I want to sit out a difficult crisis situation quietly in a dark corner in order to somehow stay afloat. But it is precisely at such moments that it is worth thinking about intensive, high-quality business development. Natalya Chinenova tells about the directions in which it is possible to move in difficult market conditions.
Natalya Chinenova is a practitioner in the field of organizing a retail business from scratch, developing franchising, systematizing, formalizing and regulating business processes of a retail enterprise, developing personnel motivation systems, and forming management strategies. Has more than 31 years of experience in retail.
The past year has brought disappointment and large balances to many retailers. The first quarter of 2014 exacerbated the situation: there was really no winter, the ruble exchange rate was jumping, the political situation in the world was changing. Buyers have less and less free money: at the end of 2013, overdue loan obligations of Russians amounted to 25% of the total aggregate income of citizens of our country. New players enter the market every month, and giants like Inditex and H&M are not going to slow down their pace of development. Therefore, it is not necessary to expect that customers will just return to our stores. Retailers need to think hard about how to survive this difficult situation. There are several ways that retailers can help in times of crisis.
The first and most important of them is cost reduction. The most common way to reduce costs is to fire half of the sellers and the entire administrative department, which is fundamentally wrong. Cost reduction should take place through the optimization of processes, and for this you need to understand what kind of processes are happening in the company.
Before you cut staff, look at your expenses and understand where the money goes. It is possible to reduce household expenses due to the unification of consumables. All your units should use the goods of the same brands, up to cleaning products: the more you buy one item, the more discount you will usually get. It is necessary to normalize the consumption of materials. Remember how many simple pencils you bought at the office over the past year, and compare this with how many people can use them in 12 months. Maybe two or three, a maximum of five. It is not known where these pencils disappear, but managers ask for new ones, and you obediently buy them. One pen and one pencil per month per employee is more than enough. Do not bring rationing to an absurdity and certainly do not stop providing your employees with consumables. If you do not buy anything, it means that you are refusing your subordinates in the corporate culture. Standardize administrative costs - consider exactly how much money your employees need for business trips and exhibitions, to compensate for meals or transportation costs.
Effective personnel management in crisis situations comes first. In my experience, in many stores sellers in the hall are much more than necessary. And business owners are surprised: 10 people work, why are the sales miserable? Because they take goods from you, steam them, mark them, put them out, carry out an inventory, protect the hall, prepare reports, and when will they sell them? Consultants perform the functions of other employees: merchandisers, merchandisers, managers.
Before you lay off salespeople, calculate their effectiveness. If 200 people entered the store in an hour and two made a purchase, then you do not need consultants. According to statistics, a conversion rate of 10% ensures a normal flow of buyers: so many people will buy without any help. But everything that is from above is already the result of the work of the staff. If your conversion rate is less than 10%, then sit on the sales floor and see what your salespeople are doing.
Product leftovers are a sore point for all retailers. If you have more than 50% left, then you do not need to put everything up for sale. Choose one that can be mixed with the new collection and try to sell again and put it off. Otherwise, you ruin it during the sale and never sell again. Make the next purchase, taking into account the balances, in accordance with the results of the sales analytics, observing the price category, the width of the price step, the amount sold last season, avoiding substitute goods. Try to find distribution channels for the leftovers. In small towns, there are many small multi-brand stores, where your leftovers can become a full-fledged product. It is desirable, of course, that they are in their normal form and whole boxes.
Expansion of the range
To use this path, you need to study the so-called “Boston matrix”. It is possible to expand the assortment only after we understand what is happening to him: removed all substitute goods, realized who are the sales leaders and “dairy cows”, who are “barking dogs” and “difficult children”. Now retailers have no opportunity to experiment. Therefore, the main requirements for the assortment are as follows: it should be specific, understandable, consistent with the expectations of the target audience, sufficient to fill the sales area, adequate in terms of price and quality. The main profit is brought by “cash cows” - basic things. You can’t reduce its share or remove it from the assortment, while it is definitely worth getting rid of “barking dogs”. Before introducing a new assortment, analyze existing sales, as well as the organization of a trading floor and warehouse. I want to sell gloves in addition to shoes, but on what will I represent them? We need additional equipment, for which you also have to pay. If you still dare to buy new positions for you, then, firstly, they must be actively advertised, which also leads to additional costs, and secondly, from the first day of sales, you need to closely monitor the demand for these categories.
