Top 10 Secrets for Retail Success in 2016
Meet Ritchie Sayner, vice president of business development for RMSA, Retail Solutions and volunteer for SCORE. In addition to speaking to retail groups at educational programs nationwide, Sayner contributes articles regularly to industry publications. His website, www.write4retail.com, was created as a resource for retailers. He is also the author of the recently released book, Retail Revelations-Strategies for Improving Sales, Margins, and Turnover available at RSayner@rmsa.com.
Most retail businesses encounter difficulties because they lack appropriate management techniques. More often than not, money and cash flow issues are the result of a problem and not the cause of it.
Industry analysts have found that there are 10 particular management techniques vital to success in retailing. All of these areas may not apply to your operation, but slight improvements in one or two areas can sometimes translate into greatly increased profits.
Here are my Top 10 Secrets for Success in 2016.
#10 Expense Management
An annual review of operating expenses is not sufficient in today’s ever-changing retail climate. Operating expenses need to planned and budgeted, not left to chance.
If we consider that every two percentage points trimmed from current operating expenses could add as much as 60 percent to net profit, it stands to reason that actual expenses should be compared to planned expenses at least quarterly.
#9 Markdown Management
It isn’t just what’s sold that counts, but also what hasn’t sold.
Every slow seller is a drain on earning potential. Excessive markdowns are a result of little or no planning, overbuying or just poor inventory management.
Timing of markdowns is key. The longer you wait once you know of a problem, the costlier it will be.
#8 Visual Merchandise Management
You seldom get a second chance to make a first impression—and retail is a very visual business. Visual merchandising is the silent salesperson in any retail operation. Goods well displayed are half sold.
It is the presentation of properly displayed merchandise, well-planned advertising and good housekeeping that portrays a store’s image. The effective use of color, design and quality projects the store’s attitude and image.
If accomplished properly, visual merchandising can create customer need and want of an item. If your store lacks the talent to create “pop,” hire a visual merchandiser on a contract basis.
#7 Customer Service Management
Customers are the most important people to any retail establishment. It is critical for management to develop training programs for employees. Training should be an ongoing program encompassing specific objectives that reinforce employee development and company policy.
#6 Customer Analysis Management
You lose about 18 percent of your “regular” customers annually. Customers move, shop other stores and eventually die. These attrition factors are referred to as the three Ds: desertion, dissatisfaction and death.
Review your customer base periodically to see how it has changed. People shop differently today than they did in the past. Be open to change.
#5 Debt Management
The objective here is to keep debt at a minimum and cash flow at a maximum. Outstanding debt obligations that impede credit may starve an operation of fresh salable inventory that could affect sales and cash flow.
#4 Sound Profit Management
“What gets measured, gets managed,” With all of the management tools available today thanks to technology, there is absolutely no excuse not to have current data relative to your business immediately accessible.
#3 Self-Control Management
This technique may be the most significant of all and too often the least applied. Reasonable and attainable goals must be set for all areas of the operation. Prioritize your time. All too often store owner’s micro-manage the most insignificant portions of their businesses. Tackle the issues that will have the greatest financial impact first.
#2 Inventory Management
This topic is best described with three terms: turnover, cash flow and gross margin return on investment (GMROI).
Of these, turnover is by far the most essential. Seldom have I encountered a retailer experiencing cash flow issues that had a good turnover rate. Remember that for every week of improvement in annual sell through, cash flow increases by approximately one percent of sales. Nobody comes in your store looking for merchandise that was received last year. Increases in profitable business come from a constant flow of properly timed new merchandise. Focus more on what is selling rather what isn’t for maximum sales.
#1 Dollar Planning Management
Retailers do not fail from overbuying. They fail when they can’t pay for their overbuying.
The development of a sound merchandise planning and open-to-buy program is crucial to the survival of any retail operation. Forecasting and planning must be based on the sound evaluation of current and projected sales and inventory figures.
Classification merchandising or the development of trends by type and end-use of merchandise is essential. Buying merchandise in the right amounts, timing deliveries properly, the proper selection of styles and adequate assortment planning is the key to increased profits.
Flickr Image by Ari