"How high is up?" Moreover, "How LONG is up?"

In the world of retailing, every December is fascinating, challenging, and  - especially when the results are positive! - even thrilling. And this December is no exception.

For whatever reasons, the all-important consumer confidence index continues to rise.  And retail sales are far stronger than expected just months ago. In fact, November was the 6th consecutive monthly increase in retail sales!  It now appears as though they will maintain this robust nature through the end of this month.  

Retailers are basking in this "It's all good!" moment. And, with sales being up more than expected and inventories held in check, margins are likely to be higher. All in all, one of the best Holiday Seasons in years. 

So, we ask, "How high is up?"

Our estimate today is "Not very high."  But more to the point, "How long is up?"  That is, can this level of growth be sustained? 

We think not. We anticipate that the first two quarters of 2012 will look a lot like the first two quarters of 2011, bleak for retailers. Retailers should relish this fine Holiday Season, but must go into Q1 and Q2 of 2012 with discipline and restraint.

• It has been noted that consumers, who on the whole have had more debt than assets for awhile, got religion from recession-fear. For the last 2 years, they have steadily reduced their family debt burden. 
• Then, this Fall, while incomes have been stagnant, consumers started to put more spending on credit than they paid off. And apparently they are continuing that trend through the Holiday Season. My, what short memories we have!
• The unresolved European debt crisis is looking very, shall we say, "European". It lacks a needed sense of urgency. 
• For every job opening in this country now, there are, on average, 4.25 applicants. In healthy times, it's closer to a 2:1 ratio. 
• Moreover, those folks in Disneyland-on-the-Potomac seem frozen in a "Wait for the election!" mentality.

All in all, very disappointing. Especially for retailers as we start a new year. We expect the optimistic consumer confidence to be ephemeral. 

Enjoy it while you can, but don't get too used to it.

Tired of the Mystery and Voodoo Around Open-to-Buy? So Are We!

Most retailers have heard of the inventory managing tool "Open-to-Buy". (BTW, "Open-to-Buy" is slang for a budget for how much inventory to bring in, and when.) But all too often, Open-to-Buy has been shrouded in mystery. Too complex and/or too expensive.

Those days are over! The Retail Owners Institute is on a crusade to spread the word: Managing and controlling inventory IS within the reach of all retailers.

Here's the deal: Open-to-Buy is just a 4-part formula!  And any retailer, anywhere, can put that formula to work, on their own!

What can an Open-to-Buy do for a retail operation?
    •    improve margins
    •    improve cash flow
    •    reduce the time spent on inventory management
    •    help have the right merchandise in your store at the right time
    •    avoid excess inventory
    •    invaluable when delegating to buyers
    •    help you sleep at night!

How Does The ROI Take Away the Open-to-Buy Mystery? Here Are Four Answers!
The ROI is the foremost resource for retail financial training and know-how. The Institute is dedicated to taking away the mystery of retail finance. Retailers CAN control the cause-effect connections between sales, margins, expenses, profits, inventory turns, and cash flow.

Here are 4 different ways (free or very low cost) that you (or your staff) can learn more about controlling inventory with an Open-to-Buy plan.

#1. Free TOPICAL TUESDAY webinar
November 15. 10 am Pacific Time/ 1 pm Eastern Time
"Back by Popular Demand: CONTROLLING INVENTORY LEVELS"
Free registration • Go here
About 80% of retailers are over-inventoried some or all of the time.  As we approach this particular Holiday Season, having excess inventory may be especially treacherous.

Right now, controlling inventory is the #1 job of the CEO or owner. This live TOPICAL TUESDAY webinar with Pat Johnson & Dick Outcalt, Co-Founders of The Retail Owners Institute, will review the basics of inventory management, and show how The ROI's online multi-department Open-to-Buy Calculator automates the number-crunching for you. 

There will be plenty of time for Q&A, so bring your questions (and your buyers!!)  Go here to register for free

#2. On-demand info on The ROI site: CONTROLLING PROFITS, INVENTORY & CASH FLOW
This is an entire section at The ROI, dedicated to this major responsibility of retailing. Available online, 24/7, on-demand. Explanatory how-to articles that reduce the mystery. Short videos that teach, explain, and illustrate. Online calculators that automate the process (nothing to download or install; they just work!)

