Learn what benchmarks are and how they can help you plan and execute a strategy to deliver maximum profits to your retail business

1. Creating Financial Success For Your Retail
Business:
Understanding and Using Retail Benchmarks
San Francisco International Gift Fair August 1, 2010
What Is Benchmarking?
A Systematic And
Continuous Process Of
Searching, Learning,
Adapting And Implementing
The Best Practices From
Within Your Own
Organization, Or From Other
Organizations, Towards
Attaining Superior
Performance
Emphasis On Market Share
And Comparative Data On
Sales And Operations
What Is A Benchmark?
• A Measured “Best-in-class” Achievement,
Recognized As The Standard Of Excellence For A
Particular Process
• A Reference Point Or A Standard Against Which
Other Performance May Be Measured Against
• Examples May Include:
Rate Of Customer Complaint - 5%
Employee Satisfaction Rate - 95%
Information Retrieval Time - 5 Seconds
Customer Response Time - 30 Seconds
Gross Margin - 50%
Annual Sales Per Square Foot - $500

2. Why Should a Retailer Understand And Utilize
Benchmarking?
Helps Retailers To Increase Performance
Also Helps To:
• Identify Potential Internal Weaknesses
• Provide Guidance For Improvement Planning
• Verify Strengths And How Further Exploiting Them
• Utilize Best Practices To Improve The Operation Of Your
Organization
• Spur Innovation And The Development Of New Product
And Merchandising Concepts
• Improve Cost Structures And Competitiveness
• Help Recognize Opportunities For Outsourcing And
Strategic Alliances
Benchmarking Can Provide Important Information To
Drive Accelerated Business Improvement
Without
Objective With Benchmarking
Benchmarking
To Become More Evolutionary Change Understanding Of
Adaptive Competition Ideas From
Proven Practices
Implement Industry Best Few Solutions, Frantic Many Options, Superior
Practices Catch Up Activity Performance
Defining Customer Based On History, Gut Market Reality, Objective
Requirements Feeling Or Perception Evaluation
Establishing Effective Lacking External Credible Unarguable,
Goals & Objectives Focus, Reactive Proactive
Developing True Pursuing Projects, Solving Real Problems,
Measures Of Strength/Weaknesses Based On Industry Best
Productivity Not Understood Practices
Benchmarking Exists In A Number Of Different Forms,
Each Offering A Differing Perspective And Usefulness
Industry General
• Typically High Level And Industry Broad
• Offers A Macro-economic Perspective
• Normally Offers Only A General Perspective To Where And How Your
Business Compares To Benchmarked Firms
Industry Segment Specific
• Represents Data From “Like Firms” That Operate In The Same Business
Environment
• Generally In The Same Manner As Your Firm
• Offers Comparable Database And A Higher Level Of Credibility
Operating Metrics
• Very Specific, Typically Financial Line Item Detail
• Offer “Eye Opening” Perspective When Significant Variances Are
Discovered

3. Ensure You Obtain The Proper Benchmark Before
Assessing Store Performance
Example: Sales Per Square Foot Can Vary Dramatically Within Retail Category
Type Of Apparel Retailer Store Sq Ft Sales/Sq. Ft.
Women’s Boutique 1,500 - 3,000 $400 - $700
Men’s Boutique 2,000 - 8,000 $150 - $300
Shoes 1,200 - 2,500 $250 - $475
Closeout Department Store 12,000 - 30,000 $100 - $150
Upscale Department Store 120,000 - 180,000 $425 - $825
Drug Store 15,000 - 22,000 $125 - $215
Convenience Store 2,000 - 3,000 $325 - $650
Gift Shop 1000-3000 $200 - $900
Make Sure You Obtain The Appropriate Statistic For Your Store Size and Type
Source: hdl company survey, ICSC
Retailers Should Be Continually Focused On Building
Value By Seeking Out Improvements In Performance
Change in
Business Valuation
Return On Investment Investment Growth
Sales Costs/Margin Working Capital Capital Expenditures
“Selling More”
“Keeping More of
Every Dollar Sold”
“Tying up Less
Capital for
Every Dollar “Growing
Sold” Value-Creating
Formula”
Benchmarks Enable Retailers To Examine Different
Aspect Of Business Performance And Effectiveness
Sales Effectiveness
Is The Business Achieving Its Optimal Level Of Sales?
Merchandising Effectiveness
Is The Utilization Of Inventory, Product Mix And Merchandising
Strategies Maximizing Gross Profit Potential?
Marketing Effectiveness
Are The Investments In Advertising And Promotions Generating An
Appropriate Level Of Incremental Sales And Profits?
Management Effectiveness
Are Investments In Non-sales Generating Overhead Appropriate?
Capital Effectiveness
Are Working Capital And Assets Generating Market Comparable
Returns?

