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Way back in the 1980s RMSA put together a document entitled “10 Secrets for Success in Retail Management.” I recently rediscovered this publication and thought the message warranted repeating as we enter a new decade. I have taken the liberty of updating the original list a bit for the sake of freshness. What I find most interesting however is that the basic principles that make up a successful retail business are pretty much the same in 2010 as they were then and always have been.
The main reason why most retail businesses encounter difficulties is that they lack appropriate management techniques. More often than not money and cash flow issues are the result of a problem not the cause of it. Industry analysts have found that there are ten particular management techniques vital to success in retailing. It may be that not all of these areas apply to your operation. Slight improvements in one or two areas alone can sometimes translate into greatly increased profits. With gratitude to RMSA for content and acknowledgment to a certain late-night television host for format allow me to present the Top 10 Secrets for Success in 2010.
#10: Expense Management
An annual review of operating expenses once the profit and loss statement is generated at year-end is not sufficient in today’s demanding and ever-changing retail climate. Operating expenses need to be planned and budgeted not left to chance. If we consider that every two percentage points trimmed from current operating expenses could add as much as 60% to net profit it stands to reason that actual expenses should be compared to planned expenses at least on a quarterly basis.
#9: Markdown Management
It isn’t just what sold that counts but also what hasn’t sold. Every slow seller is a drain on earning potential. Excessive markdowns are a result of little or no planning over-buying or just poor inventory management. Timing of markdowns is key. The longer you wait once you know of a problem the costlier it will be to remedy.
#8: Visual Merchandise Management
First Impressions in Visual Merchandising
The saying that you seldom get a second chance to make a first impression rings true for this management technique. Visual merchandising is the silent salesperson in any retail operation. Goods well displayed are half sold. We are in a very visual business. It is the presentation of properly displayed merchandise well-planned advertising and good housekeeping that portrays a store’s ….
First impressions are very important. They influence the customer’s conscious and subconscious decision-making processes. The effective use of color design and quality projects the store’s attitude and …. I refer to this as a store having “pop” or “wow factor.” If accomplished properly visual merchandising can create customer need and want of an item.
If your store lacks the talent to create “pop” hire a visual merchandiser on a contract basis. With the downsizing and reorganizing of retailers due to the economy a plethora of talent in this area abounds in nearly every region of the country.
#7: Customer Service Management
Customers are the most important people to any retail establishment. They are not dependent on us; we are dependent on them. It is critical for management to develop training programs for employees. Training should be an ongoing program encompassing specific objectives that reinforce employee development and company policy.
(And remember that even long-term employees need training—regarding new products new product technology fashion trends communicating effectively with customers and so on. Nobody is ever so skilled that there is nothing left to learn.)
#6: Customer Analysis Management
Retailers often refer to their “regular” customers without realizing that up to 18% of these customers are probably lost on an annual basis. Customers move shop other stores and eventually die. These attrition factors are referred to as the three “Ds”—death desertion and dissatisfaction.
Customer Satisfaction
It is important to review your customer base periodically to see how it has changed. Perhaps you need to change some things to attract new customers. Be open to this. People shop differently today than they did in the past and they will probably shop differently in the future.
#5: Debt Management
The objective here is to keep debt at a minimum and cash flow at a maximum especially in 2010. Outstanding debt obligations that impede credit may starve an operation of fresh salable inventory which could ultimately affect sales and cash flow.
#4: Sound Profit Management
“What gets measured gets managed” according to management guru Peter Drucker. With all of the management tools available today thanks to technology there is absolutely no excuse not to have current data relative to your business immediately accessible. This list of information needed for sound profit management includes but is not limited to a cash flow statement balance sheet income statement vendor profitability report fast and slow seller report and sales and inventory forecast (open-to-buy plan).
#3: Self-Control Management
This technique may be the most significant of all and too often the least applied. Goal-setting is the starting point. Reasonable and attainable goals must be set for all areas of the operation. Successful implementation of all of the techniques discussed here is essential if one’s goals are to be achieved. Prioritize your time. All too often store owners micro-manage the most insignificant portions of their businesses. Tackle the most important tasks first those being the ones that could have the greatest financial impact on the business.
#2: Inventory Management
This topic is best described in three terms: turnover cash flow and gross margin return on investment (GMROI). Of these turnover is by far the most essential.
Seldom have I encountered a retailer experiencing cash flow issues that had a good turnover rate.
It should be remembered that for every week of improvement in annual sell-through cash flow increases by approximately one percent of sales. Nobody comes in your store looking for merchandise that was received last year. Increases in profitable business come from a constant flow of properly timed new merchandise. For maximum sales focus more on what is selling rather than on what isn’t.
#1: Dollar Planning Management
Retailers do not fail from overbuying. They fail when they can’t pay for their overbuying. The development of a sound merchandise planning and open-to-buy program is crucial to the survival of any retail operation. Forecasting and planning must be based on the sound evaluation of current and projected sales and inventory figures. Classification merchandising or the development of trends by type and end-use of merchandise is essential. Buying merchandise in the right amounts timing deliveries properly and having the proper selection of styles with adequate assortment planning are the keys to increased profits.
Ritchie Sayner is vice president of business development at RMSA Retail Solutions which works with retailers to improve performance. He can be reached at RSayner@RMSA.com.
Ritchie Sayner
nsra.org
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Summary of Retail Management Success Secrets
The article revisits and updates RMSA’s “10 Secrets for Success in Retail Management” emphasizing that fundamental principles of retail success remain unchanged from the 1980s to 2010. Key management techniques include expense markdown visual merchandise and customer service management among others highlighting the importance of planning analysis and self-control to enhance profitability and customer satisfaction.
“Seldom have I encountered a retailer experiencing cash flow issues that had a good turnover rate.”
Real-World Examples of Retail Success Techniques
The principles outlined in the article on retail management success can be seen in action across various businesses today. Here are some real-world examples that demonstrate these techniques effectively.
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Expense Management: A global coffee chain regularly reviews its operating expenses and implements cost-saving measures such as energy-efficient appliances and waste reduction strategies to enhance profitability.
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Visual Merchandise Management: A popular fast-fashion retailer uses eye-catching window displays and in-store layouts to attract customers and boost sales creating a strong first impression that aligns with its brand ….
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Customer Service Management: An online retailer known for its exceptional customer service invests in continuous employee training programs resulting in high customer satisfaction ratings and increased customer loyalty.