#3. The OPEN-TO-BUY CENTER
This is one of the new "special purpose portals" of The ROI: an entire website dedicated to Open-to-Buy! The remarkable multi-department Open-to-Buy Calculator is hosted here. Any retailer, anywhere, can do their own Open-to-Buy plans in just minutes. (Try it yourself! 1st month is just $4.95!) 

And, if you need some refresher, the Open-to-Buy Center includes articles and videos. Just look under the RESOURCES tab.

#4. BASICS of OPEN-TO-BUY eLearning Kit & Calculator
Want more structured training? Need to train your staff in Open-to-Buy? Here's the perfect answer!
The BASICS of Open-to-Buy is a self-paced, online eLearning "KIT": a step-by-step how-to training course, and an online "calculator" that automates the cause-effect number crunching.

Talk about doing away with the mystery! And it's needed more now than ever before! Go to The ROI's eLearning portal for details about this new management training tool for retailers and buyers. (Be sure to watch the short video about the BUYING PLAN Forecaster!)   "Learn it. Do it. Profit from it!"

There you have it. Four different ways that you and your staff can make Open-to-Buy planning your new best friend! Just depends on how you like to take in information. But the key: no more mystery about how much to buy, and when. (And, no more intimidation by "the experts".)

Who's Job Is Growing? The CUSTOMER's Job!

Think about cost-savings programs in stores - e.g., less staff on the selling floor and more "self-service". Self check-out by the customer. Online searches by the customer for product information. Online shopping.  

Don't each of these actually shift the work to the customer? 

The "job" of being the customer just keeps growing. (In fact, some grocery stores are starting to experiment with programs "allowing" the customer to scan the merchandise, place it into their shopping bag in their grocery cart, and then automatically ring up the total charge and pay via debit card - all using the customer's time, effort, and smart phone! "Attention Shoppers: Bring your own cash register.")  

Where is the "value" for the customer in all this?  

Reflect for a moment on the definition of "value".  Value: Benefits received, for the burdens endured.  

Certainly, many of the shopping burdens have been shifted to the customer, especially with the onslaught of new technology. But, what benefit does your customer receive for the increased "burdens" they now endure?

Some enjoy cost savings. Others like the increased sense of control. Still others may relish the time savings, or at least not having to wait for service.  But of course, not every customer has the same concept of a "burden".  

Want to deliver more "value" to your customers?  Start by understanding what your best customers consider the burdens of shopping with you.  Then, as a competitive edge, unburden them the best way you can! 

Retailers: Have questions? Want answers? Join online TOPICAL TUESDAYS webinars - FREE

Success in retailing demands a competitive edge, and there are many ways to do that: product selection; pricing; customer service; location; instore "experience"; services; etcetera; etcetera.

But, retailers fail for only one reason: financial.

For eleven years, The Retail Owners Institute has been dedicated to providing any retailer, anywhere, with financial management know-how to avert financial failure. 

And now, that effort continues in yet another way. We are launching a series of TOPICAL TUESDAYS webinars for retailers. Led by Pat Johnson and Dick Outcalt, Co-Founders of The Retail Owners Institute, these are timely and interactive. And FREE!  

Free Registration is Now Open
Here are the upcoming topics. Register now for as many as you wish. Let your friends and colleagues know about them. And be sure to bring your questions!  

"Make More with Less! The Power of GMROI"
Tuesday, September 13 10 a.m. Pacific Time/ 1 p.m. Eastern Time/ 6 p.m. in London
click here for details &  free registration  

"Is My Store Failing, Or Am I Failing My Store?"
Tuesday, September 20 10 a.m. Pacific Time/ 1 p.m. Eastern Time/ 6 p.m. in London
click here for details & free registration  

"The BASICS of Open-to-Buy"
Tuesday, September 27 10 a.m. Pacific Time/ 1 p.m. Eastern Time/ 6 p.m. in London
click here for details & free registration  

"Will you have a profit…or a loss?! How to Know"
Tuesday, October 4 10 a.m. Pacific Time/ 1 p.m. Eastern Time/ 6 p.m. in London
click here for details & free registration

Timing Is Everything!

