MARKET WATCH by: DARRELL WISBEY www. darrellwisbey-retailadviser. com
With 30 years of retail experience, Darrell have built a reputation for being a leader who interprets the market accurately, defines strategic direction and delivers success by motivating, developing and inspiring teams to achieve continual improvement.
Column
1ST QUARTER, 2017
The CRITICAL TIME FACTOR in RETAIL
Over decades of retail observation one conclusion which can be confirmed is that time in this industry is also on a constant path of acceleration. From the creation of a strategy to the placement of product orders to sales being processed through the POS, the company“ C Suite”, the Board of Directors and indeed the Shareholders will demand the delivery of bigger, better and faster results.
The Easy Retail Strategy.
It can be argued that around the world retailers generally always resort to using the same two common behaviours as the easy answers to driving business:
1. Promote“ price off” to secure customer attention and drive increased traffic through the doors
2. Launching and promoting events earlier and earlier to be ahead of the competition
Both of these age old retail strategies are initiated to protect market-share by catching the business opportunity before the competitor can claim it. Both strategies are intended to drive increased traffic to generate additional sales and profit but, is being first a guarantee of success?
In managing time can a retailer be too early?
Having been in Australia for the recent pre and post- Christmas trading months it is evident that the retailers there use the“ first to market” strategy as a primary retail“ attack tool”. Observations included:
1. Christmas Toy Catalogues launched early in the belief this will gain the retailer the largest marketshare of the available lucrative Christmas toy sales.
2. Christmas seasonal items and gift lines entering“ price-off” mode before the“ fever pitch” peak sales had even commenced,( in a market where it is argued the peak sales are being generated later and later each year).
3. Supermarkets and Bakeries launched,( receiving negative customer and media response), Easter Hot Cross Buns immediately post-Christmas,( effectively 31 / 2 months before the April event timing.
6
The obvious challenge in all of the above actions is will they work to generate,( across the related trading period), bigger and more profitable sales for the retailer. The dangers are:
1. Do the total event sales increase,( like for like stores T. Y. over L. Y.), or will the same sales simply be spread over the extended trading period?
2. Will the early discounts result in loss of profit potential available from the“ fever pitch” trading weeks closer to Christmas?
3. Can the retailer retain event interest from the early launch timing through to the event fixed calendar date? The clear challenge, when using the first into market launch, is to guarantee the sales and profit,( full margin), continue momentum into the event peak sales window.
Get it and Sell it as fast as you can – the importance of Stock-turn.
Whilst retail has always been about buying and selling within the shortest timeframe this has never been as critical as it is in retail today. The arrival of“ fast fashion” in the recent years is a perfect example of how the retail time line for stock revolutions has accelerated over time. There was a time where fashion was driven by the seasons of summer and winter. Over time retailers introduced mid-season ranges and found themselves artificially introducing pre-season offerings and today there are fashion retailers with a core strategy to launch new fashion ranges by the week. Affordable fast fashion is designed to capture the shopping desire to have the latest first. Some retail experts are declaring this is really all about“ disposable fashion”.
The term of fast fashion actually holds within the title the key to retail success …. fast rotation of stock. The ability of the retailer to turnover stock has always been a critical challenge and that is never more so than in retail today. Stock costs money and the faster stock can be sold through,( with minimal markdowns as a consequence of poor product selection and / or inaccurate quantification), the healthier and more profitable the retailer will be. Fashion, trends and fads arrive and pass at an ever increasing speed in retail and therefore it is critical that retailers have the ability to buy and sell through in the fastest possible timeframe.
Be quick or miss out – the availability of stock for promotions
Another observation made whilst in Australia was the strategy applied by Aldi,( supermarket), with their“ hot price” specials released on Wednesdays and Saturdays. Promotional products,( often big ticket and male orientated), are catalogue promoted in advance and will be lined up down the centre of the store. The best of these items will sell very fast often being sold out in 1, 2 or 3 days. Unless the customer arrives early on the opening day,( and will usually be queued up waiting for the doors to open), there is a chance they will miss out on a purchase. This Aldi“ fast” strategy has two significant purposes:
1. To attract in particular the male customer into a traditionally female shopping domain
2. To drive sales,( often higher ticket prices), generating faster stock-turns in what is already a high stock-turn retail format.
The ALDI strategy of selling electrical appliances, gardening products and more at the speed of selling groceries is one reason why they are so successful in their worldwide expansion. Aldi clearly understands the power of time and have a formula to sell-out big ticket items in a few days. The impact on stock-turn and GMROI is powerful.
Conclusions:
1. When deliberately planning an earlier than previous launch it is critical to be sure the early momentum can be continued into the biggest trading weeks of the event.
2. The earlier the launch the harder it will be to continue the sales momentum unless there is additional investment in marketing support,( and this will be an additional operating cost).
3. Together with changes in the planned event launch and promotion there will always be a requirement to complete buying quantification at the highest possible level of accuracy.
4. Using tracking reports will allow the earliest alert on“ off plan” performance and therefore the activation of corrective action and that will result in timely sell through with lowest markdowns.
5. Developing strategies that drive stock into and out of stores in the shortest timeframe are critical for retail success today.
6. The best retailers find ways to broaden their customer appeal and initiate strategies to sell more product in faster timeframes.