Latest Key Retail Benchmarks Now Available

How Do Your Stores Compare? 

One of the most popular features of The ROI is the unique Performance Benchmarks Trends we focus on, chart out and display for 54 separate retail segments. These are available to you online, anytime, 24/7, for free. 

The ROI has selected 6 Key Ratios (of more than 40) for retailers to regularly monitor. Then, The ROI presents 5-Year Trend Charts for each of these key ratios.

• Pre-Tax Profit
• Gross Margin
• Inventory Turnover
• Debt-to-Worth Ratio
• Current Ratio
• Return on Assets (ROA)

Go here to find your retail segment. How do your stores compare? Are you trending the same ways as other stores like yours?

"So, how can these benchmark numbers be used by retailers?"

• For perspective. Calculate these ratios for your own business, and then see how you compare to your retail industry segment.
• Use these benchmarks when you are setting your own target ratios for the next year.
• You should know that when you are seeking a bank loan for your business, the bankers will look at these industry benchmarks as they assess your store's performance. 

Have questions about these benchmarks or what they mean?

Be sure to take advantage of the free Benchmarks Resource Center, and its How, Why and Do-It-Now Resources. 

All these specialized resources are available online, anytime, 24/7, for free. And only from The ROI!

Meanwhile, here are some useful reminders about the Benchmarks

• The 54 retail segments featured at The ROI reflect the definitions and designations of the North American Industrial Classification System.

• Retailers may need to examine the benchmark numbers in more than one segment to get perspective on their own store's performance, particularly if their store does not exactly fit the NAICS category.

• The numbers used for the charts on The ROI site are from the middle two quartiles; that is, neither the top quartile (top 25%) nor the bottom quartile (bottom 25%).  

Ready? NOW Is the Time to Edit That Seasonal Merchandise. 4 Keys to Being Artful

As of today, there are only 9 really good selling days left before Christmas. So now, right now, is the time for merchants to edit.  And that, of course, means being smart about markdowns.

Take a dispassionate look at your inventory, especially the seasonal goods. The goal: NO seasonal merchandise left over at the end of the season! 

Whether you call it "editing", or "thinning the herd", the point is the same. Do whatever it takes to move out that seasonal merchandise! 

But of course, you also want the most margin from those goods (some of which sell only at this time of year.) So, that's where the fun begins: you must be the Artful Merchant. Just don't wait!

4 Keys to Artful Seasonal Markdowns

1. As you know, in markdowns, timing IS everything.
   You must act now, when you have the most customer traffic in your stores. And, these shoppers are still focused on buying gifts! (The folks who come in after Christmas - the price-hounds, bottom-fishers, cherry-pickers - are a different group altogether.)


2. Use a scalpel, not a machete.
   Be a merchant! Those  "entire store on sale" tactics
 shriek desperation.


3. Make your markdowns matter.
   Be at least 1/3 to 1/2 off. Even "below cost" if needs be. (The pros know the original cost is irrelevant.) Get whatever cash you can for the merchandise. Otherwise, 3 weeks from now, well after Christmas, those markdowns will cost you 60%, 70% or 80% off. 


4. Start now, and stay on it.
   Every day, find more slow-selling (or non-selling) seasonal goods, and mark them down.

Remember the goal: NO seasonal goods left after the season is over! Let's go! Take markdowns now. And have fun!

Want More Tips for Smart Markdown Management?
Sit back and watch this lively webinar - Markdowns: Timing Is Everything! - from our Recorded Live at TOPICAL TUESDAYS archive. 
(Unlimited free access, online anytime, for ROI Members. Or, get 3-Day Online Access for just $9.95.)

Unique Pricing Tactic: Customer Service IS a Two-Way Street

Chris Morran of The Consumerist, a blog from the Consumer Reports people, featured the menu posted at a cafe in France (appropriately enough, in Nice!)

Three different prices for a cup of coffee, depending on how politely you order. 

• "Coffee" --- $9.65

• "Coffee, please." --- $5.85

• "Good day! Coffee, please." --- $1.95 

Yes, that's right. Your coffee costs much more if you are abrupt or rude! 

Apparently it began as a bit of fun from the frustrated workers, who had grown weary of being treated rudely by the customers, Morran writes. And now, it's part of the actual posted menu. 

"It started as a joke because at lunchtime people would come in very stressed and were sometimes rude to us when they ordered a coffee," explains the cafe's owner. "I know people say that French service can be rude but it's also true that customers can be rude when they're busy."

The owner says he hasn't yet been compelled to charge anyone the higher price and that the sign has resulted in his regular customers now being overly polite when they order. 

"They started calling me 'your highness' when they saw the sign," he say

A timely idea you can use in your stores? 

