Resist at All Costs - John Stanley

Take a walk down Retail Main Street and you would think that the major retailers had discovered the magical formulae to stay in business, it seems every other retailer is having asale. The theory being if you have a sale you will attract more customers who will buy moreproduct and all will be well.

The trouble is the theory has many flaws, one is that the real challenge is that it is almost impossible to generate the extra sales required to justify the sale. All retailers in all retail industries are facing the same challenge. They have three options too consider.

Option One
Do nothing and hope the G.F.C. storm will blow away. These retailers believe if they do nothing the market will get back to how it was and there business will then improve. This is almost a form of insanity, “not doing anything and expecting a different result”.

Many garden centres in many countries have tried this approach, but, they forgot that during that period the consumer has changed whilst they as retailers have often had the same mind set and as a result they have been left behind. The National Garden Survey inthe USA indicates that 40% of garden activity is with the over 55’s,yet they only account for33% of the garden owners. At the same time 70% of the garden spend is at homes without children. In the last 12 year period the American consumer is spending almost $200 a yearless on their garden. An indicator that the option one retailers have lost their way and the market is shrinking.

Option Two
Play the same game as the Main Street retailers and sell on price. Gross profit is the real income of the business and price reduction often means a reduction in gross profit with the result that the business is less profitable. How many retailers do you know that are just about hanging in there as a result of this strategy. It did not work for the High Street retailerand it will not work for the garden retailer.

I am seeing stores reducing prices by 30% and more, this means that they need to increase sales by 600% if they are working on a 35% margin. The maths does not add up.

Option Three
Create a different package that appeals to the weekday convenience/weekend experience consumer. This means looking at the consumer base in your catchment area and providing a total package that appeals to this consumer base. The package will vary based on the consumer needs in the market place. For example: A consumer in an inner suburb will have different needs to a rural consumer.

Real growth is achievable and there are examples of garden centres around the world that understand the new market place. They realise they have to maximise the sale price and have to work the price points and price barriers more closely than they have ever donein the past. They have to relook at costs and reduce cost where they can, this does not mean reducing costs on training, which is an investment in the business or pruning labour costs unnecessarily as this can reduce the average sale per customer. These winners are optimising the product mix and sales and are investing in extra services to provide a better experience for the consumer.

Tim Atherton, a financial colleague of mine stresses you can improving net profit by 25%. It is about looking at retail detail and acting on the detail. Image the difference you could make to your bottom line if you increased the average sale by 1%, increased the customer count by 1%, reduce shrinkage costs by 1% and reduced management costs by 1%.

If you are working on a 35% margin and you put up your prices 2% your could reduce sales by 5% and still maintain your gross margin.

The option three garden centres are the innovators. I often use Zara, the Spanish fashion clothing company as an example. Whilst other retailers in the sector have problems meeting their target figures, Zara continues to be a major success and far exceeds the profits of its socalled competitors

The winners are the Option Three garden centres in this changing world.

Source: John Stanley

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