KUSHNIRUKRetailers should look to automate back-end business processes to increase efficiencies and buy back time to focus on the areas that matter most to them. By Marshal Kushniruk

 

There is no question about it, automation is revolutionizing every industry and business function around – from sales, marketing, advertising and customer experience to accounting, payments and more. While many retailers have started to digitize at the front-end, such as adopting mobile payments to replace credit cards, there are several areas in the backend of the business that can also be automated to improve efficiencies. This saves time and resources for focusing on growth areas of the business like customer experience.

Digitization doesn’t have to be daunting. Here are three key areas retailers should consider automating this year and why:

Inventory Management

Having real time views into inventory levels is critical, especially for luxury items. By understanding precise inventory levels, companies can reduce costs and resources tied up in inventory - when items are not selling - and improve the customer experience for items that are hot on the market and in high demand, ensuring that inventory is always available. The key here is that inventory matches demand, and sales inventory management software makes accurate numbers easily available.

Further, inventory automation solutions take other variables into consideration that may affect inventory level demands. For example, if springtime is approaching, the software forecasts a drop in demand for winter coats and will remove or prompt the administrative user to remove the line item from the purchase order.

Marketing Automation

Reach the right customers on the right channels at the right time. Marketing automation helps to build loyal customer relationships. Marketing automation uses the customer journey to share relevant, personalized information. It creates an ongoing conversation with customers and subscribers to build brand loyalty. This supports customer retention, cross-sell, upsell and advocacy customer stages. As such, it ultimately has a great impact on the bottom line through generating returns on investment.  

In the retail space, businesses can look to create unique experiences through mobile, such as through mobile coupon campaigns. While they may seem old-fashioned, coupons are actually a major aspect of the shopper experience (online and in store), and highly influence the purchasing decision – but these days digitizing the process is so much more valuable than paper. According to the 2017 Valassis Coupon Intelligence Report, coupons can tempt 79 percent of loyal customers to switch brands.

Furthermore, just over half (51 percent) of in-store shoppers will make a purchase based on a mobile notification received in store. This provides an opportunity for retailers to tap into consumer behaviors by automatically pushing shoppers mobile coupons based on their past purchases and in-store location and prompt them to add more goods to their shopping cart. This brick-and-mortar trend takes marketing automation a step further than traditional email campaigns.

Tax Compliance Management

Retailers operating in the U.S. or across borders cannot avoid tax, but automation does make it less cumbersome. Traditionally, the tax-exempt certificate creation process has been a manual “high-touch” process involving multiple phone calls, mailings and emails. According to Aberdeen research on the cost of compliance, 38 percent of large companies with revenue over $1 billion stated that management of customer exemption certificates was the most difficult component of sales and use tax management.

However, sellers no longer need to manually fill out and file paper certificates; an automated process removes this cost and room for error.

For a salesclerk in a brick-and-mortar storefront, plugins to the POS system help them to easily look up a tax-exempt organization and see if their certificates are already on file. If not in the system, the buyer and seller are prompted to either take a photo of the certificate for upload, or walk through a digital intake form – automatically saving the criteria in the system across all locations for that retailer.

From the buyer’s perspective, the solution also ensures that their documentation across retailers is always up-to-date by sending automatic reminders to renew exemptions and stay tax-exempt across all of the companies they buy from. This digital exchange network allows the buyer to remove the hurdle of proving they are exempt, so they can react to a deal and buy in the moment. Additionally, the seller gets the benefit of the back-end compliance data to ensure they have what they need to “prove” the tax exemption was valid. 

These automated processes are each a win-win for buyers and sellers by ensuring that high-demand products are readily available; consumers can make purchases through a deal and retailers can prompt a customer to try a new product or make a repeat purchase based on known data about their preferences; and tax-exempt businesses can easily manage their documentation while sellers have all sales tax documentation proving exemption readily available.

By streamlining back-end processes and improving efficiency through automation in these areas and more, retailers can use their time smarter to engage with customers, build brand authenticity and understand consumer desires and needs to ensure their business is growing and providing value.

