Why retail businesses_fail

The State of
The Retail Industry
Why Retail Businesses Fail

White Paper

“When I want to understand what„s happening today or try to decide
what will happen tomorrow, I look back into the past because that„s
the best predictor of the future is actually the past”.
Oliver Wendell Holmes

Romeo Richards

The Business Education Center

January 2012

Copyright © The Business Education Center. 1

Contents:

03 Executive Summary

06 Research Reference

11 Why Did La Senza Go Into Administration?

15 Lack of Level Five Leadership

18 Lack of Understanding of their Target Market

23 Lack of Trained Staff

24 Lack of Sales Training

25 Lack of Product Knowledge

27 Bad Customer Service Provision

28 Low Wages

30 Harrods‟ Success Secret

35 Prescription: How to Turn Retail Failure Into Success

37 Retail Blue Ocean Strategy Framework

40 The Retail Success Hexagram

45 About Romeo Richards


Executive Summary

The UK‟s retail guru, Mary Portas, recently released her High Street revival report,
commissioned by the British Prime Minister David Cameron. In which she discussed
the reasons for the decline of the UK High Street. This follows an earlier report,
produced by Colliers CRE which addressed a similar subject.

The Australian retail industry is also awaiting a report from its Productivity
Commission into the Australian retail industry. No doubt the US government is likely
to get involved in the fight to save its retail industry.

Indeed, urgent action is required if we are to tackle the challenging realities that the
retail industry are facing.

The retail industry accounts for 8% of the UK‟s GDP, 7.9% of US
GDP and 18% of Australian GDP, employing approximately 3 million
people in the UK, 14.4 million in the US and over 1.5 million in
Australia.

It is understandable that these governments will be concerned about the decline of a
very essential industry sector.

Whilst most retailers are facing difficulties, a handful, are achieving phenomenal
success despite trading in similar economic conditions. Why is that? Why are a
handful of retailers achieving extraordinary success whilst the vast majority continue
to struggle?

Why are Tesco and Holland & Barrett, the third and fourth most profitable
businesses in the UK, whilst retailers such as La Senza, Jane Norman, Mothercare,
JJB Sports, Clinton Cards, Thorntons and HMV struggle?

The reports, written by both Mary Portas and Colliers CRE,
highlighted a number of challenges facing the retail industry.
However, both failed to address the core problems. Furthermore,
they both failed to answer this simple question:

Why are some retailers experiencing phenomenal success despite
those challenges?


This is the first time in the history of modern retailing that a single document has
captured the core challenges facing the industry.

It is the first time a document on retail has revealed that most retail executives are
inadequately equipped to run a business and that the majority of retail middle
managers are bordering on incompetent.

You will also learn why Tesco is the second most profitable retailer in the world and
why Harrods is the favourite shopping destination for the rich and famous.

According to The British Council of Shopping Centres, 1/5 of the UK‟s shopping
centres are in financial trouble. I have just returned from Bolton. The traffic was so
heavy that I had to go through Manchester City Centre. The reason for the traffic was
people travelling to The Trafford Centre.

Manchester City Council has increased the hours of operation for on-street parking
in the city centre from 08:00 to 20:00. Previously it was 08:00 to 18:00. Retailers are
complaining that it is going to deter people from shopping in the city centre.

But here is what I find fascinating. The Lowry Outlet Mall, in Salford Quays has six
hours free parking yet people do not flock there and choose instead to shop in the
city centre despite the increased parking charges or go to The Trafford Centre.

So what exactly is it that The Trafford Centre has that draws so many people to it to
the extent that they are willing to queue from Junction four of the M61? It‟s more than
just free parking.

All indications point towards 2012 being a very tough year for the retail industry.
According to Verdict Research, the first three months of 2012 are going to be one of
the most challenging times for the industry as consumers reduce spending after
Christmas.

However, there are retailers who are looking forward to 2012 as being their best ever
year. So what‟s going to make the difference?

This White Paper outlines the core challenges facing the retail industry and gives an
innovative framework for pulling the industry back from the brink.

Winston Churchill once said “The farther backward you can look, the farther forward
you are likely to see.”

The Industrial Revolution started in Great Britain. Great Britain was once the
industrial capital of the world. Today the relics of old mills and manufacturing towns
that lay waste all over the UK are evidence of an entire industry that has taken its
place in history.


Rolls-Royce and Rover were once the pride of Britain, today they are both foreign
owned. While the rest of the British automotive industry struggle Rolls-Royce has
reported the highest sales in its 107 year history despite the economic downturn.

The manufacturing and automotive sectors within the UK became
irrelevant because they did what the retail industry is currently
doing now: blaming circumstances outside of their control for their
challenges.

As a result of blaming outside forces for their woes, the manufacturing and
automotive industries did not make the necessary efforts to adapt to change.

The wind of change is blowing in the retail industry. The internet has changed
consumers‟ shopping habits. Book, music & DVD and electronics retailers are the
most affected by the changes brought about by the internet. However, whilst the rest
of the industry cries “chicken little the sky is falling”, Richer Sounds is achieving
phenomenal profit margins.

The failing of the UK High Street has little to do with the reasons
Mary Portas gave in her report, neither is it the result of difficult
trading conditions. It is a result of an industry that is stuck in the
past.

Like the manufacturing and automotive industries if the retail industry does not
embrace change, change will be forced upon it.

“Here is Edward Bear, coming downstairs now, bump, bump, bump, on the back of
his head, behind Christopher Robin. It is, as far as he knows, the only way of coming
downstairs, but sometimes he feels there really is another way, if only he could stop
bumping for a moment and think of it” (A. A. Milne, Winnie-the-Pooh).

There is another way to pull the retail industry from the brink if only retailers could
stop blaming something or someone else and think of it.

This White Paper outlines the new way forward for the retail industry.


Research Reference

 Albert Einstien. 2011. The thinking that we are has brought us to where.
Available at:
http://thinkexist.com/quotation/the_thinking_that_we_are_has_brought_us_to
_where/254777.html
Accessed on 6th January 2012.

 Anderson, C. 2009. The Long Tail. Random House Business Books.

 Asda Group Ltd: 2010. All about Asda. Available at:
http://your.asda.com/system/dragonfly/production/2012/01/04/12_59_19_568
_All_about_Asda.pdf

 Big W. 2011. Annual report. Available at:
http://media.corporate-
ir.net/media_files/IROL/14/144044/WWL0002_AR2011_WEB.pdf

 Best Buy. 2011. Annual report. Available at:
http://phx.corporate-ir.net/phoenix.zhtml?c=83192&p=irol-reportsannual

 Buckingham, M. 2005. The One Thing You Need to Know. Free Press.

