Retail Passion

Business Dynamics

 Allocation of assignable resources in today’s business world

How many times have we read a statement like the one above and said, my God, that is exactly what I need to do with my operation?  Only to finish the article or book and by the time we are done, we have lost what we were trying to push through.  How many libraries have we accumulated, how many authors have we made rich?  With any operation, we have something to keep us honest and to keep us in check.  With manufacturing we have the machine shop floor.  With retail we have the sales floor.  With “fill in the blank” we have some portion of our operation that the rubber actually hits the road and that our actions truly make a difference. 

So how do we avoid being pushed and pulled by the latest and greatest?  Or even worse, doing nothing and letting the business run itself?  As one of my mentors told me “It ain’t rocket science” but it can be just as dangerous to your business as blowing up a rocket.  Ask anyone who has blown up their business.  What happens when we read one of these articles?  What suddenly motivates us to put in that extra effort and time?  What is it in life that triggers this effort?

Passion.  The driving force that pushes through everything in life.  That burning in us that says we can make a difference and that difference will be worth it in our lives. Giving ourselves a pat on the back and justifying why we are here.  The true answer to all the philosophical dilemmas and why millions of people still search for their Mecca. 

That is the great thing about business.  It provides clear metrics to measure your behavior.  The one thing that all of us need or want in one manner or another.  Instant gratification.  Even though the difference between a mature adult and an immature adolescent is the timeline on how long it will take to receive our pat on the back, we still want it.  I want it and still love it when I hit my numbers and can get my “pat on the back”. 

Retail Detail

Impulse vs. Destination in Retail Sales

All the books, postings and advice I have seen on retail and most of them leave out this most important factor.  Destination purchases vs. impulse purchases.  What is your business and are you capturing both or just one side of the equation?  Are people driving down the road on a quest for your product or do they see a sign and it triggers an impulse to stop and make that purchase?  I know there are certain situations that are driven by both buying impulses.  There are times when a decision is made as a premeditated decision and other times it is a “crime of passion” as they say.  Scary but crime and retail have a lot in common some times.  Both are choices made by humans to satisfy a craving, desire or urge.

Traditionally we hope that we have a customer coming to our location as a destination customer and once they are in the store we can sell them additional items to increase the basket or average purchase.  We have destination merchandise advertised with signage, displays or loss leader pricing and we stack impulse product everywhere around it.  There are certain retailers that do have a very strong impulse draw and the retailer usually has a heavy density of stores in their markets to take advantage of that impulse.  Without density, the impulse could wither or the sale could go to the competition.  Usually these types of sales are for a generic product that could be gotten at a number of retailers.  There may be a slightly unique edge that a private label brand may offer but branded product has so far held the market.  The challenge again is to provide value to the customer whether that is by price, quality of product or service that is above and beyond their competition.  Impulse products have a low decision making effort before the purchase so small value added incentives can trigger the buying decision. 

What is your customer after when they come to your stores?  Are they a destination customer?  Does your product mix provide both impulse and destination purchase options?  Many smaller retailers do not think these primary marketing questions through.  Without thinking through how resources would  be allocated, product mix and inventory levels set and how they will be measured,   they will be leaving money on the table.

Value in Retail Part 2

Value in Retail:  Added or Eroded?

Speaking of behavior, not only do we need to examine our behavior but the entire team’s dynamic needs to be looked at.  One of the more common issues I have run into in retail is the double bind.  A double bind is when an individual is caught between two other people that have conflicting agendas.  This dynamic plays out in all aspects of our lives.  An example that happens often in family life is when a child is told yes by one parent and no by another.  The child is caught between a “rock and a hard place”.  Something has to give and it may be the child’s mental psyche if we are not careful.  Employees become caught in this type of a situation all too often.  A firm that just went through a GAP analysis showed that middle management wanted its supervisors to visit six locations per day.  At the same time, corporate operations produced a store visit book with financials, inspections and other data to structure the supervisors visit.  The hitch?  A visit using the visitation book required the supervisor to spend two to three hours at the location.  There was no way any supervisor was going to visit six locations and maintain any quality control.  Management immediately became aware of the situation but unfortunately neither faction would give.  To this day, the company has not resolved the conflict and revenues continue to suffer. 

So, how do we get around that?  The pat answer has always been to get management buy in before a program is implemented.  Nice in theory but many times it does not happen.  Change is never easy to deal with.  That is a whole different topic for discussion at a later date. 

