Retail Lessons From A Food Retailer

RETAILING LESSONS FROM A FOOD RETAILER -PRET A MANGER Ten years ago, on a layover at London’s Heathrow Airport, we discovered Pret A Manger, or as we fondly call it, Pret. It was a small sandwich shop at the end of the terminal and I paid no attention to it, since Im not a sandwich person. The reason I am not is that soft bread just does not cut it for me. I need a serious crunch at the crust level, and nice most middle without even a hint of sponginess. This is why, when I heard the sound of the tuna and cucumber sandwich meet Liat ’ s teeth, I made a turnabout and bought one myself. I ’ ve been hooked ever since. We started to almost look forward to those layovers, and would make a B-line to Pret to stock up on sandwiches for the flights. If we didn’t eat them within 8 hours they’d be dead - soggy and inedible. But fresh they were fantastic!

When Pret came to New York I was thrilled. I am a Pain Qoutidien fan (again, the bread...) but Pret will always occupy a warm spot in my heart and palate. When in a rush, one of their sandwiches is indispensible, because it provides both nutrition and culinary pleasure.

In the Sunday New York Times (I confess I read it) Business section there was an article about Pret. I now understand better, and I believe strongly that there is much to share and learn from Pret’s success. When the first shop opened, one could have easily said “The last thing we need is another sandwich shop” . One could also have said, “All sandwiches are created equal” , and be generally right. What Pret proved was that one can differentiate the final product based upon corporate culture, and find a niche and loyal following in what appears to be a non-differentiatable space.

Pret’s value proposition is twofold: All ingredients are fresh and sandwiches made daily on premises (product differentiation) and the “restaurant” serves food faster and in a more pleasant manner than elsewhere (the goal is to serve every customer within 60 seconds or entering the shop) - service and atmosphere differentiation. Both elements are most ambitious, given the typical employee turnover in fast food 鵬-400% annually) . How did Pret break the mold?

Product differentiation

Pret was onto the green initiative well before its competitors. Ingredients are marked as “line caught tuna” to show commitment to the environment, and they are generally very fresh. Uneaten food is given to food banks every night to avoid waste. Food chefs’ task lists are timed to the second (for example, it should take 1 minute and 6 seconds to make 6 bowls of granola) , such that fresh food can be supplied throughout the day. This is very different from other sandwich shops, many of which prepare the food in a central kitchen and then truck it to the various stores. At Pret no trucks are ever used, even for delivery orders (those are delivered using a trolley) .

As a result, the sandwiches and salads truly taste different. The bread is crunchy, the sauces and dressings have a unique zing to them, and the vegetables, even lettuce, not wilted.

Culture differentiation

The Pret culture is what most community banks strive to achieve: a strong team ethos, a welcoming and pleasant atmosphere. Here is how they achieve this allusive goal:

1 Hiring. New hires are screened for personality characteristics such as “cheerfulness” to support the positive aura of the stores. Then they are sent tone of the shops for a six hour day, after which the store’s employees vote whether to keep them or not. If they flunk out they get โ and are sent on their way.

2Acculturation. Once hired, the key to retention is gaining support from the other store employees. The reward and recognition system, as well as financial incentives, are geared to facilitate a team approach. Bonuses are given based upon the entire team’s performance, which means that a bad hire could cost everyone at the store money. Selecting the right employees and retaining them is key to everyone’s success. Pret’s turnover is therefore only 60% , which seems high for banking but is extremely low for the food industry.

3Mystery shops. I am generally not a fan of mystery shops. We all ask the same questions, employees know who the shoppers are, and often scores are not correlated to customer retention or performance. At Pret the shoppers provide the employees direct feedback ( e.g. You didnt smile when I approached you) , plus outstanding scores lead to another immediate bonus ( ๛ for a full time employee). The shops and incentives put much peer pressure on the entire team to perform to standards.

4Further team building. When someone gets promoted or achieves a milestone they get a bonus, but the money must be given to colleagues who helped the recognized employee along the way.

5Rank ordering all stores. I am a huge believer in rank-ordering. It is a simple yet potent tool to motivate strong performers to do even better, and to shine the light on those who are not pulling their weight. At Pret all stores are rank ordered quarterly, and the top 10% get 60 scratch-off cards that have different prizes on them, ranging from ฟ to an iPod, which they give to other employees who excel by way of recognition.

6Fun. Fun is another extremely powerful tool which we use too little. I especially like all-inclusive parties. At Pret all employees have a party twice a year, plus managers get roughly 񘘐 a year to spend on fun and outings with their employees.

7Training. Training alone is insufficient to affect behavior change, but training coupled with incentives, recognition, team pressure etc. can be a game changer. Pret has an extremely detailed training program and materials. I believe that clarity of expectations and providing the tools to meet them is key to success. Every new employee at Pret gets a large binder that is full of detailed instructions on how they should spend their time. The goal is to build relationships with regulars, let their personality shine out and make the store appear bustling at all times.

8Certifications and promotions. After three months employees much pass a written quiz. An example of a question is “what is the maximum amount of time a customer should wait in line? ” The employees need to show proficiency in many different areas at a high level of detail: food safety, disposal, service etc. Once they pass the quiz they graduate to a Team Member Star status, which allows them to move up the ranks and get hourly raises as they do so.

While sandwiches are not checking accounts, The Pret challenges have much in common with our business. Their business involves:

High fixed costs: real estate, restaurant equipment etc.

Labor intensive

High employee turnover

Some low-skilled workforce

Potentially undifferentiated product

Thin profit margin

Regular customers are key to success

Retail Banking is not very different. We have expensive branches which we still must retain and staff, our turnover is high during normal economic times, etc. Yet our approach to hiring, training, retaining, compensating and recognizing the retail banking workforce often does not present the cohesive approach founded on a firm philosophy that Pret employees. We tweak one or another of the employees environment- change incentives, improve training etc. -without presenting a clear philosophy that expresses itself in every aspect of our employee’ s life. I found that telling employees exactly what it is we are looking for strategically (as opposed to micro-management) , and teaching them how to do it is the first step to behavior chage. It needs to be followed by structuring positive reinforcement to desired behaviors and results, as well as clear consequences to non-performance. Consistently applied, this approach bears fruit and yields happier employees, more satisfied customers and better shareholder returns.