Lean Retail – Making Apparel Business More Sustainable

Tarang Gautam Saxena

October 30, 2011

The operating environment for the fashion retailers in India is only moving towards a more challenging and competitive direction even though the market is yet to mature. The market has grown over the last two decades on account of brand proliferation and developing retail network and more recently due to new product category creations. High consumer awareness and exposure to international trends has cut the product life cycles short. Topping this up, the last 12-18 months has witnessed the growth of the online platform offering an alternate, convenient and cost effective shopping option for consumers.

It is necessary that fashion retailers manage their operations efficiently both in terms of managing a complex and responsive supply chain at the back end and delighting the customers at the store with great product offers and customer service. Adopting lean practices can help fashion retailers to achieve significant improvements in store profitability and customer satisfaction, making their retail business sustainable through a positive impact on bottom-line.

The concept of lean philosophy, pioneered by Toyota, is built on the premise that inventory hides problems. The basic tenet of this philosophy is that keeping the inventory low will highlight the problems that can be dealt with and fixed immediately instead of maintaining inventory in anticipation of any bottlenecks.

“Lean retailing” is an emerging concept and has  already been adopted by retail organisations in the Western countries using technology such as barcodes, RFID (across the product value chain from raw material sourcing through production through final delivery at the retail store) and item-level inventory management and network architectures.

In an ideal scenario a retail organization would be lean at both the store and the distribution center. The organization would leverage technology such as RFID to uniquely identify the movement of its inventory accurately and use fulfillment logic as per the store’s merchandizing principle to have replenishments in tune with customer demand.

Some international retailers that have adopted lean retailing techniques include Wal-Mart, Macy’s, Bloomingdale’s, The Gap and J. C. Penny. Applying lean philosophy to fashion retail in India may sound like an avante garde concept as of now. However, there are some leading large retailers in India such as the Future Group who are early adopters and have already adopted lean practices in their retail supply chain.

An understanding of what lean retailing is and some of its principles can help in appreciating how this concept can make the apparel retail business more sustainable. Lean retailing aims to continuously eliminate “waste” from the retail value chain, waste being defined as any activity/process that is not of “value” to the customer. A fundamental principle of lean retail is to identify customers and define the “value” as those elements of products or service that the customer believes he should be paying for, not necessarily those that add value to the product.  Further the value should be delivered to the customer “first-time right every time” so that waste is minimized.

Lean retailing requires simplifying the workflow design in delivering products to customer. Given that the connotation of value is customer-centric, simplifying the workflow design requires streamlining the core and associated processes so that any kind of waste is eliminated. Further pull-system drives replenishment at the stores (and the shelf) based on what customers want “just-in-time” (neither before nor after the time customer demands). This results in a value flow as pulled by the customer.

Those practising lean retail have invested in information technology that allows the stores to share sales data in real time with their suppliers. New orders for a given product maybe automatically placed with the supplier as soon as an item is scanned at the check-out counter (subject to minimum order size criteria). Smaller stores may use visual systems wherein the sales staff can gauge through the empty shelf space the products that have been sold and that need to be re-ordered.

Removing bottlenecks throughout the supply chain is another principle driving lean retail. It entails redesigning processes to eliminate activities that prevent the free flow of products to the customer. Further, lean retail requires following a culture of continuous improvement. Continuous improvement (or “Kaizen”) focuses on small improvements across the value chain that rolls up into significant improvements at an overall level.  Kaizens not only can lead to elimination of wasted effort, time, materials, and motion but also focus on bringing in innovations that lead to things being done faster, better, cheaper and easier.  Involvement of staff at the lowest levels is very important in Kaizen activities and that means that companies must invest in training, up-skilling their talent pool in Lean Principles.

In the context of apparel retail business, lean retail can help in improving organisational responsiveness to customer needs, the speed with which the products are delivered to them and meet their expectations as per the latest trends. Systematic application of lean principles translates in increased throughput (Sales), with lower Work in Process (Investments) and as per customer requirements of Quality, Design, Trends and Time. Improved information visibility across the chain leads to reduced instances of out of stock and excess inventory at the same time, minimising inventory control costs and reducing shrinkage. At the front-end lean retail may lead to redesigned in-store processes and systems for consistency in frontline behaviors to provide standard customer experience.

With the focus on training and involvement of the workforce, Lean principles have resulted in improving employee satisfaction without increasing labour costs that in turn positively impacts revenues and profitability. Some retailers in the West have reported reducing their store labour costs by 10-20 percent, inventory costs by 10-30 percent, and costs associated with stock outs by 20-75 percent on account of lean retail.