Marshal Kushniruk is the executive vice president at Avalara.

ENGLISHHow grocery retailers can overcome the challenge of recruiting and training talent in the midst of a shrinking labor pool. By Jim English

Consumers have put the pressure on delis, the fastest-growing segment in grocery stores, to deliver a new experience with an expansive variety of food service offerings to meet their changing needs. In fact, prepared foods have skyrocketed in the grocery space, with annual revenue climbing from $12.5 billion in 2006 to $28 billion in 2015, five times the rate of traditional restaurant growth, according to the National Restaurant Association – and it’s not expected to slow down.

As a result, grocery stores have evolved from simply providing ingredients and produce to operating more as a grocerant, now selling high-quality, prepackaged meals and fresh grab-and-go items.

Any leading banner will tell grocers that meeting consumer demand for high-quality products and experiences begins with a smart back-of-house operation. However, deli operators must first overcome the challenge of recruiting and training talent in the midst of a shrinking labor pool.

Recruiting top talent

Gone are the days when employee candidates came knocking on your door. Grocers now have to actively find and recruit them by using strategic and creative tactics.

How? First, leverage your company culture to attract potential employees who are seeking a career, not just a job. Once you have their attention, you can showcase how you’re offering a variety of perks to ensure they’re set up for success, such as medical coverage with multiple options, discounts on products, predictable working hours, safe working environments and team building. One of the best starting points to identify good candidates is by tapping your top team members for referrals.

Second, create and highlight an appealing work experience. Employees actually want to deliver on your brand promise, but they want to do so safely and without frustration. A modernized physical workspace with equipment and processes that ensures workers can perform the job is instrumental in securing top-notch talent. Design the environment that delivers the service you want, and it will be easier to recruit the right people for the job.

Training loyal employees

Finding the most passionate and committed employees is only half the battle. The process of training and retaining that same talent is the other half, and in some cases more difficult if grocers don’t have the right resources in place. Training empowers deli workers to do their jobs well by giving them responsibility and purpose day in and day out – and it demonstrates your commitment to the workforce.

The deli, in particular, is the most difficult space to train for due to operational hurdles and hazardous challenges grocery operations aren’t typically accustomed to. Limited space, full customer visibility, food-safety precautions, hot fryer oil, slippery floors and sharp cutting tools are just a few factors to consider.

Creating a turnkey model for training deli workers to perform both back-of-house and front-of-house tasks within the small workspace is the most effective way of tackling the job. Your training toolkit for success should include an assortment of methods that appeal to every type of learner. Video training, one-on-one sessions, group training and printed materials are a few effective approaches. 

Additionally, the equipment vendors grocers choose to partner with play a critical role in employee training and retention. When grocers install equipment that reallocates labor from dangerous, time-consuming jobs to tasks that deal directly with the customer, operational efficiencies decrease and employees reap the benefits. Equally as important, these vendors serve as the ultimate resource for training before, during and after equipment installation, essentially becoming an extension of your team.

Is your back-of-house deli operation ready for growth?

The products grocers offer, and the experience they deliver – is all an outcome of the people that they hire. Consider the current state of your operational model. Having the right balance of innovative equipment, well-trained staff and a forward-looking plan to meet consumer demands can help you succeed in the grocerant evolution. 

Jim English is the vice president of national accounts at Restaurant Technologies.

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Pastor SPThe future of independent jewelry retailers is dependent on newly emerged luxury e-commerce aggregators providing digital marketing and online legitimacy. By Jennie Pastor

The e-commerce fine jewelry market is growing three times faster than the fine jewelry industry as a whole. Like high-end designer fashion buyers before them, fine jewelry consumers are growing more comfortable purchasing big-ticket pieces online, even browsing and ordering directly from mobile devices.

As more fine jewelry retailers consider moving online, either in place of or as a supplement to a physical retail storefront, it is important they understand the challenges unique to fine jewelry e-commerce. In this article, I’ll explore these challenges and the recent emergence of a number of online fine jewelry aggregators – what problems are they trying to solve and does the industry need them?

