Are Retailers "Technology Laggards"?

We know four multi-store retailers (in 4 different geographic markets and retail segments) whose cash flow problems have landed them in the Special Credits department of their respective banks. In each instance the owners have personal guarantees on the loans. And given the economic crisis, whether any of these businesses can survive is still in doubt.

As we reflect on these 4 very distinct businesses, we recognized one shared trait: they each have very old, cumbersome systems.

• Some struggle even to get monthly P&Ls (and therefore find out many months too late how great their losses are).
• Others have very difficult purchasing systems (which tempt the buyers to place larger, less frequent orders, thereby slowing turns...and making their cash flow problems even worse.)
• In every instance, the Owner – and thereby the business – is dependent on essentially one person, either the controller or the custom software developer, for coaxing reports from the systems.

We've heard all the rationales for why this happens. Updating systems is seen as an expensive and time-consuming project, so many retailers are happy to defer that to another day. Others convince themselves that their particular segment is "very unique", and therefore the cost to have something custom-built would be prohibitive. Or, whatever custom-built solution they have had in place for the last 15 years would be impossible to replicate with current off-the-shelf solutions.

Here's the issue: Retail businesses with outdated systems are less able to spot problems in advance. And, once a crisis hits, they are less able to adapt and respond.

As the Owner, you are responsible for the survival of the business. Do your systems provide you with the appropriate information, when you need it?

Going forward, the only retailers who are "technology laggards" are former retailers!

Retail Survival in the “New Normal”

The "New Normal". It is tough and demanding. The temptation for many store owners is to return to “managing in tough times” approaches. Slash expenses, put in more hours yourself, extend suppliers, and cut back on inventory purchases. Unfortunately, even if you can do these things, it is likely they won’t be enough. Sorry, but those “tried and true tactics” may not be sufficient in the New Normal.

Here is why. Those old standbys are focused almost exclusively on the income statement (also called the profit and loss statement, or P&L.) What is needed in the New Normal is this: You must dedicate your attention to that other part of the financial statement you receive from your accountant or bookkeeper: the Balance Sheet.

As Owner, your #1 responsibility is the survival of the business. Therefore, you need to put considerable thought and energy into your Balance Sheet. You must steer your Balance Sheet with at least the determination you have been steering your P&L. Effectively controlling a retail business in the New Normal must start with – and tirelessly stay focused on – your Balance Sheet.

The Balance Sheet is the most telling measure of the financial strength of your business. Without financial strength, your retail operation lacks staying power, and could be flattened like road kill.

Retailing is Not Dead; It's Being Re-Invented!

"Four days, for savings, for you!"

Five-store Kitchen Kaboodle in Portland, Oregon has been a full-line, full-price kitchen and furniture retailer for 30 years. It's become a prominent and respected private chain.

But customers increasingly have been buying only the merchandise that's been discounted. And only at the times that suit them the best. Of course, that's the trend everywhere. So what can retailers do?

Effective March 6, Kitchen Kaboodle boldly switched to a 4-day week with everything off price!

Here's part of Kitchen Kaboodle's announcement of their new business model of "Four days, for savings, for you!"

"Shocking? Not really. As a locally-owned business, as your friends and neighbors, we feel a special need to give you what you want, these days more than ever. And who doesn't want the same great Kitchen Kaboodle stuff, at new lower prices? You don't want cheap steak, you want steak, cheap. To get it, just visit us Thursday through Sunday, or stop by anytime on the web. See you Thursday morning!"

By going to a 4-day week – closing all Mondays, Tuesdays and Wednesdays – Kitchen Kaboodle is cutting expenses by over 30%. By passing those savings on to customers, all prices on 100% of the merchandise are discounted all Thursdays, Fridays, Saturdays and Sundays. And none of their five stores are closing!

As Co-Owner John Whisler says, "We're offering our best merchandise, at the best prices with our best staff on the best days for shopping, all for our best customers. That's retailing for this 'New Normal.'"

See the Kitchen Kaboodle website for more info about their reinvention. For further details, call John Whisler at 503.241.4040.

Full disclosure: Outcalt & Johnson: Retail Strategists, LLC, the Co-Founders of The Retail Owners Institute, developed this reinvention concept for and with the Owners of Kitchen Kaboodle.

What Is "Value" In This Economy?

Value is not just another word for low price. Instead, the definition of value is, "benefits received for the burdens endured."

How can retailers deliver more “value” to customers? Start by “unburdening” them!

Think about common cost-saving programs in stores

• less staff on the floor and more "self service";
• self check-out by the customer;
• online searches by the customer for product information;
• online shopping;
• etcetera
  

Aren't these really shifting the burden - the work - to the customer? And what benefit does your shopper receive for the increased burdens they now endure?

Retailers: Time to Focus on Your Most Profitable Customer

Most retailers are facing difficult choices in 2009: where and how to cut back. Many have no choice but to cut expenses, cut inventory, go out of categories, or even close stores.

The challenge: how best to choose? What to cut, and what to keep?

We believe these tough owner choices can be guided by knowing just who is your best - that is, your most profitable - customer. This economic climate offers a great opportunity for you to do to your customers what they have done to you for years...shop around for them! Be very selective. You must lose the ones that are not good for you.

Remember, the retailers who will continue to survive in 2009 and beyond are those not with the most profitable locations or merchandise, but the most profitable customers.

You may be surprised at how quickly you can get the facts for yourself. And it may cost you nothing extra! Indeed, with today's POS systems, you may already have the data available to you. What better time to turn that data into strategic management information you actually can use to help your business survive?!

Retail Dealers: What Will It Take to Survive This Financial Crisis?The Answer: C - A - $ - H!

Your #1 responsibility as a retail owner is the survival of your business. Here is a 4-Step Survival Plan that you, as Owner, can put into practice right now.

1. CONSERVE Cash
2. RAISE Cash
3. FIND MORE Cash
4. Start with Step #1 again!

Remember, especially in this economic environment, the "old rules" no longer apply. Lenders, vendors, landlords, and yes, even employees, are more open to negotiating. This is the time to find new win-win situations.

Where's Your CASH FLOW Plan?
To control cash in your retail business demands an up-to-date Cash Flow plan. And we mean a basic Cash Flow, that you always have with you. Here are some key reminders:

• Cash Flow plans have just three basic parts: (1) cash coming in; (2) cash going out: (3) the difference.
• Cash Flow plans are projections. You are looking ahead a few months, at expected sales (cash coming in) and purchases and expenses (cash going out).
• It's just arithmetic! Just find the difference each month between the cash in and the cash out. Now, you can start to plan, manage and control the cash!
• Update your Cash Flow plan! It is a living, breathing tool. Many retailers do a rolling three-month or four-month plan. Others actually do a weekly cash flow.

The Top Five Killers of Stores (And guess what did NOT make the list?!)

Last year, every 12 minutes, a retail business in the U. S. failed. Over 5 failures per hour, every hour, every day, 24/7/365. What caused these failures?

#5. Out-of-control growth
#4. Out-of-control expenses
#3. Failure to manage Gross Margin
#2. Out-of-control inventory
#1. Being out of cash

Notice what's missing from this list? Not one mention of the "top line" - sales!

If there is any good news in this list, it is that the most damaging forces for retail businesses are in fact "controllable variables". Owners CAN control expansions and growth, expenses, inventory, and yes, even margins...all of which affect the availability of cash.

That's not to say these are easy choices; many are very anguishing. But especially in this economic climate, the most uncontrollable variable of all is the customer.

As Owner, keep focusing your resources, energy, and efforts on those parts of your business you can control. Happily, those are the ones that are most likely to enable you to survive!