Yes, the Web IS a "Location" (And increasingly the preferred location of shoppers!)

We're continuing to read and also hear anecdotal reports from retailers about foot traffic being way down, especially in the malls. Currently, the shoppers are just not showing up as they once were. 

How to account, then, for the increases in retail sales? Yep, it's the internet. 

Shopping isn't declining. People still need to buy what retailers sell.  But to survive, retailers must be where the shoppers are. And that means being on the internet.

However, having a robust e-commerce capability can be very daunting. And expensive. But not having those choices for your customers can be fatal. And that's where "shopping platforms"  - like Amazon Merchants - must be considered.  

We know. Some retailers reject this as a matter of principle. "That's like getting in bed with the devil", they grumble. 

We understand that concern. But, in our view, retailers should regard these shopping platforms as the contemporary shopping mall. 

It used to be that when considering where to lease space for your store, you would compare a shopping mall to a free-standing location. The mall required higher rent, plus CAM charges. And rules about what hours to be open. Grumble, grumble.

But, that's where the shoppers were! As a free-standing store, even a "destination retailer", your advertising budget was just a drop in the bucket versus the mall's presence.

Retailers always must be where the shoppers are. Today's shoppers increasingly are on the web, not in the malls. If you are not already there, or need to expand your presence, we urge you to investigate the increasing array of options. Not just Amazon and eBay, but now Facebook and Pinterest, for example. 

The Decline of "Retailing On Steroids"

Retailing's extended infatuation with "Bigger Is Better" is what we refer to as Retailing on Steroids. You know, the category killer "big box" stores, the ever-larger "super stores". It's been going on for decades.

According to the International Council of Shopping Centers, retail square footage in the United States has now grown to 23.1 square feet per capita, by far the highest in the world. Yikes! We seem to be over-stored (or under-demolished!)


Now, Downsizing Is In

• Best Buy is touting its "Stores within the Store", as they deal with their excess space. 

• Radio Shack and Staples are closing hundreds of stores. 

• Sears is trying to "reposition its real estate assets". 

• Target is opening City Target stores, with smaller footprints, and products scaled to smaller urban condos and apartments. 

• And Wal-Mart is doing the same thing.


Better Is Better! Bigger may not be.


And what these initiatives have in common - besides the need to shed retail square footage - is the attempt to replicate the "specialty store" shopping experience. Yes, they're now going after the fundamental competitive advantage of independent retailers: Better Is Better! Bigger may not be.
 The advantages that smaller stores offer:

• improved "theater of retailing"

• much closer connections between the sales staff and customers

• financially, higher sales per square foot.   

Therefore, in our view, independent retailers need not worry when they read and hear the media reports. What these "big guys" do not have is the agility and responsiveness that independent retailers and their customers thrive on.

Easy Tool to Motivate Sales Productivity

Here's a useful rule-of-thumb when discussing compensation with your front-line sales staff:

• Each employee should expect to generate sales per hour that are 10 times their hourly pay.
• So, someone being paid $12 per hour would be "expected" to ring up $600 in sales during a 5 hour shift.

Now, clearly that 10X multiplier will be different, based on your retail industry, margins, etc. For some stores, it will be 8X; for others, maybe 12X.

But, there IS a number you can determine. And, then you can and should share it with your staff!

Ready Feedback for Each Sales Associate

Since each employee knows how much they are being paid per hour, they can do the math for themselves. Each day. Each week. Even each hour, if they want.

Especially today, people want to believe that they are making a contribution, making an impact. And they want to get frequent feedback on how they are doing.

This way, they can "Do it myself!"

Best of all, by giving this tool to your staff, everyone can properly refocus on productivity.

Whether your store's "number" is 10X, 8X, 12X, whatever: You'll know you have a winner when you hear employees bragging that they beat the multiple!

New! Look What Else GMROI Can Reveal

The Retail Owners Institute® is well-known for its focus on GMROI - Gross Margin Return on Inventory (Investment). 

In our view, this dynamic tool is the #1 measure of inventory productivity. And frankly, if you are in retail, you had best be focused on inventory productivity

As a reminder, GMROI tells us this: "How many Gross Margin dollars am I getting each year for every dollar I have invested in inventory during that year?"

Why do we like GMROI so much?

It is multi-dimensional. Instead of looking only at margins, or only at inventory turns, it combines them. That's why some call it "earn 'n turn". It shows you which merchandise is delivering the most bang for your buck. 

It is quick to calculate, and a wonderfully objective measurement, whether you are comparing stores, departments within stores, or, especially, vendors!

And now, a new, insightful use for GMROI

When used to compare a given retailer's performance versus their retail segment, we suggest that GMROI can be the single-most-telling measure of a retailer's financial viability.

Quick • Verifiable • Sophisticated • Uniquely Retail

To make this new use of GMROI easy and fast, The ROI has built an online calculator (go here), available for free at The Institute. In 2 quick steps, you can:

1. instantly calculate GMROI for a specific retail operation;
2. compare that GMROI to the average for that retailer's segment. 

Here's what that comparison reveals (in just seconds!)

• If their GMROI is below the average for their retail segment, beware; a cash crunch or weakening profits could be in the offing.
• Is their GMROI above the average? Inventory productivity is strong; positive cash flow and/or strong profits are very likely!  

New Insights on Major Retailers

This works for any retailer for which you have the numbers, whether your own stores or publicly-traded companies. 

Just for fun, using their most recent financial statements (for 2012), here are the discoveries about some major retailers.

Wonder about other retailers? Or want to know how your stores compare? Go here on The ROI site to test this for yourself. 

Retailers: "Turn on Your Financial Headlights!"

In our work with retail situations across North America, we have observed three kinds of owners:

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

Think for a moment about these owners who have become mere bystanders in their business. It's as if they are driving a car at night without the headlights on! 

The car goes just fine; it doesn't need headlights to run. But no one would drive like that, especially on a freeway at high speeds. You want to be able to see ahead, to know what's coming, to anticipate adjustments, and make them in time to stay on the road. 

The same is true in every retail business. 

Your business may be barreling down the highway without you being able to see ahead. Meanwhile, especially at this time of year, the accountants and bookkeepers will be very concerned with tabulating financial history. They are just recounting - to the penny! - where you already have been.

But as the owner of a business, your major strategic responsibilities include projecting and preparing for the future. No crystal ball required; just your experience and good judgment!

As this new calendar year begins: 

• Take time to look ahead: What trends are affecting your customers? Your competitors? Your suppliers? Your local community?
• Anticipate "what's next?" in your retail segment, from new products to fickle customers. Tap into the opinions of others, whether through your buying groups, trade associations, business magazines, online resources.
• Then, turn your attention inward. As you consider how best to respond to these pressures in the marketplace, compare the varying financial implications of those "What would happen if I...?" choices. 

Or, in other words, now is the time to "Turn on your financial headlights!"