By Brian Walker – The Retail Doctor Group

Imagine this: You where once a prime athlete, sharp, lean, focussed, agile, fast and very fit.

Then you matured, put on a few kilos, spread out a bit, possibly got a little lazier, found excuses to avoid getting fit, became easily distracted and generally slowed down.

Then you realised that some of your peers actually stayed fit, lean, sharp and fast and you where left behind.
Now transpose that scenario to today’s business sector in retail where some businesses have actually got unfit, dare I say lazier, with their CEOs not quite recognising the impact that the race to the customers heart and mind is actually more challenging than it was a year or so ago.

You might recall, that it wasn’t that long ago that we had:

• Near full employment
• Comparatively low interest rates
• Healthy export earnings
• Positive and continuous GDP
• Comparatively high consumer sentiment
• Businesses buying and selling for astonishing EBITDA multiples
• Optimism abounding where even a very average retail offer survived.
• Credit was king and cash was something that we used to use.

All equating to a consumer, for whom tomorrow was another day of shopping. The demand curve became infinite and even the most average fitness retailer was surviving.

How did some retailers respond to these conditions?

• Went off strategy and played in markets that were “not their sandpit”
• Broadened their core offer and range (Be all things to all people)
• Lost the essence of their unique point of difference
• Didn’t continually improve and set themselves smart goals
• Lost the art of cultural alignment with their people
• Misplaced the effective people framework
• Increased their debt levels
• Expanded their networks (some opening stores despite declining sales)
• Fostered a culture of true non performance
• Carried too much of the wrong product
• Replaced the art and science of retailing with the bravado of invincibility
• Misread the market including our competitors and consumer movement.
• Lost focus on the skill required to successfully implement their strategy
• Missed the understanding of the detail required to truly run a great business

Take a look at the businesses that have fallen over in the last six to 12 months and you will see a commonality of “unfitness” surfacing as the pervading market conditions took hold with many of the above characteristics being evident. We have many “Fitness” tips to help retailers and here are a few of the ‘front line ‘tips to assist in getting retailers ‘Fit for Business”:

• Invest in understanding where your sales are made, where and to whom. The relationship of sales to stock and location mix can be easily misunderstood.

• Diagnose the investment in customer service and satisfaction levels with the key being to productively understand your customers ‘service elasticity” – or in other words the point at which too much service is actually as uneconomical as too little service is damaging.

• The recent Mckinsey surveys on customer service levels in a challenging economy suggests the following: “One key is to minimise wasteful spending while learning to invest in the drivers of satisfaction. Specifically, companies should challenge their beliefs about service and test those beliefs analytically. Many will discover that long-held but seldom-reviewed assertions about what customers really want are wrong.”

Our Retail Doctor research shows us that some retailers, faced with rising costs in a challenging economy, are in some cases responding by increasing prices, whilst decreasing service levels in their retail offer. As a result, our customer experience research shows that satisfaction scores are in static or actually starting to decline from previous growth.

This doesn’t auger well for the brand equity built up over a period of time or the immediate effect of lost sales. The February retail results still showed us a customer still willing to consume with shifting patterns of discretionary expenditure which are not easily changed.

Many analysts are now starting to comment that the downward economic cycle might actually be flattening out which indicates that a “Fit” businesses will be quicker to bounce back.

The right service levels rather than simply decreasing levels are an an important “fitness indicator” in the bounceback as some of us move from being Fat to Fit.

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Happy “Fit” retailing

The Retail Doctor