The crisis is often called the period of new business opportunities, and this thesis is confirmed in practice. For two crisis years, the turnover of the shoe retail chain Vera Victoria Vito almost doubled, and the retail project itself reached a payback and profit. This was achieved through a number of measures, which are not always obvious, but that work in practice, ”says Sergey Vovdenko, CEO of Vera Victoria Vito.
Sergey, in two crisis years, your network has reached a payback period, and this happened at the very time of crisis. I know that you have carried out work on training employees. Is this really what gave such an amazing result?
Of course, but not only! Training of sellers helped us to increase sales, but this is only 5% in the volume of all measures we have taken to increase the efficiency of our network. Moreover, the training costs for our managers and sellers were significant, since we ordered the training of our sales personnel from a consulting company that organized a whole system for us: we analyzed the telephone conversations of managers, our sellers also went with voice recorders, and all their actions were analyzed . However, the main increase in sales that we were able to achieve was due to the introduction of retail analytics. That is, it was necessary to optimize the work at all levels, all employees and myself had to learn and apply new knowledge in practice.
Two years ago, when the crisis struck, we seriously thought about whether we need retail at all. Initially, we had a wholesale company, and retail was conceived as an auxiliary tool for studying demand, in order to understand what our wholesale client wants. And during the crisis, the number of bulk orders we went down sharply, most of our customers decided that they did not need expensive products and they would find something cheaper. My employees kept saying the same thing: “Why will we sell expensive products if we now need to reduce prices, reduce the cost of goods, trade margins?” I decided to analyze the situation and came to the conclusion that we have only two ways - either close the retail, or, contrary to everything else, continue to work in the selected price segment, or maybe even take a step towards a higher one.
We work in the medium plus segment. The range of goods we have is quite wide - these are shoes, bags, accessories, leather goods, umbrellas and cosmetics for shoes. Before the crisis, the price of a pair of shoes in our shoe stores was about 4-5 thousand rubles, now 8-9 thousand rubles, respectively. In principle, the consumer already realized that they would have to pay about twice as much for imported goods. Everyone is used to it, except for business owners and sellers. On our own and according to the stories of our wholesale buyers, we well know that sellers still bombard their leaders every day, convincing that they will not be able to sell goods at such prices, and the main thing is not to follow their lead! Because although the consumer complains that it has become expensive, those who are used to a certain level of the product are not ready to refuse it.
Vera Victoria Vito is still a small network - eight stores (the ninth opened the other day), and we do not have a separate staff of analysts who would monitor the market. But it turned out that we are able to collect the necessary information if we properly maintain our own database. How to do this and use this information effectively - advice from business trainers helped.
There were recommendations in all aspects of the retail business: sales techniques, assortment optimization, advertising promotion, brand positioning and loyalty formation. I'll tell you about the main ones.
Firstly, this is a new approach to setting prices for goods in retail - differentiated pricing. This innovation had the most powerful effect on the size of the revenue and profits of stores, and I am ready to share this experience!
In trade, everyone knows this rule - 20% of goods sold in retail give 80% of revenue, and the remaining 80% of goods give only 20% of revenue. However, most small retailers, without specialized knowledge, establish a single trading margin on all goods. So we did - we bought goods, set the same wrap, and closer to the end of the season we announced discounts based on what and how it is being sold. Indeed, in retail, the main problem is the leftovers. If at the end of the season there remains more than 30% of the goods, the season has failed, there will be no profit.
On the advice of the consultants, we divided our entire product into three categories: A, B, C according to liquidity. In category A, we included 20% of the goods that are sold best, in category B were goods of medium liquidity, and in category C, goods that were sold with difficulty. And then they introduced a differentiated margin. For category A, the margin is higher, for category B - lower, and for category C we began to set discounts from around the middle of the season. This allowed us to quickly get rid of goods that are sold poorly. Yes, we earned almost nothing on category C, but we earned very well on a product of category A!
