It is a Common Retail Maxim; It is not what you sell;
Make Retail buyers and Sales Managers space accountable for and ‘buy’ their shop floor space..?
In the current uncertain, tough retail times The RETAiL Alert Group is recommending that Australian retailers’ undertake a forensic audit of all current shop floor fixtures to ensure that every shop floor fixture is returning a weekly gross profit number that at least covers mid range Shopping Centre sales per meter expectations.
No room in the current retail trading environment for ranges of specialty store inventory that do not deliver at least the mid mark of Shopping Centre sales per meter expectations per fixture location.
Without reaching mid range Shopping Centre sales per meter expectations, Australian retailers’ will lose sites at lease renewal; it’s that simple…..
Following the recent RETAiL Alert Group article on OTB we are following the ‘it is not what you sell, it is how you buy’ theme by talking to one of the most ignored roles of the new breed of Australian Retail Buyers and Sales Managers;
In 2009 Australian retail buyers and sales managers should ‘buy’ shop floor space and be made accountable for space occupied.
You only have to walk the malls at end of the winter and summer seasons to see space being used to quit dead inventory with little or no mark-up crimping the introduction of super profitable new season’s ranges.
During the
last ‘easy retail’ fifteen years the focus on making retail buyers and sales
managers accountable for the space they ‘own’ has slipped.
Now is the time to make retail buyers and sales managers accountable for the space, (bays; tables; stands) they own.
Observing retailers, as we do there is a historic ‘lock’ in some retailer layouts; observe very little category space allocation change as retailers move into new comparative seasons; some layouts downright boring.
In some instances retail buyers and sales managers simply seem to ‘hit’ against last year’s unit sales, expect space to be available with no discipline to make sure that sufficient gross profit is generated to pay the rent and overheads for space occupied.
Even in good times with deflation in cost of goods allowing for generous mark down margins not OK, but in times of inflation in cost of goods with limited mark down margins for error not certainly not OK.
The RETAiL Alert Group has a view that it has been sometime since certain established chain retailers have challenged seasonal space allocation layouts and are heading into ‘loss of site troubled waters’ at lease renewal time.
Shopping Centre Landlords are in the business of maximising rents; no quarter given for retailers’, particularly specialty retailers sitting at the bottom of the category sales per meter pack.
As stated those specialty retailers struggling to hold store space at lease renewal or those just not meeting market expectations on space per meter return against their peers against Westfield type sales per meter rankings particularly vulnerable.
Shopping Centre Managers, such as Westfield provide valuable regular sales per meter comparisons by category to retailer tenants setting the overall sales per meter metric target for retailers for most categories.
The RETAiL Alert Group (Australia) ‘basic’ Space Management Steps
Successful retailers for eons made retail buyers and sales managers accountable for space; early days $’s or £’s per linear meter of foot.
Retailers then became fancy and went to planograms however the basic precept of making each fixture, table, bay ‘pay’ has got lost with terms such as GMROI becoming fashionable; GMROI being used to make ‘smart’ retail executives feel good; ask retail buyers and sales managers what GMROI means you get various replies and interpretations.
The KISS principle should be applied against retail space fixture management and gross profit targets.
The end result, many retailers particularly specialty retailers have slabs of super expensive shop floor mall space not covering occupancy and operating costs; a recipe for long term site failure.
As a front of mind statement, Australian market retail occupancy and operating costs do not bring down retailers’; it is normally lack of profitable sales from space occupied or not giving a return brings down retailers’, particularly stressed high occupancy cost specialty retailers.
Now retailing has returned to ‘normal’ or ‘tough’ 2009 and 2009 conditions we are recommending the return to buyer and sales manager space accountability as a set rule to run retail businesses, particularly specialty retail businesses.
In simple terms, what is purchased on an OTB plan has to have space calibrated to allocate space based on targeted gross profit generation; calibrated space set against anticipated occupancy, fixed costs and required return cents in the $ return for the following season.
If retailers do not have space planning built into their merchandising and planning system this is not hard exercise, basic spreadsheeting; simply allocate costs against a typical store size with a typical ‘kit’ of fixtures; give a ‘space value’ against each fixture making it easy for store teams to understand how to ‘value’ fixtures against gross profit generated each week.
We also recommend challenging the supply chain to make sure that glitches in late deliveries are limited; that no sale is lost on semi basic product (we recommend classic EDI principles even on vertically integrated product); Item Level RFID ‘barcodes’ relevant in many instances speeding stock to floor.
For further information on ‘China to Shelf’ initiatives and Item Level RFID ‘bar-codes’ with EAS loss prevention visit The RETAiL Alert Website.
In conclusion we would like to repeat the five steps for successful specialty store space management.
The RETAiL Alert Group (Australia) ‘basic’ Space Management Steps
It is hoped you find these thoughts helpful and useful in planning your shop floor for winter 2009 and the balance of 2009; they are going to be tough seasons for most……….?
Should any further advice, assistance or information required contact the writer; contact details below.
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The RETAiL Alert Group is looking for input and retailer concensus on all key retail sector issues for future reviews by industry and government progress and support on relevant Australian and New Zealand retail(er) market matters.
The RETAiL Alert Group bulletins have been created as a forum for the industry to comment and contribute to issues pertinent to the Australian and New Zealand retail sector.
Should retailers’ or interested parties prefer information provided to be covered by a Non Disclosure Agreement the RETAiL Alert Group will comply?
The RETAiL Alert Group Website details previous bulletins on this and other matters.
The RETAiL Alert Group Website provides continual retail sector advice on sales / margin growth, technology including RFID, supply chain and cost saving options in planning for the trading year commencing January 2009 and the trading period summer - Christmas 2009.
See http://www.retailalert.com.au
Great summer - Christmas 2009 Selling and Trading.........
Tony Standley
Principal