What a great way to keep retailing fun! And to gently remind customers that customer service IS a two-way street!

Oh. But of course, "Thank you!" for the idea!!

Every Retailer's Dread: "Too Much Inventory!"

"So, retailers, how much inventory should you have on December 31?" Now, thanks to The Retail Owners Institute's online BUYING PLAN Forecaster, any retailer can find out. Anytime, from anywhere. For free!

That's right. Retailers now can develop their own inventory buying plan whenever they need it. From their laptop, their tablet, even their smartphone! In just minutes. All online, in the cloud. And now, FREE unlimited online access!

"Why is it free?" 

That's a fair question! Two main reasons:

1. Unfortunately, there are lots of in-house spreadsheets used by retailers that are well-intended, but not necessarily accurate. So, we want to make it easy to get correct Open-to-Buy calculations.
2. The ROI's goal in everything it does is to bring the power of better inventory control and improved cash flow (and more peace of mind!) to more retailers. This basic BUYING PLAN Forecaster can help.

The ROI's view: "Retailers, be our guest, 24/7 from anywhere!"

---

About The ROI's BUYING PLAN Forecaster. 

• With just 3 easy inputs of numbers you know, you can find out in minutes how much inventory to bring in, and when, to meet your goals for sales, margins and turns. 
• Immediately get monthly buying budgets, targeted Ending Inventory (that's the key number!) amounts for each month, even the projected GMROI for as many plans as you want.

And it's dynamic! Want to see "what would happen if I...?" No problem! Change turns. Or change sales in some of the months. Or adjust margins. See immediately what difference that makes. All on your own!

The Institute's BUYING PLAN Forecaster is one-of-a-kind.

• Online, in the cloud. Nothing to download or install.
• The formulas are all built in.
• Sophisticated, accurate, and fast.
• Easy for retailers to use!

And now, even better, it is available for any retailer, anywhere, to use anytime. For FREE!  

Retailers, don't let your inventory "get out of whack!" 
Why wait? Try it yourself. Just go here on The ROI site.

Now, Lenders Compete(!) to Lend to Retailers

Is there any opportunity for a responsible retailer to get reasonable financing?! 

Our quest to find a positive answer for that question has gone on for years.

That's why we have developed a new service: Banks4Retailers.com.  

Now retailers can do their own comparison shopping - for lenders!

Here is the concept behind this new website:

• Retailer Track Provide the tools for a retailer to put together a responsible, substantive loan proposal.
• Lender Track Find lenders who are able to evaluate a retail business on its merits, not just its industry label. 
• Reviews by Retailers  We are providing a platform for retailers to share their experience with these lenders:
  • Were you treated with respect?
  • Would you refer other retailers to them?

The 5 very different organizations on the Find Lenders page provide access to over 2,500 sources of financing, from traditional banks to "alternative lenders" to investment funds. They offer streamlined matching services between a retailer's financing request and willing lenders. All online, in retail time. 

Is this what they call "disruptive lending"? 

We sure hope so! 

But, like everything else in retailing this is an on-going experiment! 

• We make no guarantees that any retailer can obtain financing. 
• We are not recommending one lender over another, nor does any lender's appearance on the site constitute our endorsement of them.

Our goal is simple: provide a free service to retailers – a no-cost, no obligation service – where lenders compete for your business.

Please go check it out. And let us know what you think. Even better, add your comments on the Review page for Banks4Retailers; share your thoughts with other retailers.

Thanksgiving Day Store Openings...Really?!

The announcements of retailers with plans to open on Thanksgiving Day just keep coming. We have a few thoughts about the disintegration of the sanctity of Thanksgiving Day. But first, some background.  

Every retailer is keenly aware of the slow-to-revive national and international economy. Currently, as we all are probably aware, the results for retailers are decidedly bifurcated.

• The deep-discount, low-cost operators are generally doing okay;
• the high-end luxury retailers are getting considerable publicity as they continue to out-perform the economy.   
• But where and why is the crunch?

The big picture looms up: mid-priced retailers (a very vague description, granted) are stepping all over each other.

There is an abundance of excess product available, a general lack of specialness, and with an all-time high of 23.1 square feet of retail space per capita (highest in the world, by far), the crunch on the mid-range retailers has become an ugly sight.

So, what does that have to do with Thanksgiving Day store openings? Our sense is that the retailers who have announced Thanksgiving Day openings are the most crunched.

They are seeking any potential advantage that they can. We don't blame them for it, but it is a sad and telling sign.

Moreover, they are chasing market share (a bit like chasing a mirage.) "If we aren't open, we will lose volume to our competitors."  But at what cost?

Our message to you won't be a surprise: Keep the perspective! How to do that?

