Tell young entrepreneurs to use the leader in their industry and as a benchmark as they work to create their own brand. Don’t look at what your competition is doing – if you emulate the leader in your industry, you will achieve a higher level of engagement with consumers and make their buying experience richer.” – Steve Stoute
Knowledge is power, or so they so say, but knowledge that can’t be translated into action is a little like having a strategy without tactics that support the strategy.
Benchmarking is power in many cases, and interestingly over the years it is our landlords that have held the power by consolidating retailers’ performance in areas such as sales per sqm and moving annual turnovers that have given them an unfair negotiation advantage with many retailers. (Given that the goal of every business is to gain an unfair advantage over their competitor, they have my highest regard.)
So if we define a benchmark as a measurement used for comparison, benchmarking, in retail terms, is a systematic and continuous audit used to identify, measure, and analyse the quality of your internal business strategies, operational procedures, and policies,against industry (and global) best practice.
Many retailers haven’t harnessed the power that both understanding and communicating benchmarks across their sectors will bring. This is possibly because we sense that communicating these benchmarks weakens our position or gives away secrets.
Certainly not communicating benchmarks is a greater weakness for many than communicating and sharing.
Retail Express has launched a retail sales index benchmark database for retailers, which is to be applauded.
The new Retail Sales Index, which is a very good intention, can help retailers access market intelligence and benchmark results, trends, and trading conditions, however, in true benchmarking terms, it should only influence you if you measure apples with apples against best practice, internally and externally, and if you know how to interpret the results.
Comparing sales results with other retailers in your sector is one thing, but the true value of these results lies in your ability to interpret and act on them alongside your business benchmarking results and strategies to improve.
For example, comparing Armani sales per sqm with Best & Less, even though they are both fashion retailers, is meaningless. Brand, consumer markets, segments, and categories all have to play a part.
If you delve deeper into actual benchmarking against best practice, have you got the smarts and business fitness team capability to influence the results?
Let’s say, for example, you are a women’s fashion retailer with a ladies jackets’ stock turn of five, and you want to lift it to six. What does that mean? What are the supply channel implications? Merchandising strategy? What are the cash flow implications? What are the working capital implications? In fact, what is the correct stock turn relative to your, category, cash position and so forth, and how would you influence improving the numbers?
If store A has sales per sqm of $10,000 and store B has sales of $9000 per sqm, does it follow that store A is the fitter of the two?
Not necessarily, and so benchmarks must work across a range of variables that are integrated.
And this is where knowledge becomes power, not so much in the benchmarks themselves (an important first step), rather the business fit implementation steps taken to transform the right benchmark into action.
This gets even more interesting when we utilise omni-channel benchmarks across both the physical and virtual space to increase performance – benchmarks of one generation may lose some relevance in the new order of retailing.
Australian retail has never been particularly good at benchmarking, but local and global industry best practice exists. So, too does a strict template audit methodology to gather factual data on retailer capabilities.
The key to successful translation of sales data lies in looking at it more holistically in context and ensuring you have the right team in place to understand how you can influence the results and make the necessary changes, transforming knowledge into power
Happy fit retailing,