The current economic meltdown, while fearful, is beautifully timed for retailers!

Sure, consumer confidence is down. Businesses aren't hiring. Nobody is lending money. But so what?!

The first ten days of August - unless you sell beer - are the absolute dog days of the retail year. As long as world leaders are getting their abrupt comeuppance regarding their fiscal irresponsibility, the timing for retailers is perfect.

Consumer confidence, although presently in the tank, is fickle. In six weeks, or by the holiday selling season, it could be at the highest in years. This kind of crisis brings leaders worldwide to a new sense of urgency. And we have high hopes that they all have gotten the message.

Retailers - be grateful for this timing. And reassure others to do likewise.

Creative Crisis Management Must "Pencil Out"!

The Internet for Retailers: "The Arab Spring of the Commercial World"

There's a major sea change affecting retailing right now, whether we're ready for it or not.

Sea changes have hit retailing in the past, of course.

• Department stores once ruled retailing. Ah, but they didn't die. Instead, they went horizontal. They became known as Wal-Mart, Costco, Target, etc.
• Then "big box" stores, like Circuit City, Borders, Toys R Us, etcetera, stole the thunder from malls.
• In fact, there was a time when malls essentially had no vacancies. Now, they are being "re-purposed". Retirement homes, anyone? Charter schools?

But the current upheaval affecting retailing may be the most game-changing of all: the Internet. It continues to dramatically change the retail industry, at an increasingly fast pace. It's the Arab Spring of the commercial world! 

All those things that specialty retailers prided themselves on delivering in-store, in-person, are now available on-demand, 24/7 to the shopper via their smartphones.

No matter which consumer segment you target, they are increasingly web-reliant. They depend on the web to give them product information, shopping recommendations, price comparisons, store reviews, and more.

For hints of the future, watch the Millennial Generation. Yes, the "Digital Natives". The ones we know only from the tops of their heads, as they are busily texting.

That group now is larger and more influential than the storied Baby Boom generation that drove so many adjustments during the last 50 years. Watch every shopping decision they make: how, where, when and what they shop.

But don't stop there. All other consumer segments are being affected by the sea change as well. Grandmas buying off tablets? Baby Boomers checking prices from INSIDE a store on their smart phone?!

In fact, the fastest growing group of Facebook users is now the over-50 age group. So much so, that the teenagers are deciding to move away from Facebook. Where will they land?

So, which will it be for you?
There are three kinds of retailers:

1. Those who make things happen.
2. Those who watch things happen.
3. And those who say, "Uhh, what happened?!?"

Don't let the internet - the Arab Spring of the commercial world - turn you into retailer type #3.

The 5 (only!) essential financial levers of a retail business

Now Available in The Retail Owners Institute^® eLearning Portal

The Retail STRATA:G^® Kit
(That's "strategy". Every retailer needs one!)

Fact: Every retail business has only 5 essential financial levers. Not 50. Not 500. Just five. Manage these, and you can maximize your future.

Fact: These 5 financial levers are linked. They're integrated. Inter-connected. Changes in one impact all the others.

Fact: Connecting these 5 financial levers has now been "automated". The ROI has developed breakthrough "in the cloud" calculators that "connect the dots".  Now, any retailer, anywhere, can produce fully-integrated financial plans for profits, inventory, and cash flow!

The Retail STRATA:G Kit reveals these 5 essential levers, explains how they work and why they matter, and then provides the "calculators" that automate the process for any retailer, anywhere.
Click here for more info.

See how retailers can learn - then use - the basic financial levers of a retail business.

What People Say About the Retail STRATA:G Kit

"Our retailers need help with inventory control and cash flow, and how to make better business decisions. Your courses are right on point."
--Manager, Field Business Consultants, National Franchiser

"I want all 28 of our S.B.D.C. Certified Business Advisors to use this whenever they are working with a retailer."
--State Program Director, Small Business Development Centers

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McDonald's Remodels - Again! (And for WHICH Customer?)

You probably saw the news. McDonald's is launching a $1 Billion "makeover" of their stores.

