Retail isn’t rocket science – the keys to a more profitable business
It doesn’t matter what your particular specialty is in retail – in an office, a shop or online – the basics stay the same throughout.
Within the retail environment, many key issues have a huge impact on performance, both positive and negative.
Business performance improvement fundamentals can make a difference to any business. Improving performance will pay huge dividends in the long run.
Hilary Kahn, an honorary member of The Ebeltoft Group of International Retail Experts, and Norman Thurecht, partner at Pitcher Partners and an accountant and adviser to retailers, say “it isn’t rocket science”.
They say business owners need to remind themselves of the basics and the importance of doing them brilliantly all the time; measure effectiveness against what is possible and focus intently on delivering what their customers want and need (often they don’t recognise their needs) so that they keep using the business and become passionate advocates for what is on offer.
Over upcoming articles and online workshops, Pitcher Partners has one goal in mind: to ensure that every subscribing business gets practical, usable guidance on how to become more effective and more profitable.
Basics don’t really change, retailing never moves on from there. Yes systems become more sophisticated, with advancing technology customers are more knowledgeable, demanding and have a whole lot more shopping options.
Once great businesses struggle or fade into oblivion – like Myer, and Ansett, Franklins, Waltons, Laura Ashley, Roger David, many community pharmacies, Brashs, Dick Smith Electronics.
Others triumph, like Apple, JB Hi-Fi, Bunnings, and Chemist Warehouse.
Four critical retail equations
The equations are clear:
1. Every business needs more satisfied customers using them more often – the challenge to every business is to determine the customers you have and need, how to keep them satisfied and how to get them using your business more often.
2. These customers need to use every part of your business – whether you run a fashion store, an aftermarket dealer or a technology retail/service operation, you have to focus on two things –
a. A relevant, current stock and services offering, well presented, up to date and competitively priced (not the cheapest) turning over frequently and profitably;
b. In an environment that is attractive, well located and is quick and easy to shop (convenience).
3. Finally we need them to buy more and be offered more so that three financial indicators keep reflecting the success:
a. Conversion rate (how many who walk in actually buy?);
b. Retail average sale or basket size (how much do they spend?); and
c. Items per transaction (are they buying only the one item that they asked for, or more – what they want and need, a solution?)
4. Leading to the end bottom line goal of making more profit. We’ve all seen numerous examples of businesses chasing profitless sales and often unnecessarily sacrificing profit.
When push comes to shove, it’s what happens on the sales floor that matters. Because customers demand more, and will tolerate less, we’ve got to deliver our products and services more compellingly, and more consistently.
That means every customer, every store, all the time, especially peak period.
Customers ‘vote with their feet’. The statistics around the world show that customers are prepared to desert their favourite stores in droves if not satisfied.
Check your customer count – are customer numbers going up, static, or staying the same?
Getting the four equations pumping
In Pitcher Partners’ March 7 webinar, hosted by CCIQ, and workshop we will deal with each of these four equations in more detail.
We will focus, give tips, and recommend strategies, offer workshops and online programs so that every business finds opportunities to get better results. What gives us the right?
We’ve had decades of experience working with hundreds of different retailers – large and small, nationally and internationally. We’re hands on and practical – we’ve seen it all – huge success and sadly, the opposite as well!
There’s an old saying about not knowing where we are going unless we know where we’ve come from. How are you going on the four equations? Why not take a snapshot
1. Equation 1: More satisfied customers revisiting more often
a. Cover four important trading months of the year – not necessarily sequential months over 2013, 2014, 2015 (the same month each year);
b. List the number of customers and/or transactions (items sold) in each month
c. Are the numbers increasing, static, declining?
2. Equation 2: Using all parts of the business
a. Identify the major parts (or departments/categories including services)
b. In the same months as 1a over the three years
c. List two figures: number of customers, transactions (items sold) and turnover in those months
d. Are the numbers increasing, static, declining?
3. Equation 3: Spending more
a. Using the same departments and months, for each month and year calculate:
i. The retail average sale (total revenue divided by total transactions for the month);
ii. Items per transaction (total units, items, SKUs sold, divided by total transactions)
b. In the same months as 1a over the three years
c. Are they increasing, static, declining?
4. Equation 4: Making more profit
a. Using the same departments and months, for each month and year calculate the gross profit
b. Is it increasing, static or declining?
It may take some time to gather this information now, but you will be amazed at the insights and information you will get.
In the upcoming webinar The Retail Cash Bucket on March 7, and workshop we will strive to deliver recommendations that you can use to give you real opportunities to become super successful having fun as you go