 Centre for Retail Research. 2011. Who‟s Gone Bust in Retailing 2010-2012 .
Available at:
http://www.retailresearch.org/whosegonebust.php

 Chan, W and Mauborgne, R. 2005. Blue Ocean Harvard business School
Press.

 Collins, J. 2001. Good to Great. Random House Business Books.


 Coles Food and Liquor +. 2011. Annual report and financial statements.
Available at:
ir.net/media_files/IROL/14/144042/2011_Annual_Report_Financial_Statement
s_pages_66_180.pdf
http://www.corporate-
ir.net/Media_Files/IROL/14/144042/2009AR_pages72_180.pdf

 Costco. 2011. Annual report. Available at:
http://phx.corporate-ir.net/phoenix.zhtml?c=83830&p=irol-reportsannual

 Co-operative Group Ltd. 2010. Annual report and financial statements.
Available at:
http://www.co-operative.coop/Corporate/PDFs/Annual_Report_2010.pdf

 CVS Caremark. 2010. Annual report. Available at:
ir.net/media_files/irol/99/99533/2010_Annual_Report.pdf

 Department for Business Innovation and Skills. 2011. UK retail - overview.
Available at:
http://www.bis.gov.uk/policies/business-sectors/retail

 DSG International Plc. 2011. Annual report and financial statements.
Available at:
http://www.dixonsretail.com/dixons/en/investors/resultsreports

 Dun and Bradstreet. 2004. Why small businesses fail. Available at:
http://www.captureplanning.com/articles/69960.cfm

 Gladwell, M. 2005. Blink. Abacus Books.

 Gladwell, M. 2000. The Tipping Point. Abacus Books.


 Harvey Norman. 2011. Annual report. Available at:
http://www.harveynormanholdings.com.au/annualreports.htm

 Home Retail Group Plc. 2011. Annual report and financial statements.
Available at:
http://www.investis.com/ar/2011/financial/groupfiveyear/

 J Sainsbury Plc. 2011. Annual report and financial statements. Available at:
http://annualreport2011.j-
sainsbury.co.uk/downloads/pdf/sainsburys_ar11_full.pdf

 JB HIFI. 2011. Annual report. Available at:
http://www.jbhifi.com.au/documents/reports/110_2011-09-09_4-04-34.pdf

 John Lewis Partnership Plc. 2011. Annual report and financial statements.
Available at:
http://www.johnlewispartnership.co.uk/content/dam/cws/pdfs/financials/annual
%20reports/John_Lewis_Partnership_annual_report_and_accounts_2011.pdf

 Kingfisher Plc. 2011. Annual report and financial statements. Available at:
http://www.kingfisher.com/files/reports/annual_report_2011/files/pdf/annual_re
port_2011.pdf

 Kmart. 2011. Annual report and financial statements. Available at:
s_pages_66_180.pdf

 Lowes. 2010. Ten year financial history. Available at:
http://www.lowes.com/AboutLowes/AnnualReports/annual_report_10/financial
s/10_year_financial_history.pdf


 Marks and Spencer Plc. 2011. Annual report and financial statements.
Available at:
http://corporate.marksandspencer.com/documents/publications/2011/annual%
20report%202011

 Myer Holdings Limited. 2011. Annual report. Available at:
ir.net/media_files/IROL/23/231681/Myer_Holdings_Limited_2011_Annual_Re
port_to_Shareholders.pdf
http://investor.myer.com.au/phoenix.zhtml?c=231681&p=irol-reportsannual

 National Retail Federation. 2009. Retail and Gross Domestic Product.
Available at:
http://www.nrf.com/modules.php?name=Pages&sp_id=1214

 Richer Sounds. 2011. Richer Culture. Available at:
http://www.richersounds.com/information/aboutus_culture

 Sears Holdings. 2010. Annual report. Available at:
http://www.searsholdings.com/invest/docs/SHC_2010_Form_10-
K.PDF#pagemode=thumbs&page=1&zoom=100,0,0

 Stephanie Anderson. 2012. Retail staff face underpayment: audit. Available
at:
http://www.canberratimes.com.au/news/local/news/general/retail-staff-face-
underpayment-audit/2415988.aspx

 Target. 2009, 2010 and 2011. Annual report. Available at:
http://sites.target.com/images/company/annual_report_2010/documents/Targ
et_AnnualReport_2010.pdf
s_pages_66_180.pdf


 Tesco Plc. 2011. Five Year Financial Record. [Online]. Available at:
http://ar2011.tescoplc.com/pdfs/financial/five_year_record.pdf

 The Guardian. 2011. Asda profits hit by price war. Available at:
http://www.guardian.co.uk/business/2011/oct/06/asda-profit-drop-tesco-
grocers?INTCMP=SRCH

 The Home Depot. 2010. Annual report. Available at:
http://www.homedepotar.com

 The Kroger Co. 2010. Annual report and financial statements. Available at:
http://www.investis.com/ar/2011/financial/groupfiveyear/

 Walgreens. 2011. Annual report. Available at:
http://files.shareholder.com/downloads/WAG/1612343002x0x513852/74B4B1
67-0B5C-46D3-A0A4-6435CEC99183/WALGREENS_2011_AR.pdf

 Wal-Mart Stores Inc. 2011. Annual report and financial statements. Available
at: http://www.investis.com/ar/2011/financial/groupfiveyear/

 Wm Morrison Supermarkets Plc. 2011. Annual report and financial
statements. Available at:
http://www.morrisons.co.uk/Corporate/2011/annualreport/_assets/download/p
dfs/fullReport.pdf

 Woolworths Food and Liquor +. 2011. Annual report. Available at:
ir.net/media_files/IROL/14/144044/WWL0002_AR2011_WEB.pdf

 Xe.com. 2011. UPDATE 1-Australia retail sales disappointingly flat in Nov.
Available at:
http://www.xe.com/news/2012/01/09/2387129.htm?utm_source=RSS&utm_m
edium=TL&utm_content=NOGEO&utm_campaign=News_RSS_Art1


Why Did La Senza Go Into Administration?

Lingerie specialist La Senza went into administration in the first week of 2012. It is
amongst some 183 UK retailers including: Barratts, Clinton Cards, Habitat, HMV,
Focus DIY, JJB Sports, Jane Norman, Mothercare, Oddbins, TJ Hughes and
Thorntons that got into trouble in 2011. This is in addition to the thousands of
retailers that went bust without making the headlines.