For Consumers: Limited Access

Enter “fine jewelry” into a search engine, and you’ll find the results will typically look like this:

      • At the top of the search, after sponsored listings for high-end jewelry designers and brands, one usually finds large department stores with broad e-commerce sites that include fine jewelry among their many product offerings.

      • Next in the search results are usually the well-known fine jewelry design houses and the mass-market fine jewelry chains.

      • Finally, if you scroll far enough, one may also find a smattering of websites for small independent retail jewelers, often jewelers local to the searcher’s location.

Whilst this may appear to be a reasonable amount of options, such results actually miss a large portion of exceptional fine jewelry available to consumers offline – from new and emerging designers not listed on department store sites, and from the thousands of independent retail jeweler storefronts without heavily marketed e-commerce platforms. How can online consumers find unique and interesting jewelry that isn’t mass-produced, like vintage and estate pieces, one-of-a-kind designs, or fresh work from new upstart designers? It is this access problem that fine jewelry e-commerce aggregators were created to solve.

For Retailers: E-Commerce Challenges

Differentiation

In addition to premium designer brands and national chain stores, there are more than 15,000 independent fine jewelry retail stores across the U.S. selling a diverse range of pieces not available on department store or chain sites. These independent jewelers, many of whom have been selling jewelry for generations, represent almost half of total fine jewelry retail sales in the U.S. In an industry this fragmented, online brand differentiation – particularly for small jewelry retailers and designers – is both critical and exceedingly difficult. How does an independent fine jeweler or designer distinguish its unique brand and inventory among such a crowded field?

Trust & Authenticity

For any online luxury purchase, a consumer must have a high degree of trust in the retailer before buying a pricey product without the ability to see and touch it in person. For fine jewelry, consumers’ required “leap of faith” in the online retailer is magnified, as most jewelry buyers are not trained gemologists and thus cannot assess the quality and authenticity of precious stones and metals, even with the jewelry in their hands.

Jewelry buyers must rely on the integrity of jewelry retailers to accurately represent and value their products. Global jewelry design houses and large luxury brands rely on their established reputations to build online consumer trust; for small jewelers and emerging designers, however, building this required level of credibility online is challenging. How can a small retailer or designer prove their authenticity and credibility to skeptical online consumers new to their brand?

Digital Marketing

Any business that has ventured into the vast waters of digital marketing knows that it is obscenely easy to spend budget-busting amounts on overly broad or misdirected online marketing campaigns for very little return. Big brands have big budgets to fund teams of digital marketing experts to manage multi-channel PR campaigns, social media feeds, paid search, search engine optimization and influencer strategies – all driven by robust data analysis on site traffic, consumer demographics, and user behaviors and engagement. How can small retail jewelers and designers direct their limited marketing dollars efficiently, often without the benefit of in-house digital marketing and data analytics expertise?

Enter E-Commerce Aggregators

Recently, the luxury space has seen the emergence of a number of e-commerce aggregators. These aggregators typically seek to bring together inventory from designers, collectors and/or retailers to provide online luxury consumers with access to a large, diverse and easily searchable selection of luxury items. Some of these aggregators specialize in fine jewelry, while others include fine jewelry within a broad offering of luxury goods. As online-only players, aggregators generally have streamlined, user-friendly e-commerce platforms, digital marketing expertise and data analytics teams.

The fine jewelry industry is undergoing a significant change, and independent jewelry retailers and designers in particular are feeling the crunch. In 2016, 1,500 fine jewelry stores in the U.S. closed permanently. These store closures were largely driven by declining in-store footfall and sales as jewelry buyers move online. Simultaneously, many independent retailers, as well as emerging designers, have struggled to find solid footing online as new entrants to e-commerce.

