Efficiency Rules – The future of retail

While brick-and-mortar retail has struggled to compete with the convenience of 24-hour online shopping — with many companies shuttering as a result — there is still hope for the in-person shopping industry.

The Future of Shopping: the Canada Market Report 2021, found that “half of Canadian consumers have missed the social aspect of shopping in-store since the start of the pandemic.” 

While that brings some reassurance for retailers, many stores on the South Island are facing a looming threat in the form of the disruptive behemoth Amazon. When the 115,000-square-foot Amazon fulfillment centre opens at the Victoria International Airport, products will be delivered to the doorsteps of Greater Victoria customers within hours instead of days.

These shortened delivery windows will undercut the biggest advantage local retailers currently have — ensuring that products are available and accessible on the day of purchase for customers. 

Without that advantage, how can local stores compete? One Victoria-based retailer is ahead of the pack, using data-informed tech innovation and old school respect to challenge the online giant.

Combating Complacency 

The Canadian Tire store at Hillside Shopping Centre is the third largest in the country and the largest in B.C., with over 93,000 square feet of retail space and a total footprint of 150,000 square feet. It’s owned and operated by Justin Young, who is well aware of the need for retail to innovate and evolve — fast. His store is thriving, moving over three million units of product every year with sales increasing each year since opening in 2016. 

“I think the biggest risk that the industry faces is complacency,” says Young, whose first Canadian Tire store ownership was in Thompson, MB, in 2001. “Traditional retailers are masters of disrespecting the customer.

Traditionally, employers look at employee productivity, because of how it affects the business. What we’re trying to do is respect customer productivity. And customer productivity, at its core, is about respecting the customer’s time.”

“What we ultimately want to do is create an environment where we are removing the barriers for you to shop and not waste your time.”

Eight months after opening, Young and his team tore apart their store design and remerchandised it from scratch, focusing around an approach called absorption merchandising. This involved redesigning the entire structure of the store, based on a measurement of sales to space, with a goal of reducing the team’s walking path when replenishing stock. 

For example, five per cent of the store’s unit sales is a single item — those ubiquitous blue Rubbermaid storage bins. Prior to absorption merchandising, capacity on the sales floor was for 1,400 units. This meant that to keep up with the sales volume, employees would have to restock those bins 49 times a year to prevent the shelf from being empty.

“Keeping those shelves full would kill your labour costs, because you’re constantly having to fill it, and you’re not going to execute at that level,” says Young, who made the data-based decision to increase shelf capacity to 6,200 units, which only needs to be replenished 11.1 times per year. 

“​​We’re able to grow sales because the probability of having it on the shelf is extremely high compared to what it was before,” says Young. 

Another strategy to increase productivity was to invest in repositioning the escalators. Young had the option to keep the originals left behind by Target, which faced the back of the store and required customers to travel further to get upstairs. This was a common feature in traditional department stores designed to keep customers in the store as long as possible. 

“What we ultimately want to do is create an environment where we are removing the barriers for you to shop and not waste your time,” says Young. 

Now, the escalators face the front of the store, making the second floor easier to access directly from the front entrance.

In addition to changing the direction of the escalators, Young commissioned Limbic Media to design a light installation to draw further attention to them. This not only helped lure customers upstairs to see what was on offer on the second floor, it offered an interactive experience that customers were craving.

Shoppers of any age can control the colour and movement of the lights with a touchscreen and can choose sounds to accompany it. The result is a tactile moment of fun that’s hard to replicate online. In addition to the escalator lights, Young also had Limbic create a 60-foot lighting display on the front of the store to attract attention and, again, bring some delight to the shopping experience. 

Customer Productivity 

While Young values the importance of these eye-catching differentiators, his primary focus remains customer productivity — how efficiently customers can get what they need. One significant friction point he’s using tech to tackle is the challenge of selling high value and hard-to-access items. Whether they’re small enough to be slipped into a pocket or too big to be lifted, these items can tank productivity for customers and employees alike. 

Large and expensive items required time-consuming processes to release the item to the customer. Tracking down keys or paper chits, unlocking display cases, stock shortages, disrupting shopping patterns and lack of being able to track in-store product movement were just some of the frustrating barriers customers used to encounter. Not to mention the cost of employee time, potentially cancelling out any profit made from the sale and risking customers leaving empty-handed. 

All of that has changed with the new OrderUp system. After their success working together to create the store’s curbside pickup software during COVID, Young hired SYNQ Access + Security Technology (SYNQ) to build out a new system. Locked cabinets and large items on display are fronted with a tablet, allowing customers to access stock lists and select items that are located in the stockroom. They are then brought to the customer — who has meanwhile been tracking their progress via a QR code — at checkout. 