In addition to top-line and bottom-line impact, lean retailing by enhancing the enthusiasm and motivation of the frontline staff creates distinctive shopping experiences for customers.

Inditex, the world’s largest clothing retailer with Zara as its flagship brand, has successfully achieved supply chain excellence following lean principles.  It targets fashion conscious young women and is able to spot trends as they emerge and deliver new products to stores quickly thereby establishing its position as the leading fast fashion retailer. The product development processes is based on customer pull-system. Its design team reviews the sales and inventory reports on a daily basis to identify what is selling and what is not.  Additionally, regular visits to the field provide insights into the customers’ perceptions that can never be captured in the sales and inventory reports. Critical information about customer feedback is widely shared by store managers, buyers, merchandisers, designers and the production team in an open plan office at the company’s headquarters. Frequent, real time discussions and interactions within the team help them to understand the market situation and identify trends and opportunities.

Further, Zara manufactures the products in small lots and many styles are typically not repeated. Style cues for replenishments are derived from real time customer demand. At the back end, Zara holds inventory of raw materials and unfinished goods with its supply partners which may be local or offshore manufacturers. Typically, the fashion merchandise is produced at the local manufacturing base and quickly delivered while the staple low-variation range is produced offshore at cheaper costs.

Following lean retail practices implies a higher stock turn and frequent replenishments by the suppliers based on real-time sales. Building and maintaining reliable and responsive suppliers through win-win partnerships, is imperative to realize the success of lean retail implementation as high stock turns and frequent replenishments involves the commitment and involvement of the entire supplier base.

Like in any transformational effort, change management plays a critical role in reaping the benefits of lean retail. The whole philosophy requires paradigm shift in attitudes, behaviors and mind sets of those involved upstream and downstream across the value chain. Training, communicating and inspiring the front end staff is thus an important aspect in the overall success and companies need to device a compelling vision that is shared by employees across functions and hierarchy across the entire chain.

India tops as biggest shoplifting nation in the world


October 27, 2011

Subir Ghosh

Asian Correspodent , 27 October 2011

Indian retailers suffered the highest loss of stocks to theft in the world for the fifth year in a row in 2011. Half of this loss was attributed to shoplifting by customers. The silver lining here was that India is the world’s only country where the shrink rate (loss of stocks because of thefts by customer, employees and supplier) came down in 2011, according to the Global Retail Theft Barometer 2011.

The shrink rate as a percentage of sales was 2.38 per cent, costing local retailers Rs 3,470 crore, according to the annual survey conducted by the Centre for Retail Research in Nottingham, UK, and underwritten through an independent grant from Checkpoint Systems. The study was conducted across 43 countries between July 2010 and June 2011. In India, it covered 100 retailers, of which 60 were part of modern chains and 40 were from the unorganised sector.

Shoplifting, employee or supplier fraud, organised retail crime and administrative errors cost the retail industry US$119 billion in 2011 or 1.45 per cent of sales. This global shrink rate is 6.6 per cent (0.8 per cent in Asia-Pacific) higher than the previous year. Dishonest employees were responsible for US$41.65 billion or 35 per cent of shrink. In Asia-Pacific, a majority of retailers perceive dishonest customers as the single most important source of loss, responsible for US$9.7billion of losses or 53.3 per cent. However, the average amount admitted stolen by employees was more than four times the average stolen by shoplifters.

“Shrinkage reported by most retailers is due to multiple causes, not only outright theft. This includes factors such as supply chain and storage losses, quasi-shrinkage due to poor data integrity, and due to causes that lie outside the store rather than in-store,” pointed out Devangshu Dutta, Chief Executive of Third Eyesight, a New Delhi-based consulting firm which focuses on the retail and consumer products ecosystem. Third Eyesight works with retailers (including e-tailers), brands and manufacturers, as well as service organisations and suppliers to the retail sector and the consumer goods supply chain.

“Although there are commentators who view retail crime as a harmless or intriguing social phenomenon or simply as cost of doing business, this ignores the impact of criminal gangs, growing levels of violence against employees and customers, and the links between retail crime and drugs, fraud and extortion,” said Professor Joshua Bamfield, Director of the Centre for Retail Research and author of the study. “Moreover, retail crime on average cost families in the 43 countries surveyed an extra US$200 on their shopping bill, up from US$186 last year. In the U.S., that figure was US$115 in Asia-Pacific.”