The remodeled restaurants will replace bright reds and yellows with subtle colors. They can feature flat-screen TVs, lounge chairs and electric fireplaces. They also are adding free Wi-Fi in most of its U.S. restaurants. Thanks to "seating zones", customers who want to linger will be separated from those who want a quick bite.

What does this mean - or matter - to independent retailers? Simply this: heightened expectations!

When was the last time your store was remodeled? Or, put another way, how many fast-food franchises in your town have been remodeled since your last update? If the price points on your merchandise are somewhere north of a Big Mac, but your store's look places you squarely in the Bush Administration, it may be time to reconsider how you are re-investing in your business. The customers expect no less!

Will McDonald's Remodel Chase Away Families?
Some observers have assumed that this makeover is meant to appeal to laptop-toting workers, and worried that it would drive away the families-with-young-children who depend on McDonald's as a reliable place for food their kids will eat. After all, as her kids run around, how many scowls from someone hunched over a laptop can any mom endure?

Our view is that this remodel is focused on a different market segment: teenagers! Think how Starbuck's has become a cool place for teens to hang out. What if McDonald's could attract them back? Offer a more "grown up" atmosphere, flat screen TVs, Wi-Fi for their texting - and those fries - might McDonald's become a cool place for teens?

The "Theater of Retail"
The "look" of your store says a great deal. It IS an arms race, no question. Once you accept that you need to remodel with some frequency, be certain to keep focused on that customer you most covet. Then make your store a place where that shopper wants to spend her time (and her money!)

Retailers' "Digital Divide"

According to a research study, mobile shopping from a smart phone "is more frustrating than sitting in traffic or visiting the D.M.V." Get this: Some 85% of the shoppers interviewed expect the shopping experience on their phones to be as good or better than on a computer!

Wow! That's quite a high standard!

The pressure for retailers is relentless: build e-commerce websites optimized for the small screen. And while you're at it, create shopping apps. It is an arms race that just keeps escalating.

Happily, a fast pace and rapid changes are not new to retailers. (In fact, that's what attracted many of you to retailing in the first place!)

As you take on these challenges of integrating new technology into your operation, remember to take advantage of "in the cloud" services. These let you experiment without a major investment in hardware/software.

Just remember: "Don't let the perfect be the enemy of the good." It's better to be in the game than on the sidelines.

Big Box Store's Dilemma: Great Customer Service...for Amazon's Customers?!?

Ironic, isn't it? Big Box stores are being morphed into specialty stores.

Not so long ago, shoppers were using the specialty stores and their knowledgeable staff as their source for knowledge about the newest products...and then buying from the Big Box stores! The specialty stores were the "showrooms" for the Big Boxes, who as low-cost providers, could offer lower prices.

This is a long-standing "specialty store dilemma": hire, train and keep a knowledgeable sales staff who can educate the consumer about new products (aka "great customer service"), only to lose the sale to the lower cost, lower-priced competitor. This has been long known to specialty retailers in all retail segments, whether audio/video products, art supplies, power tools, whatever.

But now, look what's happening to the Big Box stores. Customers go there to see, hear, and touch the latest products (think Best Buy), so they can decide which one they want to buy. Then - customers being customers - they buy it at a lower price from online providers (think Amazon)!

The Big Boxes have become the "showroom" for the online retailers of the world! In their efforts to provide better customer service, the Big Boxes incur added costs (both in-store for people as well as robust web sites chock-full of more information) only to lose sales to the new low-cost providers of the world.

What goes around, comes around.

Or, consider the impact of category killers like Barnes & Noble and Border's Books on independent bookstores. Now these "category killers" have become dinosaurs themselves. Increasingly, more books are bought online, and/or in digital form, for a lower price at greater convenience.

Retail Darwinism at work.

Greatest Growth Opportunity in Retailing? Better Owners!

Winston Churchill once said, "Some are born great. Others achieve greatness. And some have greatness thrust upon them." And so it is with business ownership. Some are born to it; others achieve it; still others have it thrust upon them.

Whatever their route to retail ownership, few recognize or appreciate that being the owner is its own job, separate and distinct from any other job in retailing. Whether the "Owner" is one person (perhaps the founder); several people (perhaps family members, business partners, even investors); or, as in the case of a corporation, represented by the Board of Directors, the job of the "Owner" is the most under-performed and overlooked job in retailing!