Your retail operation should always be observing your surroundings and competition. But, never get caught up in the media hype or the herd mentality ("Everybody else will be open.")

Instead, keep your focus on your very best customer. Ask yourself, "Would they really care whether or not we are open on Thanksgiving?" (Our guess in most cases: Probably not.)

Meanwhile - sigh - will store openings on Christmas Day be next??

How to "See" Your In-Store Traffic Patterns - Free!

Yep, there's an app for that! 

Here's an FYI for you: we recently discovered a "time lapse" app to use with the camera of a smart phone.

• With your camera phone set to video mode, it automatically snaps the shutter at whatever time interval you set.
• Then, when you watch the video, it has condensed the action that occurred over hours into minutes.
• And best of all, it can be FREE!  Just search for "time lapse" on your app store. 

We can think of lots of ways for retailers to take advantage of this "in-store traffic copter".

• Which way do people turn when they come into our store?  
• Do folks hesitate once inside, not knowing where to go? 
• Which displays attract customers?
• Which ones do they seem to disregard?
• How many shoppers actually get to the back of our store?
• And, this one is fun: how often do we see our sales staff actually moving away from the cash wrap??

Pictures ARE worth a thousand words  

These time lapse sequences can highlight all kinds of opportunities in your store. Plus, they can help yourecognize any trouble spots.  

Then, after you've made some adjustments, do another time lapse study to see whether that helped!  

It's free (well, some apps are free.) It's fun. And it's a great way to involve your staff as well.  Just check on any of the app stores for "time lapse". 

Retailers...Don't Be MYTH-LED!

As Retail Strategists, we follow retailing trends and their impacts on 55 retail segments. In so doing, we've identified that some of the accepted "truisms" in retailing actually are myths. We are exposing them as myths, to prevent retailers from being myth-led.

Here are three examples:
Amazon will eventually run all retailers out of business.

Don't Be Myth-Led! The customer has the final say. 

Until Amazon solves the fact that 90% of customers want to touch, feel, test, try on or taste before buying, their growth from retailing will be limited.

Because of the soft and disappointing Back-to-School sales, 2013 Holiday sales are commonly predicted to be lackluster.

Don't Be Myth-Led! What matters is how consumers are spending.

BTS results were affected by the uptick in sales of homes and cars. In November and December, houses and cars will not suck disposable dollars away from Holiday spending.

Struggling malls can be turned around as the economy improves.

Don't Be Myth-Led!  Probably 15-20% of them have no future as malls.

How to get the highest and best use from that real estate? Retrofit them into retirement homes!

Is Cash Going the Way of the Rotary Dial Phone?

In many stores, cash registers already have gone the way of the rotary dial phone. Is cash itself the next thing to go?

One merchant we know had a customer pay for a very large purchase in cash. Literally.  Stacks and stacks of $100 dollar bills! 

It was such an unusual occurrence (and such a substantial amount of cash), he actually posted pictures of the cash on his Facebook page! (And then nervously walked the deposit to the bank.)

The Mobile Payment revolution is just beginning

Keeping up with accepting cash, checks, credit cards and debit cards is just part of doing business as a retailer.

And now, the ever-expanding capabilities of technology, plus shoppers' growing comfort level and confidence with online payments and virtual payments, has opened up the floodgates of new ways to pay that do not involve a traditional account from a financial institution.

For example, some retailers accept "payments" when the customer provides their phone number and PIN. The retailer receives "payment" without seeing a bank account or credit card account number. 

Instead, that "linkage" has occurred between the customer and their payment processor...which is not necessarily a financial institution!

With this new technology comes a new wave of companies eager - and able - to be the new payment processors. 

The social media platforms, retailers, technology firms, telecom companies and others - Amazon to Apple, Google, Facebook, Square - are leveraging their customer base, their Big Data, and their rapid-fire pace of innovation.

• For example, last  week it was announced that Intuit and Square have teamed up to allow merchants to quickly link their transactions via Square to their QuickBooks accounting.
• And, PayPal (eBay subsidiary) acquired a mobile payments startup - Braintree - for $800 Million, as they try to catch up in the mobile payments world.

Meanwhile, some retailers scoff at the notion that customers will pay via their smartphone or some kind of electronic wallet. 

• They cite studies such as this: 63% of Americans use their phones for only two things: talking(!) and texting. 
• Most customers, these retailers reassure themselves, will need a lot of education and preparation for the "mobile payment" revolution. 

Actually, that education has begun! Customers learn by doing. They're getting their practice at places with high volumes of small transactions (think Starbucks). Then, when they are trying to pay for higher value purchases (think your stores!), they expect the same level of  technology sophistication.

