Retail Store Operations Meaning & Management Guide

Retail operations are the activities that allow online and physical stores to function.

The aim of retail operations is to enhance the customer shopping experience and lower the retailer’s costs. Efficient retail operations keep your business running smoothly.

So how do you ensure efficient retail operations across both online and physical locations? This post will highlight the main challenges as well as some tips for maintaining successful retail operations.

What are retail operations?

Retail operations are the day-to-day functions that keep your small retail business running. If your business is new, then retail operations might include choosing your store location and design. Once your store is looking bright, shiny, and ready to welcome customers, you’ll want to focus on hiring a retail team you can rely on.

The more your business expands, the more operations you’ll have to carry out in order to keep things running smoothly. Think of operations as the set of systems and processes you rely on to prevent problems — like managing your supply chain to prevent shelves from sitting empty or goods from being damaged .

Retail Operations Examples

Managing your retail operations requires juggling multiple responsibilities and switching between different types of tasks, but knowing how to design your daily workflow for efficiency can help to take the stress out of it. Let’s get into some examples of retail operations and the role they play in your business.

Store Design & Development

After signing your lease, designing your store layout will be your first priority. This is your chance to make sure your store is customer-friendly and designed to showcase your products.

Organize your layout according to what you want to showcase: For example, what lighting do you want to use? Do you have signs to advertise a certain product line or guide customers toward specific promotions?
Always consider the customer experience: When choosing your store aesthetic and layout, think about how customers will experience your store. For instance, consider what they’ll reach for first and what elements will attract their attention as soon as they walk through the front door.

Store layout and design may change as you scale your business, and it may even become more specialized. When it comes to operational efficiency, flexibility is key — you have to be willing to adapt your floor plan to meet the needs of your retail business.

Hiring & Employee Management

Current research shows that at least half of front-line retail workers are thinking of leaving their jobs due to a lack of flexibility and control over their duties, so retail operations managers should think about ways to optimize the hiring and employee experience for today’s retail workforce. And while the retail environment is not a traditionally flexible one, there are ways to get creative with the people management process.

Be open to re-structuring the way your employees work: With the growing popularity of the gig economy, some large retailers have adopted this format and let their employees choose what they want to do every day, whether it’s working the register, stocking shelves, or talking to customers.
Offer opportunities for advancement: A recent McKinsey survey revealed that career advancement is extremely important to front-line retail workers, so operations managers should think about how to make development paths possible for their staff.
Attract and recruit the right candidates: By creating an employee-friendly environment with flexibility and development, your job description is going to attract the best candidates. That’s when it’s time to use an all-in-one solution like Homebase to help you create job posts.
Streamline the hiring process: A good hiring tool lets you keep track of all your candidates in one place and schedule interviews with them. Streamlining operations in this way can help you focus on multiple areas of your retail venture at once. The best part? With Homebase, it can all be done without paperwork.

Inventory Management

For retail operations managers, keeping your inventory coordinated and flowing is probably one of the biggest parts of the job. But maintaining inventory is a balancing act because you’re always trying to anticipate customer demand and avoid stocking too much.

You don’t have to reinvent the inventory management wheel — there are many tried-and-tested methods for keeping control of your stock:

Perpetual inventory management: This is the simplest form of inventory management that involves counting inventory as it arrives, but stores that use barcode scanners and radio-frequency identification (RFID) tags can automate this process.
ABC analysis: This technique involves separating inventory into 3 categories with A as the most valuable inventory with the most impact on profit, and C as the least valuable and the least impact on profit.
Just-in-time inventory management: You can use this technique and order inventory only when you need it to avoid accumulating too much back stock.
Safety stock inventory: Safety stock is extra stock that is ordered to set aside to avoid running out of those items.
FIFO and LIFO: You might use the “first in, first out” (FIFO) system if you need to sell the older inventory first, and the “last in, first out” (LIFO) system works best for inventory with a shorter shelf life that needs to be sold quickly before it expires.
Reorder point formula: This formula helps you calculate the minimum amount of stock you need before it’s time to re-order, and it depends on your average daily sales, your delivery time, and safety stock.

Transaction Processing

Transaction processing includes the processes, equipment, and software that makes customer transactions possible. It can be low-tech solutions like pen and paper or high-tech solutions like transaction processing software that works together with your store’s POS system.

Most retailers rely on POS systems to help them with their transaction processing because it removes the need for storing product information on a spreadsheet. For example, without a POS system to store product numbers, a cashier would have to refer to a piece of paper to find the price for every product.

Retail business owners can also use an accounting transaction processing system (TPS) to record payroll and employee data, but you can also use our platform to organize key areas of team management in one place that helps you keep a record of everything from onboarding to time tracking.

Marketing

Local business marketing is all about getting the word out about your products. Marketing increases your reach beyond your existing customer base and helps you reach more potential shoppers, and as an operations manager, here are some marketing strategies you can set up to attract more customers to your store.

Build a following on social media: Tap into the power of Facebook, Instagram, and even TikTok to provide value to your followers and create excitement around your products. For example, if you sell hiking and camping equipment, you can create posts and stories about what products are best for staying hydrated during a summer camping excursion.
Take advantage of local SEO : Use Google My Business to make sure your store’s website shows up on local SEO searches, and use local keywords and hashtags — like “organic markets in Houston”—to drive more online traffic to your site.
Take part in local events: Introducing yourself to the community at a local event like a farmer’s market, crafts fair, or retail conference can help local customers connect to your brand.