Coincidentally, just a week ago, I visited La Senza in The Trafford Centre,
Manchester; to take photos of poor visual merchandising examples for research for
my forthcoming book on visual merchandising display.

Why do many retailers get into trouble or go bust?

Let‟s read what a La Senza spokesperson had to say about why La Senza went into
administration:

“Due to trading conditions in La Senza's high street locations and the overall macro
environment which are having an adverse effect on the company, the board of
directors of La Senza has filed a notice of intention to appoint administrators.”

The UK‟s retail guru, Mary Portas, recently released her High Street revival report,
commissioned by the British Prime Minister David Cameron; into why the UK High
Street is at risk of becoming extinct. According to her report, the main reason for the
demise of the High Street was that:

“High Streets have reached „crisis point‟ with the rise of super-malls, out-of-town
supermarkets and internet shopping”.

This follows another report by Colliers CRE which highlighted the “downward spiral
and degenerating or failing” of the UK High Street.

The willingness of the British Prime Minister to get directly involved in the retail
industry‟s crisis outlines the severity of the situation. However, the UK government is
not alone in expressing concern for the retail sector. The Australian government has
also commissioned a report into the future of the Australian retail industry.

Thousands of jobs depend on retail. Whenever, a retailer goes out of business,
especially chain stores, they leave a large hole in the labour market. Therefore it is
understandable that governments are concerned.


Did La Senza and the other big retailers that are in trouble, actually suffer because of
the „challenging economic environment‟ or „challenging trading conditions‟, to adopt
the fancy language of retailers themselves?

Is the UK High Street in danger of extinction because of reasons described by Mary
Portas and the Colliers CRE report?

I beg to differ.

The core problem with most retail businesses in the UK and in many developed
countries is: they are run like non-profit organisations.

The fundamental reason for the existence of any business is to
make profit. Any business that does not have profit as its core goal
will either fail or languish in mediocrity.

It is true that businesses need to provide good customer service, take care of their
employees and support the community. However, businesses do not exist for those
reasons. They exist solely to make a profit. It is only after they have achieved their
core purpose for existence that they will be able to fulfil their other responsibilities.

Let me qualify this statement to avoid becoming „lost in translation‟. I did not say
businesses exist solely to make money, I said profit. There is a big distinction
between making money and making profit.

The retail industry is the only industry where increased sales is the key performance
indicator. I am writing this White Paper on Boxing Day; which is the day when most
retailers start their biggest sales of the year. The irony is that even though they will
make their biggest sales today, it does not necessarily mean that they will be making
their biggest profit margin today.

When the dust has settled, and customers have returned home, as retailers tally the
figures; they will fall into the following categories:

• Profitable retailer

• Break even retailer

• Losses retailer


How can retailers expect to make a profit by discounting their
merchandise at 50% or 70%? Retail profit is an average of 3%. Even
the most profitable retailers make between 3-5% profit.

However, the large majority of retail profit margin is between 1.5 - 3%. Therefore, if a
retailer is making a 3% profit margin and they discount their merchandise by 50%,
how much profit will they be making?

Don‟t take my word for it, the diagram below is the business growth framework for
Accenture, one of the world‟s largest business consultancy firms. If a business sat on
Accenture‟s sofa and said it was hearing voices, this is the diagnostic framework
Accenture would roll out to investigate the company‟s malady and issue an invoice
for one million pounds thank you very much:

Source: Accenture 2005

As you observe in the framework, profit is highlighted in as one of the engines of
growth in a business.

How many retail businesses have the Accenture business growth
template as a part of their business strategy?


The peripheral reasons most retailers go bust are follows:

• Lack of “Level five” leadership

• Lack of understanding of their target market

• Lack of trained staff

• Lack of skilled sales staff

• Lack of product knowledge

• Low wages

• Bad customer service provision

• Failing loss prevention strategy

La Senza went into administration because like most retailers it did not apply
fundamental business principles. It did not focus on profit, instead it was focused
only on increasing sales. A company that increases sales without increasing profit
will not survive.


Lack of Level Five Leadership

Jim Collins, in his book “Good to Great”, introduced the concept of “level five
leadership”. According to Mr. Collins;

“The key to an organization becoming great is having a “Level Five Leader” -
Someone who blends genuine personal humility with intense professional will -
leaders at the other four levels in the hierarchy can produce high levels of success
but not enough to elevate organizations from mediocrity to sustained excellence”.

This may sound conceptual or theoretical, but it is not. Many of the best retail
executives are level four leaders. They produce a burst of results for a short period
then fade away.

Most retail executives are good sales people but bad business
people. They can sell ice to an Eskimo yet they do not know how to
run a retail business.

There is a fundamental difference between being a retail professional and a
business person.

Being a „retail‟ professional requires an understanding of all the nuances of retail.
However, the ability to run a successful retail business requires the application of
certain universal business principles. Such principles are absent from the majority of
the failed or struggling retail organisations, because the leaderships in those
organisations lack an understanding of those principles.

Tesco is the third most profitable business in the UK and the second most profitable
retailer in the world. Why is Tesco, a retailer, the third most profitable business in the
UK? Tesco once had a “Level Five Leader”, Terry Leahy, who transformed an
ordinary UK retail organisation into a global retail giant.

The idea that retail executives are good sales people but bad business people might
sound counter-intuitive, therefore, let me expand on this concept with the following
analogy.

Many accountants are really good at what they do as accountants. They can take
one look at a statement of accounts and tell whether it is accurate. However, many
accounting businesses fail. Why do accounting businesses fail when accountants


are good money managers? It‟s because accountancy is a profession and like most
professions; it is completely different from a business.

A similar case can be made about retail executives. Many retail CEO‟s and
executives are expert retailers who know the ins and outs of retail. They sleep and
breathe retail. They took the time to learn retail but did not take the time to learn the
retail business; which is a major reason why many retail businesses fail.

You can pluck a good business person from any business and make him a retail
executive and he will be able to perform better than most retail executives. The
fundamentals of business are universal they never change.

Let me expand on this point with the following examples:

Microsoft is not just a successful company because they make the best software in
the world. It is successful because Bill Gates, a shrewd businessman, formed
alliances with major corporations and government institutions.

There were many search engines in existence before the arrival of Google. Why is
Google more successful than all of them? Google‟s business model was and is
better than the rest.

Facebook was not the first social media site yet Facebook dominates social media.
Why? Facebook has a better business model than the rest.

