BUSINESS REVAMPING AND CLOSURES
© 2009- Joel Johnson
According to Walletpop.com, more than 65 well known retailers are closing stores, restructuring, revamping and trying to find answers for increasing sales, profits and turning around underperforming units. Who isn’t? There is something, however, that separate these stores from the pack. The top management of these firms should individually take the time out of their busy schedules to observe the goings on, in cognito, not as normal store visits, in order to develop working plans that will put a screeching halt to future failures. Yes, I know, they claim they already do this, but if so, why do they not see?
Follow the link for a walletpop.com’s complete list:
Well known giants in all industries are beginning to face the fact that they can no longer hold onto underperforming locations and they are pulling in their horns. Companies like Payless ShoeSource, Zales, Blockbuster, Sears & Kmart, Samsonite, Waldenbooks, Jones Apparel, GM, Chrysler, Starbucks, Ann Taylor and Macy’s, just to name a few.
Don’t blame these closures and restructuring on the recession, the market crash or the real estate fiasco. No matter what you hear from above, these challenges began long ago. Current events, however, do open the door to save face for some as they make the claim that the economy is the cause.
If the current international economic challenge did not cause these problems, when did it begin? It began when they took their eyes off the customer and tweaked their business models, designed of course, to compete and remain viable in an ever changing retail environment (tweaking= reducing perceived costs). Reducing expenses is a good thing and should be an ongoing event, but reducing necessary investments is somethng that should be reconsidered.
There are two types of expenses; controllable and non-controllable. Some expense line items are really investments disguised. Advertising and marketing is one of those.
Cutting out the lights when not is use is one way to reduce the electric bill, but to cut out rows of lighting to reduce electricy expense will drive customers away and that will reduce sales and profits and the ability to remain in business. I saw dark stores in more than one location, which told me this must be corporate directives. A good store manager would know better. Managers should determine reductions in expenses, not bean counters. Bean counters know numbers not retailing.
It is obvious that if you reduce the use of electricity you will cut the electric bill and the saving will go to the bottom line, but that is not why you cut the electric bill. You cut the electric bill when you decide that lighting is unnecessary. Putting up motion sensors in bathrooms, stock rooms and office space can cut electric expenses. Similar things can be done to reduce other line items.
The troubles began when the corporate leaders decided to take their eyes off of what made them successful in the first place and began listening to the familiar song, “No one rides the fence. They either fall off one side or the other. A business that is not growing is dying.” They have not learned that a business can grow broke. They have not learned that every segment and unit of a business must be a profit center and that growth should be financed from cash flow not excessive leverage. Many do not understand that net profit and cash flow are not the same.
If asked, very few of the store managers could tell you the difference between gross profit and net profit, mark-on and markup. Don’t bother to ask them what their average turn rate is or what would be considered a good turn rate for their industry. Most have no idea. Many think their acid test is to determine how much excessive bile is flowing in their stomach. They don’t know because most don’t know how to read profit and loss statements or balance Sheets. They are not trained to know and corporate would prefer that they do not learn—a major mistake.
How can they possibly be asked to run a profit center or do anything outside of carrying the store keys and delegating responsibility for store setups or hiring and firing employees, according to corporate directives, of course?
For the past few months I have been visiting some retail giants in the Texas market (East Texas, Dallas/Ft. Worth, Austin, and Houston) to discover what has gone wrong. After a while I realized it would not take a rocket scientist to see the obvious, yet it must not be so obvious to executives in these companies that are responsible for business development and corporate profits, especially the CEO’s.
Jim Collins, in his book, Good To Great, uses an analogy of a bus and talks about how great companies have the right person in the right seat. It appears, however, that the drivers (CEO’s) of the companies listed in the walletpop.com site may be asleep at the wheel, but then I am just an outside observer without finite details of the inner workings of these large companies.
In most of the businesses that I visited from walletpop’s list, I discovered employees too busy rearranging shelves, racks and stocking merchandise or visiting with each other to say hello to customers. There were very few trained sales associates. I had to literally hunt them down. In most cases they had very little product knowledge and had no idea where merchandise was located within the store and showed very little desire to make the sale. When I asked to speak to the managers, it seems they were too busy, not available or out of the store at the time. It is almost as if the store manager sent out directives to all employees saying, “I do not want to talk to customers. That is your job. Don’t bother me. Handle it!”
Whatever happened to professionalism and salesmanship? Whatever happened to good store managers and good training programs? What happened to commission incentives and management buy-in to personnel development programs? Whatever happened to the customer is always right and the customer comes first before anything else? How is it possible that management has forgotten who their real boss is and who really writes their payroll check?
At one store, after I finally found the merchandise I wanted and made my selection, I walked to the checkout area. To my amazement, there were 12 checkout lanes and only one (1) open to receive customers. Can you believe that? One cash register open! That should tell you something about that store. The line had 15 people waiting, impatiently I might add, to be checked out.
I waited for a few minutes and finally decided I did not have the time or patience to shop in a store that does not care about its customers time or business, so I put the merchandise back and left the store. As I did, I wondered how many potential customers left that store each day because of such poor service. As I visited other stores in Texas, I realized that this seemed to be a common theme in the stores on walletpop’s list.
I discovered that their competitors, those that are NOT listed in the Walletpop.com list had clean well lit stores, fast check-out, well merchandised stores, with friendly and knowledgeable employees. Could these things really make that much difference in the longevity of retail establishments. You bet it can.
I discovered well trained employees that knew the store layout, its contents, and about its products. How do you suppose they obtained that information? You guessed it! Great management and super training programs.
Through my visits with some of the employees I discovered that they were compensated fairly based on their abilities and they were allowed to take advantage of a good company benefits program, bonus incentives based on productivity and recognition for a job well done. In addition, I discovered an amazing team spirit and it oozed out into the community in the form of charitable contributions and individual involvement. That really speaks loud that they really care about their communities and their customers.
I saw sincere smiles and friendly greetings, when I arrived and while in the store. When I completed my shopping experience I was promptly checked out and they actually thanked me for shopping there. It was a good experience. It left me with a desire to come back.
It was obvious that the employees were not working for the company just for the paycheck, but rather for something bigger than themselves—a winning team. In most every case and with few exceptions I noticed that management seemed to have the right people in the right seat on their bus. No wonder these company CEO’s never run out of properly trained employees to fill those management seats and provide the necessary leadership for growth and profitability.
There are valuable lessons to be learned from those who continually fail to live up to their customers’ expectations and those lessons are what drive the competition to win the larger market share.
It is true that you cannot ride a wire fence very long. You will soon fall off one side or the other. Why would you want to sit on such a narrow line anyway? Better to build a strong foundation for long term growth and profitability. It is all about choices, isn’t it?