MOM Knows Best
Merchant culture, streamlined distribution key to retailer success, Murray says at CRU
GLENDALE, Ariz. -- One way to determine if you are a true retailer: Ask yourself the question, do you have ownership and control over your supply chain? Are your employees truly engaged with customers and the offer for the majority of their time in the store?
Chris Murray, CEO of Trinitas Consulting Group, Fort Worth, Texas, urged retailer attendees at CSP's 2014 Convenience Retailing University (CRU) conference to realign to a merchant operating model (MOM), which places the focus on the customer and the retail offer. In particular, he homed in on three areas of the model that could help in this migration: supply-chain optimization, hiring employees with a merchant mentality and enabling engagement with customers.
First, the supply chain. Murray, who has a background at distributor Core-Mark International as well as on the retail side at Shell Oil Products US and Texaco Refining, said most retailers outsource their supply process today to a primary wholesaler and a gaggle of direct-store-delivery (DSD) suppliers.
"There is confusion and inefficiency," he said, noting the setup results in an uncompetitive cost of goods, problems competing on price with other channels, and unnecessary out-of-stocks, among other issues.
In particular, he believes most retailers have way too many DSD vendors in their supply process. Manufacturers, he argued, should focus on manufacturing products and not delivering them.
"It separates the operator from ownership of the offer," said Murray. "It gives ownership of the area to the supplier."
He advised retailers to take the MOM approach to supply, which limits supply to the primary wholesaler and a very select number of DSD vendors--only those whose products they consider an essential part of their offer. It also would ideally include a single, automated ordering and receiving process, and that store employees stick to the plan-o-gram when merchandising items. And instead of the current model, where the primary wholesaler is making deliveries to the store once a week, with DSD vendors in and out several times, the MOM model requires the wholesaler to visit at least three times a week, with DSD vendors whittled down to a select few.
The results, according to Murray: the ability to access lower prices, better product availability because you will not be limited by the supply chain, increased freshness of product and better employee focus.
On this last point, Murray noted that MOM transforms all retail employees in merchants with a "customer-first, offer-first" mentality. "A lot of people are hiring for control capabilities," he said, with job descriptions for store managers heavily focused on required skills that involve controls: conducting audits, counting money, etc. Any customer engagement tends to be limited to the transaction.
"The winning c-store retailer wins on people and the offer, not control," said Murray.
In MOM, all store employees--from the counter associate up to the store manager--would have "merchant" in their title. They would be hired based on their ability to engage on a personal level with customers, and promoted based on how efficiently they deliver this engagement.
As part of the MOM approach, a retailer should streamline administrative tasks and release store managers as often as possible from them to engage with the customer.
"If you layer administration on stores, it can influence how the store works, said Murray. A retailer should evaluate all non-customer, non-offer processes to determine if they are necessary or could be improved. The goal: Allow a store manager--or chief merchant, in MOM parlance--to engage with customers 70% of the time, vs. being engaged in paperwork and control-related processes.
The benefits, said Murray, are many. The store will be "customer ready," and customers in turn will offer better feedback.