McDonald‟s sells hamburgers. Does anyone believe that McDonald‟s is successful
because it makes the best hamburger in the world? No way! McDonald‟s is the
world‟s leading fast food company because it has the best business systems in the
world.

My point is this, whether it is Microsoft, Google, Facebook or McDonald‟s it‟s not
their products or services that makes these companies the leaders in their industry
nor are they just successful because of the industries in which they operate; they are
successful because of their business models and strong leadership.

The CEO of Apple could go to any retail chain and make it as successful as Apple.
Success in business is not dependent on the industry. However, it is dependent on
the following four key components:

1. Good leadership.

2. Good talent.

3. Good systems.

4. Effective Marketing.


The reason why Tesco and Holland & Barrett are the third and
fourth most profitable businesses in the UK is because they have
these four components in place.

I did not say they are the third and fourth most profitable retailers in the UK, I said
they are the third and fourth most profitable businesses in the UK.

Business success transcends industry it is dependent on:

• Effective leadership

• Great people

• Robust systems

• Dynamic marketing system

In most cases, only “Level Five Leaders” have the ability to develop these four
components.


Lack of Understanding of Their Target Market

I visited Harrods for research for my books on store design and visual merchandise
display. Harrods, for anyone reading this White Paper who might not know this, is
the Mecca of retailing. Royalty, A-list celebrities and the „who‟s who‟ from around the
world fly into London just to shop at Harrods.

You can now imagine my anticipation when I visited Harrods. In my mind everything
in Harrods was made of gold. I was disappointed, when I noticed a toy bus I had
purchased for my son from Asda, was also being sold in Harrods. It was exactly the
same toy bus, in exactly the same packaging as the toy in Asda.

A question popped into my mind, why is it that exactly the same
bus, probably manufactured in exactly the same factory in China, is
sold in Harrods for twice the price that it is sold for in Asda?

The answer is decisively simple – Asda sells a „toy bus‟, however, Harrods sells a
„classy toy bus‟. There is a difference. This is marketing 101: people buy emotionally
but justify their decision logically.

Customers who shop at Harrods do not shop there to buy Harrods‟ products; they
shop at Harrods to buy „elegance and class‟. Harrods sells them class even if it is
„Made in China‟.

How does Harrods pull this off? They achieve it with the combination of an elegant
store design and attractive visual merchandising displays. When you move from one
department to the next in Harrods it is like moving from one store to another. Their
ability to use their store design to create the illusion of differentiation is one of the
keys to Harrods‟ success. Harrods understand their customers; they know what their
customers desire so they design their store and display their products to satisfy the
desires of their customers.

Marcus Buckingham, in his book “The First Thing You Need to Know”, wrote that
when he interviewed Sir Terry Leahy, who transformed Tesco into a global brand,
and asked him what was the key to Tesco‟s successful transformation. Sir Terry
Leahy replied that it was asking and answering the simple question: Whom do we
serve?


When Tesco figured out whom they were going to serve, they changed their store
layout and products to serve their target market. As a result of those changes; Tesco
increased its number of checkout counters which reduced the amount of time
customers spent queuing at the checkouts; ultimately resulting in a dramatic
increase in Tesco‟s footfall.

Wal-Mart serves the person who lives: pay check to pay check.

The Body Shop serves the ethical consumer.

Waitrose and Holland & Barrett serve the consumer who wants to live longer.

Ann Summers took merchandise once hidden in secret „adult‟ shops; made them
trendy and brought them to the High Street. They made a taboo subject acceptable
to the mainstream.

If I was to take my partner shopping at John Lewis she would probably phone my
mother to inform her that I was having a nervous breakdown. She would not want to
be caught dead in a John Lewis‟ outfit. She describes John Lewis‟ clothing
department as a Bridget Jones museum where they store a collection of Bridget
Jones costumes.

However, John Lewis continues to increase profits year on year because John Lewis
understands their target market.

Someone like my significant other might not want to be caught dead
in John Lewis‟ outfit, but there are people in the UK, who love
Bridget Jones‟ memorabilia, these people are John Lewis‟ target
market, so John Lewis cater for them.

The most successful retailers understand their target market and show their
understanding of their target market through their store design and visual
merchandising displays.

The retailers that go bust fail to understand this basic marketing concept.

Most book retailers are struggling because they are still using the 1960‟s business
model in the Amazon era.

Borders failed because it did not effectively develop its internet business and it
invested heavily in compact discs when music was going digital.

WH Smith only makes money from its airport and train station sales. The rest of its
stores are struggling.


Waterstone‟s is also on a downward trend. Sales are down and customer footfall is
in steep decline.

Why are bookshops under threat? Amazon! They will all shout. Of course Amazon is
the cause because Amazon understands their market better than them. Since it
seems Amazon is not going away anytime soon, are all book stores going to close
down?

Will WH Smith and Waterstone‟s close down? Or will they rise to the
challenge and modernise their stores? Instead of complaining about
Amazon, they need to redefine their target market, redesign their
service delivery, redesign their customer service experience and
redesign their stores to attract their target customers.

On Christmas Eve, I had not done my grocery shopping and was dreading the
prospect of entering a supermarket, knowing how packed they were going to be. But
as I drove past my local Lidl store, I noticed it was empty. I rushed in and completed
my shopping. As I drove back home a question came to mind; why is it, that even on
this day when most supermarkets are typically jam packed to capacity, was Lidl
empty?

The answer is that Lidl does not have a target market. One of their biggest sins was
making the decision to force customers to pay for carrier bags. Marks & Spencer can
afford to do that because they appeal to a different class of customer.

In Tesco and Asda, customers who are environmentally conscious have the option of
paying for carrier bags. However, those who do not want to pay for carrier bags also
have the option of getting free ones.

This is because Tesco and Asda understand their customers. Lidl‟s senior
management, on the other hand, believed that having implemented a similar strategy
in Europe, they can introduce the same in the UK. If the Brits do not like it, tough!
Well, the Brits are showing their displeasure with their feet.

I have tried to demonstrate with the above examples, that success or failure in retail
is the result of the strategies every retailer adopts. Those retailers who understand
their target market and cater to them will continue to move from success to greater
success, while those who roll the dice and hope that customers show up are the
ones who will struggle or go into administration.

I hate to be the one breaking this type of news to the retail industry but I guess
someone will have to do it: the internet is not going away. This means that retailers


are not only competing with one another, they are also competing with factory
owners in China whose name they have never heard. Shoppers are now ordering
directly from warehouses and distributors, for example an individual can log on to
eBay and order a pallet load of goods.

