Improving Profitability with Retail Analysis
Retailers are transforming their businesses by examining their industry and market position while assessing the objectives of the total organization. The transformation process determines where functional objectives and supporting human and cultural elements may have created gaps between the optimal and actual operating structure and results. The process touches all aspects of the organization -- both internal and external-- to design comprehensive solutions.
Identifying Opportunities
There are several key indicators that alert retailers of potential challenges to overcome through business transformation:
- Higher than average industry SG&A ratios
- Declining and/ or flat sales results
- Top performing functional areas coupled with high overall expense rates
- Below industry inventory productivity
- Companies in distress
Approaching the Challenges
We recommend a tried and true business transformation approach. First, conduct a comprehensive review of all practices and productivity levels across the organization. Next, design reengineering efforts to drive newly defined company goals. Finally, focus on:
- Leverage merchandising information systems to enhance forecasting
- Establish micro-merchandising capabilities
- Establish strategic supplier partnerships
- Reduce overall inventory costs
- Review organizational structure of merchandising areas
- Implement effective merchant goals
- Develop measurement standards.
Sales & Customer Service
- Develop a consistent and accurate Customer Service Index
- Create employee recruiting and selection criteria
- Implement recognition and reward programs.
Finance & Administration
- Improve performance in all back office, financial and paper processing areas, including accounts payable, sales audit, general accounting, credit and collections, headquarters and administration
- Implement productivity measurement, goal-setting and feedback.
Organizational Renewal
Link each of the above areas, as appropriate, with analysis and enhancement of cross-functional processes. The development of operating strategies to support the mission and vision turn concepts into results.
Culture Change & Integration
- Seek commitment from management
- Set clear and specific goals
- Measure and quantify results
- Coach, reward, and recognize employees.
Realizing Results
Mid-size to large Retailers can expect to achieve anywhere from $5 million to $50+ million in savings as a result of a business transformation project. One $550 million specialty retailer achieved a 3 percent to 5 percent sales increase over trend, approximately $3 million in reorganization savings, and $3.2 million in inventory cost of funds. In another instance, a $612 million drug-store chain reduced payroll by $2.5 million, increased same store sales by 5 percent, and improved in-stock rates by 15 percent.
For more information on this topic contact Pat Fitzpatrick at Atlanta Retail Consulting Inc
