Surviving Tough Times
By
Joe Milevsky, CEO
Owning
and operating a business is never easy. Having consulted with
hundreds of independent retailers over the years, I have
seen companies struggle during the best of times. I have also been
around many companies that have excelled during the toughest of
times.
Last
year I met a gentleman that operated a furniture store in a rural
area of Michigan. A client of mine that was with me sympathetically
stated how tough it must be to do business in an area that has been
so negatively economically impacted. The gentleman from Michigan
stated “I decided long ago to not participate in any downturns in
the economy. I do however encourage my competitors to participate.
I do not want them going out of business. I need them to attract
interest in furniture in our market place through the dollars that
they spend on advertising. I need them so that my customers can see
how good we are at what we do in comparison to my competitors. This
is our 30th year in business, and we are having the best
year in our history by far!”
Understand the things that you cannot control and minimize your
focus on those things:
-
You cannot do much about the economy.
-
You cannot do much about world events.
-
You cannot adjust the price of gas.
-
You cannot dictate to the Fed interest rate
adjustments.
-
If
a tough competitor decides to move into your neighborhood,
you most likely will not be able to stop them from coming.
-
Although you can create a great work environment that will
minimize employee turnover, you cannot completely control
the loss of key personnel.
You also
cannot control the unprecedented change that we have gone though in
this country. Although you can and should support
domestic manufacturers, merchandise is going to continue to be
manufactured outside of the
United States.
Big box retailers will continue to get their hunk of the
marketplace. Many manufacturers will be driven to continue to move
more of their product through their own branded stores.
Understand the things of which you can have some control and
maximize your focus on those things. Quite frankly, those things are
the same things on which you should focus during not-so-tough
times. The need to properly focus just becomes much more pronounced
during tough times.
·
Declining traffic - Sales perspective
Your paradigm must shift. Your attitude must be positive.
The gentleman from Michigan said it best.
-
Every customer that comes into your store
becomes more precious than ever. If you are not measuring
traffic, start measuring traffic now. Measure not just the
overall traffic coming into your store, but the amount of
traffic greeted by each salesperson on your sales staff.
-
Expect your staff to participate in
generating traffic. Demand they generate leads from
customers that were initially non-buyers and that they keep
track of upcoming needs with customers that have purchased.
Have a system to be sure you can measure their actions, and
congratulate success.
-
As you measure traffic you can also begin to
understand that with a decrease in traffic, other key
performance measures should go UP! Close ratios should and
must go up because your salespeople have the opportunity to
spend more time with each customer. The same is true with
average sale.
-
Develop the skills to coach performance
improvement among your salespeople. Every customer is
precious so every person that interacts with each customer
is more precious than ever.
·
Declining Traffic – Marketing Perspective
-
Advertising brings qualified customers into
your stores. Without traffic counts, how can you truly
understand your advertising’s effectiveness?
-
Evaluate your brand. What is your niche?
What is your competitive differentiation? Why would
someone choose your store over your competitors? Your
marketing efforts must exploit your brand.
-
During tough times more than ever, carefully
budget and plan your advertising proactively. Every penny
spent must be maximized.
-
Understand the most effective media mix in
your marketplace. It is a moving target so continually
reevaluate it. Don’t rely on others to tell you what a
great media buy is. Learn how to buy media effectively.
-
Develop non-traditional marketing processes
including an interactive website and other internet devices.
Improve your merchandising skills
Slowing sales will lead to an increase in undelivered inventory
leading to cash-flow issues during tough times. You must become a
merchandiser in the truest sense of the word.
Develop your understanding of open-to-buy. Ensure that whatever
inventory dollars that are available are focused towards the items
that will give you the greatest return on your investment. Even
though container buying may allow higher margins initially, it can
have a dramatic negative effect on cash-flow if containers fail to
sell to anticipated goals.
Develop item elimination strategies and the disciplines to unload
inventory that does not meet pre-established standards of
performance. You should never tolerate merchandise that does not
perform up to your expectations. During tough times your tolerance
needs to be more intense.
Establish over-all gross margin goals. Ensure that you factor in
markdowns that will be necessary to assist you in the elimination of
merchandise that does not meet your standards. Meet those goals.
Develop your Annual Budget,
Financial Review Processes,
Balance Sheet and Cash-flow Analysis.
Over
the years, on my initial visits to potential clients, I have found
that one in thirty independent retailers utilize a budget. This will
lead to tough times for the independent retailer even if
the times are not tough. I can assure you that your big box
competitors understand the significance of budgets.
A
budget can be thought of as a series of goals leading to the
ultimate goal of profitability acceptable to the owner of a
company. Developing financial review processes that examine
performance to goal is critical to the health of a company and
keeping it safe.
Appropriate P&L to budget performance, coupled with merchandise
skills that limit inventory and maximize turns, and the development
of necessary expense initiatives, lead to stronger balance sheets
and improved cash-flow. Quite a mouth full, huh? It is not really
that complex. However, without these processes your company is
extremely vulnerable to tough times.
Blindly cutting expenses may not be the best practice. Cutting the
wrong expenses may eventually lead to cutting the most important
expense of all: owner income.
Build
a great place to work and a highly organized environment
-
If there is extensive stress and conflict;
-
If leadership is not properly perceived;
-
If every mistake is aggressively noticed but every positive
performance viewed as ‘just doing their job’.
-
If systems are not properly developed;
-
If your lines of communication are not clearly defined and
therefore not respected;
-
If there is no feeling of team;
-
If accountability does not exist;
-
If there is no sense of vision or direction;
then
your company cannot be a great place to work. The stress on
your business must be intense and you then are especially vulnerable
to tough times. During tough times your employees will seek
opportunities to undermine positive business efforts and perhaps
seek other employment. The level of service that you would hope
your employees would give to your customers will not be consistently
realized.
Service!
Service! Service! Service! Service!
Won’t happen in a stressful disorganized environment.
Won’t happen without measurements.
Can’t consistently happen without clear goals.
Can’t happen without accountability.
For you
to survive tough times you must continually strive to create a
customer experience that surpasses expectations.
The
image that you portray in your marketing efforts:
Should meet or exceed expectations as your customer
pulls into your parking lot.
-
Then
should meet or exceed expectations when they walk in your front
door and see the interior of your store.
-
Then
should meet or exceed expectations when they are approached,
greeted and assisted by your salespeople.
-
Then
should meet or exceed expectations when they are ready to apply
for credit or pay for their merchandise.
-
Then
should meet or exceed expectations when they go through the
delivery process.
-
Then
should meet or exceed expectations when they have issues or
concerns post delivery.
If any of
these areas are not consistent with the other areas of your
business, then a disconnection is guaranteed. The way to survive
tough times is to run your business professionally in both tough
times and proactively in not-so-tough times. This applies to all
areas of your business. Retailing is detailing.
Hopefully, your main interest is not just to survive but to truly
thrive. For that to happen, you will have to be open to change.
Change is not easy. Many of the issues that I have discussed in
this article will require changes in the very culture of your
company. If you choose to resist change and wait for things to get
better, you may not be able to survive the tough times that we are
experiencing today and will be experiencing in the future.
Change is
coming; it is always coming. Proactively embrace change. For those
of us that do, the future is exceptionally bright.
|
