Mistakes of retailers in a crisis

Business is run by people, and people are known to err. In a stressful situation, when uncertainty and pressure build up, the likelihood of mistakes and their "cost" increases. But, since crises happen from time to time, veterans of retail management have accumulated a certain experience of counteracting their consequences, both positive and negative. Kirill Volkov, a marketer with 13 years of experience, marketing director of the Academy of Retail Technologies, tries to find all the most valuable in the accumulated baggage of "anti-crisis" knowledge in order to save entrepreneurs from fatal mistakes.

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Kirill Volkov is Marketing Director at the Academy of Retail Technologies. His specialization includes marketing, advertising, and PR. He has over 13 years of marketing experience. He has held top positions at luxury fashion companies (such as Cashmere and Silk, Brunello Cucinelli, Missoni, and Santoni) and in the mid-market (such as Ecco, Goorin, and Ragwear). He has extensive practical experience in all areas of marketing, including strategic planning, research, communications, branding, public relations, and trade marketing. He also holds a Bachelor of Arts degree in management from The Open University Business School, UK.

The Academy of Retail Technologies is a consulting company focused on the fashion industry and small and medium-sized businesses. It provides consulting and business training services.

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When communicating with the owners and top managers of retail businesses, both large and small, you sometimes wonder how people in different situations and surroundings find themselves subject to such similar managerial stereotypes. To an outside observer, it is obvious that following such behavioral patterns will lead to trouble, however, immersed in their problems, people often lose their sanity and rationality. But many things have already passed.

Let us examine these "traps" in more detail, and, perhaps, having recognized himself, the reader will be able to draw the correct conclusions and find the strength to rebuild himself.

Reliance on false beliefs

In difficult times, the market is full of rumors, speculation and insider information from "reliable" sources. Someone speaks about the closure of the import of clothing and footwear from the EU countries, someone - about the imminent collapse of the ruble or dollar, about the introduction of a new monetary unit, about denomination, etc. Having believed in one of the "theories" and developed it, it is easy to lead your company in an absolutely dead-end direction. On the contrary, the professionalism of a marketer is ...

1) fact checking;

Xnumx) narrowing uncertainty;

3) miscalculations of different scenarios "what if".

Instead of discussing the next “insiders” at the meeting, it is better to spend such valuable time developing various scenarios, taking into account several input parameters: the ruble exchange rate, the possibility of revising rental rates, the possibility of revising the terms of supply, dynamics of demand, etc. Fortunately, there are not many factors affecting trading. This will enable a more sober assessment of the consequences of better or worse development of the situation. As one of the founders of Hewlett-Packard, William Hewlett, said, "You cannot manage what you cannot value." In times of crisis, this statement is doubly true.

Unfortunately, one of the varieties of false beliefs is also the knowledge gleaned from articles and speeches by "experts". “During the crisis, consumers are redistributed from the premium segment to the middle segment,” we read. "Demand for basic models is growing." "Leather gives way to leatherette." "Brands A and B will be replaced by X and Y." "Customers are becoming more rational." And so on and so forth.

All these statements may well be true. But the truth is that almost every retailer has their own unique situation, and different audiences have more different reactions than similar ones. In addition, over time, as the crisis develops, customer perceptions and behavior change significantly.

In this regard, it is better not to try to glean valuable observations on the side. The key to understanding the reaction to the changes taking place is deep and reliable knowledge of your customers. Shoe stores almost always have a customer base of several consumer groups that will react differently to changes. Some clients will buy 5-10 pairs of expensive ballet flats to “stock up” before the price rises, while others will wait for sales to buy winter boots at the lowest price for their next salary. It is the understanding of the nature of consumer behavior and the use of this knowledge for management that the contribution of marketing is valuable, and the crisis is a real test of competence.

Ignoring

While it sounds strange, some companies still try to do business as if nothing is happening. “We have survived 2008 and will survive this crisis” - say the owners, signing new lease agreements and orders for collections of promising brands.

In some situations, this behavior is justified. When the cost of exiting a started project is higher than the cost of continuing (and this can be calculated!). Or the company has experienced significant growth and the general recession will slow down its development, but there will be a small lag for business expansion. But, unfortunately, one can count on the fingers of one hand the commercial organizations that really have a "margin of safety", and more often it turns out that having taken on the unbearable burden of new projects, the business bursts at one moment like a soap bubble.

Healthy conservatism in defining development paths, honest financial forecasts and not always simple decisions can save you from mistakes. Retail chains, which by 2008 did not succumb to excessive expansionist sentiments, are still alive. And many have already served as a sad example that inspired the author to write this article.

Reactivity

All markets, although to varying degrees, are experiencing a drop in demand. If in the field of tourism and car sales, demand falls instantly and sensitively, then the shoe market is more inert and demand reduction occurs less noticeably and not so synchronously. However, the first signs of the situation appeared in the fall of 2013, when some large companies experienced the first serious recession. But what to do when purchases are made taking into account growth, traffic falls, and competitors dump?

