Chasing Sales to Raise Cash? Oops! How to Avoid that "Fateful Fallacy"

If you ask retailers, "What's the best way to improve cash flow?", almost every one of them will answer, "Raise sales!"  

Consider this retailer, who contacted us a few weeks ahead of his largest vendor putting him into bankruptcy:

"There's something wrong here. My sales are up in all three stores, and we had our best profit in years. But, I can't pay my bills on time."

That owner suffered from not knowing that profits and cash flow are NOT the same.

Plus, raising sales in an attempt to solve a cash flow problem may actually worsen cash flow! (Sadly, that's exactly what happened to that now ex-retailer.)

How to avoid this fateful - and potentially fatal - fallacy? Follow these 4 steps.

1. Understand the cause-effect connections of the financial levers in your business.
2. Focus on the controllable variables in your retail business, especially inventory.
3. "Turn on your financial headlights!" Use The ROI's online 3-in-1 INTEGRATED Cash Flow Calculator.
   Use it to play"what if...?" with different sales plans, margin assumptions, and turn rates. 
   See in advance which combinations will get you the outcome you want.
4. And remember, in a crisis, if you have to choose between profits or cash, always choose cash!   see more

Retail IS a Mirror of Society

We just read about a high school class of 15 students, plus their teacher, that went into an Apple Store. Each student had a gift card from the school to purchase a MacBook. And, each transaction was to be handled separately.

The employee then discovered that the students were "speaking" to each other in sign language. They were from the nearby school for the deaf.

So, the employee used a laptop on display to exchange brief typed messages with each student, and processed each sale individually, as requested (without the teacher serving as "translator.")

Here's where the story takes an unusual twist.
A couple hours later, the employee went on his lunch break, going to the food court in that mall. And who should he see there? 

Yep, the high school class. All talking to each other. Out loud! No sign language!

The students and the teacher spotted the Apple employee, and called him over to their table. It was true that the school was paying for all of them to get MacBooks. But, the students are not deaf.

Seems they were conducting an experiment. They were spending the day at the mall. They had pretended to be deaf, and gone store to store to see how they would be treated.

Their discovery? In their words, almost every store treated them terribly, clearly preferring to be done with these "deaf kids" as soon as possible. 

In fact, no other employee in the mall had even grabbed a pencil and paper in an attempt to communicate with them.

Quite the "Mystery Shopper" experience, isn't it? 

Might this make an interesting discussion topic for your next staff meeting?

• How should we treat people who "are a little different", as the Apple employee described them?
• And, how should we feel about being part of "an experiment"? Just because we work in a mall, in a store that is open to the public, does that mean retailers should be "fair game" for someone's sociology experiment?

We believe that "Retail is a mirror of society." And this is just one more example.  

Click here to go to the original blog posting, and read more details. 

Wanted: Good Citizen Owners

In the hustle and bustle of retailing, it can be easy to forget that being the Owner is its own job, separate and distinct from being "the boss",  president, or manager.

Of the 5 major areas of responsibilities that only the Owner can assume, it may well be that "Citizenship" warrants the highest priority right now.

What is "citizenship" for a retail business?

It starts with the recognition that "Retail is a mirror of society." Retailers must be responsive to changes in our society - economic, demographic, cultural, etc - in order to survive.

But, merely being responsive isn't enough. Retailers show leadership - and citizenship - not only by the business decisions they make, but also how they make those choices.

• What products?  
• What suppliers?
• What advertising messages?
• Which employees?
• What customer experience?

Each of these decisions affects whether your retail operation will be viewed as a "good citizen." Are your decisions consistent with the values you seek to maintain? 

Like it or not, retailers operate in a goldfish bowl. Shoppers' opinions about your stores are not limited to prices, customer service, or product selection.  How Owners choose to handle these Owner responsibilities also shapes how your stores are perceived.

What will your legacy be as an Owner? Will you and your stores be recognized for "outstanding citizenship"?

Lost Your "Competitive Edge"? Then, It's Time to Get Out of Retailing!

For retailers worldwide, January is a month of reflection. Cold, hard-nosed reflection. 

• "As I consider restocking, and go through the process of assessing 2012, I keep wondering, 'WHY am I doing this?!'"

• "Sure, I love my merchandise and the customers who love this merchandise. But, my results just are not good."

• "My staff and others are telling me that some of our best customers are going to a competitor. Hmmm...." 

Do some of these thoughts and concerns sound (all-too) painfully familiar?

If so, The Retail Owners Institute would suggest that all of these concerns reflect the same missing ingredient: you have lost your Competitive Edge. 

The solution? Re-discover and establish a distinctive and compelling Competitive Edge! Fast!!

Ask yourself, "What do we offer that separates us from all our competitors?" 

• Absolutely the lowest prices?

• Absolutely the broadest inventory assortment?

• Absolutely the very best location?

• Absolutely the wanted lines that no one else has?

• Absolutely the best e-commerce operation in your market?

• Absolutely the services for customers that are unique and special?

• Absolutely the most efficient and frugal operation around?

• Absolutely the biggest outlet for your merchandise anywhere? 

And of course, "absolutely" means without question, obvious to everyone. That is the only way any of these strategies represents a true Competitive Edge.

What if you do NOT have a true Competitive Edge? 

Then, absolutely, you should consider cutting your losses and closing down!

Kidding yourself that you are okay regarding a Competitive Edge is one of the tell-tale signs of a retailer in decline.

Reflection time is over. 

It's time to commit. Act now! Reclaim your Competitive Edge!

Holiday 2012 "Crunch Time"

Ready for This Season's Special Finale?

Ahh yes, the "Season Finale": that special time between December 26 and New Year's Day.

Savvy retailers know that the post-Christmas time will determine the overall outcome of their 2012 Holiday Season. Which will it be for your stores?

• A full "Ho! Ho! Ho!"
• Cut back? Just a "Ho! Ho!"
• Or - yikes! - just a "Ho Hum"

This is a unique period of time, and a tremendous opportunity. Many retailers find they net more from this time than any earlier stretch of 6 - 10 days!

Why? Because of the many opportunities to reduce expenses. Less advertising cost. Less staff. Fewer hours than the pre-Christmas stretch. And, the opportunity to clear out seasonal merchandise, generate cash, and move on to the New Year.

• Special merchandise buys, in readiness for those After-Christmas Price Hounds;
• Special customer service perks for those shoppers using Gift Certificates;
• Renewed emphasis on capturing customers' email addresses;
• Special incentives to bring the customers back. Liberally give out coupons - bag stuffers! - such as "15% off February Purchases".

The goal: NO seasonal goods left after the season is over. 
The clock is ticking. The customers will be there.

"It's not how you start; it's how you finish!" is especially true for retailers. To make the most of your 2012 Holiday Season, focus every effort on finishing strong.