Having the right knowledge in the stores is important to help customers make the right decisions. It increases both profitability and customer satisfaction for a store. But it doesn't really end there. When they see that their knowledge leads to customers buying from them, it builds their confidence, which makes them feel better about their jobs and stay longer. Win-win in other words.
How do you ensure that everyone has the right knowledge and information?
Most retail chains today work with some combination of intranet, in-store email and meetings. Channels that all have their strengths, but which also only reach about half of all staff. With an LMS, that figure is typically somewhere between 80% and 100%. But bringing in an LMS means one more tool to pay for and manage. Will an LMS for retail have positive ROI (return on investment)?
To answer that, we need to start by defining what is the impact or outcome that we are measuring when working with an LMS in retail. So we know what return on investment we expect.
For many people we talk to, the conversation is often about making a point or reaching out:
- "We want to set up onboarding for new employees"
- "We want to reach out with product information"
- "We want to reach out with a new concept for the stores"
But is reaching out really the goal? No, it is not. Nine times out of ten, reaching out is about driving change (the tenth case is about compliance and bureaucracy). And the goal of the change they want to drive is almost exclusively increased profitability.
The goal of an LMS is profitability
Profitability we know we can drive from two angles.
- Increase revenue - i.e. sell more
- Reduce costs - Waste less
Selling more is easy to understand. If you have 500 salespeople who get better at upselling so that every day they can sell for 50 crowns more than before, that's 9,125,000 crowns more in a year. Here we can also focus on selling more of the products with good margins and getting better at helping the customer solve their entire need to increase the average purchase.
Reducing costs can be done both directly and indirectly. The biggest cost item tends to be staff. Therefore, it is extremely important to get new staff up and running faster, and retain them longer, as it always costs to bring in a new one who (although an LMS makes the process faster) needs to be trained and warmed up.
All this is true for all industries. There is no intrinsic value in training for a company. Value only arises when it has an impact on the business.
How profitable is an LMS for shops, what ROI can I expect?
How long is a string? We can't answer how long your string actually is, but what we can do is tell you how long the string needs to be at least to be a profitable string (metaphorically).
We focus our example on selling more, as this is the form of profitability that is easiest to calculate for a general example like this.
To work out how much more you need to sell to make a profit on investing in an LMS, we use the following formula.
Cost per employee / gross margin = requirement for increased sales.
For cost per employee, we use our average package and assume 500 employees. Cost per employee is then 9 500 SEK (average package) / 500 employees = 19 SEK per employee and month.
Had your products cost zero to buy, this would have been the requirement for how much more sales your LMS must drive. But now your products cost money to buy, so we have to account for that too, and since we don't have your margin figures, we borrow from the Swedish Retail Federation's Profitability Report 2022, where we see that the gross margin for retail is 32.7% on average.
DKK 19 / 32.7% gross margin = DKK 58.1.
To recoup the investment in an LMS, each salesperson must sell for SEK 58.1 more per month. For most stores, that and a little more can be recouped on a single extra sale during the month.
So the big question that remains is: do you think your salespeople would be able to make an extra sale a month if you could make sure that every single one of them always has the right knowledge about the products (and what complements them as an extra sale), the right sales techniques and the right information about current promotions and the value customers can get from it?
If the answer is yes (which it honestly should be for all retailers), please contact us and we'll see how much we can increase your profitability.
Do you want your stores to sell more?
Then you should book a free demo to see how Evercate can help!
Talk to usWhat is Evercate?
Evercate is a platform that gives retailers control over ensuring that the right information and knowledge reaches the right people in each store at the right time. No need to rely on the intranet, store email or store managers to have the time and understanding to pass on the information in the right way.
Everything is measured and clearly shows where you need to focus to improve your results.
Our customers use Evercate for new hire onboarding, product training, promotional information and more.
