Optimal Retail in Traffic Challenged Times – Part 1

This series of entries will deal with three overarching themes to ensure you maximize your business when the malls aren’t as busy as they used to be and when the consumer is tightening their spending habits due to economic uncertainty and lack of confidence.

This first theme is entitled “Strategy”. There are three areas of a retailer’s strategy that must be buttoned down in order to try and optimize one’s business in tougher times:

It is imperative that the leaders in the business over-communicate to the point of nausea. There is enough uncertainty out there that your employees don’t want to be left in the dark about anything to do with their company. Ensure that all levels receive weekly (if not daily) messages about company direction, overall company health, new products, marketing campaigns, human resource initiatives etc. Employees will be doubly nervous during this economic upheaval that they may become paranoid and start rumours if they hear very little about the company, its plans, direction and/or its performance from the company itself. An engaged and fully informed staff will be more productive and will be more focused on the task at hand – which is to maximize sales and “Convert Every Customer”.

At this time, it is imperative that any initiative, any forecast, any product launch, any company directive is planned down to the very last detail leaving nothing to chance. Inventory by store by department and classification should be planned down to every fixture by week. Every marketing campaign should be planned down to the penny and examined at every turn in terms of performance. No marketing initiative should be undertaken unless it can be measured very specifically against performance of driving traffic and sales generated in the stores. Global branding marketing (billboards etc.) that cannot be directly correlated to a boost in performance should be shelved.

The stores should have a certain ‘Snap, Crackle and Pop’ to borrow a phrase from Rice Krispies. Every store should focus on making the product and assortments sing. The stores should be vibrant and colourful. They should emanate an energy and vibe that is conducive to shopping and spending time. They should be humming with friendly and efficient staff (not over plentiful) who can multi-task and handle multiple customers at the same time. If your stores (and be objective here) do not hum or the product does not sing, then you should stop everything and make it so. That is the one strategy that should prevail above all other marketing and corporate initiatives.

These are challenging times for everyone. But everyone is in the same boat. There may not be as much money being spent out there this holiday season, but people do have to spend. The question is whether you have the core strategies to maximize what is out there and ensure you get more than your competition.

TheRetailTherapist

Optimal Retail Part 3

My last installment in this “pause” I am pursuing is regarding the need for productivity. Heaven knows that rents and those dreaded “extras” are making retailers small and large weep on a daily basis. The notion of improving productivity (and its cousin efficiency) must be woven into every initiative a retailer undertakes.

As an example, the easiest one to pinpoint is the largest store expense, (along with the label as its largest “bugaboo”) staff payroll. Almost always measured as a percent to sales, the old fashioned way of detecting an increase in productivity is having the percentage go in a downward direction (often what I call a “death spiral”). This does more damage to your brand and any increases in productivity from a sales perspective than anyone can tabulate.

It is an easy thing to do: Decree to “cut payroll”. The Brick and Sears are living examples right now of what happens to sales and profits when a short-sighted leader announces that it is necessary to cut back hours on the sales floor and that the stores must “hit a number without fail”. I wish it were that simple. The Brick has since come back from the brink of insolvency to add more hours and ensure that customers are looked after and sold some merchandise. What a revolutionary notion!

To be honest, if you operate stores, they are your faces to the consumer. This is what the consumer can touch and feel and see. Why mess it up with some arbitrary goal of payroll percent? If you want to talk productivity, then give each staff member a Sales Per Hour (SPH) dollar goal and track it. Once each sales person accomplishes these goals, you have more than paid for their services, added sales and made customers happy. You have therefore improved your brand position.

Or, you can track conversion, which is my favourite statistic. If you increase conversion (increase the number of purchasers from the actual number of people that wander into your store aka traffic), you are improving productivity. That is a goal worth pursuing in store.

Productivity of inventory is another form of generating cash flow and ensuring smart investments and returns. It is obvious that if the wrong merchandise is bought and is therefore not selling, that affects productivity (not to mention Gross Margin per Square Foot productivity as well after you have to take massive markdowns to clear the slow moving merchandise). But you could have the right merchandise, just not in the right quantities. Or you could have the right merchandise but not in the right places (ie what is selling well in Vancouver is not in Halifax and vice versa, therefore you are sitting with productive merchandise but in the wrong places). This makes the art of allocation, planning and distribution very important. Personally, they should be the smartest people in the room.

Productivity in the distribution centres is critical to ensure timely deliveries of fresh merchandise as well as replenishment of fast selling merchandise. But can your distribution centres turn on a dime, re-route, change their daily and weekly routines based on the trends and needs of the business? A flexible system, along with a very clever and sophisticated software package to analyze the business will yield higher productivities as well.

The final element I want to mention regarding productivity is based on the marketing dollar spent in a particular season or campaign. The question usually isn’t whether the campaign worked or was effective, but how does the campaign get measured? How can we tell whether it was effective or not? How do we pinpoint the exact cause of the dip or surge in sales? Those are questions that should be asked before designing and deciding on a particular marketing program.

In today’s retail reality, productivity is king. Every dollar must be squeezed out of every asset from people to real estate to size, colour and style of merchandise, not to mention vendor.