Here is the good news: the majority of people still prefer to shop from physical retail
outlets. The question is how does an individual retailer ensure that shoppers are
attracted to their store? It can be done by adopting the concept of the “Blue Ocean”
strategy.

Adopting the “Blue Ocean” strategy is the only salvation for book, DVD, music and
furniture retailers.

What is “Blue Ocean” strategy? Blue Ocean strategy is “the simultaneous pursuit of
differentiation and low cost” which results in the creation of a new market space
making the competition irrelevant.

The concept of “Blue Ocean” is practiced by the most successful businesses
organisations whilst struggling businesses pursue what is described as the “Red
Ocean” strategy. “Red Ocean” strategy is fighting to compete in the existing market
place.

The “Red Ocean” strategy is adopted by many of the book, DVD,
music and furniture retailers. They are trying to compete against
the internet and it is just not possible. A brick and mortar store can
never go head to head with the internet and win. It can never be
cheaper that the internet.

However, to drive customer traffic to their stores they must become more innovative
and creative. For example a book store could arrange more book signings; of course
authors want to sell their books so it is a win-win situation for all parties concerned.

In order for the book signings to be a successful marketing platform for the book
stores it would be advisable for retailers to work in collaboration with the publishers
from the onset in order for the book signings to be better promoted.

Promotion of the book signings could take various formats such as making effective
use of social media sites, local press and captivating signage in and outside the
store.


Another idea could be to arrange book clubs for various genres of books, this would
entice a variety of customers in to the store, these book clubs would also need
promoting in a similar way as described for the book signings promotion.

The trick is to be innovative.

Richer Sounds is a classic case of a retailer that has adopted the “Blue Ocean”
strategy. They understand that people still prefer to interact with other people. So
whilst other electronic retailers focus on price, they focus on excellent customer
service and staff product knowledge. Their “Blue Ocean” is excellent customer
service and superior product knowledge.

For book, DVD or music retailers to compete in Amazon country, they need a “Blue
Ocean” strategy that goes beyond price discount. They need soul. They need
understanding of the perception of their target market.

• What do they want?

• What are their hopes and fears?

• What is their perception?

I can order a book or DVD from Amazon and receive it the following day. I can
download music instantaneously from iTunes. There are millions of “me” in the world.
What kind of “Blue Ocean” strategy can WH Smith or HMV devise to get me away
from my laptop? It takes me half an hour to drive to the city centre, pay for parking,
spend another half an hour in WH Smith or HMV and another half an hour to drive
back home.

The 64 million dollar question is:

What can WH Smith or HMV do to make it worth my while?

Let me give them a clue, I could order my groceries online, however, I choose to go
to the supermarket. My reasoning? That is for book, DVD, electronic and furniture
retailers to figure out. They probably need to visit Starbucks, it might just hold the
keys to unlocking their creativity.

The only point of differentiation that most retailers know is price
reduction. Price reduction is not a business strategy, it is a death
wish.


Lack of Trained Staff

A friend of mine is a manager at Tesco. He knows the profit margin of each and
every product in his store. Why does knowing these profit margins matter? For a
number of reasons. Firstly business is about making profit and secondly it highlights
the significance of “training” to retail success.

As a manager at Tesco, my friend receives frequent periodic training on every
aspect of running a retail business. Little wonder Tesco is the second most profitable
retailer in the world and the third most profitable business in the UK.

Tesco, like most successful retailers, understand the significance of staff training to
the success of their business. Subsequently, they ensure that their staff are
constantly trained.

It never ceases to amaze me how an individual will open a retail
store worth millions of pounds only to have the store managed by
someone they are unwilling to spend a few hundred pounds to train.

The two common excuses retailers give for not training their staff are:

1. It is expensive.

2. Absentee cover.

I‟m probably the only person who doesn‟t get it, just imagine this scenario:
Someone, somewhere, is leaving his multi-million pound retail store in the hands of
an individual and he says it is too expensive to spend a few hundred pounds to
provide that person with the requisite training to manage his store well, can you
imagine that?

What am I missing?!

And these same retailers complain that the reason why they have to call in the
administrators is because of harsh trading conditions.

No it is not!

It is because they did not provide their staff with the requisite training to run their
retail organisation well.


Lack of Sales Training

According to a survey commissioned by Blue Martini Software; retailers could be
losing up to £8bn per year as a result of inadequate staff training. The survey
revealed that 84% of potential customers who left stores without buying said they
were going to buy from another retailer.

This means that the store they entered was unable to sell them on yes so they sold
them on no.

As many as 95% of retail employees have never received any form of sales and
marketing training. As a result of their inability to sell, most retail staff just stand by
the sidelines as customers examine merchandise and cross their fingers hoping they
will decide to buy.

Retailing is about selling. This means that anyone in retail should be, at the very
least, given basic sales training.

If retailing is about selling and 95% of retail staff have never received any form of
sales training, surely there is a linear relationship between lack of sales training and
retail businesses going bust?

It is like a medical doctor who has never been to medical school, how many people
in this world would want an untrained doctor to treat them?


Lack of Product Knowledge

Covert sting operations, conducted by „Which?‟, the consumer organisation, in 2011,
revealed that many retail employees lacked knowledge of the products they sold.
Just 8 out of the 154 stores investigated, scored an excellent mark. Surprisingly, not
a single well known High Street brand was amongst those eight.

In this information age where consumers have access to vast amounts of information
at their fingertips, one would expect retailers to realise the importance of product
knowledge for their staff.

Nowadays, many shoppers search on the internet for products prior to stepping foot
in a shop. They read information such as product specification, where to get the best
deal and customer reviews. They visit shops to basically clarify what they have
already read. If the store staff are unable to answer their questions, there is no
chance that they will be able to sell to them.

Here is the secret, despite the fact that people conduct research on the internet, the
large majority still don‟t trust information found on the internet. That is why books are
still highly rated even though the information in most books can be found on the
internet.

People still trust other people and prefer to interact with people. This is the reason
why despite the internet, bricks and mortar retailing will still survive. However, there
is a new dynamic and retailers need to understand this.

The consumer of today is better informed than the consumer of ten
or twenty years ago. Consequently, today‟s retail staff needs to be
better informed than the retail staff of ten or twenty years ago. One
cannot navigate the 21st century with a 19th century skill set – it
will not work.

Hence the reason why even though many electronic retailers are going bust, Richer
Sounds has been featured in the Guinness Book of Records for the past 20 years as
having the highest sales per square foot of any retailer in the world.

Coincidentally, they continue to top the „Which?‟ survey for excellent customer
service and product knowledge.