Postponing these changes and adjustments in stores is not the answer. Retailers have no choice; they must be accepting of these technology "advances", in order to keep pace with their customers' expectations. 

The harsh lesson, once again: Even if it is an arm's race that just keeps escalating, you must keep up with the flow of technology...or get run over!

Deciding Where & How to Cut Inventory?

"But, I Can't Sell from an Empty Wagon."

Obviously, there's truth in the basic retailing maxim that "you can't sell from an empty wagon." If you don't have an appealing assortment of goods your customers need, they have no reason to visit your store. 

However, today, you may have to redefine "full wagon". 

Here are some questions to ask about each item added to your store:

Q. Can my customers get this item at other stores in my market area?
Yes?  It probably has no pulling power.

Q. Is this a good margin item, or is it subject to a lot of price competition?
The latter? Slow turners with weak margins are double trouble.

Q. Does having this item in stock help me sell other higher-margin merchandise?
No? You may not need it.

Q. Can I get faster delivery on this item than I am now getting?
Yes? Sweet! You may be able to cut back on your stock.

Q. Do I order larger quantities of this item than I actually need in order to take advantage of price breaks?
Yes? Be careful! You may be coming out on the short end when you figure in all your carrying costs.

Q. Do I have an emotional attachment to this item that reflects my personal taste rather than a business-like response to my customer's desires?
Yes? Get rid of it!

Time for Retailers to Shop Around...for Customers!

All retailers have been going through this lengthy recession, and it has been ever so painful to many.

In order to survive, most retailers have needed to market frantically, to garner as much sales volume as possible. That approach was what it has taken to survive.

But, perhaps you have sensed it. The media certainly has been trumpeting it. The recovery in the economy seems to be happening.

It's now time for retailers to change tactics. 

Retailers must do to your customers what your customers have been doing to you for years: you must "shop around" for customers. 

Not all customers are good for you. And you must give yourself permission to lose the bad ones!

You see, it's not just the customers who have many choices of where to shop. Retailers can - and should! - be just as choosy about who they want as customers!

Now is the time for you to "trade-in" some of those more troublesome (and costly) shoppers.  Now that you have survived the recession, you must focus only on your best, most profitable customers. 

What will be the defining characteristic of successful retailers in 2013 and 2014? Those with the most profitable customers. And now's the time to start shopping around for them!

Want to know more about this? Go here on The ROI site to see how you can identify and focus on your best, most profitable customers.

Back-to-School Results "Soft". Hmm...Really?!

We were taken aback a bit by seeing that early Back-to-School sales are viewed as "softer than expected." 

Then, in contrast to that negativity, we saw this report:

"In August, American consumers were the most upbeat in more than five years. The Bloomberg Consumer Comfort Index rose to its strongest reading since January 2008."

So, what's happening? 

Well, for one thing, the glut of apparel and small electronics available at deflationary prices continues to lower the average unit sale in most stores.

"Oh, so if sales are down 2-4%, I might actually be even with L.Y. in units sold?"  Right! 

A second "Big Picture" factor: basic demographics. Who produced that BTS market of 6 to 22 year olds? 

Oh yes! They are Generation X, born between 1962 and 1978. That small group born after the Baby Boomers and before the Millennial Generation. Generation X is a decidedly smaller group than those before or after them.

"Back-to-School sales are disappointing." Oh really?! Maybe they are actually darn good! 

And maybe all these converging trends help explain why retailing is forever challenging. And so much fun!!

This Year, Back-to-School Season Could Kick Off Strong Fall/Holiday 2013

The 8 weeks between July 15 and September 15 mark the annual Back-to-School season. 

While "Back-to-School" merchandise is not the dominant category for most retailers, many retailers take advantage of the opportunity to bring shoppers into their stores. 

More so than most years, we see this B-T-S season as a key indicator of how Fall/Holiday 2013 might turn out for retailers.

This may surprise you: we anticipate 6%-8% sales increases during this year's Back-to-School season. 

The economy continues to improve, and consumer confidence keeps rising. 

But what really drives our hypothesis for such a strong B-T-S season is this: there will be far greater interest in discretionary fashion apparel than in recent years. 

Here's why. 

1. The Recession discouraged much of the discretionary spending; the focus had to be on basics. Now, fashion can re-emerge.
2. The competition represented by the "gee whiz" electronics for kids has subsided, as those devices have been acquired. They already are in every kid's backpack.

And that bodes especially well for B-T-S retailers. Plus, since they by and large have their inventories under control, margins should stay quite strong. Might that be great news for Fall/Holiday?

Whether or not you're in the Back-to-School business, we urge you to "go to school" on this year's results. It may be a delight! 

