| Where
is the weakest link?
By Evan Wise, Managing Director
of Management One
Retailers
tend to find much to complain about, but that is not
a new phenomenon. Forty years ago I remember my father
coming home from a day at his menswear store and complaining
about this vendor or that customer. A bigger difference
today is the stressful effect of chain stores on the
independent retailer. Many don’t know how to cope
and get despondent or just end up closing the business.
Winning@Business™
includes the methods to solve problems rather than complaining
about them. By putting the situation into perspective,
you can begin to fight back instead of just lamenting
about your unfortunate situations.
The
first step is to take a comparative look at the different
advantages the two types of retail stores may have.
The typical chain probably has these advantages:
1.
Megabucks to throw at the physical facility
2. A national marketing budget
3. A highly efficient management process
4. Tight control over expenses
5. Information with which to target buys and eliminate
waste
6. Ability to use other store inventory for internal
transfers
It
may seem pretty daunting at first glance. Many retailers
get stopped at this first view of the mountain to cross.
However, there are some advantages that a specialty
retailer has as well:
1.
An onsite owner to assure consistent service and quality
2. A focused and targeted understanding of the local
market
3. A close tie to the community
4. A history with customers
5. Flexible policy to serve customers
The
next step in solving the problem is to look at the disconnects
between advantages they seem to possess and the potential
opportunities there are to exploit. Three of the five
advantages the chain has are attainable by the specialty
retailer. In fact, if they are to survive they must
adopt a highly efficient management process, a tight
control over expenses and the same quality of sales
forecasting, classification planning and open-to-buy
guidelines by which the chain operates. That is where
a consultant can guide a specialty retailer to success
in fighting the chain for market share.
The
fact is that when it comes to inventory planning, most
chains use top down planning which means they start
with a sales goal, buy nationally, and then distribute
to local stores based on revenue generated at that store.
The local retailer can do bottom up planning which looks
at the local trends and then determines the open-to-buy
based on the local market. When a retailer has the right
goods for the right market, they have a better chance
at having the right numbers on the bottom line. A sales
forecasting and inventory planning tool must be able
to look at the latest figures and project the customer
needs accurately. Working off of last year’s figures
or making guesses on inventory needs will not work in
today’s dynamic and competitive environment. A
planning system like Winning@Retail™
is the best way to achieve inventory planning that surpasses
the information that the chain receives. This is critical
for a specialty retailer since he doesn’t have
the other stores to rely on for supplemental inventory.
When
it comes to efficient management of the operation, a
management process like Winning@Business™
has proven to be an essential tool for specialty retailers
to rival the management systems of larger chains. This
brings a method to identify the strategy and direction,
get everyone involved in identifying the problems and
opportunities and then addressing them quickly and efficiently.
Even the chains have trouble doing this efficiently.
Another
key to specialty success is efficient marketing. Unless
a customer comes into the store to shop, he will never
know the improved service, flexibility in policy or
greater level of selection and targeted inventory. Developing
a marketing plan that identifies the differences and
publicizes them in the marketplace is required to combat
the national marketing approach.
The
New York Times Management Reader (2001 Henry Holt &
Co.) tells of Polly’s Gourmet Coffee’s response
to two Starbucks moving into the neighborhood. After
the initial drop in business, they managed to grow 40%
then 30% the next year. They found a weakness in Starbucks;
they can’t roast their coffee on site and they
have a selection limited by their national distribution
system. Polly’s portrayed the pre-roasted coffee
at Starbucks as the “ordinary brew” and
hyped their greater selection. In addition, they implemented
a new management process, tightened cash management,
trained employees in new skills and became more efficient
than Starbucks!
Sophisticated
inventory planning combined with a management process
that quickly implements action is the key to success.
Expense management, cash flow planning, marketing, sales,
merchandising, promotions and a whole list of other
skills and processes are needed to optimize bottom line
results. Every specialty retailer needs to improve the
handling of these critical tasks to grow, despite national
competition, big box competitors or regional specialty
stores.
The
best retailers use all of these advantages to fight
back when sophisticated national competitors threaten
their business. Some of the retailers just complain
about the situation and the rest just quietly go out
of business.
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