Business intensification is the optimization of all existing processes, accompanied by the introduction of modern sales technologies and software products. Remember that any implementation should be thought out and have a payback period. It’s not enough to buy fashionable gadgets. You need to know where, how and why to install them, what profit and for how long they will bring the store. In this situation, any changes should be as free as possible. Many are frightened by the phrase "software products": in the imagination there are complex software worth thousands of dollars. In fact, even the banal “1С” has a huge number of modules that are easy to integrate, have an affordable cost and allow you to more effectively manage the assortment or develop loyalty programs.
In addition to introducing innovations, intensification implies optimization of current processes in the company. First of all, it concerns three areas: marketing, logistics and commerce.
Let's start with marketing. It is important to remember that marketing is not advertising, but market research. It is not possible to build a product matrix or pricing, track substitute products, if you do not analyze existing sales. This should be done by a category manager, an employee of the marketing department. Now in any store there is a merchandiser. But in most cases, this is a person without the necessary education and without understanding the principles of merchandising, who came up with some concepts and does something to his taste with shop windows and a trading floor. It often looks awful. And merchandising, by the way, is also under the responsibility of the marketing department.
Logistics is not only traffic. It includes warehouse operations, and optimization of ways and methods of delivery, delivery time to stores. An important point that everyone forgets is the simplicity and speed of transferring goods to the trading floor. The bestseller must be ready to lay out at any time.
The commercial department is a providing link in the work of a trading company, because it is he who carries out the procurement. In many companies, this department is represented by one forever busy accountant. In an ideal situation, commerce should work in three directions. Financiers sell and buy money, for example, take loans. Bookkeeping optimizes taxation and internal monetary processes. Economists, on the other hand, care about the safety of money of shareholders and investors, draw up budgets, forecast and set tasks, and monitor their implementation.
Attracting New Customers
To expand the base of regular customers is possible due to the normal loyalty program. When I say “loyalty program”, I do not mean a useless funded card. On average, there are 35 discount cards per Russian, while a normal person uses a maximum of five. Increasingly, buyers refuse to receive newsletters because they do not give any real news other than the start of a sale. The experience of Bosco di Ciliegi is very interesting: they invite customers to interesting exhibitions and presentations, arrange client shows of new collections. Arranging such events is quite possible even with a minimal budget. This is especially true for shops in small cities with a small customer base. You can create a real community around your store, not just loyal customers, but loyal fans.
Only lazy does not speak about customizing today. Buyers want to express their personality. The pioneer of this trend was Levi's jeans brand, which sewed jeans on the patterns of customers, but this action was very expensive. Today, Adidas makes custom-made sneakers and promises to soon launch the production of tracksuits, prints for which customers will choose. The luxury brand Miu Miu offers pin-up blouses or dresses to the collar in the form of letters, from which you can even make whole words. The Pandora jewelry brand also works: all pendants for bracelets are standard, but everyone can choose the ones he wants. Amid fierce competition, personalization is very good.
Expanding to other regions is a natural way for the retailer to develop. It is not necessary to do this by opening new stores, because no one has canceled such tools as franchising, wholesale or online sales. There are much more than a thousand cities in Russia, and there too people need to shoe in something. You can always find new consumers.
In the ideal case, before rushing into the fires of any of these options, you need to analyze your business, even the most primitive. Evaluate what your strengths are, where you are weak, in which directions you can develop, and in which - not yet. If you start competently moving in one direction, this will lead to changes in all other areas.
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