The key to surviving an economic downturn is to assess what factors have been integral to your business’s success until now. Whether it is the product you sell, your pricing, marketing strategy, customer relationships, your location or a combination of these factors, now is the time build upon and consolidate these strengths.
While focusing on your business’s key strengths, the following key areas need to be kept in check.
The recent spate of events surrounding the global economic crisis has prompted retailers to re-evaluate their businesses to ensure they survive in a tougher economic climate. Many retail businesses are upping the ante and are fighting fiercely for the consumer dollar. Current economic indicators suggest now is not the time to be complacent and the short term challenges of making changes to improve business are clearly outweighed by the potential gains.
Maintaining a realistic sales plan:
Project a realistic sales plan and conservatively link the plan to the stockholding and wages.
Sales data is a useful tool for developing a sales plan and should serve as a guideline when developing a sales strategy.
Key data could include:
- Store sales
- Departmental/category sales
- Percentage of gross profit and sales ($) per category
- High stock holding categories
- Sales by suppliers
- Best sellers/slow sellers.
Sales data is also very valuable to your team, as it allows them to clearly understand their position and how they can make an impact with sales, gross profit and net profit.
A sales promotion strategy should also be implemented highlighting incentives to encourage repeat business. Focus the team on key lines to drive bulk sales, increase the average sale through bundling of products and focus on shifting slow selling stock to free up cash.
Managing your finances to maintain stability:
Cash flow is fundamental to the success of managing a retail business. It is important to predict sales trends and to forecast required stock levels to meet demand and link these in with both the fixed and estimated variable costs. This planning allows a retailer to accurately predict any potential bottlenecks in cash flow and adjust accordingly. Some key areas where cash flow can impact on a retail business result from retailers aiming to increase stockholding for busy trade periods such as Christmas without careful planning.
Seeking professionals to help set up plans to guide your financial management, identify your limitations, manage stakeholders (franchisees, suppliers and investors) or assist you with capital investment (i.e. buying, leasing, borrowing) could be worth the investment to ensure you make well-informed choices.
Fundamental to managing your finances is establishing the following benchmarks and targets and reporting frequently:
- Sales
- Cost of Goods Sold
- Gross Profit ($ and %)
- Trading Profit ($ and %)
- Customer Counts
- Wages ($ and %)
- Store Expenses (%)
- Average Spend ($)
- Units per Transaction
- Stock turn
Managing your stock levels and stock turns:
The goal of effective stock management is to maintain the level of inventory that provides an adequate variety of merchandise to achieve the objectives of your sales plan.
Out-of-control inventory causes lower margins and reduces cash flow. Retailers tend to overstock when sales are good and understock when prospects are bad. Both are equally risky.
Over 80 percent of retail businesses are over-stocked some or all of the time, however under-stocked products are also an ‘opportunity lost’.
- Ensure you are never out of stock on your best sellers.
- The key to supporting cash flow is to buy smaller and more often. This provides you with the ability to be flexible and adapt quickly to any changes in the market. Remember to keep your business fresh and engaging and never stop reinventing.
- Buy stock based upon your promotional plan and prioritise stock in hot spots.
- Focus on promoting new and volume lines and plan in advance the ticketing requirements to build a strong value proposition. Limit your risks but ensure a point of difference.
- Negotiate with suppliers in advance to secure give aways, samples or value-add stock, and if possible try to get extended terms to assist with cash flow.
- Rationalise your suppliers – be important to few and manage the relations and renegotiate with minor suppliers if they are to be maintained.
Marketing your business to strengthen your identity: A good marketing plan is essential to any successful business and is even more crucial at a time where all businesses are fighting for the consumer dollar. One of the keys to executing a good marketing strategy is to plan your promotions calendar in advance. Lock in with centre management any marketing opportunities available. Leverage from the activity of others – local marketing and other retailers.
Plan a strategy to ignite the interest of your existing customer database. You already know your existing customers – it is important to always consider how you will keep them satisfied and returning. Retailers can often make a mistake of mass marketing to try to expand their customer base when trading patterns change. Regardless of circumstances, people are different and not everyone is motivated by the same offering, so it is generally better to define your target market and customise your campaign accordingly.
Recognise and reward loyalty. It is important to acknowledge and reward those people who contribute to your success. A retailer’s incentive scheme should be designed to reward and maintain customer loyalty as well as drive demand for future purchases.
Editors note: for more tips on marketing your business, refer to our article ...
Planning your visual merchandising strategy:
There are often far too many messages for a customer to take in with one glance of the store or precinct in which you trade. Your message can easily be overshadowed by others in the same space. It is important to think in advance and plan a strategy to out-merchandise your competitors. This is not a one-off hit but regular layering of creative messages about your business and your point-of-difference.
The exterior of a store and focal window displays are usually the only opportunity to capture shoppers’ attention and entice them to come inside. There is no room for error with this piece of valuable real estate.
Retailers using the simple yet effective powers of visual merchandising to grow the recognition and identity of their business will constantly reap the benefits of ‘silent sales’.
These can be ‘make or break’ in tougher economic climate. To maximise your return on space investment:
- Plan and prepare merchandising changes;
- Identify the key hot spots to be working with value promotions;
- Change displays regularly;
- Measure the return from the key hot spots on a weekly basis;
- Budget for the results that you need to achieve from each category; and
- Record and track the improvements in your results.
Make it easy to shop and make it fun!
Building and leading your team:
The cost of replacing a shopfloor staff member can be as high as 90 percent of their salary, and businesses with high staff turnover levels can also suffer from low morale, instability and inconsistent service levels. Prevention is better than cure and retention is better than replacement.
Some of the following points will assist in creating the vision for the team and ensuring they maintain focus:
- Understand what each team member values in their position;
- Create links that make an employee feel like they belong; Have a plan for your key team members and allow them to understand the future;
- Clearly communicate your goals for the business and how staff influence the outcomes; and
- Update frequently on the progress made.
Clearly articulate your business’s culture and its overall objectives. Plan motivational strategies for your team – build team morale in your business by staging activities to keep them going.
It is also important to communicate the business’s expectations of each team member. Establish clear individual goals and train team members well so they can meet the objectives of your sales strategy. Measure the outcomes of the goals and it is important to reward successes. The key to keeping a team motivated is to recognise all efforts. Celebrate wins in public and guide staff in private.
Managing your own emotional health and downtime:
As important as it is to run an efficient and profitable business, retailers must always be cautious not to allow their business to take over their lives. To work efficiently, and for your own health and wellbeing, it is important to create a balance between your work and personal commitments. This is a complex issue but there are some key strategies that can help including scheduled time-outs and learning the power of delegation. Once you have established that an individual is capable of doing a task or role,hand some of the work over to them. This not instils confidence within them, but it also enables you to focus on the bigger picture.
