Proving that training will provide a return on investment is something most retail managers will grapple with...

Bike shops: How do you prove retail training has value?

How can you prove that retail training will provide a return on investment? It’s the kind of question that many a bike shop owner or manager will grapple with. Here (courtesy of product training platform Myagi) Simon Turner – a US-based retail pundit who’s worked on the shop floor and distribution – provides his take:

Every responsible retail store manager wants to improve retail sales. Every brand that supplies their partner stores with merchandise wants to see more retail sales from those stores. Every customer who walks into a retail store is looking to buy something or looking for something to buy. Every responsible sales associate is looking to help customers find something to buy or complete a purchase since that’s their job.

So why are sales slipping at so many retailers and what can be done about it? Is the answer a new appreciation for retail training along with new approaches to implementing it required in the industry? A good approach to assessing the ROI of retail training is vital to driving this change.

Measure the drivers of retail sales to find improvements

First up, management guru Peter Drucker has said: “if you can’t measure it you can’t improve it.” So retailers need to know what drives retail sales and how to measure these drivers in order to find improvements. There are four components that drive sales in retail stores: traffic, conversion, average transaction value and shopper yield.

Traffic is the number of shoppers that come into the store on a given day or other period used for calculating purposes. Conversion is the percentage of store traffic that completes a purchase in that period. It’s calculated as:

# of store sales/store traffic

So if your store traffic in a day is 200 shoppers and 50 of them made a purchase, your retail conversion is 25%.

Another important and related retail sales metric is the Average Transaction Value or “ATV”. So if each of the 50 shoppers who made a purchase bought a total of $5,000 worth of merchandise, then the ATV would be $100.

Finally, Shopper Yield provides the product of conversion and ATV and any increase in either or both drives it up.

Shopper Yield = Conversion x ATV

Knowledgeable retail sales associates can have the biggest impact on sales

Often overlooked is the fact that one of the most important drivers for improving sales metrics is the retail sales associate and how well he or she can deliver a superior shopping experience so that more customers buy more in store. A well trained, knowledgeable and personable sales associate who interacts with the customer in the right way can make the difference between a sale and a lost customer. It’s been estimated that a knowledgeable sales associate can increase sales by 23% directly because of the knowledge they have applied to the retail sales process. However, sales associates don’t walk in the door with this knowledge. They become knowledgeable over time through experience and proper training. Yet, it’s estimated that retailers only train their staff about 10 hours per year on average and many store associates leave because they don’t receive proper training.

Since you can’t generate a great deal of additional sales with 10 hours of training, there is a vast opportunity being squandered by the retail industry. This must be because training is looked at as a cost and not as an investment. In an industry where margins are typically slim, cost is the weed that needs to be controlled to the point of extermination. However, to put retail training in perspective as more of an investment, rather than a cost, we need to consider the return generated from the cost of training in the form of increased sales. This is the return on investment or “ROI”.

Proper retail sales training can significantly increase shopper yields

In the case where a Retailer has worked with its brand suppliers to implement a comprehensive online retail training program that covers retail operations, product knowledge, sales and customer service, we can reasonably assume that conversion might increase by 1 extra sale per associate per day. It’s also safe to assume that the ATV might increase by 10% or $10, to $110. These increases are not unreasonable in light of retail studies showing sales increases from training.

If that’s the case, let’s take a look at the impact between two comparable stores that are part of the same retail operation. In this scenario, each store has 6 sales associates who interact with an average of 33 customers in a given day. The sales associates in Store 2* receive proper retail and sales training, whereas the associates in Store 1 maintain the status quo.

The increase in Shopper Yield in Store 2 is $1,160 or $193 per sales associate per day. Interestingly, $600 of the sales increase comes from the additional conversion generated by the sales associates and $560 comes from the increase in ATV. It becomes clear that to get the greatest shopper yield, both metrics need to be improved.

The ROI of retail training can be as much as 200X

Now let’s look at the cost associated with this training – a cost that’s held back countless retailers and brands from further investing in retail training. Let’s assume that the sales associates each do one hour of training per week at a cost of $5 or approximately $240 per year. If they take 12 training modules of approximately 5 minutes each, then this lines up and is equivalent to about $1 per day per associate for training. This means that the annual amount of training is more in the region of 50 hours, but the cost of this training is paid back in just over one day! If we also assume that a retail sales associate works on average 240 days per year and can generate an additional $46,320 in retail sales, we can see that the retail training they’ve received has an ROI of nearly 200X.

In this case, the manager of Store 2 who has incurred higher costs due to an increased training budget has still outperformed the manager of Store 1 by a significant margin. It follows, that Store 1 should adopt the practices of Store 2 and not the other way round. The industry as a whole needs to transform from being like Store 1 to being like Store 2.

Invest in training sales associates for retail prosperity

From this analysis, we can reasonably say that retail training should not be looked at as a cost or expense that impacts margins and reduces profitability. Rather, it’s an investment in the long-term prosperity of your retail business. It will generate sufficient additional sales to more than cover the increasing costs associated with running a retail business. If there’s a better investment in retail than in the proper training of store associates that generates additional sales resulting in higher shopper yield, we’d love to hear what it is. We think that nearly 200X ROI is pretty hard to beat!

Five steps to measure your retail sales and improve them with training

1. Measure your store traffic, conversion, average transaction value and shopper yield with an industry recognized retail analytics system.

2. Provide access for your store sales associates to an online retail training platform that provides short, sharp, video-based training across retail operations, product knowledge, sales and customer service.

3. A/B Test stores or teams within a store that have taken additional online training versus those that have not and compare key retail sales metrics over time to determine the uplift in sales and associated ROI.

4. Once positive ROI is established, plan to roll out retail training to your other teams and stores. This will require review of your training budget and someone in the organization to manage training.

5. Use your training platform for onboarding new store associates and getting them to ramp to maximum sales capacity faster.

This article first ran on Myagi’s own site.

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