The 2011 study also found that while retailers increased their spending on loss prevention and security by 5.6 per cent over 2010 to US$28.3 billion globally, loss prevention equipment’s share of total loss prevention expenditures actually declined slightly. This may be why fewer thieves were apprehended globally. The region with the sharpest decline in loss prevention equipment’s share of expenditures was Europe, down 6.25 per cent. Notably, shrink in Europe increased 7.8 per cent, topping the global average.

“Of the top 50 global retailers who responded to the survey, the ones which reported a decline in shrink from the previous year did not construe loss prevention merely as a matter of theft, but worked across their operations to systematically combat shoplifting, employee theft, vendor loss and administrative errors. Ninety-six percent of these retailers’ stores used audit programmes to monitor the use of loss prevention policies and above all, the retailers increased their loss prevention spending almost twice as much as the global average,” said Bamfield.

In Asia-Pacific, shrinkage was highest among categories like cosmetics, perfumes, health and beauty, and pharmacy; apparel and accessories; and video, music and gaming. The most-stolen items from the cosmetics category globally included shaving products, perfumes, lipsticks, scissors, nail clippers, and tweezers. High quality seafood, alcohol and fresh meat made up the top three most-stolen grocery ‘high-risk’ product lines.

So, where does this place India? Is there more than meets the CCTV eye?

Said Dutta: “The articles that I have read about the study do not provide a comparison of modern retail stores in India and their counterparts in the west. It would be useful to look at a like-for-like comparison, rather than comparing unlike retail formats, or taking an ‘industry’ average, when the research samples in different countries are so varied. Smaller stores lack sophisticated information systems to capture and transmit data as accurately as the large stores, as well as storage and handling processes are also less sophisticated. This increases the shrinkage due to non-theft factors, which would also reflect in the ‘total shrinkage’. Having a higher proportion of traditional retail outlets in a study sample can compound this inaccuracy.”

Retailers like Future Group, Lifestyle, Godrej, MegaMart, Fabindia offering 0% EMI to attract customers


October 24, 2011

Writankar Mukherjee, Atmadip Ray & Pramugdha Mamgain

Kolkata/New Delhi, 24 October 2011

Retailers are countering the economic slowdown by offering interest-free equated monthly instalment (EMI) schemes, which they say are not only helping them pull customers into stores but also encouraging shoppers to buy higher value products.

Such EMI-based sales promotions have staged a big comeback at a time near double-digit inflation has put a heavy strain on household budgets, making people defer non-urgent and big-ticket purchases even on credit because of hardening interest rates.

But transactions carrying zero percent financing have grown more than 50% over the past year, say retailers and bankers.

From apparel sellers such as Arvind Brand’s MegaMart and Fabindia to multi-product retailers such as Future Group, Lifestyle and Godrej, firms reckon that zero-interest EMI options are the most effective discounts they can offer.

While retailers end up bearing the interest for the duration of the credit extended, they see it as an acceptable cost of keeping the sales register ticking during the downturn.

"EMI schemes are removing inhibitions and inducing consumers to splurge on big-ticket items," says Himanshu Chakrawarti, chief executive of Essar Group’s Mobile Store, the country’s largest mobile phone retailer. He says consumers going for six-month EMIs are buying handsets priced twice than they had initially planned and those going for nine-month to 12-month schemes are tripling their size of transaction.

Almost a third of the high-end mobile phones, such as the iPhone and the latest models of Blackberry and Android-based phones, sold at the Mobile Store are paid for through instalments. The company, which rolled out EMI schemes at its 1,200 stores across the country over the past couple of months, recently became India’s largest seller of BlackBerry smartphones.

Instant approval of loans and minimal documentation help speed up EMI-based transactions, says Parag Rao, senior executive VP, HDFC Bank. He says the bank has seen a more than 100% spurt in this loan category over the past year with an average transaction of 30,000. "Since the amounts are much smaller compared to home or car loan, the EMIs don’t pinch much," he says.

Consumer durables and jewellery sellers were the first to offer such sales schemes, but now retailers across product categories are betting on interest-free instalment schemes. For consumers, this spells the return of consumer financing schemes, which had dried up during the global meltdown in 2008 and 2009 when banks turned away from most unsecured lending schemes.

But the return of such schemes is becoming a major motivator at a time when studies are showing consumers are searching for the best deals and discounts like never before. A latest study by NM Incite, a Nielsen-McKinsey Company, shows that conversations about deals and discounts account for 50% of all conversations in social media forums this Diwali.