Indeed, The Retail Owners Institute believes that failures in retail are traceable not to weak management, nor to weak CEOs. Instead, most retail failures can be traced directly to under-performing ownership.

Meeting the Owner-Only Responsibilities
The ROI has identified that every retail business - no matter its size - has three levels of management issues, or responsibilities, each with its own unique demands. The Institute has defined these three levels: Owner level; President level; Management level.

Too often, these three levels of issues are entangled and overlapping. And, just as often, the word "owner" is used interchangeably with "boss" or "president" or "manager". This confusion can no longer be tolerated. Even when one person must fulfill all responsibilities, it is important that the differing roles and obligations be separated.

The #1 responsibility of the Owner? Survival of the business. That in turn demands consensus at the Owner level on this fundamental question: What constitutes success? Without that consensus, a business will flounder. Only the Owner(s) can answer that question.

Success in retail does not depend on "location, location, location." Nor does selling the latest "must-have" product assure success. Today, the true retail success stories will be written by those companies whose Owners are effectively performing their actual job; doing those things that only the Owner can do.

Tale of the Tape: What Retail Benchmarks Show

The Retail Owners Institute(R) has updated the charts and graphs of performance benchmarks for 52 retail segments, and recently posted them on The ROI site. These are the ratios prepared for and used by virtually all lending personnel. We show charts and graphs of five year trends for 6 key ratios for retailers to monitor (Turnover, Gross Margin, Pre-Tax Profit, Debt-to-Worth Ratio, Current Ratio, Return on Assets).

Most users of the Store Benchmark numbers displayed at The ROI are focused on their specific retail segment. Depends on what kind of retail business they have: gift shop? apparel store? hardware store? pet store? However, we have spent some time reviewing all of the segments. What did we discover? Generally, they look awful!

While there are improvements vs LY (going against "soft numbers"), few retail segments are back to even with 2008 performance levels. That Recession, you remember.

Gross Margin and Pre-Tax Profit Trends
After topline sales, what do most retailers pay most attention to? You got it! Gross Margin, and "the bottom line". And sure enough, over half of the 52 segments showed increases in Gross Margins vs 2009; same with Pre-Tax Profit.

Of course, we are going against "soft numbers", since 2009 was so grim.... Comparing 2010 to 2008, a somewhat different picture emerges:

Margins up: for a whopping 2/3rds of the reported segments (35 out of 52), 2010 GM% exceeded 2008 Gross Margins

Profits down: On the other hand, for 34 of the 52 retail segments, Pre-Tax Profits are still below 2008 levels.

The Lenders & the Vendors
Meanwhile, what do the bankers watch? They keep an eagle eye on your Debt-to-Worth ratio. (Their focus is on getting any and all loans repaid.) There are some promising trends here to report!

2010 vs 2009, only 15 retail segments showed increases in the Debt-to-Worth ratio. And that's a good trend! It shows these businesses are getting financially stronger.

And 20 retail segments showed improvements in the Debt-to-Worth ratio vs 2008. (Might be something to that "survival of the fittest" idea. The retailers still here are in fact stronger.)

What ratio do the credit departments at your vendors pay most attention to? The current ratio. It measures your ability to pay your bills on time. The benchmarks on that measure show how tough the retail environment continues to be.

Comparing 2010 to either 2009 or 2008, a scant 23 retail segments (only 44%) showed improvements in the Current Ratio. In fact, as you look at the benchmark trends, note for yourself how many segments have Current Ratios below 2.0 (a C grade).

Inventory Turnover
What really drives these ratios? Inventory turnover. Here again, the overall indicators are not promising. Twenty-six of the retail segments showed declines in turnover. That means more cash is tied up in (old) inventory. And only 17 segments showed increases in turns for 2010 vs 2008.

As Michael Gould Bloomingdale's Chairman noted, "No retailer ever filed bankruptcy because their turns were too high!"

What's the "bottom line" of all this?
Opportunity abounds! Those retailers who can better manage these key metrics of retail financial strength can quickly separate themselves from the more mediocre performers.