Workplace Culture Cultivation

Once you’ve hired great employees, create a work environment that keeps team members invested in the culture and encourages them to stick around. A great way to do this is by letting your employees know you value and respect them.

Here are some culture fundamentals you should foster for your team:

Be intentional about listening to employee needs and taking action on their feedback.
Organize team-building exercises that encourage employees to demonstrate their ability to problem-solve, get to know each other, and work together as a team.
Think of special rewards and bonuses for birthdays, anniversaries, and great performance.
Regularly recognizing good work and calling it out.

How to Improve Retail Operations

Optimizing retail operations is essential to improving profits for your retail store. Here are six ways to improve your business’s retail operations.

1. Automate where possible

Automating parts of your retail operations will speed up your day-to-day admin, make it easier to accurately track your inventory, and help inform future purchasing decisions.

Although it’s tempting, tracking inventory with lengthy spreadsheets can get out of hand quickly. It’s time-consuming and puts you in danger of human error and poorly informed business decisions. Instead, integrate all your POS and inventory management systems and let them do the tedious work for you.

When you automate your inventory management with high-quality software, you get access to helpful features like low stock alerts, automated purchase orders, and inventory reporting.

The best inventory management software accurately syncs your data in real time as stock is sold, received, or returned.

2. Unify online and offline selling

Customers like to view goods in person before completing their purchase online.

Hybrid shopping (a blend of online and physical shopping) is the primary buying method for 27% of consumers and 36% of Gen Z—more than any other generation.

Alexa Allamano, the owner of Foamy Wader, a Shopify-based jewelry store with a physical store in Langley, WA, explains how she has successfully unified online and offline selling by offering “literal window shopping” with her “Scan to Shop” method for monetizing window displays.

“Using a system of scannable QR codes merchandised in my store windows allows me to capture sales and leads outside normal open hours,” she says.

Since her business offers custom sizing, the click-and-collect approach drives online traffic from the store’s foot traffic and guides shoppers through the personalized online experience.

By tapping into the BOPIS (buy-online-pick-up-in-store) trend, Allamano has met customer needs and seen positive results. “The benefit of this omnichannel approach has caused an increase in both my online and in-store average order value (AOV) of 10% and 19% respectively.”

3. Offer experiential retail

Shoppers are craving live in-person experiences. According to a Forrester Consulting Study, 32% of consumers plan to engage with brands through experiential retail in 2022. To stay competitive, 40% of brands said that experiential retail would be a top priority for them.

To create memorable shopping experiences for customers, focus on creating customer-centric interactions. These could be:

Interactive product demos
Workshops or classes
Community-based events
Pop-up showrooms
Try-before-you-buy events

Experiential retail encourages customers to spend more time with your brand. For example, sportswear brand Lululemon embraces experiential retail at their Chicago flagship store. The idea was “to create a space where customers could spend three hours, rather than 30 minutes.”

Instead of experiencing Lululemon through their clothing, customers could head to a health-food-beverage restaurant, a yoga studio offering classes, a workout studio featuring branded classes, and a meditation studio.

4. Optimize inventory management

Access to accurate real-time data is key for optimizing your inventory management. Be prepared to adopt new technology to make your existing inventory infrastructure more efficient.

RFID (radio frequency identification) tags enable you to better search, identify, and track items. Unlike traditional line-of-sight bar codes, RFID tags can be read at a distance and from any orientation for quicker inventory processing. This gives you better inventory visibility with the potential of more frequent updates.

Syncing your POS with your inventory management software will automatically track product sales, returns, or exchanges, saving time, and improving accuracy.

Start performing quarterly inventory counts in cycles. Instead of counting everything at once, break it down into sections. Spend one cycle counting one area or type of inventory and the following counting period on another item type or section in your warehouse.

Conducting inventory counts will help reduce the chance of costly overstocking or frustrating stockouts.

5. Optimize returns and exchanges

Total returns account for $428 billion in annual lost sales for U.S. retailers. Returns don’t need to represent the end of the customer journey with your business. Instead, returns are an opportunity to deepen your understanding of your customers’ requirements.

BORIS (buy-online-return-in-store) offers the chance to meet and convert customers personally. Use the opportunity to learn more about the exact product specifics your customer is looking for and help them find it.

To encourage customers to shop with your brand again, offer a return to gift card option so they can choose to buy something else at a later date.

6. Streamline checkout

In retail, the online shopping cart abandonment rate sits at around 76%. And 18% of shopping cart abandonments are due to a long and complicated checkout process.

By streamlining your checkout process, you’ll make it easier for shoppers to click buy and follow through on their orders.

Tiffanie Hartenstein, the CEO of ORACLE Lighting, an automotive lighting company with a Shopify store, says that a streamlined and personalized checkout process is key to improving conversion rates.

In your physical locations, using a mobile POS system enables store staff to take payments anywhere in the store and virtually eliminates lineups to pay at checkout. This line busting tactic gives customers an efficient checkout experience.