retailers run purely on transaction counts but this assumes that there’s a hundred percent relationship between traffic and transactions, and second that it’s easy to back into service time at a cash register. Depending upon the type of services that you plan to provide, services aren’t necessarily that easily quantifiable and in addition traffic counts speak to the opportunity that the retailer has to sell more things to more customers. Transactions only occur after that opportunity is passed.

Joyce: Okay. So Greg- what’s your take on the value of traffic information in the retail environment?

Greg: Well Joyce I think you bring up a good question and I think Brian touched upon it. So you guys think about a retail business in terms of a funnel where at the very top of funnel there may be people walking past the store, then the next level of the funnel is people walking into the store and the final level of the funnel at the very bottom of the funnel is people who actually transact. As Brian talked about it, if you think about each level of the funnel there exists a perfect conversion rate from the people who actually walk in, to people who actually buy and so you want to staff against the opportunity that Brian was mentioning because that is what will allow you to maximize the conversions versus what you did, because if you could staff against what you did in terms of transactions, it is almost like driving looking at the rearview mirror versus looking at the windshield in front.

Joyce: Ok. So Brain are there other shortcomings that you can think of in terms of relying on traffic data that plans store staffing or are there particular risks that aren’t addressed by traffic data?

Brian: While traffic provides visibility to patterns of customer activity, it doesn’t speak for all of the associates’ activity such as merchandising, product shipment processing and certainly training. These thing can be done in between customer visits but without specific payroll allocations and directions, either those tasks aren’t going to get completed or customers are going to receive poor levels of service.

Joyce: Ok. And Mark, do you feel the same about that or do you have a different take?

Mark: No, I completely agree with Brian but I think one of the things we have experienced over time is that traffic tells you one side of the picture and there’s a risk in certain situations where traffic is not really helping. Not all customers spend the same amount of time in the store and this may be because of the product in a particular store, or maybe the time of day. We have situations where you will see a spike in traffic because the store is acting as the path to a car park or a food store and you really then can’t treat traffic the same in every store every time of the day, and this is why we are interested in the concept of occupancy and see if that will actually help us address those that have a rapid in and out of customers as opposed to stores where the customers comes in and the store can be hard shopped which means that the customers spend more time interacting with the associates, more of the product is touched and really that can then be tied back to the staffing levels , and as Brian talked about, that the related activities that need to start from or come from the customer interactions. The more you can align as Brian said the demand of the customer to the actual staffing will give you the biggest opportunity for sales and conversions.

Joyce: Ok. And Greg, I know that you have a strong point of view that occupancy data is a key metrics retailers should be tracking. Can you define what you mean by occupancy and talk about what leveraging occupancy data would look like in action?

Greg: Absolutely. I think Mark helped kick it off but it’s a very simple idea. If you ask a manager, how busy it is, the way they judge how busy it is, isn’t the in and out count at the door. Humans don’t quite think like that. What a store managers would do, if they think it’s busy or not, they would look to see how many people are in the store, how many customers are in the store? This idea of occupancy is in some ways very old and yet very new. It is old in that this is the way most store managers view how busy it is in the store. It is very new in that most retailers actually don’t measure it because it is very very difficult to measure. This is also why some store managers they look at the walk in and walk out data and they can’t compare from their old mental memory is about how busy it was in the store. They don’t think about occupancy not in terms of walk ins and walk outs. So what occupancy essentially is, is how many people are there in the store and what specifically about occupancy is that it’s more relevant in terms of understanding what is the workload on the staff, it’s not just the number of people in the store it’s actually the number of customers, that means the number of people minus the employees because if it small and there are a lot of employees, then the number of employees could be quite high. What specifically that you really want to know is buyer occupancy, so how many of you are actually there to buy and not just to shop, right? So if a husband and wife are in the store they may just be one buyer not two shoppers. So this is something where as a store manager or as a store associate, they can know and see because they are there but the way it has been traditionally measured is not permanent count on the walk in and the walk out data. So it doesn’t really give you an accurate picture about what the workload is. Mark touched upon some of the reasons why walk ins and occupancy and walk outs are different and one of the biggest reasons is that the dual rates are different. You could be at a store where one customer is there for five minutes and another customer is there for an hour, and the walk-in counters would say oh yeah there are two people but the workload is totally different for the staff for the one that’s there for an hour it’s actually may be 10X the workload. So, occupancy captures that and it’s more in line with the way store managers even think about how busy their store is. I think when we say occupancy I also realize that sometimes retailers get confused by this term merely because of the idea of rent occupancy, the cost to occupy a space, but in terms of what we really need to hear are how many customers are there in the store and this captures the dual rate of how long the customers are storing that’s workload on the staff.

