"Why Be Open 7 Days When Only 4 Are Profitable?"

As we have all read and heard - repeatedly - it has been a VERY tough couple of years for independent retailers everywhere. Lack of willing customers, narrower margins, inability to get traditional bank loans, huge increase in on-line competition, etc., etc. has been brutal on thousands of retailers.

With all that doom and gloom around us, it's a special thrill to tell the remarkable turnaround story of one brave retailer. We've been asked by The National Retail Federation to present this case on January 11 at their 100th Anniversary EXPO in NYC at the Jacob Javits Center. (If you are going to be there, please come by to meet our client, John Whisler, one of the Co-Owners of Kitchen Kaboodle.)

Here's the copy that The NRF is using to describe our presentation:
"Why Be Open Seven Days when Only Four are Profitable?!"

This session will feature a real-life case study in creative crisis management, and how challenging conventional wisdom can help the independent retailer serve their best, most profitable customers with the products they want, at the prices they want, and the times they actually want to shop.
Speakers:
Patricia M. Johnson and Richard F. Outcalt
Co-Founders; The Retail Owners Institute®

And if you cannot be there, here's the gist of the story:

At the moment of steepest economic free-fall, their bank abruptly called their loans, their attorney described Chapters 7 and 11, the owners' respective homes were pledged, it was February and slowest time of the year, their vendors were anxious to get paid, and their 100+ employees were trembling with the uncertainty.

Yet, the owners kept their cool, created a never-been-done-before plan, disregarded the nay-sayers, and then executed it like the pros they are. (Eight months later their industry presented them with a "First-in-America Award for Innovation"!!!)

For 2011, we wish you the kind of strength, fortitude and vision that this retailer displayed. We all need to keep our eyes on the horizon and not be focused on the rough waters around us.

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.

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.