If independent retailers and designers cannot find ways to grow their online sales, then consumers may find their jewelry options shrinking and ultimately consolidating into just a handful of big brands and design houses. The success and future of independent fine jewelry retailers and designers is thus, to a certain extent, tied to the success of e-commerce aggregators in providing trusted and efficient online sales platforms for online luxury consumers.

Jennie Pastor is the CEO and co-founder of Kavador, a fine jewelry marketplace. 

MAGUIREHow retail landlords can successfully make retail-medical leases work. By Andrew Maguire, Esq.

 

Recently, there has been a nationwide surge of hospital systems and other medical providers opening locations in suburban malls and shopping centers. Suburban medical offices offer convenient health care for patients, and retail landlords are excited by this new demand for their space. However, the medical use tenant and retail landlord must navigate three main obstacles to make retail-medical leases work properly. 

Use Restrictions

Any medical provider will want their lease to allow it to perform its full range of services within their leased space. During lease negotiations, medical tenants often push for the exclusive right to conduct their practice specialty within the shopping center. The landlord will typically limit these ‘use exclusives’ to preserve the landlord’s options for leasing to other medical-related tenants in the future. For example, the landlord might insist on adding language to the lease, which permits it to lease space to a pharmacy with an in-store clinic. Both parties to the lease should review the use exclusives, which have been granted to the shopping center’s existing tenants to verify that the medical tenant’s use will not conflict with these existing tenants. 

Before leasing any retail space, the healthcare tenant should carefully check the applicable zoning code. If the zoning designation for the shopping center does not allow for the tenant’s medical use, the tenant and landlord should coordinate efforts to obtain zoning relief from the municipality.  

HIPAA

Retail landlords may be unfamiliar with the patient privacy restrictions placed on healthcare providers under the Health Insurance Portability and Accounting Act of 1996 (‘HIPAA’).  To avoid HIPAA’s stiff civil and criminal enforcement, the medical tenant is right to limit landlord access within those areas where patient records are kept. Typically, the landlord will agree to stay out of any patient file areas unless accompanied by a tenant representative or in the event of an emergency.  These access restrictions must be explained to contractors who enter the space to perform work during the term of the lease.   

Retail Standards vs. Medical Needs

In order for the lease between the shopping center landlord and the health system tenant to work effectively, certain retail leasing standards must be relaxed. Although landlords often impose mandatory business hours and continuous operations requirements on their shopping center tenants, healthcare providers usually argue that their hours of operation must follow the work schedule of their on-site doctors. 

In return, retail landlords will often deny co-tenancy rights (which allow for rental reduction based on the vacancy of other space in the shopping center) to medical use tenants, as medical tenants are perceived as being economically independent of the other businesses in the shopping center. For this same reason, healthcare tenants generally object to paying for membership in merchants associations with the landlord’s other tenants.

Access to the medical premises is a critical deal point which often results in intense negotiation. Depending on the nature of its medical use, the tenant may push the landlord to make exceptions to permitted loading zone hours to accommodate ambulances and handicapped patients. Similarly, the number and location of tenant’s reserved parking spaces is a common source of contention. If the tenant’s medical use requires redundant energy supply (e.g., urgent care with operating rooms), the lease should specify the location and capacity of the tenant’s dedicated generator, with a clear breakdown of the parties’ related economic as well as maintenance responsibilities.       

Medical tenants frequently have cooperative use agreements with other healthcare systems. By extension, these tenants negotiate for their cooperating specialists to practice within the premises without obtaining landlord’s consent. 

Additionally, healthcare tenants will fight radius restrictions (which limit the tenant’s ability to open other locations within a specified area) and landlords’ attempts to impose percentage rent (which is complicated by the nuances of insurance coverage and Medicaid). 

Retail landlords will often insist that healthcare tenants coordinate and pay for their own trash collection, including ‘red bag’ waste and other hazardous medical materials. The outcome of lease negotiations on these issues will vary depending upon the context of each particular transaction.

