#1 Not Innovating Fast Enough
People are smart by nature. Sometimes they need just a push. Innovation takes some of that and some background information if the action is worth taking. Of course you really cannot tell what's going to happen if you do this or that. But tools can help to understand the cause and effect.
It is impossible to improve and innovate in all areas at once. You should pick some ideas to work on and implement them consistently. Implementation is a creative process and every business needs to plan their own methods. It is not easy but the competitors can show it is not a rocket science either. Oh, and you can always learn from the best.
The key question is, though, where to start. Where are the most burning issues? Which KPIs need to be improved and which ones are worth improving? The management team needs to do mathematics, needs to simulate the future and play around with what if scenarios to identify the KPIs to follow in the next season.
#2 Not Moving Fast Enough On Digital
Digital is the new old. It is true that not every retailer has upgraded their presence to the web. In some cases it can be justified but mostly not. It is old news that shoppers use computers and mobile devices to browse the catalogs and make purchases.
New new is social. Social networks take the place of traditional brochures and impact the purchasing decisions more than ever.
All this means that you should be more flexible, more agile, much faster in your actions. And your plans (see items #1, #3, # and #5) should be few steps ahead. At least they must not lag behind.
#3 Not Pushing Your Wholesaler Hard Enough
Relations with wholesaler impact the most important metric in the retail business, the GMROI. There are some rules to follow:
- Keep the inventory at the optimal level. The rule of thumb for periodic intake is forward cover of lead time plus 50% plus 1 week. Yes, the best math is based on weeks.
- Obtain good purchase price. The lower the better but in order to get best terms for some categories you should relax on the others. You just need to find out which ones.
There are many merchandise categories, many suppliers, many points of sale. Each one has specific characteristics and it is very hard to tell where to push your terms and where to let it go. Because it is much easier to negotiate if you can offer something in return.
Typically you put together a spreadsheet model and try to change some variables. You can get fairly accurate results for one single store and category but what if you have fifty categories and fifty points of sale? Add time periods, customer segments and suppliers to the equation and the number of spreadsheets blows through the roof.
There needs to be a specialised system to manage what-if scenarios at great scale and accuracy. The best systems let you plan ahead several months and produce a "shopping list" for each category.
#4 Hanging Into The Past
The author of the referred post means that the retailer should not cling to yesterday's means of customer communications. But it is equally important to have modern tools in the back-office as well. In old times you could start planning a brochure weeks ahead and during the time it gets to the printing house you would also have a specific markdown figure to put in there.
Nowadays you can push your messages out in a blink of an eye which means that your markdown calculus needs to be done even faster.
#5 Failing To Develop A Strategy For A Future
Yes, plan is the key. Everybody needs to make plans. Ironically, in some cases this should be rephrased as "everybody needs to learn to make plans". The original post mentioned seven key areas for planning. We are just pointing out three of them:
- e-Commerce is growing. But it is not only growing on its own right, it creates a new phenomenon of multichannel or omnichannel commerce. For example a customer might order a product from your web site and return it to high-street store. Old-style and disconnected silos of business management systems just don't cut it. If you don't upgrade you need to have someone manually filling the gaps.
- Increasing wages mean that you can not afford to manually fill the gaps between e-cart and cash till.
- Declining promotion funds push you to have meaningful negotiations with your suppliers. But you can not afford to have teams updating spreadsheets and hunting errors in there. You just need to get a shopping list based on your latest demand simulation.