Industry Boot Camp: Retailer Topics & Speakers

josh hunter

• March 20 2009
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photo: Joanna Tichauer

After assembling for a general state of the market update from SIMA Chairman Emeritus Dick Baker and BRA Chairman Todd Roberts, a group of nearly 150 of the industry’s leading decision makers split up. Retailers broke off into their own group for two targeted, insightful presentations. Here are some highlights.

Alan Roseman, Merchadise Planning: Yesterday’s Gone, What’s Your Tomorrow?

The first speaker to take the podium was Alan Roseman, founder of Strategic Results. Roseman is an expert in operations and data management with more than 30 years of retail experience. He outlined in great detail ways for retailers to increase profits and cash flow with strategic merchandise planning.

Roseman opened his presentation with a broad stroke explanation to retailers that there are factors that they can control, and there are those that they can not. He emphasized to retailers that it’s pointless to focus on factors like weather, competition, and the economy because they are out of their control. However, factors that retailers should be focusing on in the current economy include reducing wasteful spending, better planning, improving sales staff performance, and managing expenses.

Then Roseman got into the nitty-gritty details of merchandise planning, sales planning, monitoring financial statements, producing a breakeven analysis for stores, and creating an effective cash flow plan.

“The recent turbulence in retailing makes accurate merchandise planning more critical than ever.  Retailers that create their own OTB (Open-to-Buy) budgets normally base their projections on last year’s results.  This approach can leave a retailer in a vulnerable and uncertain position,” he continues. “A professional merchandise plan is based on statistical analysis and computer modeling with inputs that take the economy, location, trends and business history into account.  The result is an accurate sales forecast for each classification of merchandise in the store.  This sales plan is generated for each month’s sales in each classification.  The merchandise plan is based on a number of key variables such as store events, monthly stock to sales levels, freshness of inventory (freshness factor) and many other local influences.”

Monitoring Trends:

Roseman advises retailers to tap into their point of sale systems and monitor trends. He emphasizes that inventory must be segmented into meaningful classifications for this to be effective. He suggests that trends happen at a classification level, and that vendors are not classifications.

“Numbers only have value when they lead you to the right action,” Roseman says.

Here’s a quick example of tracking sales performance by classification from his presentation:

He also advises retailers to get involved with Actionwatch, a company that aggregates data from more than 200 specialty retailers in the action sports industry and produces insightful results for users.

Breakeven Analysis:

Roseman says retailer have to monitor financial statements and expenses closely. He also stongly urged retailers in attendance to create a breakeven analysis of their business using this method:

Sales - Cost Of Goods Sold (COGS) = gross Profit (MMU)

Gross Profit (MMU) - Variable Expenses = Contribution Margin

Contribution Margin - Fixed Expenses = Profit

When Profit equals zero, that is breakeven.

Some applications Of Breakeven Analysis that Roseman mentioned include:

-What is your required MMU?

-Are variable expenses controlled?

-Are fixed expenses minimized?

Cash Flow Planning:

Roseman also offered this method for producing an effective annual cash flow plan.

Beginning of the year:

cash - current liabilities = opening cash

Current Position:

Opening cash + YTD sales - YTD expenses - YTD purchases = current net cash

Forecast Period:

Current net cash + planned sales - planned expenses - on orders - planned receivables = net cash at end of period

Overall, Roseman’s presentation was very well-received and extremely informative. After he was finished, ZJ Boarding House Owner Mikke Pierson took a moment to tell the retailers in the room that Strategic results has been working with his store’s staff for years and that it has been a major factor in keeping them in business during the recession.

photo: Joanna Tichauer

Gregg Solomon, Solutions For A Challenging Economy

Next up to present was Gregg Solomon. With 15 years of experinece running Quiksilver’s retail division, there wasn’t a retailer in the room that didn’t have their ears wide open to hear Solomon share some of his secrets to finding solutions for a challenging economy.

He offered information customer retention, cost containment, marketing, real estate tips, and receiving government assistance.

Customer Retention:

Solomon stressed the importance of word of mouth marketing. He stated that a study shows that 80 percent of customers polled reported never returning to stores when employees seemed indiffernet. Eighty percent also said they wanted to be noticed, and 100 percent said they wanted to be greeted.

Cost Containment:

He also suggested that labor cost should be closely monitored. Labor hours should be scheduled according to traffic volume, store hours can be reduced based on sales data, and retailers can track key perfomance indicators (KPI) by installing traffic counters. This helps retailers follow the conversion of the total number of customers that come in the store versus customers who make a purchase. Solomon said Quiksilver’s top perfroming stores were achieving 17 percent conversion while he was with the company.

Marketing:

Solomon believes customer loyalty programs, one on one marketing, adjacent product buys, vendor supported marketing events, and friends and family programs are all areas retailers could be capitalizing on. He used the example that the number one turning piece of inventory in a Lowe’s home improvement store in a bottle of water to emphasize how lucrative add-on purchases can be to hitting sales goals.

Real Estate:

According to Solomon property managers are more willing than ever to negotiate lease rates due to increased vacancy rates. He suggested retailers reach out and ask for better deals, one specific suggestion was agreeing to extend lease terms in return for a rent reduction. “You have to be willing to lose a deal to make the best deal,” Solomon says.

Government Assistance:

Solomon says that part of the economic stimulus package includes loans for small business owners. Of the 787 billion dollar package about 1.4 billion will be set aside for small businesses, he says. He also urged retailers to look into the way they are claiming losses on their taxes. Part of the package also allows small businesses to write off losses over five years.

Overall, both speakers were able to open upproductive discussions and all the retailers in attendance were engaged. The general consenses following the break out sessions was very positive.