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:
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!
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.
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.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.
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.)
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.
"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?!"
And if you cannot be there, here's the gist of the story:
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.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.
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"!!!)
"The Entrepreneur's Pledge"
The Kauffman Foundation for Entrepreneurship, based in Kansas City, has been helping entrepreneurs leverage their ideas for many years. Their "Entrepreneur's Pledge" certainly resonates with us. It captures the essence of the people we had in mind when we began building The Retail Owners Institute®.
The Entrepreneur's Pledge, from the Kauffman Foundation of Entrepreneurship
The Entrepreneur's Pledge, from the Kauffman Foundation of Entrepreneurship
I AM
- an entrepreneur
- following a dream, pursuing an opportunity, taking charge of my own destiny.
- bringing something of value to society, making a job for myself and for others, and creating wealth that benefits my family, my community, my country, my world.
- one of a movement of millions of entrepreneurs and innovators who made America great, and who will keep our country going...and growing.
- what I am, because many people have helped me along on this journey.
THEREFORE, I WILL
- tell my story, sharing my successes and failures, so that others taking the entrepreneurial path can learn.
- strive to mentor an aspiring entrepreneur.
- make my voice heard by those who make policy decisions that affect me and my business.
- appreciate and celebrate my accomplishments, and the accomplishments of my fellow entrepreneurs.
- give back to the society that helped me to be successful.
- build a stronger America.
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