Three Rules of Retail

Three Non Negotiable Rules of Retail

Selling the Most Amount of Product at the Best Margin Possible with the Lowest Expense Possible.  Period.

Sell the Most Product You Can:  First rule of retail is that sales cover a multitude of sins.  How true.  If we do not have sales, all else is lost.  Too many merchants worry about other issues a retailer may face such as shrink.  While these do need to be addressed, sales are the first line on a financial and all else follows those metrics.

Sell at the Best Margin You Can Get:  Here is the great balancing act in sales.  Sales volume vs. gross margin.  What is the magic point where we do not hurt either part of the equation and maximize our gross profit income?  Too many retailers have done the see saw marketing program where we need sales so we lower the price and now we need margin so we increase the price.  The customer sits and wonders who the heck is running the show and do we want to be a part of this?  Competition, fixed and variable costs and cash requirements all play a part in our pricing strategy.  No matter what, value is what you are trying to provide for the customer so focus on that.

Sell at the Lowest Expense Possible:  I have always said the job of retail operations is get the money to the bank.  When we look at our retail business, it does us no good to have large sales increases and then lose it because of dishonest employees, poor controls or losing our focus.  When money disappears, it is because we have lost our focus.  The minute we look the other way, something will happen and you will pay dearly for it.  How many times has an incident occurred and you looked at the individual responsible and were shocked.  A trusted friend?  A relative?  Your best employee?  The little old lady that looked like your grandmother?  You never know but retail will teach you very quickly that focus is essential.  And this is only the shrink!!  We haven’t on labor costs, utilities, lease costs and all the other expenses that drain your margins and penny profit.

A financial can be overwhelming with detail.  New management theories can cause us to chase our tails and lose focus on what retail is really about.  Sell as much product as we can at the best margin we can get for the lowest expense possible.   That’s what retail is really about…

Value in Retail Settings

Value:  Added or Eroded?

Many years ago I was taught to review each day when I laid down at night to see what I could have done better. What could I have done to have a better outcome that day?  Now looking back on all the days I have spent in retail, I wonder how many of us could benefit from this exercise.  What could we have been done better to achieve the goals we set out for the day?  How could we have made one of our team members a better person or a more completely rounded employee?  How about our significant other?  Have we spent time with our emotional bank account as Stephen Covey states so well in his management classic, “Seven Habits of Highly Effective People”?  Many of the management books on the market today have been the latest greatest trend at one time or another.   Management by Objective, Management by Wandering Around, Walk the Talk, Who Moved the Cheese, Herding Cats and how many more have wandered through our shelves.  All the time, looking to see how we can add value. Add value to our customers, add value to our team members, and add value to our owners and board.

So how do we measure this “value” we are trying to create?  Where is the metric we need to use and who determines it?  What is your strategic plan to measure your strategic plan?  Many of today’s management books deal with character and tend to be a little light on behavior and those that do have behavior struggle on tying it to a metric. More to come with the next post…

Clerks Aren't Jerks

Clerks Aren’t Jerks

How many times have you had a good experience with someone behind the counter?  How many times a great experience?  Considering all the transactions each of us conducts every day, week, month or year of our lives, most of us are lucky enough to have at least mediocre service.  The ones that stick with us and shared with our friends are the bad ones.  The reason I am bringing this up is that for the most part, Clerks Are Not Jerks.  For all the bad media, the stereotypes and the condescending sneers used to describe them, they are good people doing difficult jobs.  So why aren’t they treated better by employers and customers?  

Have you ever heard of the Pygmalion effect?  Those qualities we want to develop or create in others?  With our front line people, it works from both sides of the counter.  Customers may tend to view cashiers in a harsh manner so that they can feel better about themselves in their upcoming day.  Even middle managers can demonstrate this attitude towards their teams.  Thank goodness, most managers with this philosophy do not last long, but the damage to the individual and the organization has already occurred.  How do we as managers overcome this trap?  How do we get the most out of our most valuable resource? 

Follow the resources. We always talk about “walking the talk”, put your money where your mouth is, etc but to really get “real”, look at your checkbook. If your resources are going to your goals, you are in good shape.  Example:   Are you spending money on training?  On follow up?  Are you visiting your third shift employees?  Are you investing in training?  What metrics are you using to hold your HR/Training team accountable?  How often are they reviewed?