It seems one cannot read the retail news these days without learning about the demise of at least one retail business, and in some instances these are iconic national or international businesses.
This week it’s about the likely collapse of Topshop and Topman. This business has been a stalwart of the fashion sector for more than six decades!
What must a retailer do to survive and prosper in the current retail world?
Bear in mind that tough trading conditions are not just being experienced in Australia, but around the westernised world. Even in the US, which is currently experiencing strong economic growth, stores are closing and shopping centres are not attracting the traffic or sales that they once enjoyed.
A Credit Suisse report recently forecast 20-25 per cent of American malls would close in the next five years. In 2018, 6400 shopping centre stores closed, with less than half that amount opening, despite some favourable deals being offered by the landlords. This trend is forecast to continue for the foreseeable future.
Is this an apocalypse of bricks-and-mortar stores? Will it happen here?
We don’t know the answers to those questions yet. What we do know is that retail is tough here too: April 2019 sales were negative on last year. This appears to be true in online sales as well. In more general terms, the Australian economy only grew by 1.8 per cent over the last 12 months, according to the ABS.
Yet some retailers are still growing and showing strong returns. This begs the question: what are they doing and why are they not feeling the pinch? Whilst there is not one ‘silver bullet’ there are many indicators that contribute to their success.
These are two of our retailers getting it right and showing good growth:
Here are some important disciplines to create a growth strategy in the current retail conditions:
- Have an appropriate, flexible strategy for the fast changing retail customer and constantly analyse customer messages and trends.
- Have a discernible and strong point of difference providing the customer a tangible benefit. If the customer does not experience it, it is not a point of difference.
- Have a seamless omnichannel distribution model that allows the customer to purchase at times, methods and places that suit her / him.
- Have a team of effective people who demonstrate the right attitude and go the extra mile to satisfy customers, particularly with regards providing a great experience. Some of the world’s leading brands such as Sephora and Westfield have Experience Managers, or XM as the role is known, to focus on this important differentiator.
- Create the right stock and services mix, which is curated to the customer’s wants and needs. Most retail businesses are sitting with a significant percentage of slow stock. The installation of up-to-date technology and the ability to manage data is key in this important aspect of successful management.
- Stay connected with your regular and high value customers and treating them as VIPs through media and effective database communication. This will help build loyalty and enhance brand appeal, leading to better sales.
- Keep the store visually attractive and fresh. Many stores do not change the windows or interiors with new merchandise often enough. Consumers today need a reason to open their wallets and if the store looks the same as it did last week or last month, they will not even consider your store as new and relevant.
- Have a relevant marketing and promotional plan, particularly on social media, with the correct pricing strategy. This will be essential to gain attention and drive traffic. It is no longer good enough to just be in the right location, retailers need to drive their own foot traffic to their business.
- Provide in-store product information, sometimes with interesting related stories, such as where it comes from, what it’s made of, whether it’s environmentally efficient, what its history is, etc.
This adds value and appeal.
None of these steps alone are enough to make the difference, but together they are the difference between success and failure.
We call it being ‘Fit for Business’. How ‘fit’ are you for the challenges ahead? Are you an athlete or a spectator?
In most retail businesses, a 10 per cent variance in sales will make the difference between a profitable store and a non-profitable store. This applies to both big and small businesses and can be tested with any Profit and Loss statement.
Here’s an example:
The astonishing change in profitability is the result of just a 10 per cent variance in sales.
Doing the above nine key disciplines in your business well will virtually guarantee a 10 per cent increase in sales.
The businesses that have implemented some or all of the above actions are still showing 10 per cent growth, while those that have not are seeing sales fall up to 10 per cent from last year and their profits disappear.
First Published in Inside Retail on July 4 2019