I have always argued that if anyone was to open another DIY store in the UK ,that
was in direct competition with B&Q; they would put them out of business within a few
months. Every time you enter a B&Q store and ask the staff about the location of a
product, their favourite line is always: they have just rearranged the store. They have
no idea where their products are located in the store let alone what the products do.

This is a trade store and many of their customers are tradesmen, therefore you
would expect B&Q to provide its staff with sufficient product knowledge to be able to
improve their customer experience in their stores.


Bad Customer Service Provision

These days, the only reason I visit my local PC World store is to buy ink for my
printer. This is due to the fact that it is the only retailer in my locality that sells the
type of ink cartridge suitable for my printer.

Every time I enter a PC World store I encounter a similar level of service. I am
always forced to queue up for a long time at the checkout, waiting for staff to serve
me. Even when the store is empty I have to wait to be served, whilst there will be a
group of staff chatting a few meters away from the vacant checkout.

PC World and her sister company Curry‟s are struggling and their management
wonder why? I am sure if they were to go bust the CEO would blame harsh trading
conditions. The fact that his store rank at the bottom of many customer satisfaction
surveys would not be seen as a factor in their demise.

In this “Long Tail” retail environment where consumers are constantly presented with
endless choices, one would think that retailers, especially High Street retailers would
realise the importance of excellent customer service and try to instil it as a
fundamental part of their business strategy.

30 to 40% of people will buy solely on price. The majority 70% of people will buy on
quality and convenience. Even though the retail industry is in crisis, the luxury sector
of the industry is still growing strong. This is because no matter what the economic
situation is people will still shop. The only question is where will they shop.

Luxury retailers understand this fact and train their staff in excellent customer service
provision.

I have noticed in my local Asda that when staff are asked for information, they do not
just point, they walk customers to the location and ask them if there is anything else
they can do for them.

People go to restaurants where the food is terrible but never complain because of
the attitude of the staff. However, if it was the other way around and the food tasted
great but the service sucked, they would be highly unlikely to return to that
restaurant.

Good customer service is a key component to the success of many of the most
successful retailers whilst bad customer service provision has been one of the major
contributing factors for the failure of many retail ventures.


Low Wages

A friend of mine, who is a retail consultant in the US, said that in his office they
always joke that one day they might write a book on, „How to get out of retail‟; he is
convinced it would be a bestseller!

Why does my friend believe that a book on „getting out of retail‟ would be a
bestseller? Answer: many retail employees want to get out of retail.

They view retail as a „transitional job‟. As a matter of fact many retail employees are
part-time workers. Many are students who view retail as a means of getting „pocket
money‟ whilst in college or university. With the exception of those who are actually
studying retail, the majority hope they will leave retail as soon as they complete their
studies to find a „better job‟.

One of the reasons for this is a result of low wages in the industry. I know that I am
touching some raw nerves here, but bear with me as I try to make the case for why
low wages are neither good for the staff nor for the retail business owners
themselves.

Low wages encourage:

• Staff dishonesty

• Disloyalty

• Unprofessionalism

…This results in bad customer service and poor productivity.

One of the key factors responsible for the failure of most retail businesses is the
incompetency of middle management. I do not use the word incompetency to mean
any disrespect to middle retail managers, but the fact is the large majority of them do
not have the slightest idea about the concept of running a business.

The main reason for this is that many middle managers rise through the ranks
without the appropriate training just to „avoid low wages‟.

One of the major reasons highlighted for the demise of „Safeway‟ was it had more
managers than store staff. Imagine an army with more Generals than Infantry
soldiers. The manager to store assistant ratio was about 4:1. It has been suggested
this occurred as managers would promote their friends to managerial positions to
avoid low wages.


When I worked at Tesco, all of us dreamt of becoming a manager because it was the
only way we were going to be able to get good wages. The managers get double pay
for working bank holidays and are offered more shift days than the store assistants.

I am not suggesting that the retail industry increase staff wages. All I am saying is
low wages have an adverse effect on the industry and it is one of the reasons many
retail businesses go bust.

Low wages grant retail employees reasons to engage in dishonesty. When
employees feel that they are not being treated fairly there is the tendency for
increased dishonesty. If you are a retail store owner who expects your staff to
manage millions of pounds on your behalf and you pay them a few hundred pounds
a month, chances are they might be tempted to steal from you.

Therefore, it is vital, if you are going to be entrusting people with your assets, that
you provide them with sufficient incentives to make them want to protect it on your
behalf.

Disincentivized staff, as a result of low wages, will not be inclined to provide good
customer service. When people work because they have to, they will not provide
your customers with the level of customer service they deserve. When your
customers do not receive the level of customer service they believe they deserve,
they will choose to take their custom elsewhere.

Retailers are trying to adopt the McDonald‟s model of employing high school
dropouts and training them to be successful in retail. There is nothing wrong with this
principle. However retail does not have the same system as McDonald‟s.

You can pluck someone off the street and place him in a McDonald‟s to work and he
will be fully functional within a few minutes. The reason for that is the system will
make up for his weaknesses. Retail does not have a system comparable to
McDonald‟s, therefore, cannot practice a similar recruitment process.

I cannot stress this enough: having the right people is a key element in the success
of every successful business. Any business that does not have the right people will
either languish in mediocrity or fail. Recruiting and retaining good staff is one of the
largest expenditures for many businesses, getting it right can pay dividends.

Part of the process of recruiting and retaining good staff is ensuring they are fairly
compensated and incentivized.

As the saying goes, you get what you pay for.


Harrods’ Success Secret

Harrods is one of the most successful retailers of all times. In January 2011, despite
the global economic downturn, the retailer‟s sales were in the region of £1bn. What
is it that makes Harrods more successful than most retail organisations?

Harrods success can be attributed to the following three factors:

1. Good store design.

2. Attractive visual merchandise display.

3. Effective loss prevention strategy.

Harrods‟ store design is in a class of its own. It is unique, innovative and clever. One
important element of their store design is the concept of the stores inside stores. The
store is designed in such a way that as customers move from one department to the
other, it gives the feeling of moving from one store to the next in a shopping mall.
Whoever conceived that design concept provided Harrods with a huge competitive
advantage over it competitors.

Harrods‟ visual merchandise displays are as attractive and inviting as merchandise
displays can get. As customers enter one designer outlet to another, they observe a
completely different display representative of that designer. It is as if the designers
themselves went into Harrods to arrange the displays.

