Top 10 for 2010

Way back in the 1980s, RMSA puttogether a document entitled “10 Secrets for Success in Retail Management.” I recently rediscoveredthis publication and thought the mes-sage warranted repeating as we enter anew decade. I have taken the liberty ofupdating the original list a bit for thesake of freshness. What I find most inter-esting, however, is that the basic princi-ples that make up a successful retailbusiness are pretty much the same in2010 as they were then and always havebeen.The main reason why most retail busi-nesses encounter difficulties is that theylack appropriate management tech-niques. More often than not, money andcash flow issues are the result of a prob-lem, not the cause of it. Industry analystshave found that there are ten particularmanagement techniques vital to successin retailing. It may be that not all of theseareas apply to your operation. Slightimprovements in one or two areas alonecan sometimes translate into greatlyincreased profits.With gratitude to RMSAfor content and acknowledgment to acertain late-night television host for for-mat, allow me to present the Top 10 Secrets for Success in 2010.

#10: Expense Management. Anannual review of operating expensesonce the profit and loss statement isgenerated at year-end is not sufficient intoday’s demanding and ever-changingretail climate. Operating expenses needto be planned and budgeted, not left tochance. If we consider that every twopercentage points trimmed from currentoperating expenses could add as muchas 60% to net profit, it stands to reasonthat actual expenses should be com-pared to planned expenses at least on aquarterly basis.

#9: Markdown Management.It isn’tjust what sold that counts, but also whathasn’t sold. Every slow seller is a drain onearning potential. Excessive markdownsare a result of little or no planning, over-buying or just poor inventory manage-ment. Timing of markdowns is key. Thelonger you wait once you know of aproblem, the costlier it will be to remedy.

#8: Visual Merchandise Manage-ment. The saying that you seldom get asecond chance to make a first impres-sion rings true for this managementtechnique. Visual merchandising is thesilent salesperson in any retail operation.Goods well displayed are half sold. Weare in a very visual business. It is the pres-entation of properly displayed merchan-dise, well planned advertising and goodhousekeeping that portrays a store’simage. First impressions are very impor-tant. They influence the customer’s con-scious and sub-conscious decision mak-ing processes. The effective use of color,design, and quality projects the store’sattitude and image. I refer to this as astore having “pop” or “wow factor.” Ifaccomplished properly, visual merchan-dising can create customer need andwant of an item. If your store lacks thetalent to create “pop,” hire a visual mer-chandiser on a contract basis. With thedownsizing and reorganizing of retailersdue to the economy, a plethora or talentin this area abounds in nearly everyregion of the country.

#7: Customer Service Management.Customers are the most important peo-ple to any retail establishment. They arenot dependent on us; we are dependenton them. It is critical for management todevelop training programs for employ-ees. Training should be an ongoing pro-gram encompassing specific objectivesthat reinforce employee developmentand company policy. (And rememberthat even long-term employees needtraining—regarding new products, newproduct technology, fashion trends,communicating effectively with cus-tomers, and so on. Nobody is ever soskilled that there is nothing left to learn.)

#6:CustomerAnalysisManagement.Retailers often refer to their“regular”cus-tomers without realizing that up to 18%of these customers are probably lost onan annual basis. Customers move, shopother stores, and eventually die. Theseattrition factors are referred to as thethree “Ds”—death, desertion, and dissat-isfaction. It is important to review yourcustomer base periodically to see how ithas changed. Perhaps you need tochange some things to attract new cus-tomers. Be open to this. People shop dif-ferently today than they did in the pastand they will probably shop differntly inthe future.

#5: Debt Management. The objectivehere is to keep debt at a minimum andcash flow at a maximum, especially in2010. Outstanding debt obligations thatimpede credit may starve an operationof fresh salable inventory which couldultimately affect sales and cash flow.

#4:SoundProfitManagement.“Whatgets measured, gets managed,” accord-ing to management guru Peter Drucker.With all of the management tools avail-able today thanks to technology, there isabsolutely no excuse not to have currentdata relative to your business immediate-ly accessible. This list of information needed for sound profit management includes, but is not limited to a cash flowstatement, balance sheet, income state-ment, vendor profitability report, fast andslow seller report, and sales and invento-ry forecast (open-to-buy plan).

#3: Self-Control Management. Thistechnique may be the most significant ofall and too often the least applied. Goal-setting is the starting point. Reasonableand attainable goals must be set for allareas of the operation. Successful imple-mentation of all of the techniques dis-cussed here are essential if one’s goalsare to be achieved. Prioritize your time.All too often, store owners micro-man-age the most insignificant portions oftheir businesses. Tackle the most impor-tant tasks first, those being the ones thatcould have the greatest financial impacton the business.

#2: Inventory Management. Thistopic is best described in three terms:turnover, cash flow, and gross marginreturn on investment (GMROI). Of these,turnover is by far the most essential.Seldom have I encountered a retailerexperiencing cash flow issues that had agood turnover rate. It should be remem-bered that for every week of improve-ment in annual sell-though, cash flowincreases by approximately one percentof sales. Nobody comes in your storelooking for merchandise that wasreceived last year. Increases in profitablebusiness come from a constant flow ofproperly timed new merchandise. Formaximum sales, focus more on what isselling, rather than on what isn’t.

#1: Dollar Planning Management.Retailers do not fail from overbuying.They fail when they can’t pay for theiroverbuying.The development of a soundmerchandise planning and open-to-buyprogram is crucial to the survival of anyretail operation. Forecasting and plan-ning must be based on the sound evalu-ation of current and projected sales andinventory figures. Classification merchan-dising or the development of trends bytype and end-use of merchandise isessential. Buying merchandise in theright amounts, timing deliveries properly,and having the proper selection of styleswith adequate assortment planning arethe keys to increased profits.IRitchie Sayner is vice president of busi-ness development at RMSA RetailSolutions, which works with retailers toimprove performance. He can be reached at RSayner@RMSA.com.