That Magic "Ten Point Checklist" for Retail Success

Over the years, we've been asked occasionally to pull out of our files the checklist that we MUST HAVE to help retailers raise sales and/or to raise margins.

Don't laugh! It's assumed that such a magic solution surely would be in our files. Of course, if we did have such a magic wand, we would see to it that every retailer in the world would be prospering!

Recently, we were approached to help a small shop "raise sales and raise margins"  (we had heard that wish list many times before.)  An attorney and an accountant who were trying to assist the shop owner to do that asked us, "Don't you just have a 10 point checklist of things to do?"

Hmm. The outside world does think that retailing is easy. All you have to do is follow the checklist.

Our response: Retailing is NOT easy. And, there is no magic 10 point checklist.

But...There IS a "Five Point Checklist"!

Retailing has always come down to just five basic to-dos. Just do these five things well, every minute of every day, and surely sales, margins, and profit increases will follow!

1. Have the right product  
2. at the right price  
3. at the right time  
4. at the right place  
5. for the right customer.

See how easy it can be?!

Use This 4-Day Fourth to the Max!

This hasn't happened for more than a decade. But this year, the stars align. The 4th of July is on a Thursday! 

We see it as a gift for retailers from the calendar gods. Four days, Thursday through Sunday. What a great opportunity for a true blow-out sale event.

The smart merchants can hardly wait. Neither should you!

Freedom from Old Merchandise!

Look around at your merchandise, wherever it is. On the shelf or in the backroom.

If it's not current, it's old. If it's old, mark it down! 

Turn it into cash. Take whatever you can get for any and all old goods.

Be ready to use those 4 days to the max. Start now!

• Round up the merchandise, and mark it down.
• Get the balloons and signs ready.  
• Think sidewalk sales. 
• Make it festive and fun.
• Group merchandise by color (you know which ones to feature!)   
• Play those Sousa marches (keeps people moving too!)

Do it right, and the customers will love it!

There are less than 2 weeks to go. Use the lead time, starting now.
Find out how revolutionizing it can be to have freedom from old merchandise! And, more cash in the old till!

That Other "Obesity Epidemic": 80% of Retailers Are Over-Inventoried Some or All of the Time!

Retailing is different from all other industries. Why? Because inventory is the only engine of profitability. Managing the inventory is truly the #1 responsibility of top management in retail.

And yet, about 80% of all retail operations are over-inventoried or out of balance some or ALL of the time!

• As such, these retailers become short or out of cash. 
• Or they are forced to cut margins drastically to get rid of non-selling merchandise. (Ahh, which is worse? Out of cash or out of profit??)

The reasons for this rather sad situation are many, but two major issues stand out.

• The sellers of merchandise, the vendors, are very well trained at their job - selling! And meeting sales quotas.
• Meanwhile, the retail buyers of the merchandise, who may be excellent selectors of product, are not so well schooled at the management part of their job: setting and meeting buying budgets.  

(The reps usually know that budgeting inventory purchases is simply a four-part formula, called "Open-to-Buy". But do you think they want the buyers - their customers - to use a budgeting system? Of course not! "Are you kidding?! We don't want them that smart!")

But are the buyers really the weak link? Not usually. 

Instead, the problem is traceable to senior managers who are under-trained – or under-committed – to their #1 responsibility: managing and controlling that inventory!!!

"Fitness Center" for Out-of-Shape Inventories

Those days now can be over! With some humble delight, we love that thousands of retailers from around the world are benefiting from this (cheap!) online resource from The Retail Owners Institute®: the Open-to-Buy Center. 

• Those who use the Open-to-Buy Center learn the basics of Open-to-Buy.
• Plus, they generate their own buying plans, all online, with the Open-to-Buy Calculator . Easy and fast for retailers. 

Click here. Go to the Open-to-Buy Center  See how this "fitness center" for out-of-shape retail inventories is helping to combat that other "obesity epidemic".

Knowledge is power! Some day soon, the playing field may be level!

Retailers as Unpaid Tax Collectors: Enough Already!!

The debate continues over the "Marketplace Fairness Act". You know, whether sales tax should be levied on internet purchases.

A major issue for retailers, of course, is the administrative burden that would be thrust upon them to remit tax payments to thousands of jurisdictions across the country. That is a tremendous expansion of the retailers' obligation as an unpaid tax collector.

Is it just us, or are the assurances that "free software will be provided to make it easy" seem not all that reassuring? 

One Idea for Easing the Burden

Raymond L. Dever, a retired accountant in Tucson, offered one solution:

"My suggestion would make it the responsibility of a state agency to ensure that these taxes are reported and remitted by their residents.

"Have each state designate one agency to receive once-a-year online submission from each Internet retailer that lists the name and address of every person who made a purchase in that state, the item purchased, and the amount of the purchase. After that submission,the Internet retailer is done." 