TheRetailTherapist

Optimal Retail Part 2

This second Optimal Retail installment focuses on what I am calling ‘Sophisticated Leadership’. The word “Leader” or “Leadership” is bandied about today throughout society at schools, regarding sports teams, in boardrooms and throughout the ranks at all levels of corporate life.

Is he/she exhibiting leadership tendencies?

Is he/she an effective leader?

What style of leadership is someone employing?

There certainly can never be too much of a good thing called ‘leadership’ but what I have found is that the more ingrained the leadership qualities are throughout an organization, the more consistent the performance. When a company exhibits a certain level of leadership, it does not need to be constantly and overtly spoken about or critiqued on a daily basis. There is a sense of maturity about an organization that permeates all levels and all facets of the business when there is a healthy dose of sophisticated leadership.

Some of the telltale signs that an organization is demonstrating sophisticated leadership skill sets are as follows:

• The company has a focused set of goals and objectives that have been cascaded effectively to all levels
• Every employee at every level can articulate the mission or vision of the company
• Meetings throughout the company are effective, efficient and always relevant
• Employees feel engaged (see Part 1) and are enjoying their jobs and find their work rewarding
• Store contact from head office is frequent, supportive and positive – the store is always the priority
• Store visits are frequent, effective, engaging and educational for all parties – they are never dreaded
• There is a “delegate and develop” mentality that permeates the organization
• Everyone throughout the organization cherishes learning
• All levels throughout the organization feel a high degree of accountability
• The culture is positive and persuasive not demanding and authoritarian

Peter Drucker used to say that the no. 1 job of leaders is to develop other leaders. This is true of any organization exhibiting ‘Sophisticated Leadership’. This does not mean that every person needs to possess a post graduate degree, much less a university degree. It certainly doesn’t mean that there is an intellectual air to the people running the company. Most of the time it actually is to the contrary, where messages, goals and job descriptions are kept very simple and user friendly and everyone understands their role. Southwest Airlines would be an excellent example of Sophisticated Leadership without any intellectual overtones, just a real Texas/southern drawl to CEO and founder Herb Kelleher and very simple, understandable and executable messages.

There is a way to test and assess how sophisticated a company’s leadership is. First you have to walk the halls, sit in a few meetings, visit stores and observe behaviours. But it can be a real eye-opener. There is no way to optimize a retail business without continually optimizing the level of sophisticated leadership of the organization.

TheRetailTherapist:)

Optimal Retail Part 1

I am going to take a different tack for the next little while. I hope you will indulge me. Even though I am trying to make a living on some of the advice I am about to impart, I figured the retail scene could use some help from any and all corners to get through this tough environment.

I have compiled two checklists (because in retail, we all love our checklists ) to assess whether a retailer is maximizing their business and, if not, to identify some areas that retailers can look at in order to help them achieve “Optimal Retail” status. The second list is a “Top Ten Non-Negotiables in Tough Traffic Times” list (with apologies to David Letterman). This list will give you my own take on what cannot be overlooked in these softer times in order to help retain “Optimal Retail” status.

We will start with a few excerpts over the few entries from my basic “Optimal Retail” checklist and follow up with a few excerpts from the “Top Ten” List. I will pick and choose a few in each list. For the full list, please do not hesitate to hire me …

One common trait of any great organization, regardless of industry is an elevated amount of “Employee Engagement”. The more the employees of the organization at EVERY level understand the business philosophy, buy in to the direction and culture of the product and the brand and the more they are encouraged to participate in the communication processes set up for them, the healthier the organization usually is.

This is the first thing I look for when I assess an organization. How committed are the employees? What is the turnover like and at what levels? Do the front line employees understand the “mission” of the company? Why do the front line employees want to work for that company?

Some of the little engagement keys to look for are:

• Types and frequency of communication vehicles
• Do all employees have access to the information they need?
• Do employees feel they can make a difference in the company and that they have a voice?
• What is the ratio of HR professionals to the total employee base?
• Is there an annual employee survey?
• What is the compensation philosophy of the company ie. is there profit sharing or options available for ALL levels?
• What does the performance review process look like and more importantly, what do the employees think of the process?

The old adage of  “keeping morale high amongst the troops” doesn’t necessarily cover all the bases any longer. Employees need to be constantly stimulated and engaged in the inner workings, creative development and decision making of any company. If they feel like they have the ability to provide input and that their feedback is being heard and acted upon, their productivity will soar and the newest, freshest ideas will be unleashed to provide the company with a great competitive advantage.

Peter Drucker always used to say that companies should treat their employees as if they were volunteers. This simply means making them feel appreciated, making them feel special, expecting a lot but understanding that they are more prone to walk out on you today than ever before. A very well respected employee base is a productive one for sure.

I will leave you with one further thought…I remember when I ran a division for a big global retailer and I made sure I read every exit interview in the division. One comment resonates with me to this day: “My work was appreciated but I wasn’t”.  Those 7 words have stayed with me for over a decade and they inspire me improve every day in the area of employee engagement.

TheRetailTherapist:)