“We want to get to a place with software and with operational processes where we can have goods waiting for customers before they even wait,” says SYNQ CEO Nolan Wheeler. 

If the employee has retrieved the purchase before the customer shows up for it, the item is placed into a compartment in the store’s new SYNQ-created touchless locker, which can be opened with the customer’s phone whenever they’re ready to leave.

Beyond OrderUp, Young’s next tech endeavor is so innovative that the store qualifies for a Scientific Research & Experimental Development (SR&ED) tax credit. Young’s Canadian Tire store is one of the first retailers to access the credit that is a funding staple in the tech sector.

The project being supported is a dynamic “powered sortation and diversion” system. In most retail environments, employees would use a secondary replenishment model, which requires walking inefficiently in a non-sequential manner to pick the items needed to restock the store’s shelves. 

“They zigzag, zigzag, zigzag, and every single footstep is wasted,” says Young. 

The goal of Young’s Fast Find system is to eliminate these wasteful footsteps. 

“It’s a codified system like the Dewey Decimal System, except it’s for product location,” says Young. “We created a barcode-enabled location system that allows for employees to locate products so that there’s knowledge on the products that are located in the store all the time.”

An impressive five per cent of the Hillside Centre store’s sales are of Canadian Tire’s ubiquitous blue Rubbermaid storage bins. Young made the data-based decision to increase shelf capacity from 1,400 units to 6,200 units, which means replenishing stock only 11.1 times per year. Photo By: Joshua Lawrence.

When leaving the retail floor and entering the stockroom, the first difference you notice is the change in the volume of light. Work areas are illuminated. Additional lesser-accessed areas are only lit up when needed, triggered by motion. Unlike standard warehouse spaces with aisles that are wide enough to accommodate a forklift and warehouse workers, these ones are narrow.

With each product organized by barcode, the entire shelf rotates, similar to the rack at a dry cleaner, bringing forward the correct product for retrieval. From a machine resembling a cherry picker, employees can access different levels of product shelves. Footsteps — both lateral and vertical — are all but removed. Instead, employees use a control panel to access.

The efficiency of the store’s powered sortation and diversion process, in tandem with the absorption merchandising method and OrderUp system, helps ensure that the right item gets to the right place when and where the customer wants it. 

Every decision is driven by data with Young’s commitment to customer productivity in mind. And this is just the beginning.

“We’re using data now to drive the next level of automation,” says Young. “We’re going to validate and test things that are still wasteful … for example, for a retail worker, they’ve got a handheld device most of the time. And when they scan a product, they set [their device] down to pick up the box.” 

Similar to footsteps, Young sees this too as waste that can be minimized. He’s working with two companies to explore voice picking — using voice prompts to direct workers to product locations — and hand-integrated finger scanners, both of which will remove the waste of picking up and setting down a device endless times.

People Power 

Young is also navigating the circuitous route to collect new employees — another problem that requires innovation and thinking outside of the box. (Read more about the skilled labour shortage on page 32.)

Young’s employees can number from a low of about 150 up to 175. 

“But despite our best efforts, we still need 10 to 20 percent more,” says Young.

Young has devised a three-step approach to inflate his employee roster: retention, development and training, and recruitment. As well, over the last four years, the average wage at his Canadian Tire store has increased by 57 per cent. And he’s still making money.

Beyond good pay, Young has managed to retain employees by making his store a desirable place to work. A social committee organizes a raft of events — ugly sweater day, foosball tournaments, Easter egg hunts, barbecues. Staff who work off-hours are paid more.

For staff development and training, Young doesn’t hold employees back. 

“We don’t own them,” he says. 

Instead, employees who want to advance are trained to move up in the company and are encouraged to leave the store, armed with valuable marketing skills. Young has shepherded three employees who went on to own Canadian Tire stores. 

He’s gone outside B.C. to find workers. His first foray was moving 22 Ontario residents [workers and their families] to Victoria to work at his store. Some of the earlier transplants could afford to buy a home, but to house others, Young created a real estate holding company to purchase homes that employees can rent. 

In March, he’ll be welcoming eight or nine new workers from Singapore, Kuwait, Dubai and Saudi Arabia, who will live in his homes. Young had to confirm that there were no Canadians who could do the work. 

“They’ll be off-hours folks [night time work], managerial, very niche,” he says. 

The new employees will be doing auditing, stocking and logistics duties.

For Young, innovation offers opportunity. When it comes to the future of retail, Young is optimistic yet pragmatic. 

“I’m absolutely convinced that they won’t eliminate brick-and-mortar,” says Young. “We’re going to coexist in a hybrid world of digital and physical. But I can strongly say that our traditional way of retailing is fundamentally going to change.” 

This article appears in Douglas Magazine’s Feb/Mar 2022 issue.