We think this is a thoughtful concept. But of course, the retailers still have to compile and report this data. And receive no compensation for providing this service!

Heightens Privacy Issues

Moreover, these suggestions illuminate and magnify privacy concerns: even though the credit card companies and merchants have all this transaction data, how many shoppers want their internet purchases reported item-by-item to a state agency?  

(We will save for another day the discussion of the monetization of shopper data by Amazon, Google, FaceBook, etc, without any recompense for us, the shoppers.)

If the goal – in the interests of fairness – is to collect the taxes at the point-of-sale in order to "protect the consumer's privacy" (that is, not have the information aggregated and reported to public agencies), then retailers should be compensated for providing this "combo service" of tax collecting and privacy protection.  

Another Option: the Credit Card Companies

Here's another option: the credit card companies should be remitting the tax payments directly to the appropriate jurisdictions. 

This is instead of sending those funds back to the retailers, who then must assume the administrative costs of transferring the appropriate amounts to the proper taxing authorities throughout the country.

Saves time, save steps, and just makes more sense!

• They, the credit card companies, already have all the transaction data
• They know where the card holder resides
• They know which items are taxable, and which are not
• They already are distributing funds and keeping records

Say "Yes!" to Fairness...for Retailers!

What do you think? Please let us hear from you.

J.C. Penney Dilemma

Well, What Would YOU Do?!

There's not a more compelling retail dilemma going on right now than the J. C. Penney turnaround. "Will they or will they not survive?!" Surely, 116,000 employees (down from 150,000 a year ago) are anxious to find out.

Before you quickly answer, "Here's what I would do to turnaround Penneys" (everybody's a retail consultant, after all...), consider some facts:

• Brain drain: A high percentage of the best brains have either been fired or decided to quit in the last year;
• Sales have been declining 25% or more for the last six months;
• Gross margin dropped in 2012 to 31.3% from 36% the year before;
• A monster operating loss in 2012 eroded 20.9% of the owners' equity.

Now, let's read their financial status the way it is taught at The Retail Owners Institute:

• The Current Ratio ("the ability to pay vendor bills on time") dropped from 1.8 to 1.4. Hmmm; no wonder they are begging for loans at ANY cost!


• The Debt-to-Worth ratio ("the number one measurement of financial strength") rose from 1.8 to 2.1.  Ahhh; of every three dollars in assets, two dollars are "owned" by OPM, other people's money.


• GMROI (Gross Margin Return on Inventory Investment, the #1 inventory productivity measurement) dropped from $2.13 to $1.74.  Oh my; both profits and cash flow have been hammered.

But, look at a few, but very major, intangibles:

• Mike Ullman, the ex-CEO that the Board brought back, is reputed to have remarkably good relations with key vendors and factors. Question: Can he restore enough confidence that the Back-to-School orders now being placed will get shipped?!!  

• With 1400 stores, there are a huge number of landlords that will do all they can (that's a key word) to prop up Penneys.  

• There may well be some equity in the Penney name and 100+ year history. But, only if the "value" of the name and history as an asset is greater than any "liabilities" associated with the name and heritage; the Balance Sheet MUST balance!   

(For more perspective on JCP's performance compared with the Department Store retail segment, see this Retail Benchmarks page on The ROI site.)

So, if you had a billion dollars sitting around, would you be inclined to loan it to Penneys?!!

This New Normal Demands New Strategies

Yes, We Know. We Have Previously Advised Otherwise...

For retailers needing money, Outcalt & Johnson and The Retail Owners Institute® have long advised these 3 key steps:

1. Make your business bankable
2. Keep your business bankable
3. And never expect your vendors to "bank" you!!  

That still is very good advice.

Problem is, in today's economic climate, banks simply are not inclined to loan to retailers of ANY size, shape, or form! (We know; we've been trying to help retailers get financing, but with little or no success.)  Yet, to fund growth, successful retailers badly need loans.

What's a retailer to do?

Adapt! Be like The ROI. Recognize that, in this New Normal, some vendors(!) may be willing to be your new "bank".

Of course, there are caveats! To borrow from vendors, retailers must:

• Do all of the preparatory work that they would do for a bank loan (Get a quick overview from this TOPICAL TUESDAYS webinar.)  

• Treat this proposed transaction as formally (that is, at arm's length) as you would with a difficult bank.

• Offer to the vendors personally guaranteed promissory notes for all loans. (Yes, folks. This is not slow pitch!)

• Prepare and share integrated Cash Flow projections for the year(s) the loans will be outstanding.

• Make darn certain that you repay these loans on time, or preferably, early!

• Remember, if you disappoint your vendors, your "lender of last resort", you're toast!  

