September 29, 2006
IT'S NOT TOO EARLY
Prepare for the most profitable quarter of the year
www.hownet.com
by Ed Legum, President of the Edmond-Howard Network
Now’s the time to think and plan for the best six weeks of the year. This year, like every other year, retailers look forward to the Holiday selling season with mixed emotions. Great expectations mix with uncertainty; excitement mixes with apprehension. And for good reason.
According to the NRMA (National Retail Merchants Association), in the months of November and December retailers generate 33% of their yearly net sales, 33% of their yearly gross profits, and over 50% of their yearly net profits. During this period salespeople and managers earn over 70% of their yearly commissions.
These numbers take place over the six week period between the day after Thanksgiving and the first week of January. With so much riding on how well your stores will perform during the short six week goldrush, another emotion may set in: fear.
An antidote to fear
Champion marathon runner, Juma Ikaanga, when asked if he feared his competition, said this: “What is there to fear if you are prepared? The will to win means nothing without the will to prepare.” And this advice holds true for retailing. You have worked hard the whole year for these six Holiday weeks. Prepare and win. Here’s some help.
The ghost of Christmas past
A few year ago, I was talking to a retail distribution manager for one of our clients. It was in the middle of December, and I asked her how things were going. She said something like this, “Not too well. We’re out of the Hot001 phone [the latest, greatest model by the latest, greatest manufacturer]. Our people are screaming. The warehouse says that the manufacturer is out of them. We’re losing business. Our customers are walking out of the stores.”
Another of our clients was in a different fix. Customers were forced to wait up to two hours to get help. The only answer the company could come up with was to install a deli-counter-type numbering system. “Number 59? 59? Anyone with a 59? OK, 60. Who’s number 60?” Ahhh, the joy of shopping.
How ready are you?
To help you prevent these kind of disasters from hitting your stores this Holiday selling season, here are ten questions that you may want to ask yourself. If you have positive answers to all the questions, then you may have an excellent chance at making the most of the six weeks. But, if you don’t have all the answers, that’s good too, for now you know what you don’t know. And now you have a clear idea of what you may need to do to help ensure the predictability of your Holiday success.
Questions and tips
Ask yourself:
1 What can I sell on an item-by-item basis, during the six weeks between the day after Thanksgiving through the first week after Christmas? What did I sell last year? Are there any special promotions this year that I did not have last year? What is my current sales trend? What is the best I could do? What is the worst? What is reasonable?
> Answering these first questions places you in the role of a merchandising manager. This is the way many of them think. Their job is performed well, when they project and supply inventory quickly and accurately.
2 What do I want my opening inventory to be for November 1st? When must I order this to ensure that I will have it by November 1st? Do I trust my suppliers enough to play it tight? Do I want to give myself a little slack, realizing that there may be holes and supply gaps in my supply line? Do I want to extend my one-week to two-weeks on hand? to three-weeks? or four weeks?
3 What do I want my opening inventory to be for January 1st? Will this give me enough inventory to take full advantage of the post Holiday accessory rush?
> If you sell to your projections, and you end the season with one or two weeks on hand, does it matter if you carry extra during the selling season? In my opinion, no. Because turn is calculated as follows: Cost of goods sold for the year divided by the store’s average on-hand inventory. Seasoned retailers may take reasonable risks at the Holiday season by projecting aggressively. They may plan their season’s inventory needs by holding a simple truth clearly in mind – “You can’t sell what you ain’t got.” A worse sin than having a little too much, is to run out of hot inventory during the six weeks. You can never make up for this loss of business.
4 By the end of January, what can I do to ensure that my inventory level will be sufficiently reduced to maintain my inventory turn objectives?
> Clearance sale, anyone? Yes, you may miss on one or two items. Promote them out the door. Or, if it makes sense for your business, balance the inventory between stores.
5 What do I want my store(s) to look like? What have I done to ensure that our customers get “into the spirit of the season” as soon as they enter? What special displays have been planned?
>You may want to consider the basics: Which colors evoke the Holiday spirit? How might you introduce these colors into your store signage and display materials? What are the most universally recognized symbols of the season? How are these symbols reinforced in your stores? How might you integrate Holiday decor and still maintain your store’s personality?
6 What does my promotional plan look like? How well will it compete in the markets? How well will it support our stores in our efforts to create sales gains over last year?
> When holding planning meetings for their Holiday advertising campaign, many retailers first tack every ad from last year’s Holiday season up on the walls. These may include both their own ads and all of their competitors’. If you do this, it may give you a much better idea of what you may be up against, and this in turn may help you make decisions on how you might want to advertise this year.
7 How well prepared are we to meet the demands of the Holiday traffic? How have we streamlined processes? How well have we staffed up to handle the rush?
> A lot of companies who sell wireless talk about customer churn. Only a few take the more difficult route, and put into place what is necessary to hold on to them. Few things turn off customers more than having to wait for service. Unless their shopping experience is pleasant, you may be planting seeds of discontent. If you want to take “being easy to do business with” from slogan to reality, than it may be a good idea to think of ways to reduce the logjam at the Holiday season. And, yes, this usually means staffing up.
8 How well stocked are we on wireless accessories? Are we prepared to display them, sell them, and then measure the effect their sales may have on increasing gross and net profit?
> I was talking to a friend of mine who now runs the wireless product division of a major electronics retailer. We’ve known each other for over 20 years, so he felt comfortable talking candidly to me. When I told him I advised our clients to promote accessories, he said, albeit tongue in cheek, “Don’t you dare teach them to sell accessories. That’s our business. And we want it all.” With apologies to my old buddy, here is some advice on the subject: There’s a lot of money in circulation the week after Christmas. There’s a lot of toys without batteries; a lot of bikes without tire pumps; and a lot of wireless phones without carrying cases, extra batteries, ear buds, car cradles, and battery eliminators. Stock up, display, and sell accessories.
9 What do I want to do to train our frontline salespeople on how to handle the Holiday rush?
> When it’s crunch time, some may find it a bit unnerving. If you are running your stores with new hires (and who isn’t?), it might be valuable to give them an idea of what to expect. A special Holiday season prep-and-pep meeting may work wonders. Think about what you want to accomplish. Define these goals clearly. Keep it simple. And have fun.
10 What tools can we give our store managers to help them stimulate Holiday sales activity?
> What do you want your stores to accomplish? Think of the big picture. What are the key measurements in net activations gross profit, expense control, payroll, dollar per square foot, accessories per sale? How might you gather this information? What might store managers do with this information to improve their people’s performance?]
For more insight into "New Profits in Wireless Retailing" visit www.hownet.com
©2005 by The Edmond-Howard Network
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