Article

Retailers can weather economy by focusing on basics

Trusted brands and an enlarged pool of skilled workers provide leverage.

July 13, 2009

When you're caught in a raging storm, you can't change the weather. But you can control your exposure.

The same is true in retail. While the current climate is less than ideal, retailers should focus on issues they can control. Now is the time to return to the basics.

While there are some modest economic signs — including a 0.5 percent May increase in U.S. retail sales (U.S. Commerce Department) and a week-over-week rise at the end of June (International Council of Shopping Centers) — the trend remains more or less flat. It's better than a decline, but "hardly a green shoot," according to one analyst.

Multiple years of strong sales covered a multitude of business sins. But the current downturn has exposed weaknesses and mistakes.

Where to find cover today? Under an umbrella of basics: People, product and productivity.

story continues below... advertisement
		The Best Retail Customer Experiences 2009   Find out which retailers consumers crowned their favorites in five different categories across eight different retail segments. Get authoritative analysis from members of the Retail Customer Experience Advisory Panel on why these retailers are succeeding. And learn which retail technologies win over customers — and which ones don't matter.   Order your copy today!

PEOPLE: Reward high-performers, size up labor pool

The great advantage retail has now is the overwhelming size of the skilled labor pool. Employees displaced by other industries provide retailers with the opportunity to land highly trained workers.

Though many talented people bypass retail as a first-choice career, retailers now can re-introduce the industry as a new option, not only to workers in transition but also to a record number of recent college graduates. Not everyone who has climbed the ranks wields a degree in retail management. Retailers have enticed many associates from varied backgrounds — many of whom now serve as talented executives. Highlight the career path of successful leaders in your company who started in entry-level roles to show employees that you are invested in their professional development.

Rarely has there been this kind of opportunity to top-grade your talent. Create rankings based on performance. Reward peak performers and evaluate new candidates who can succeed those who don't meet performance objectives. Focusing on rewards now may help retain high-performing employees when the economy rebounds.

PRODUCT: Merchandising top brands

Retailers should know what their customers perceive as value. Not only are consumers rushing to value, they're also rushing to trusted brands. Take advantage of that brand equity.

When retailers of all kinds — whether in apparel, automotive or electronics — cut prices, they instantly lower the bar. Why would a savvy consumer go back and pay $200 when the standard has been reset to $120? Many retailers have haphazardly reduced prices with the hope of luring customers across their threshold, an ineffective tactic at driving consistent results.

Retailers should align their brand's value proposition with customers. Their best tactic might be introducing new items to their assortment while thinning the number of SKUs, a delicate balancing act. Stores can't afford to maintain high inventory levels but still need to display newness and freshness in their offerings.

The answer might be developing a complementary product at an entry-level price. If the entry point for an item is $200, the optimum solution might be introducing a new item at $119. You attract new customers to your desirable brand at entry level and still protect your brand equity and retain the opportunity to upsell.

Further, store displays are critical. People still frequent desirable retail destinations. The traffic is there and the trick is to differentiate yourself so that they enter your store. The presentation should be flawless and consistent. Ambience and lighting should highlight your assortment in a way that motivates customers to look and ultimately buy.

PRODUCTIVITY: Focus on key performance indicators

The key to improving performance is evaluating numbers and conceiving new ways to move the needle. Retailers use many performance metrics, but comp sales have traditionally been the primary measure for rewarding associates. How viable is that approach based on today's downturn?

Retailers should look to enhance metric analysis and incentive programs in favor of factors within associates' near-term influence. For instance, retailers should add an increased focus on average basket size, selling experience, traffic and conversion. This is a great time to change incentives for store teams by including additional metrics, such as customer-service scores. And, make sure your associates know the rules of the game. If the retailer's goal is three units per transaction, ensure everyone in the store knows it and pursues it. Embrace clear and concise communication to make sure everyone is working towards the same objectives.

CONCLUSION: Keep sales as top task

Whatever direction you take, never lose sight of your most important task: growing sales. Retailers should deploy holistic approaches. For example, while retailers may desire better inventory management, does delegating that task to a store sales manager diminish their time spent selling product and assisting customers? In addition, retail executives should dedicate more time than ever on the sales floor gaining better insight into time allocated to selling.

The economic outlook is muddled. But that shouldn't blur your vision. Control what's in your grasp and concentrate on the basics. The loyal customers you attract and retain now will shop you when the economic climate clears.

Brendan Sullivan is vice president of retail services for VF Corporation, a global leader in lifestyle apparel with a diverse portfolio of jeanswear, outdoor, imagewear, sportswear and contemporary apparel brands. Its principal brands include Wrangler, Lee, Riders, The North Face, Vans, Reef, Eagle Creek, Eastpak, JanSport, Napapijri, Nautica, Kipling, John Varvatos, 7 For All Mankind, lucy, Splendid, Ella Moss, Majestic and Red Kap.