"Deals are becoming the primary motivators to consider purchases. This more than anything will decide which brands will win a greater share of wallet this season," says Adrian Terron, Head, NM Incite India.

From apparel and mobile phone sellers to furniture and computer stores, retailers across the board are reporting a jump of 10% in sales on average driven by deals like EMI schemes. They say the average bill size has also grown simultaneously by 10% to 15%.

EMI-based sales have doubled for consumer electronics during this festive season, retailers say. In the case of products such as LCD and LED televisions, nearly 15%-17% of all purchases are being made through such schemes, says Devang Mody, business head (sales finance) at Bajaj Finserv Lending.

The lender has tied up with manufacturers such as LG, Samsung, Sony and Panasonic and durable retailers including Croma, Vijay Sales and Reliance. It expects the festive season to generate EMI-based sales worth 750 crore.

For jewellery retailers, hit by the double whammy of inflation and appreciating gold prices, interest-free instalment schemes have become a veritable lifeline.

Furniture retailers, staring at halving of growth to 10%, are finding a much-needed growth driver in zero-interest EMI schemes. "With inflation kicking in and discretionary spending capability of households going down, EMI schemes will become more relevant as these facilitate consumer instant gratification while paying in easy instalments later," says Lifestyle International managing director Kabir Lumba.

Future Group’s Home Town is similarly offering products on interest-free EMIs, as is Style Spa, which joined the bandwagon a fortnight ago. Fabindia launched an EMI scheme this month on purchases of 50,000 and above, which covers apparel and other products. "We intend to tap the burgeoning professional class through this scheme," the company spokeswoman said.

Analysts say retailers stand to gain even as they absorb the interest component when they offer zero-percent EMI schemes. "While such schemes may impact their margins, the interest gets accounted as a cost they need to bear to generate sales," says Devangshu Dutta, CEO of retail consultancy Third Eyesight.

Gulliver’s Travails


October 22, 2011

Srikanth Srinivas with Suneera Tandon

22 October 2011

Sanjeev Narula could say his fight with private equity (PE) investors Bain Capital and TPG is a Lilliput versus Gulliver saga. The managing director of Lilliput Kidswear, an apparel retailer that until recently was a success story, got into a fight with his principal investors over the veracity of the company’s audited accounts that were presented at a board meeting on 28 September.

Details are scant, but what appears to be a whistleblower call about fudged accounting, just as the company was readying to file a draft red herring prospectus (DRHP) ahead of a planned initial public offering (IPO), has driven a wedge between the two parties. Narula has 55 per cent of the stake, and the PE firms, 45.

A re-audit was suggested, but Narula did not agree to it. Instead, he appears to have taken umbrage at the suggestion, refused to agree to a re-audit and moved the courts.

The fight prompted many resignations from the company’s board: by the representatives of Bain Capital and TPG, four independent directors, and just days later, by the auditors S.R. Batliboi and Ernst & Young (Lilliput’s advisors).

In an appeal filed by Lilliput in the Delhi High Court on 3 October 2011 against Bain Capital India, the company has “restrained the respondents from selling, alienating, transferring or creating third party rights in any manner dealing with their shares of petitioner (Lilliput) and hence, the respondents are restrained, directly or indirectly, from acting contrary to the minutes of the Board Meeting dated 28.09.2011 and they are further restrained from giving adverse publicity to Lilliput. The petition also restrains the respondents, its associates, affiliates, servants, and employees directly or indirectly, from interfering with and obstructing the operations of the petitioner”.

After the company filed an injunction in the high court restraining its investors and related parties from exiting the company or taking matters further, no one — Narula, the PE firms, or the auditors — is willing to go public on anything. BW’s attempts to talk to them were unsuccessful; they claim the matter is sub judice.

The PE investors’ concerns stem from what is standard operating procedure. “In US firms, any suggestion of wrongdoing in an investee company is always reported by the managing partner to his fund,” says a PE expert. “That prompts a set on questions, checks and inquiries that ultimately are taken back to the investee company’s management.”

The opportunities for litigation against the PE firm’s general partnership make a firm very cautious. Occasionally, the general counsel gets involved. “All too often that ignores the realities on the ground in India, like very sensitive promoters,” the expert adds. “That could have driven Lilliput’s promoters over the edge.”

We talked to more than a dozen analysts, experts and retail consultants to try and piece together some answers. None of them, however, was willing to go on record.

The Beginnings Of A Clash
“Both Bain and TPG competed fiercely to get a piece of Lilliput in 2009,” says a leading investment banker. At that time, 35 per cent of the company was held by PE investor Indivision Fund (now Everstone Capital), with Narula holding about 65 per cent.

