The 4 mistakes of management control in retail

A little while ago, we talked about management errors in the hospitality and restaurant sector. Today, Qotid revisits the 4 most frequent errors in management control in retail.  

Indeed, management control is essential for helping retail sector companies optimize their profitability, improve their operational performance, and make better decisions.
Poor management control can therefore have serious consequences on inventory management and, more broadly, on strategic decision-making.

Without further ado, here are the 4 mistakes to avoid. 

1st mistake: Not taking into account the data from the entire company and analyzing it poorly

Some retail companies do not consider the data from the entire company and limit themselves only to that of a department or a store. However, it is important not to adopt this strategy in order to have a comprehensive view to better understand the stakes and opportunities that arise. 

To improve data management and optimize management control, it is therefore important to first identify the relevant data to try to define which ones are most pertinent for the company and which have a direct impact on results.

Furthermore, management control can help businesses optimize their inventory management.
Indeed, good inventory management (analysis of turnover rates, storage costs, etc.) helps minimize the risks of overstocking or stockouts and thus improve customer satisfaction.

The use of a data visualization tool can help provide a clear and instant overview of costs.
Dashboards and charts can also facilitate the visualization of complex data, allowing for a better understanding of trends and growth opportunities.

Finally, it may be necessary to train a team. If the company does not have a data expert, calling on former employees or external experts to improve understanding and use of data may be the solution.

2nd mistake: Not setting goals or budgets

The second mistake to avoid in management control in retail is not setting goals or budgets.

Tools such as the forecast budget are essential for performing management control. For them to remain effective, it is necessary to set goals; it may also be relevant to set goals from the outset in order to anticipate upcoming actions. 

A final step remains important: monitoring. It is therefore advisable to conduct regular follow-ups to ensure that results align with forecasts; if not, adjustments will be needed for expenses and investments accordingly. Here are some of the most commonly used indicators to monitor: ‍

Sales: this indicator measures the total amount of sales made by the company over a given period. It can be broken down into several sub-indicators such as sales revenue by store, by product, by customer, or by geographical area.‍

Conversion rate: this is the percentage of customers who made a purchase compared to the total number of store visitors. It helps assess the effectiveness of the company’s sales and marketing strategy.‍

Average basket: it measures the average amount spent by a customer at checkout. It helps identify the most popular products and detect opportunities for cross-selling or upselling.‍

Inventory turnover rate: this indicator measures how many times the entire company's inventory is sold and replaced with new products over a given period. It helps assess how quickly products sell and adjust inventory management accordingly.‍

Customer satisfaction rate: this indicator measures the degree of customer satisfaction.
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3rd mistake: Not knowing the limits of management control

Like in all sectors, retail management control also faces certain limitations that can hinder its accuracy and the effectiveness of its analyses. Generally speaking, there are three limitations that exist across all sectors. 

• The first is being aware of the cost that measuring these indicators can incur. Indeed, at some point, these measurements can exceed a reasonable cost. 

• The second concerns the manipulation of these indicators. If an indicator becomes a goal in itself, it can lead to a lot of stress and demands; it's important to remain clear-headed and limit this phenomenon. 

• The third and final limit is that the indicators are not sufficient for on-the-ground analysis; managers need to visit the site themselves to observe and ascertain.  
  
  

4th mistake: doing too much and relying solely on KPIs

Doing too much is a common and easy mistake to make. It stems from the feeling of control given by measuring multiple aspects of the business, which encourages the multiplication of control points. At the same time, this extension of measurement often comes hand-in-hand with an increase in the number of stakeholders. Management control has indeed become the responsibility of nearly all employees, each of them wishing to evaluate their performance. Although this approach has advantages, including a better visibility of activity, it also imposes unwelcome pressure on the actors involved.

Finally, management control can prove to be time-consuming if the point of sale monitors too many indicators or if its tools are ineffective. For example, management control via Excel spreadsheets, which is very common, is time-consuming and even increases the risk of errors. In this case, more resources are spent compiling and analyzing data than on drawing conclusions for decision-making.‍

It should be noted that management control software can provide a solution to these problems. On the one hand, its ease of use allows for the straightforward implementation of management control with the chosen indicators. On the other hand, automatic data collection saves time for the point of sale and helps provide a quicker diagnosis of the situation. Finally, for the more experienced users, its customization is a significant advantage. Indeed, the ability to give each employee a dashboard centered on their indicators makes their share of the work easier, faster, and less stressful.

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F.A.Q:

1. What is management control in retail?

Management control in retail is a process that allows companies in the retail sector to optimize their profitability, improve their operational performance, and make better decisions.

2. What are the 4 most common errors in management control in retail?

The 4 most frequent errors in management control in retail are: not taking into account the data from the entire company and analyzing it poorly, not setting goals or budgets, not knowing the limits of management control, and doing too much and relying solely on KPIs.

3. How to improve data management in management control in retail?

To improve data management in management control in retail, it is important to identify relevant data for the company and use data visualization tools such as dashboards and charts. It may also be necessary to train a team to improve understanding and use of data.

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