Store design and visual merchandise displays need to serve four objectives:

1. Attract potential customers as they pass by the store.

2. Entice those potential customers to enter into the store.

3. Maintain their interest whilst they are in the store.

4. Persuade them to buy.

I believe Harrods‟ ability to effectively utilise these four principles in their store design
and visual merchandise displays has been responsible for its phenomenal success.


In his book “Blink”, author Malcolm Gladwell introduced the concept of think without
thinking. “Blink” "the power of thin slicing” and “rapid cognition” is the type of thinking
process that occurs in the blink of an eye.

In his first book “Tipping Point”, Mr. Gladwell introduced the concept of the tipping
point where little things make a huge difference.

As one walked around Harrods it is evident that their success does not derive from
their „Made in China‟ products, that can be found in most stores in the UK. Their
success derives from their ability to apply the principles from “Blink” and the “Tipping
Point” to their store design and visual merchandise displays.

Harrods success stems from little things making a big difference like having lots of
store associates within easy reach of every customer and extraordinary use of
mannequins.

Why do people buy? We all buy for diverse reasons. The human thought process is
complex and irrational. Even though we try to rationalise our actions based upon
artificial environmental factors, the reality is we all do things for the same three
reasons:

1. Status.

2. Survival.

3. Sex.

The ability to design a store or create visual merchandise displays that incorporate
all these elements is one of the determining factors for the success of Harrods and
many of the world‟s most successful retailers.

The key factor to Harrods‟ success though is its ability to remain profitable. Profit is
king in business. In retail the formula for making profit is to increase sales and
reduce shrinkage.

Increasing sales requires good store design and attractive visual merchandising.
Reducing shrinkage requires an effective loss prevention strategy.

This is what Harrods and the most successful retailers have over the rest of the retail
industry, their ability to simultaneously increase sales and reduce shrinkage. Most
retailers know how to increase sales, however when it comes to reducing their
shrinkage, they are challenged.

Getting these two right is the fundamental principle of retail success. No retailer can
succeed without simultaneously increasing sales and reducing shrinkage.


Why do shrinkage reduction or loss prevention measures fail in most retail
organisations?

• Lack of understanding of the subject.

• Senior management‟s failure to prioritise.

• Outsourcing loss prevention without a mechanism for accountability.

• Inexperienced loss prevention managers.

• Ineffective use of loss prevention technology.

Harrods is the first retail store that I have ever entered that has no visible blind spots.
I am not saying that there are absolutely no blind spots as I managed to spot a few.
However, the difference with other stores is that they are not visible to
unprofessional eyes.

Anyone deciding to shoplift in Harrods would have to be:

• A professional shoplifter or part of an organised retail crime syndicate.

• Really brave.

• Really stupid.

Products are displayed in such a manner that each department seems wide open.
Store staff can stand in one end of a department and have a clear view of the entire
department.

There is CCTV in every corner of the store; in addition to store assistants buzzing
like bees, making it difficult for anyone who might intend to shoplift.

I am not saying that it is impossible to shoplift from Harrods because shoplifting
prevention requires the implementation of a combination of strategies. However, by
designing their store in the way that they did, displaying their products in the manner
that they are displayed and taking other loss prevention measures, Harrods has
drastically reduced the possibility of shoplifting.


To increase sales yet fail to reduce profit draining activities is false
economy. Many retailers feel loss prevention is something that they
could do if they had the resources. The reality is: it is something
that they cannot afford not to do because no retailer can become
profitable without implementing effective loss prevention measures.

90 to 95% of retail loss prevention department managers are ex-service personnel.
As a result of their law enforcement background, they take the law enforcement
approach to their work. They focus mainly on arresting shoplifters and dishonest
employees.

While it is true that shoplifting and employee theft accounts for almost 70% of retail
shrinkage they are not the sole cause of shrinkage. Furthermore, shoplifting and
employee dishonesty cannot be tackled by solely arresting individuals. Preventative
measures such as good store design and visual merchandise displays, as I
mentioned in the case of Harrods, are required to make any preventative measure
effective.

However, due to the fact that the majority of retail loss prevention managers know
little to nothing about store design and visual merchandising, they are unable to
incorporate those aspects into their loss prevention strategies. Hence the reason
why most loss prevention measures fail, resulting in the failure of most retail
organisations.

The average retailer makes a 1% net profit out of each dollar and the average
industry shrinkage percentage is 2.6%. This means that shrinkage is almost three
times the average retailer‟s profit margin. By reducing retail shrinkage to 50% - from
2.6 cents to 1.3 cents, a retailer could more than double his profits: from 1 cent to 2.3
cents. (Crosset Company newsletter. June 2010).


Some retailers outsource their loss prevention department to outside contractors. As
laudable as this may seem, it is a seriously flawed idea because retailers are
incapable of clearly articulating their expected outcome.

When a job is outsourced, there is usually an expected outcome. However, if the
retailer outsourcing the job cannot articulate their expected outcome, it is difficult to
hold the contractor accountable.

The ineffective use of loss prevention technology is another reason for the failure of
most retail loss prevention measures. Prior to purchasing loss prevention
technologies, the following questions need to be answered:

• What problem(s) will the technology solve?

• What are the functionalities of the technology?

• What policies and procedures need to be modified to accommodate the new
technology?

• Is the technology future proof?

To increase sales without simultaneously combating profit draining
activities is false economy. Wal-Mart founder Sam Walton once
described retail shrinkage as a “profit killer”. He was right. High
shrinkage is responsible for the death of many retail organisations.


Prescription: How to Turn Retail Failure into Success

I once worked as a store detective for one of the UK‟s top ten retailers. Many of the
incidents of shoplifting that took place during my time at this retailer were not the
result of shoplifters outsmarting us, rather they were a result of the store design or
the policies and procedures that the retailer had in place.

I remember working in stores where the toilets were located outside the store. This
meant that a shoplifter could literally walk out of the store with a trolley full of
merchandise and could not be legally arrested because he could claim he was going
to the toilet. On many occasions I was the only security personnel assigned to the
30,000 sq. ft. store with multiple exits.

On Sundays, we opened the entrances at 10:30 to allow customers to start
browsing. However, we were scheduled to start at 11:00. When we started at 11:00,
we would notice people pushing trolleys full of merchandise out of the store.
Someone in the head office, in their infinite wisdom, decided it was more cost
effective to leave the store at the mercy of shoplifters than make a half an hour
payment for security. This retailer is one the top ten retailers in the UK, yet senior
management were unable to devise a coherent strategy for profit protection.

I once consulted a $25bn retailer. As I perused the company I noticed that not a
single person in the company knew their shrinkage figure therefore not even the
financial director knew the profit margin of the company.

