There was a time when digitizing the back office for a retailer meant installing point-of-sale (POS) units to replace cash registers. Today, the term can include nearly the full scope of operations for a store — and a chain.
Art Sebastian, vice president of digital customer experience with Ankeny, Iowa-based Casey’s, which operates more than 2,300 stores across 16 Midwest states, explained that he looks at digital back-office functions as creating efficiencies in three spaces, making for what he calls a connected store experience. One of those spaces is inventory management. “(Then) there are systems that allow us to serve our guests; that’s where point of sale fits in. And there are
systems that allow our teams to manage their careers, their schedules, their benefits, etc.,” he said.
While the newer digital back-office systems can handle a large variety of functions, the operations of the newer POS units are still fairly simple, according to Perry Kramer, managing partner with Boston-based Retail Consulting Partners.
“They’ll have the basic punch in, punch out type of things,” he said. “They’ll have the basic loading for employees and securities so that the store manager can override (transactions), and these regular associates can do the normal ringing functionality.”
By combining all of the functions on a digital platform, an operator’s efficiency level gets a hefty boost. Research and advisory company Forrester Research found the cost savings can be significant. Forrester compiles what it calls a Total Economic Impact Study for digital vendors.
For the retail space, Forrester examined how digital back-office functions affected the efficiency of a hypothetical retailer with 1,000 stores and 50 frontline employees at each store. The results were detailed in a recent National Association of Convenience Stores (NACS) session, titled “Digitizing the Back Office.”
Over the course of three years, digital back-office operations saved the hypothetical chain more than $30 million in staff optimization, employee turnover costs and savings in scheduling hours. The hypothetical company would even save nearly $1 million dollars in reduced paper and ink consumption costs.
But Sebastian stressed that digital efficiencies or any other enhancements all lead to the most important person in the retail space — the customer.
The premise is the same, advised Sebastian. When you make your team members’ lives easier, you’re taking friction out of all the user experiences — anyone who touches the applications and systems. It all leads to a great guest experience.
“How do we take a good look at this, so we can make things go faster, so we can take friction out of the store, so we can create labor slack? Because we’re doing things better, faster, easier, and then ultimately delivering a better guest experience,” Sebastian said.
Small Chain Options
But Casey’s is one of the largest c-store chains in the U.S., with a foodservice offering so big that it qualifies as the nation’s fifth-largest pizza operation. What about smaller operators? Kramer said those retailers have options, too.
He explained that retailers who don’t have a complicated environment can usually find a digital back -office operation that is compatible with what they have in-store today.
“If you’ve got something that’s 10 years old, you’re probably going to have to replace it,” Kramer said. “But if you’ve got something that you’ve bought in the last five years, in many cases a lot of these software vendors are building their software light enough or thin enough to run on that stuff.”
Small chains also have different options when it comes to the software licensing, as well. There are two types of licenses, said Kramer: the perpetual license and the software as a service (SaaS) license.
For large chains, the perpetual license is most likely the best fit. The retailer simply purchases it as part of their package, usually for a flat fee per register. The retailer can have its own tech staff configure the software, maintain the systems, etc., tailored to the store chain’s particular needs.
For small chains, the SaaS license is probably more economical. It’s paid as a monthly fee. The vendor handles the maintenance and upgrades. The system is run either through the cloud or via an on-site master unit — or both.
An impressive piece of the digital back-office functionality system is its ability to monitor itself. Kramer cited a system that will not only warn of an impending problem — say, with a POS unit — but also notify the proper technicians to come and service the distressed unit.
“It looks at the (unit’s) fan speed, it looks at the heat of the main boards, and if the fan starts running too hot, too long, and the motherboard gets too hot, it predicts that register’s going to fail, and they’ll send the maintenance guys out in advance of the device actually failing,” explained Kramer.
Sebastian said that he talks to many small chain operators who ask his advice on digitizing their back-office operations, especially when it comes to affordability issues. He advises other retailers to avoid getting caught up in a technology frenzy. Instead, start with the nuts and bolts of retailing.
There’s no cost to creating better processes, he noted. If a retailer doesn’t know how to start, or if they’re concerned about the cost, they should start with the basics, such as staging products, until they’re ready to step up to digitizing. “Over time, as you get good at it … you can think about deploying technology to guide that.”