Managing your footwear business during turbulence

We are again forced to conduct business in a period of turbulence and quickly adapt to a changing reality. But the shoe business still needs to work, no matter what and despite all the difficulties. SR expert and regular speaker of the Euro Shoes business program Maria Gerasimenko gives advice on how to maintain composure and manage the shoe business in these difficult times.

Maria Gerasimenko -

CEO of Fashion Advisers and the first online school for fashion business Fashion Advisers School, expert in business management and development, business coach. Fashion business management experience - more than 12 years. Successfully defended 2 MBA dissertations (Mirbi International Higher School of Economics, Russia, Moscow, 2013) and London Metropolitan University (Great Britain, London, 2017)

Main areas of activity: strategic and anti-crisis management of the shoe business, assortment matrix management, development of motivation programs, conducting trainings in the field of management, service and sales. Clients include: Unichel, Tamaris, s'Oliver, Kotofey, Rieker, Sinta Gamma, Helly Hansen, Rusocks and others.

Rising purchase prices

Due to the increase in the exchange rate, prices from suppliers increased.

What to do: increase retail prices and lose customers or cut margins and suffer losses?

Actually there is another option.

In business, there are two performance indicators: margin and profitability.

Marginality - this is the share of gross profit relative to revenue, and it is calculated by the formula:

M \u100d (B - C) / B x XNUMX%

where M is marginality, B is revenue, C is the cost of goods. The cost price is the purchase price plus customs duties. In some cases, shipping costs are included in the cost.

Profitability is the share of net profit relative to revenue. The calculation formula is:

P \u100d (B - PPI taxes) / B x XNUMX%

where P - profitability, B - revenue, PPI - direct and variable costs.

To support our subscribers, in our Telegram chats in the "Files" section, we posted free P&L report forms and a store economic balance model. These tables will help you see the economic situation in your business at a glance.

In my opinion, in the current situation, marginality, of course, needs to be fought for. And yet remember: the most important indicator is profitability. After all, as you know, the main goal of business is profit.

Therefore, in order to simultaneously maintain profitability and retain customers, it is necessary to minimize the cost of goods, as well as direct and variable costs.

What does this mean in concrete steps taken:

1. We are negotiating with suppliers.
2. We are negotiating with landlords.
3. We refuse ineffective methods of promotion.
4. We reduce expenses that do not bring profit as much as possible.

The first two points may seem difficult to implement. Make the most of what you can. If you try, you have two options: succeed or fail. If you don't try, there's only one.

The next step is to calculate how much we need to increase the markup in order to ensure the future purchase of the assortment and maintain profitability.

Psychological support for sellers and buyers

Now is a difficult period not only from a political and economic point of view, but also from a psychological one.

Many of them had relatives in the conflict zone. Some have been bullied on social media. Someone has developed a family conflict on the basis of a discrepancy in political views. And someone winds himself up and presents in detail the most negative scenarios. Against the backdrop of this negativity, people become discouraged and become more aggressive.

It is in your power to help them. Become a support for them, give care, talk more, pay attention to non-material motivation, give small joys every day. If your stores have managers, teach them this.

When your sellers are calm and at least in a neutral mood, they pass this state on to the buyers. And people, as you know, want to be where they feel happiness and comfort.

There are no buyers, discounts do not work

Many entrepreneurs say that there are fewer customers, and you can’t lure them into the store for shopping with a roll.

It is worth noting that I received such comments and questions even before current events. Therefore, I recommend not to make discounts in the first place, but to determine the cause of what is happening.

Answer the questions:

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1. How long have you been seeing customer churn?
2. What is the traffic in your location (traffic in the shopping center or traffic near the street store)?
3. What is the conversion rate and average complexity of your store check?
4. How often do regular customers return to the store?
5. Do a mystery shopper check and evaluate the quality of service?

Option 1: Customer churn has been observed for a long time. The problem, as a rule, is that while everything remained the same in your business, your competitors analyzed performance indicators, built sales funnels, created loyalty programs, optimized purchases, improved service and opened new sales channels. As a result, the buyer chose competitors.

If you recognize yourself, do not give up, and start taking at least the first steps towards improvement.

Option 2: The outflow began after the February events. Traffic has decreased, while the conversion rate is normal (for shopping centers > 10-12%, for streets, the indicators are individual, on average, about > 25%).

Shopping malls were empty: large anchor tenants simply closed their stores. Temporarily or permanently - time will tell, but for now we have to work with the fallen traffic. What to do:

1. Negotiate with the shopping center for the revision of rental payments.

2. In the absence of mutually beneficial solutions - change of location.

And remember: now it is especially important to keep abreast, quickly adjust sales funnels, increase traffic flow and stimulate an increase in the complexity of the check and repeat purchases.

For this, serious work is needed to promote and strengthen loyalty.

I will add another list of 21 survival points in a crisis:

1. Focus on maintaining profitability, the team, customers and counterparties. Reducing the team or moving to another segment is not the best solution in a period of turbulence.

2. Work with the team: take care, cheer up, try to keep the state.

3. Switch to manual control mode: immerse yourself in store tasks, communicate with the team, control.

4. Look at expenses through the eyes of an investor: strengthen productive positions and reduce useless positions.

5. Cut off unnecessary expenses. Save first of all on what does not bring profit and does not affect the quality of work.

6. Work with regular customers, go forward to the best of your ability. They are the most loyal.

7. For wholesale: if possible, give a delay or discount to affected customers or counterparties.

8. Keep your finger on the pulse and analyze the sales range. Audience tastes may change.

9. Test your advertising slogans and creatives. What was relevant a week ago may now look out of place.

10. Calculate the financial model in three scenarios: worst, normal, best.

11. Use the financial model to identify performance metrics that will help drive money and profits.

12. Implement a payment calendar and maintain it regularly to prevent a cash gap.

13. For wholesale: do not allow the appearance and growth of receivables.

14. Take an active position: negotiate with suppliers about discounts and deferrals (in your direction), with landlords - about rent reduction, with banks - about restructuring.

15. Get rid of unnecessary inventory. You can even at cost, the main goal is to get real money instead of ballast.

16. In cases where possible, offer cooperation by barter.

17. Reduce personal expenses so that your habitual spending does not become detrimental to business.

18. Cut your dividend payout. A crisis is not the time to pull money out of a company.

19. Pull yourself together. You are the leader and are responsible for your employees. You are the last one to panic.

20. Don't waste time and energy on things you have no control over. Work on factors within your control.

21. If your company feels good in a crisis: acquire profitable assets and hire strong professionals who have lost their jobs.