4. Utilizing Benchmarks In Concert With Best Practices
Enables Optimum Improvement Opportunities
Best Practices Are:
• Outstanding Business Practices Which
Have Been Identified As Contributing To
Significant Improved Performances In
Leading Companies Within An Industry
• Industry Publications, Organizations,
Trade Shows, Webinars – Be A Continual
Learner And Seek Ways To Apply To Your
Business
Idea
• Join Or Form A Cop (Community Of
Practice) - A Small Group Of People Who
Comes Together To Explore Opportunities
For Benchmarks And Best Practices
Sharing On Common Interest Areas
Retail Business Strategy Informs The Development of
Value Drivers And KPI’s Required For Benchmarking
Strategy
Key
Value
Drivers External and
Key Internal
Performance Benchmarks
Indicators
Specific Benchmarks Will Enable The Identification of
Implications, Solutions And Potential Business Impact
Desired Obtain
Impact Benchmarks
Continuous
Business
Improvement
Design Identify
Solutions Implications
Improvement Cycle Should Repeat Itself Periodically

5. Various Internal And External Benchmarks Can Be
Utilized To Measure Retail Performance
Key Measures:
• Sales Per Transaction • Sales Per Marketing Activities
• Customer Conversion Rate • Sales Per Promotional Investment
• Sales Per Employee Hour • Overhead Percentage Of Sales
• Average Inventory Turn • Operating Margin
• Average Inventory Shrinkage • Return On Invested Capital
• Sales Per Square Foot • Sales Per Working Capital Invested
• Average Gross Margin Percentage
Benchmarks Should Be Selected Based On Operational And Strategic Objectives
Let’s Use A Generic Retail Store’s Financials To
Examine The Impact Of Certain Benchmarks
ABC Store Income Statement
Category Result % of Sales
Net Sales $600,000 100%
COGS $348,000 58%
Gross Profit $252,000 42%
Marketing Expense $60,000 10%
Real Estate Expense $48,000 8%
Administration $120,000 20%
Operating Profit $24,000 4%
Now Let’s Examine How Benchmarking May Improve Effectiveness And
Financial Performance
Average Sale Per Square Foot Benchmarking
Note: Assume Women’s Apparel Store of 1,500 sq ft
Store Benchmark Variance
$400 $550 ($150)
Source: hdl company survey
Areas To Assess
•Merchandising
•Sales Training Benchmark Varies Greatly By
•Task Assignment and Management Store Size And Type –
•Store Transaction Processes Benchmarks Are About YOUR
•Product Assortment Business Type And Size
•Pricing Strategy
Potential Sales Growth: ($550-$400) X 1,500 = $225,000

6. Retail Conversion Rates Benchmarking
Store Benchmark Variance
25% 30% (5%)
Source: retailtouchpoints.com
Areas To Assess
•Sale Training
•Labor Analysis and Management
•Store Merchandising
•Store Engagement Processes
•Store Communications Processes
•Multi-unit Management involvement
•Employee Retention Processes
Potential Sales Growth: [(.30/.25) -1] X $600,000 = $120,000
Average Gross Margin Benchmarking
Store Benchmark Variance
42% 46% (4%)
Source: hdl company survey
Areas To Assess
•Merchandise Planning Processes – Level Of Detail, Frequency,
Methods, Etc.
•Availability Of Buying Support, Domestic And International
•Resources In Procurement Group/Function
•Markdown Processes And Lifecycle Management For Various
Product Types
•Product Selection And Assortment Processes
Potential Gross Profit Savings: (.46-.42) X $600,000 = $24,000
Average Inventory Turn Benchmarking
Store Benchmark Variance
2.5 3.0 (.5)
Source: retailbenchmarks.com
Areas To Assess
•Staffing – Buyers And Planners Based On SKU’s, Product Types,
And Sales Volume
•Merchandise Planning Processes
•Availability Of Buying Support, Domestic And International
•Analysis And Management Of Gross Margin
•Markdown Processes And Lifecycle Management For Various
Product Types
•Product Selection And Assortment Processes
Potential Sales Growth: [(.30/.25) -1] X $600,000 = $120,000
Potential Working Capital Savings: ($600,000/2.5)-($600,000/3.0) = $40,000