Other investment bankers say Narula was unwilling to give up control, so Everstone, which had invested in the company in late-2006, sold its stake, and Narula sold a small part of his. After the deal was completed, the company was valued at about Rs 775 crore.

S.R. Batliboi and E&Y have worked with the company for over three years, and helped conduct the due diligence necessary for the PE investors. That was followed up by another due diligence exercise by KPMG, another global consultancy, before Bain and TPG paid about $86 million to buy in, closing the deal in January 2010. Lilliput’s revenues, say market observers, was then more than Rs 300 crore.

The company then embarked on a rapid expansion spree. It added four manufacturing plants to its existing six. In 2010, the company had about 225,000 sq. ft retail space; by September 2011, that had gone up to 700,000 sq. ft, with another 200,000 being fitted out. It also took on a lot of debt. “All of this cannot be done without at least the strategic approval of Bain and TPG,” says another investment banker. “July to September have been hard on retail, and such rapid growth implies huge inventory. That may have scared Bain and TPG.” Perhaps, but where does the alleged fudging come in?

Invent(ory) Accounting
The Lilliput story highlights a critical issue that investors in organised retail have been facing for some time: inventory management and accounting. “Stores do not do any annual stocktaking,” says one analyst. “In most cases, there is no policy for markdowns, or writing off for losses.”

That, he says, leaves the door open for accounting gaps. Other analysts say that sometimes stock from existing stores is moved to new stores without accounting for them properly. But they add that a lot of it could be because of inadequate management information systems (MIS) — at the end of the year, these transactions and markdowns are ‘rounded off’. “This could have prompted the whistle-blowing,” says a retail consultant.

Rapid expansion could exacerbate the effects of slack inventory accounting. Analysts say there is usually a benchmark of unaccounted inventory-to-sales ratios. “It is something that auditors are aware of, or should be,” says an analyst with a brokerage firm.

“There is constant pressure on the company to show sustained growth, top-line progress and a sizeable foot-print,” adds Devangshu Dutta, CEO of Third Eyesight, a retail consultancy. Other instances have illustrated the consequences of very rapid growth before.

“With investor interest one can create turnover in ways you would not use otherwise,” says Dutta. “This is partly driven by stockmarket movements, by the exit window of PE investors who want sizeable returns, and by human aspiration.”

No End In Sight?
Reports say that Narula has agreed with his creditor commercial banks to allow a re-audit; he wants them to pick the auditors (something he had disagreed to earlier). This may suggest that he is confident that there is no substance to the allegations of fudged financials.

By taking the matter to court, however, Narula may have tied the hands of his PE investors. “Once things move into the legal arena, there usually is no going back to the negotiating table,” says an investment banker. So chances of a settlement or understanding between the two parties have weakened.

The clash has also dented reputations: Narula’s, the PE firms’, the auditors’, and the advisors’. When the smoke clears after the re-audit, which people estimate should be in about six months, it might well turn out that the spat was ill-advised. “If nothing else, the value that the promoter and investors would have realised (through an IPO) is unlikely now,” says an investment banker. As one put it, what a tragedy of errors.

(This story was published in the Businessworld Issue Dated 31-Oct-2011.)

Is Retail Design Tone Deaf?

Devangshu Dutta

October 21, 2011

At the outset, let me say that this is the personal complaint of a consumer. However, I’m airing it here because I believe it is also important to the future profitability of our readers’ businesses.

Over the last few years I have felt increasingly uncomfortable with the noise in public and commercial spaces.

It may be that my sensitivity to this has increased with age, but it is a fact that noise levels have also increased dramatically in every urban public space around us. In fact, it has reached a point where I now feel that people involved in the architecture and design are either addicted to noise or, at the very least, completely immune to it.

I can’t think of any other reason why locations such as retail stores, malls, restaurants, large office receptions, and other public spaces are designed and built so badly from the point of view of handling sound.

Fundamentally Unsound

The retail soundscape, if I might call it that, is littered with noisy and uncomfortable spaces. Sound levels in busy restaurants and shopping malls can be as high as 70-110 decibels, which is the equivalent of a busy construction site. Sportswear stores play loud and fast-paced music throughout the day; are they trying to make you believe that you are in a nightclub at 11 a.m.? Internal equipment such as air-conditioning and fans add to noise levels. Restaurants and cafes are worse: noise sources include the kitchen, customers using the crockery and cutlery, chairs moving as people sit or leave, apart from the conversations going on.

