Key Points

• The retail industry often needs tools like Six Sigma to be more efficient.
• The ability to assist with return processes or supply chain assures Six Sigma implementation will be beneficial.
• The hope is that cost savings will offset any cost associated with introducing Six Sigma.

If you’re looking for two perfect partners to work together to improve things, it’s the retail industry and Six Sigma. These ideal partners for success are not at all surprising, considering how much Americans love to shop. Introducing a data-driven methodology from Six Sigma can only improve efficiency across retailers to help increase sales and customer experience. 

With retailers facing intense competition, razor-thin margins, and customer expectations that only continue to rise, finding operational efficiencies is a priority. The good news is that Six Sigma enables retailers to tackle efficiencies in a way that can help benefit sales while pursuing efforts like implementing artificial intelligence and digital transformation. 

Why Six Sigma Matters To Retail

When you consider why Six Sigma matters so much to the $7+ trillion retail industry in the United States alone, it goes without saying that it matters in a very big way. There is a lot of money on the table, and retailers need to find every edge that goes beyond the traditional sale or marketing message to get customers to shop, stay loyal, and shop again. 

Customer-Centric Processes

Focusing on customer-centric processes is among the most critical aspects of implementing Six Sigma in retail. The customer is the most essential thing in retail, so focusing on things like how the checkout process is handled or how quickly returns can be processed matters quite a bit. 

If you think about how a retailer can analyze data to reduce checkout times, it will do everything possible to improve the customer experience. 

Data-Driven Decision Making

It won’t come as a surprise to learn that retailers spend billions gathering as much customer data as possible during the point-of-sale process, loyalty programs, and online platforms. Six Sigma can be incorporated into these tools to gain insights and then measured to try and understand what is causing inefficiencies or waste. 

As with Six Sigma, retailers will look at forecasting errors or delays from a supplier that can disrupt broader operations. This reliance on concrete data helps Six Sigma distinguish itself from other efficiency operation processes. 

Standardizing Operations

We have all been in a situation where two retail stores from the same company feel they operate entirely differently. This is unfortunate because it creates a bad customer experience. The retailer then brings in Six Sigma to help ensure operations are standardized across the board, by all stores in the chain and online. Of course, this means training or retraining staff so all stores provide the same customer experience and improve brand identity. 

Eliminating Waste

One of the best use cases for Six Sigma in retail is removing activities that are not adding value, which means reduced profits and higher costs. As a result, Six Sigma will tackle excess inventory to help streamline order processing. This could minimize overstock that takes up valuable shelf space, which could mean more retail space for best sellers, which helps drive even more profits. 

Predictive Problem Solving

Another highlight of incorporating Six Sigma into a retailer’s process is that it will help the company move from reacting to problems to trying to predict them. This could mean using historical sales data to anticipate inventory levels to ensure shelves are stocked for customers. 

Challenges of Six Sigma In Retail

Employee Resistance

One of the most common problems in implementing Six Sigma in retail environments is that employees resist change. This is especially true with retail staff who work by the hour, where turnover is high. Given their low salary, these staff may view the extra work implementing Six Sigma as off-putting and not worth the extra effort. 

A company with high employee turnover needs to train new employees consistently. Managers might also resist change, as Six Sigma will remove in-store decision-making, making them feel less empowered. 

Data Collection Difficulty

Unfortunately, as data-rich as retail environments are, these data sets are often fragmented and inconsistent between stores, especially in online environments. Collecting this data from the point-of-sale, inventory systems, and customer feedback forms or comments can be particularly challenging. Moreover, even if a retailer can collect all of this data, analyzing it and taking action requires specialized skills or AI tools that may not be immediately available. 

Customer-Centric Challenges

In retail, the belief has long been that the customer is always right, but this isn’t how it works in the real world, especially with customers becoming increasingly demanding. Trying to satisfy every customer with widespread policies is increasingly complex, and customer expectations constantly evolve, so retailers must improve their processes consistently, often at significant cost. 

What’s worse, taking action based on customer feedback is often far easier said than done since feedback can be widespread and, in many cases, impossible to act on. 

Cost Constraints

Unsurprisingly, implementing the Six Sigma process in retail requires significant costs, training, and hiring specialists like Black Belts, which are not always possible based on various retailer budgets. Smaller retailers, in particular, may not have the available scale to justify the upfront cost of implementing Six Sigma processes without guarantees, which are impossible to give. 

There is also the associated cost of gathering as much data as possible and parsing through said data, which also requires significant costs. 

Overcoming Six Sigma Challenges

Retail Realities 

In many cases, retailers can overcome the challenges of implementing Six Sigma by focusing on how any rollout best meets the needs of frontline staff. One smart method would be to create smaller, focused workshops of no more than two hours to give employees hands-on training without feeling overwhelming. You can also utilize overtime with this training, so employees feel incentivized to attend. 

Leveraging Data

If you look at how retailers use their point of sale system, one of the best resources for data for Six Sigma implementation, retailers can incorporate tools to monitor stock issues in real time. Adding these processes to their systems can minimize instances in which a customer walks out empty-handed, which means less daily profit. 

Start Small

Rolling out Six Sigma nationwide for a retailer sounds like a bad idea, and it is. Instead, retailers should focus on small tests, often with no more than a few stores, and work out any kinks associated with the rollout so that when it comes time for a wide rollout, the process is as smooth as possible. 

Six Sigma Retailer Success Stories 

Starbucks

Coffee giant Starbucks achieved one of the more famous Six Sigma implementations. By incorporating Six Sigma, the company focused on its in-store process, emphasizing faster drink delivery to customers. 

The company examined wait times and determined where to eliminate bottlenecks, so it repositioned barista stations. The result was increased customer satisfaction and reduced wait times, a win-win for the brand. 

Best Buy

When Best Buy hit a low years ago, facing increasing pressure from companies like Amazon, it took it as an opportunity to incorporate Lean Six Sigma to overhaul its entire supply chain. Through these Six Sigma implementations, Best Buy reduced its inventory by 15%, which meant less overall waste and increased shelf space for top-selling items. 

This saved the company millions in costs and made top-selling items more often available, increasing profits by millions. 

Staples

One of the more prominent examples of Six Sigma success is through none other than Staples, which hired Accenture (the consulting giant) to deploy Lean Six Sigma methods throughout the company. 

The most notable result was a four-week decrease in in-store setup times, a $3.3 million reduction in inventory costs, and a whopping $30 enhancement in the supply chain budget, which meant more efficiency in getting products to stores and into customers’ hands. 

Costco

By implementing Kaizen events to examine its checkout process, Costco could rearrange its entire store layout and retrain its staff. The result was a 30% reduction in wait time, meaning customers spent less time waiting in line at stores and could focus more on shopping and spending. 

Other Useful Tools and Concepts

In many cases, implementing Six Sigma is one of the best things a retailer can do, as it can reduce costs, improve customer expectations, and increase profits. When you factor in this potential with other technologies like automation and AI, retailers have a hopeful future for profits and customer loyalty. 

Artificial intelligence will also help reduce customer frustrations by enabling better chat tools online. This will free employees to work with customers looking to buy without complaining or discussing returns. This feels like a win-win for retailers, who can start rolling out Six Sigma processes as soon as they hire experts. 

Conclusion 

Overall, the writing is on the wall that Six Sigma is a brilliant move for retailers, and the benefits far outweigh any negatives. Yes, employees might be resistant at first, but the end game is improved employee happiness, which comes from increased customer satisfaction, which is a domino effect. The bottom line is that Six Sigma will help retailers earn more and spend less, so there is very little to dislike.