How it works: when a consumer enters the store and says: “Oh! And the prices are not so high, here are the 50% discounts, but these are good leather shoes for 4 990 rubles, but the quality is excellent! ”So the buyer argues, but he doesn’t take the goods at a discount, but the one which is included in 20% of the most liquid category A product, with a good margin.
And how did your margin change?
The average trade margin before the changes was 65-70% - depending on how well the season went, and now it is from 100 to 110%, this is higher than the market average. Given that 80% of the product is sold at a fairly low price, and the average margin has increased, this result looks illogical to a layman. However it works!
The second thing we did, we seriously engaged in related products. First of all, these are bags. We refused to take on the feelings of the crisis, it seemed inexpedient to go to the lower price segment, especially since the offer increased in the low-price segment and the competition became higher. We offered Vera Victoria Vito bags of a higher quality, made of more expensive materials, using Italian leather and accessories, and - importantly - we changed the layout of the goods in our network.
And what should the product display look like?
Of course, the layout depends primarily on the level of the store, it is more dense in the lower segment and free in the boutique. I'm talking about the location of the bags in a shoe store. Many shoe retailers almost do not add bags to the assortment, as they believe that due to a reduction in the display surface, fewer shoes will be sold as a result, and this is the main and more marginal product.
But in practice this is not confirmed. You can easily reduce the number of shoe models without losing sales. To do this, you need to analyze the trading matrix and remove duplicate positions, but maintain the full size range. Do not offer the buyer 5 shades of beige ballet shoes, it is better to give a suitable size of one. Our personal experience is to reduce the assortment by almost half, but constantly sorting out the sizes, we did not lose sales by the number of pairs, on the contrary. And on the vacant windows they placed bags right on the trading floor along with shoes, which, incidentally, was met by the fierce resistance of the sellers, since for them it was a product that was easy to steal, and it was rarely sold. But due to the transfer from the traditional checkout area to the sales hall, sales of this category increased from 5% to 30% of revenue. We and the sellers are happy, and the loss of one or two units in comparison with the turnover no longer looks so frightening.
Here I especially want to emphasize that bags as a product are still good in that they require less investment when purchasing than shoes. Because in shoes you need to buy 5-8 sizes for one model, and you buy one bag.
As a result, the profit from the sale of bags can be obtained faster!
With bags, as with shoes, we applied the same method - divided them into categories and made a differentiated trade margin. This also increased profitability. There is one more piece of advice: if you see that a certain model is selling well, you need to buy it many times, and not chase after brand new models - this way you will earn more!
Of course, it is important to have a good supplier from whom you can always quickly buy the right product. And since we have our own bags, we are such a good supplier for ourselves and wholesale customers. And now we offer wholesale partners Vera Victoria Vito an additional service of integration into our sales analysis system, which allows them to see bestsellers and order these products from us, receiving a significant increase in profits.
Price differentiation has affected all other products sold in our network. In addition, we optimized the range of shoe cosmetics, reducing it from 360 names to 106 - we left everything that is necessary for shoe care, but of the same brand, and this also gave us an increase in sales by 3 times throughout the group.
At the same time, it is important to note that the basis for all these decisions necessary for our retail was the creation of an analytical system based on 1С, on which we worked for about six months. It is it that allows you to track the sale of all our products, record the sales speed of a particular model, identify bestsellers and recommend them to our wholesale customers.
Can you share what these consultants were who helped you in the development of retail?
Yes, now we are ordering trainings for sellers with the speaking name Salers. And the very first and most informative was the St. Petersburg company ITC Group. Those who work in St. Petersburg can safely recommend them. We came to them by chance, listened to the presentation of an expert of this company at one of the shoe exhibitions. These were tips aimed at the development of footwear retail. We followed the recommendations, and when they really worked, we decided not to stop and study further. It is curious that he opened our eyes to how to organize the process in retail, a person whom many in the retail market would call a “theorist” and, perhaps, even refused to listen. Once I thought the same, but now I have changed this opinion.
Recently, at many professional exhibitions, it has become customary to conduct a business program, organize free seminars on retail business management ... So now we try not to miss them!
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