For sustained exposure, 80 dB is judged to be the outside limit, and we are frequently exposed to sound levels that are higher than that, for long periods of time.

Unfortunately, it is also a vicious upward spiral of sound. Loudness feed loudness. We all raise our voices when we are competing with the surrounding sounds, and only end up adding to the noise further.

Developers spend millions on picking the right stone, fancy fixtures and creative layouts to make the place “look good”. I don’t remember ever coming across a retail space designer in India who says that the space should “sound good”. Even stores selling high-end audio equipment are badly designed and executed!

I remember sitting in a restaurant belonging to a popular Indian quick service chain after a “modern” redesign. No matter how much I tried, I could not understand a word of what my wife is saying (and that’s not just because we’ve been married for so long!). The reason my wife was inaudible was the high level of ambient noise, echoing from all the hard surfaces around us. What was worse was that I could very clearly hear a stranger who was sitting 5 tables away because the false ceiling had dome that perfectly captured his voice and bounced it across the room to me.

Toning it Down

The most basic thing to remember is this: noise has a negative impact. Not only are the customers uncomfortable, high noise levels actually interfere with the staff’s health and performance. Noise increases physical and mental stress.

What’s more, if conversations are not possible at a normal volume and tone, we have to put in more effort into hearing and understanding what the other person is saying. There comes a point when we just give up. Can you imagine what impact that has on a sale?

Studies have shown that noise can drive sales down by more than 80%. On the positive side, if sound is managed well, sales can rise by more than 1,000%! Isn’t that worth looking into?

A plea to architects and retail managers: do consider the fact that customers coming to the mall expect that space to be qualitatively different from an open market. Making a space noisy is not enough to recreate the feel of an open market – it only means that your space is noisy, and probably worse than an open market will be.

Materials selected for building and fitting out the retail outlet, the mall or the restaurant can have huge implications for how sound is handled in that space. A lot of “modern” design depends on hard, polished, reflective surfaces of stone, glass or metal. The floor, the ceiling and the walls, as well as the fixtures are all surfaces from which sound reflects back into the space, not just once but many times before it dies down. So not only do the sounds get amplified in such a space, the reflections also interfere with each other, adding to the problem.

Not Just the Sounds of Silence

Of course, just making every space a quiet “dead” space is not the answer. Sound and silence affect us positively as well as negatively.

The ancients believed that sound could transform the energy of human beings and their surroundings, and from various base sounds they created “simple” beej mantras to complex Vedic chants. Anyone who has chanted or sung hymns, or even an old peppy film soundtrack knows that sound has the power to affect our moods.

At one extreme, most people are uncomfortable in a heavy engineering factory, or for that matter, a modern shopping centre on a busy weekend, without realising why. At the other end, most people would also be uncomfortable in a recording studio, because it suppresses ambient sound as much as possible, leaving the space “empty”.

In some cases (e.g. a night club, or discount store), sounds need to be louder to ensure that the place “feels” lively, even when it is not full to capacity. In some places our enjoyment is enhanced by noise. Watching a cricket match in a stadium while wearing noise-cancelling headphones would hardly be as much fun. A school playground is “happy” when hundreds of children are running around screaming and shouting at the top of their voices, and “solemn” during a quiet morning assembly.

In some cultures and countries, normal social interaction is “louder” than would be acceptable in others. (For example, a British acquaintance mentioned to me how heavily she felt “the sounds of silence” when she moved back to England, after spending many years in Asia.)

So the key is to first define the ambience and the mood that you want to create in your space. What is the objective: who do you want to attract, who do you want to send away? (For example, operators of public transportation systems have successfully used classical music to drive away loiterers who were undesirable.)

Disney offers an inspiring example of how sound can be used. Over the years they have evolved systems combining sophisticated software and hardware in their amusement parks, such that you can walk through the whole park without the decibel-level changing too much. The music sets the appropriate mood for each specific zone. What’s more, the transitions are smooth as you move between zones.

Not everyone needs the sophistication of a Disney amusement park, but I believe it is worthwhile for most retailers to think about how sound is affecting people in their stores.

I would urge you, at the very least, to look at how it impacts conversations between customers, and between the customer and members of the serving staff, because that will definitely impact sales.

A leading cafe chain proclaims: “A lot can happen over coffee”. Yes, it can; but not if you make conversation impossible.

Try it. Tone it down. You’ll see an upswing in productivity, sales and customer satisfaction.

(Read “How Mr. Q Manufactured Emotion” in the Disney parks, on Dustin Curtis’ blog.)