Joyce: So Greg, if you implement occupancy, you augment other traditional retail metrics, what is success then looking like for that store manager or that organization.

Greg: You have to think about the labour load in three parts. I think both Brian and Mark touched upon this. So there’s a selling floor which in general you want to staff through occupancy. There’s appointments and that’s increasingly important especially for higher end stores and then there is task based work which means you should really do it by labor standards. So all three of those are very important to execute well on to make sure that customers are satisfied but for stores that have dual rates that vary between customers, staffing to occupancy is actually a really good thing because you capture the workload more accurately for the selling floor. And if you really optimize your staffing to further selling floors that you provide excellent customer service, we found that retailers can get anywhere from ten to twenty five percent boost in revenue using the same budget by simply shifting budget from when it is relatively overstaffed to when it is understaffed. I think that’s probably something similar that Brian might have seen associated with retail partners as well. And I think another key part of it is your sales associates because there is a difference between sales associates in terms of shopper yields. Dollars divided by number of shoppers. When you look at shopper yield terms of not just the walking traffic but you look at it in terms of occupancy, that really captures the sales ability of each sales associate much more accurately. So you can start to see that there is actually a big disparity between different sales associates and you can use that information to kind of slot in the best people at the best times.

Joyce: Okay. Thank you. And Brian I am going to throw in the same question over to you which is, how do you see occupancy working as a metrics and are there some places where occupancy doesn’t apply?

Brian: Sure, so let’s tackle the first part first. I think Greg is exactly right. Whether it’s an assessment about how to use it and what benefits can be gained from it. Occupancy and shopper dwell time help to establish what levels of customer service look like in the real word on a store by store basis. One of the big questions I am always asked is what is the ideal ratio of shoppers to associates and I think that these new metrics answer a better question which is how long do your customers shop and as a result how much time should associates spend working with them. Ultimately successful Shoppertrak clients work with me to find that optimal space between providing exceptional service and controlling payrolls. Regarding where occupancy might not work, I think it depends on the retailer's customer service philosophies and selling model. If you are scheduling non customer facing activities, occupancy probably plays less of a role and if you are stuck with a very minimum coverage level at all times of the day what retailers would call 1-1-1 coverage or 2-2-2 coverage might also be a little bit less meaningful, but ultimately anything short of that there’s a lot of value looking at it that way.

Joyce: I think we have teed up that occupancy matters. It matters more or less according to the business model of the retailer in question. And Mark you brought this issue to the table so can you bring us home with a summary of why the conversation of traffic versus occupancy is an important one for retailers to focus on especially now in the shopping season.

Mark: It’s been a debate for many years and we have been trying to move away from people thinking about staffing and payrolls as a controllable cost and really get them to understand that it is an investment because when you look at your staffing you look at how you invest your payroll and you are really looking at three things , first is how do they affect your customer experience, and you really want to maximize the time your associates have in front of your customers- be able to drive that appropriate customer experience. So if you are looking at better techniques and a better metrics to be able to pick and choose when we embark on staffing then you can do that and that is why it is important to look at concepts such as occupancy and see if we can drive continual improvement. But it also has a very vital role to play in terms of the employee experience because we are really looking to smooth out the scheduling, we are looking to give the right level of staffing at the right time in the right store which for the employee is important because things feel much more under control and if we are more accurate with our scheduling then there are less requirements for managers to make last minute changes. So it looks like it very much affects the quality of the life of an employee as well. And finally we are all searching for the health of the company. We are looking for that long term growth, that profitability, and if you can bring about the matching of employees and customers and give them both a good experience then you are really going to drive that higher productivity. You are going to find that your associates are going to give that extra discretionary effort and as Greg talked about you can actually see definite improvements in your sales and profitability. That is why these type of conversations, the ability to look at a new metrics, to find better ways to do things are really part of the rapidly evolving retail world. To me occupancy is an exciting area to explore.

Joyce: Excellent. Well, thank you Mark for bringing the discussion to the table and thank you Brian and Greg for sharing your thoughts today on the retail metrics and retail occupancy in particular. I know I learned a lot and I am sure our audience as well. And to those of you in the audience thanks for joining us. Please visit us on web at workforce.org and don’t forget to join the conversation by adding your comments to our discussion. Thanks for listening.

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