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Reactivity is characteristic of businesses that developed in an environment of local and not very competitive business, were able to grow and strengthen, but did not feel what it means when the market becomes "crowded" for a large number of players.

The following happens: the owner watches the situation and waits - and at this time the situation worsens - sales stagnate, the ruble falls. Under the pressure of an unfavorable environment, it is necessary to make reductions, rebuild, incurring inevitable losses. In the next round of the crisis, sales fall even more, orders are bought out with a delay, the staff plunges into depression. All that remains is to shrink even more, urgently look for money, and so on, round after round, until the business is completely closed.

Strong companies are proactive and do not rely on "chance". Determine the lowest point of demand - the most negative outlook. What to do in this case to survive with absolutely minimal sales? Do not wait for the moment when cash receipts will not be sufficient to cover current costs, but act proactively. Bargaining for rent, negotiating discounts with suppliers, cutting payroll costs, closing unprofitable destinations and shops - before things get too bad. Fortunately, if you look closely, most companies have accumulated a significant backlog of ineffective ballast, getting rid of which will only make it easier for business. To reduce the budget, and calculate the cash flow. Are there cash gaps? Optimize yet.

Thoughtless pro-activity

The opposite situation is also observed. The management goes into mortal combat for the sales plan, ultimatums are issued to partners, it is argued that in a special situation, extraordinary decisions are needed, first strategic, and then current plans are canceled and replaced by "manual" management.

As a result, chaotic and ineffective traffic occurs in stores. Prices are skyrocketing. Sales stop. There is a special offer with a small discount. Does not work. After 3 days, the discounts increase - again a miss. We give a huge discount, etc.

This is not to say that "manual" control is always harmful in a crisis situation. No, the owner can take control of all payments, personally deal with the cost structure, personally conduct difficult negotiations, personally set the staff to work hard. These are examples of useful involvement in operational management. But, a complete rejection of planning, violation of the logic of communication with the buyer, the policy of progressively increasing discounts in the season is not the best tactic. All of this wreaks havoc, demotivates employees, undermines the business and undermines the company's credibility.

Instead of abandoning planning, you need to prepare a basic marketing plan and provide additional incentive steps if the basic plan does not work. It is not as difficult as it may seem.

Think about staff last

No matter how correct the chosen decisions and anti-crisis steps are, any brilliant initiatives can break on an iceberg of misunderstanding, mistrust or apathy of sales staff.

Bosses and owners don't always find the time and the right words to speak to the top people in the company who have been entrusted with the most important process - customer service. But in vain! Collectives are filled with gloomy rumors, everyone is afraid of layoffs and layoffs, plans to do everything more difficult, and consequently the salary is reduced. HR managers themselves can be at a loss. All this does not contribute to quality service and increases risks.

Wise leaders and business owners have learned this well and do not forget to hold assembly meetings as early as possible. They explain, in simple human language, that rank-and-file employees and top managers are in the same boat, and all are required to be extremely focused and diligent in order to get through the storm.

The most valuable staff will be able to save work, in exchange for loyalty and honest work. Thus, they voice what is expected from the workers and what they can expect in return.

Forced Marketing Strategy

In management theory there is such a concept as a forced strategy, i.e. a strategy chosen under the influence of external circumstances that the company is unable to overcome. The crisis is just one of those circumstances. Many retailers, under the pressure of negative events, instead of defining, albeit forced, but well-thought-out path of development: a) take prompt actions aimed at “seemingly” improving the situation, but which lead them to a dead end, in the long term b) make separate decisions - on price, assortment, service and distribution, not consistent with each other. When a well-honed and "working" marketing complex that has developed over the years (often spontaneously) no longer works, it is necessary to reconfigure the entire complex, and not a separate part of it.

For example, a company instantly "rewrites" prices in direct proportion to the change in the ruble exchange rate, in fact, moving to another price segment. This is done in the hope that the buyer "gets used to it" and in a sense will be forced to make such expenses. At the same time, no other actions are taken, there is no understanding that such a decision will most likely lead to the loss of its audience. After all, the current income of buyers will not allow them to purchase goods 1,5-2 times more expensive.

As a result, revenues fall, loyal customers acquired over the years are lost, business collapses. At the same time, the retailer could act simultaneously in several directions: restructuring the assortment, optimizing purchases, reducing current costs, selectively increasing prices, restructuring the discount policy and, using all these tools in combination, to mitigate the painful effects of devaluation and reduced demand.

Summing up

A crisis is a real test of the effectiveness of marketing, the ability to make decisions accurately and quickly, and to adapt to a new situation. It must be admitted that the situation has changed, it will not "win back" and it is necessary to act. Assume several development scenarios, focusing not on rumors and speculation, but on those factors that have the greatest impact on the business. Play ahead of the situation, be ready to go through the most negative scenario. Enlist the support of your team and support valuable employees. Adjust the complex: price-product (assortment) -communication-sales channels only as a whole and it is imperative to keep in sight the medium-term perspective (1-3 years). Focus on your customer. Now his time is coming and the future of your business will depend on whether he stays or leaves for competitors.