7. Marketing Expense As Percentage Of Sales
Benchmarking
Store Benchmark Variance
10% 7% (3%)
Source: retailtouchpoints.com
Areas To Assess
•Measurement Of Advertising Effectiveness
•Extent And Methods Of Leveraging The Internet Channel For
Marketing
•Involvement Of Merchandising And Operations In Marketing
Processes
•Allocation Of Resources To Various Advertising Media
•Cycle Times And Number Of Iterations To Develop Creative
Content
Potential Profit Improvement: (.10 - .07) X $600,000 = $18,000
Operating Margin Benchmarking
Store Benchmark Variance
4% 6% 2%
Source: retailtouchpoints.com
Areas To Assess
•Employee Retention And Staff Turnover Issues
•Tax Implications Of Owner’s Draw Vs Store Profit
•Under Investment In Marketing And Promotional
Activities
•Under Utilization Of Cash For Reinvestment In
Growth Strategies
•Under Investment In CAPEX – Lack Depreciation
Expense
Potential Profit Improvement: (.06 - .04) X $600,000 = $12,000
Other Benchmark Considerations
Benchmark Areas To Assess
Sales Per Transaction Employee Training And Incentive Plans
Sales Per Employee Hour Employee Training, Incentive Plans And
Scheduling
Average Inventory Shrinkage Security, Inventory Processes, Point Of Sale
Reconciliation System, Shipping And Receiving
Sales Per Promotional Investment Marketing Effectiveness, Promotional Tracking
Systems, Marketing Strategy
Overhead Percentage Of Sales Staff Capacity And Utilization, Real Estate Costs,
Utilities, Unnecessary And Unproductive Services,
Outsourcing Opportunities
Return On Invested Capital Inventory Turn, Dated Inventory, Markdown
Procedures, Receivables And Credit Policies
Sales Per Working Capital Inventory And Receivables Policies, Sales Training,
Invested Pricing Strategies, Marketing Effectiveness

8. Benefits Of Utilizing Benchmarking And Best Practices
Raises The Level Of Potential
Performance “If you know neither
yourself nor your enemy,
Sharing Of Best Practices
you will succumb in every
Understanding World-class Performance battle.
In-depth
If you know yourself but not
Encourages And Stimulates Innovation the enemy, for every
victory gained you will
Improves Organizational Quality
suffer a defeat.
Exposes Employees To New Ideas
If you know yourself and
Broadens Organization’s Perspective your enemy, you need not
fear of a hundred battles.”
A Catalyst For Learning
- Sun Tzu -
Increase Employee Satisfaction
Sources For Retail Benchmark Data
The Retail Owners Institute
Retailbenchmarks.Com*
Retail Forward
Intl Council Of Shopping Centers*
SBA.gov
Census.Gov
The Aberdeen Group*
Consulting White Papers
Trade Show Seminars/Associations
Webinars
Colleagues
Some Sources Are Free, Some Are Not*. However All the Information is
Priceless For Your Business
Benchmarking
Provides Invaluable
Insight Into Previously
Unseen Performance
Variances

9. Start Today - Conduct A Management Review
Courtesy of: Berman 2009
CBCG - We’re Here If You Need Us
Lynn Switanowski-Barrett is the founder and president of
Creative Business Consulting Group, (CBCG) A Boston
based retail consulting firm. CBCG partners with retailers and
manufacturers to create and implement profit improving sales,
marketing and inventory management strategies.
CBCG helps retailers understand the business opportunities
created by today’s changing consumer trends and helps retailers
to harness the power of new media and marketing tools to
connect with today’s wired consumers.
Lynn’s 25 years retail career includes senior executive positions
at fortune 500 apparel and footwear retailers before launching
CBCG in 2004. Lynn speaks frequently at retail trade shows
across North America and teaches retail marketing and branding
at several colleges in the Boston area.
Philadelphia Gift Show July 2010 Creative Business Consulting Group www.cbc-group.net
Follow Creative Business Consulting Group
• We’re Always Talking Retail In One Of These
Places:
@RetailHelper
http://cbcgretailreport.blogspot.com
www.linkedin.com/in/lynnswitanowski
http://www.facebook.com/CBCGroup
Creative Business Consulting Group www.cbc-group.net