Okay, for those of you with good memories who are about to shout "What?! You're now telling us to ask vendors for loans?!!", we reply, 

"Yes, that's true. 

Time's have changed, and so have we. In retail, as in life, adapt or perish!"

Know About This? (re Amazon, eBay, Google) You Should!

Amazon's dominance as the e-commerce platform for "third-party sellers" may be showing some signs of decline. There is unrest among its "small merchants" about fee hikes, and now a class-action lawsuit has been filed by some merchants.

• "Third-party sellers alleged in the lawsuit that, by holding sellers' money longer than allowed (often well in excess of the 90 days), Amazon racks up interest and uses the extra cash to support its operations."

• "Amazon has skewed the relationship to best suit its own operations," noted one observer. 

• "The suit estimates the total merchandise value of third-party sales last year at Amazon averaged more than $160 million a day. By holding on to this daily cash flow for only a few days or weeks, Amazon is able to invest this money in money market funds, marketable securities and other investments, and utilize the cash as working capital in the operation of its business,' the lawsuit says."

• "Amazon has been hiking fees for its third-party sellers over the past year-and-a-half. The hikes are shrinking smaller sellers' margins to increasingly uncomfortable and untenable points. The fact that Amazon is a direct competitor to those merchants stings even more."  

This resentment of the online retail giant's actions by some of its third-part sellers seems to have emboldened Amazon's competitors. Consider these observations from some recent news articles and commentaries (again, not us):

• "eBay and Google have both offered to reduce costs and transparency for third-party sellers. The companies are naturally hoping to trigger a merchant exodus from Amazon."  

• "eBay said that it will overhaul fees for sellers on its online marketplace, lowering them for many sellers as it steps up competition with Amazon.com."

• "Google seems to be preparing for an e-commerce battle with Amazon and eBay."

• "A brewing conflict between Amazon.com and its merchants over fee hikes could benefit rival eBay, and provide an opening for Wal-Mart Stores and Google, which are just getting into the space."

• "This battle of the giants - eBay, Google, Amazon - is just getting started. Though many smaller retailers could be hurt by these three large companies squeezing their way into traditionally physical retail distribution channels."  

While some independent retailers will welcome the benefits of heightened competition for Amazon, we think it behooves all "third-party sellers" to be well aware that the true cost of doing business with any of these platforms is exposing all of your sales and customer data to your "digital landlord".
Here's what some experts warn: 

• "Knowing exactly what sells, for how much and to which customers, means Amazon can adjust its own assortment and set prices to undercut the competitors it hosts, all based on actual sales."

• "Through its third-party sellers, Amazon can also collect Customer Relationship Management data on customers who have never bought a single item from Amazon."  

Your customer database may well be the most valuable asset of your retail business. Those customer relationships represent yourcompetitive edge. Retailers must manage, protect and preserve this important asset, which increasingly has monetary value. 

Additionally, the sometimes very slow payments from Amazon to some of their merchants (exceeding 90 days) can cause cash flow havoc, especially for the "small merchants."

It always comes back to that other Golden Rule:

"Whoever has the gold, rules!"

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Reminder: all of the quotes above are from people not associated with The ROI.  We have compiled them for you strictly as an FYI.

The First Quarter Is Over. So, How Did You Do?

(What? You're Still Just Comparing to L.Y.? That Is SO Last Year!!)
 
So, here we are: already one-fourth of the way through the year. Went by fast, didn't it?

When most retailers reflect on how the year has gone so far, they are quick to compare to L.Y. That is, how does this year compare to how our performance Last Year? And most often, of course, retailers are only comparing sales results of this year to last year.

In the opinion of The ROI, comparing to L.Y. is interesting, but not significant. Retailers who assess their performance only against Last Year's numbers are essentially driving forward while looking only in the rear-view mirror! Scary!

What should retailers be comparing against? Their 2013 plan! 

• What are their planned (expected) sales for the first 3 months of 2013?
• What were actual sales?
• Then compare: are actuals above plan? Or below plan?    

Now comes the key step. Whether sales vs. plan are up, down, or sideways, determine "Why?" Which of these 3 causes would best explain the difference?

1. Is it because of changes in the number of transactions?
2. Changes in the average sale? (That is, average transaction value)
3. Changes in the number of items per transaction?

Now you are on a path to have some useful management information!

Understanding what drives sales changes provides great insights on how to make adjustments, or how to better seize opportunities.

Plus, your analysis of the transactions will help you considerably. 

• If sales results are better than plan, what does that mean for your buying plan? Any orders you might want to increase?
• If actual sales results are below plan, you will really want to take a close look at your inventory orders. You may want to postpone or even cancel some orders.
• Consider the impacts on your marketing plans. Do upcoming promotions or events need to be changed?
• You will also want to review your expense plans as well. For example, what are the impacts on scheduling your people?   