Andrew Maguire is a real estate partner at McCausland Keen + Buckman. He negotiates leases for a variety of retail landlords and health system tenants across the country. Contact him at amaguire@mkbattorneys.com.

retail on the riseWhy we can expect even better things in retail development this year. By Dan Villalpando

The retail industry welcomed 2016 with cautious optimism, not unlike the sentiment entering the previous year. Statistically, it turned out to be a decent year for retail developers and retailers, with estimates that retail sales in 2016 rose approximately 3.3 percent over sales in 2015.

While such growth is not as robust as many had hoped, it does represent movement in the right direction and begs the question: Can we expect to see even more improvement in 2017? Based on positive news regarding the gross domestic product, continued growth in the job sector and the influx of foreign investment dollars, it appears that there may be reason to expect even better things in retail development this coming year.

One facet of the economy that has a major influence on the health of retail development is the gross domestic product (GDP). The latest data indicates that the weak growth rates in the GDP of 2009-15 that stagnated around 2 percent may be a thing of the past as experts forecast growth of 3 percent in 2017. In addition, according to the UCLA Anderson Forecast of December 2016, real consumer spending, a factor closely linked to retail development, is expected to increase 3 percent in 2017 and another 3.7 percent in 2018. Another positive sign is that, according to the International Council of Shopping Centers (ICSC), holiday spending in 2016 rose by 16 percent over the 2015 season, beating predictions by 4 percent.

Although housing starts continue to be lower than hoped by homebuilders, the unemployment rate continues to fall, infusing cash into the pockets of many households. According to the Bureau of Labor Statistics, non-farm payrolls expanded by 178,000 positions in November and the unemployment rate declined by 0.3 percentage points to its lowest level since 2007. This news, coupled with predicted wage gains, indicates that more people will have jobs and those jobs will, on average, be paying more in the coming year. This should provide a boost to consumer spending, a driving influence for retail development.

In terms of what is occurring with different types of retail projects, owners of regional shopping malls have had to adapt to stay relevant. For example, as the public continues the trend toward healthier food selections and different types of cuisine, mall owners have been forced to re-envision their food courts through general upgrades in quality and the introduction of more “exciting” restaurant concepts.

They have introduced sit-down restaurants, entertainment and Internet experiences to make the mall more of an experiential venue where customers can shop, dine, socialize and be entertained. The goal is to increase “dwell time,” or the period the customer stays at the retail project, so that customers will spend more money.  

Grocery-anchored neighborhood centers generally continue to provide a good return for their owners, with transactions growing in volume since 2009, and 2015 being a peak year at $3.9 billion of transactions, and 2016 following close behind. One of the larger growth sectors in retail is a specialty grocer such as Whole Foods, Trader Joe’s and Sprouts, while another is a discount grocer like Walmart Neighborhood Market. And although there remains uncertainty over the consolidation between large-scale grocers, owners of neighborhood centers continue to be able to attract retailers eager to feed off of the foot traffic generated by a tenant mix that typically includes a grocery and a drug store.

Other retail developers are being more proactive dealing with existing space by negotiating early lease terminations in order to re-merchandise with better tenants and higher rents. Some “mid-box” or “junior anchor” tenants like PetSmart and Old Navy, which are looking to downsize their footprints, may be willing to give space back early, allowing landlords to aggregate enough square footage to attract certain “hot” retailers in an effort to revitalize their shopping centers.   

Meanwhile, many retail developers have had to deal with the closures of anchor stores, such as Macy’s and Kmart, as well as sporting goods operators like Sports Authority and Sport Chalet. As a result, so called “specialty leasing” is on the rise, with retail developers looking to re-lease large vacant space to concepts not traditionally associated with shopping centers, such as go-cart tracks, trampoline facilities, day care centers, painting studios and cooking schools. 

When it comes to the world of retail development, the undercurrent of optimism from the beginning of 2016 continues to grow. While the needle on ground-up shopping center development may still not be moving, a solid uptick in the GDP and continued growth in the job sector bodes well for continued improvement for retail developers in 2017.

Dan Villalpando, a partner at Cox, Castle & Nicholson, specializes in retail development and commercial leasing.

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