Have More Fun in Retailing: Be Strategic!

By measuring your store's performance against your plan, instead of just comparing to L.Y. numbers, and, analyzing the transactions, you are managing like the pros do.

More important, by looking ahead and anticipating, instead of just reacting, you will find that you are able to put the fun back into retailing!


For more ideas on managing more pro-actively, see the Managing Store Issues section at The ROI. click here to go there now

Ever Found Yourself in Bed with a Mosquito?

Within a couple blocks of The Retail Owners Institute's offices is a major international apparel retailer. This retailer's 10,000 sf store is on a prominent corner location. We walk past this store 3 or 4 times each day.

And to be honest, we have been underwhelmed by their displays, both their windows and their instore displays. Tired. Uninspired. Repetitive, as they "anniversary" each season. In a word, boring! 

Then, about two months ago, an independent retailer of high-end women's apparel - that is, the same price points as the international retailer - opened a 900 sf shop right next door. 

But oh, what a difference!

• This shop has nearly a dozen mannequins in the windows and on the sales floor.
• They change these displays at least every other day, if not daily!
• The lighting is "spot on", as they say!
• The windows are sparkling clean, inside and out.
• Your eye is drawn to the merchandise, especially from the sidewalk outside the shop, and even from the cars driving by.

This retailer may not be big, but they definitely are a pro! 

So, guess what happened?  Yep, the international retailer recognized they were being outclassed. By a "small retailer", no less!  Yikes!

Here's the really good news:

In the past couple of weeks, suddenly the international retailer began making noticeable changes and even improvements to their window displays (especially along the shared streetfront).  All at considerable expense, we would guess.

And, since these new displays have gone in, they also have changed them at least once a week! Progress!

Hats off to the independent retailer who is doing such a fine job of visual merchandising. Customers must love it! Top line sales growth surely will follow.

And kudos as well to the international retailer, for recognizing that they cannot just rest on the laurels of their brand name. They are working on being a "fast follower". 

Professionalism in retailing is not a function of size. 

Independent retailers have wonderful opportunities to provide leadership in many ways. And in doing so, they are raising the bar for all retailers.

As Anita Roddick, the Founder of The Body Shop, so famously said:

"If you think that being small means you can't have an impact, try going to bed with a mosquito! 

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For more (FREE!) ideas on how and where to add excitement to your store, check out The ROI's exclusive Store Rater. click here

Are You Ready? Banks - Especially Community Banks - Are Looking for Good Retailers as Customers

Those plans to grow, expand, update and upgrade that have been on hold for the last few years, due to lack of financing? They may once again be pursued!

Now is an opportune time to reach out to your banker to get the financing you need for your business.

"Data from the Federal Reserve show banks are more willing to lend and their customers are seeking more credit as both groups gain confidence in the economic outlook," according to Bloomberg News. "Easier access to low-cost financing means retailers can expand outlets and hire the staff to run them."

"Community banks participating in the Small Business Lending Fund (SBLF) have consistently increased small business lending over the past two years," said Deputy Secretary of the Treasury Neal Wolin. SBLF encourages lending to small businesses by providing capital to community banks on an incentive basis: the interest rate the banks pay is reduced as the bank increases its lending to small businesses.

Remember, it is not just retailers who have had to make adjustments in recent years to survive. So have the banks. They too are having to be far more competitive.

Even better, there are tools available to you that help to level the playing field when it comes to doing business with one of them. Here are a few to get you started:

1. First, remember that you are interviewing them!

You are looking for a lender you can work with, who respects you, and most of all, who deserves to have your business. Find someone who wants to earn it!   

2. Make a "performance based" short list of banks to interview. 

Don't limit yourself by geography. Your goal is finding a bank that understands your business. 

• Be sure to include one or more Community Banks. Go here to use the Community Bank Locator. Just enter your ZIP code, and immediately get contact info on the nearby community banks.
• Also, go here to see the Treasury Department's map and list of all Small Business Lending Fund participating banks. (That's the  incentive program described above.)   

3. Check their "grades" for Small Business lending!

Yep, banks are like any other business; see which ones make the grade! 

Go here to see the "banking grades" for Small Business lending of each bank you are considering. You can search by ZIP code, city and state, or bank name.      

4. Put together your loan proposal - and your cash flow projection.

The key: not only showing what you would do with the money you borrow, but having the cash flow plan to show when you can pay it back!

• Go here on The ROI site to see the checklist of what a Loan Proposal should include.
• Then, use the online 3-in-1 INTEGRATED Calculator  to do your own cash flow projections.