According to Dunn and Bradstreet “Of the small businesses that fail, 90% do so
because of a lack of skills and knowledge on the part of the owner”.

Based upon my experience in retail, I believe it would not be too
much of a fat claim to make that 90% of retail failures are the result
of a lack of skills and knowledge on the part of senior retail
management.

There are circumstances beyond the control of the individual retailer that they can do
nothing about. There are circumstances in which location and demographic changes
affect the retail organisation. Yes it is true that people would rather go to Asda or
Tesco to buy meat than to their local butcher because of price difference.


It would not be fair to suggest that all retail failures are the result of bad leadership or
incompetency. However, what I have tried to point out is that in the majority of cases,
especially in the case of High Street retailers, the failure can be directly linked to
their inability to embrace change.

The problems of major book, DVD, music and electronic retailers do not rest solely
on difficult trading conditions, rather they rest on their inability to grasp the concept of
the “Long Tail”.

The “Long Tail”, a concept popularised by author Chris Anderson in his book, “The
Long Tail: Why the Future of Business Is Selling Less of More”, examines the
changing consumer behaviours based upon the changes in distribution curve.

The proliferation of niche markets brought about by the internet has completely
altered the factors of distribution. Consumers are exposed to more choices than ever
before in the history of mankind.

While writing this White Paper, I decided to test the “Long Tail” theory. I keyed into
Google: “how many types of breakfast cereals are there”. Result: thousands. They
were arranged in alphabetical order and it was from A to Y. The average
supermarket carries thousands of different product lines.

Furthermore, with the internet consumers are becoming more and more
overwhelmed with choices. Amazon and its distributors carry more inventory than a
lot of High Street retail organisations combined.

In the “Long Tail” century, how can retailers survive? They can survive by adapting
to their environment.

In the “Evolution Theory” Charles Darwin introduced the concept of “Survival of the
fittest”. The fittest in Mr. Darwin‟s lexicon is not the strongest or the fastest but those
who are better equipped for survival or those who are better adapted for their
immediate, local environment.

We are already witnessing the “Evolution Theory” at play in the
luxury market. Despite the downturn in the economy, luxury
retailers are still raking in profit. Even in Spain where the country is
on the brink of collapse, the luxury retail sector is booming.

The excuse might be because the rich are getting richer so of course the luxury
market will continue to boom. This is partly the case but the main reason is luxury
retailers are more adaptive to the changing retail environment.


Luxury retailers run their organisations like a real business with good system, good
people, good leadership and effective marketing system. The luxury retailers that are
failing are those that have both luxury brands and non-luxury brands and they bring
the non-luxury culture into the luxury market.

In order for the retail industry to survive, firstly retailers need to understand that their
problem is not somewhere out there, it is right in their board rooms.

Secondly, the industry needs to come to the realisation that there is now a new
problem on the horizon and they cannot solve a new problem with old solutions.

What is the new problem?

The new problem is technology and the internet. Just as technology changed the
manufacturing and automotive industries, technology is changing the retail industry.

Online shopping grew by 14% in 2011 whilst bricks and mortar retail
sales grew by just 1.4%. According to research, conducted by food
and grocery analysts IGD, online grocery shopping is expected to
rise to £11.2bn by 2016. The research also revealed that more than
44% of adults will be shopping online for their groceries in the next
ten years.

The internet is here to stay and it is going to have a tremendous effect on the
industry. As new technologies make our lives easier, it also produces an adverse
effect on the world around us.

The High Street is in ruins, retailers big and small are going out of business,
however, instead of the industry screaming “Chicken little the sky is falling” it needs
to respond to the threat by coming up with innovative “Blue Ocean” strategies.

The difference between the few successful retailers such as Tesco, Wal-Mart, The
Body Shop, Harrods, Ann Summers, Holland & Barrett and struggling retailers such
as La Senza, Jane Norman, Mothercare, JJB Sports, Clinton Cards, Thorntons and
HMV is that successful retailers understand that change is constant, therefore, they
are constantly evolving to stay ahead of change while the struggling retailers remain
static hoping that change will not last.

Albert Einstein once said “Problems cannot be solved by the same level of thinking
that created them.”


The retail industry cannot navigate the 21st century with 19th century thinking or skill
sets. It would be like riding a horse on the motorway. I don‟t need to tell you what
would happen to anyone who decided to ride a horse to London on the motorway.


Retail Blue Ocean Strategy Framework

RED OCEAN STRATEGY BLUE OCEAN STRATEGY
Selling to a broad demographic market. Selling to a segmented market.
Focus on only increase sales. Simultaneously focus on increase sales
and reduce shrinkage.
Ignoring profit draining activities. Focus on acquisition and protection of
profit.
Untrained employees Implementation of periodic training of
employees.
Not prioritizing customer service Implementing excellent customer service
as a marketing strategy.
Not providing store associates with sales Store associates are trained on how to
training close sales.
Professional retail leadership Professional retail and business
leadership.
Loss prevention managers lack business Loss prevention managers possess
skills. excellent business skills.
Loss prevention strategy focuses on Loss prevention strategy focuses
shoplifting and employee theft. shoplifting, employee theft, policies and
procedures, low staff productivity,
procurement error, administration error.
Ignoring store design as a sales and Store design plays a key role in sales
marketing strategy. and marketing strategy.
Ignoring visual merchandising as a sales Utilising visual merchandising as a key
and marketing strategy. component of sales and marketing
strategy.
Focus only on price reduction to drive Increase value proposition to drive sales.
sales.


The Retail Success Hexagram

Listed below are the best retail success strategies used by the most successful
retailers in the world.

There are six steps for success in retail. These are the same steps successful
retailers use time and time again to remain at the top of the retail ladder. Those
retailers who have failed, or are struggling, are the ones who have not mastered the
retail success hexagram.

The steps are as follows:

1. Effective sales and marketing strategies.

2. Excellent customer services.

3. Great employees.

4. Quality merchandise.


5. Attractive yet secure store design & visual merchandise display.

6. Trained Employees.

Effective Sales and Marketing Strategies:

Retail success formula 101: Know thy customer.

Marketing 101 is identifying your target market.

Marketing is about branding. What is branding?

Branding is the story of your retail store, your customer experience and the image
you want to be associated with.

• Body Shop: ethics.

• Harrods: class and elegance.

• Holland & Barrett: health.

La Senza, WH Smith, HMV…ah what was the question again?

Excellent Customer Service:

Retail success formula 102: Redesign service provision.

I know a sportswear retailer that advertises on billboards all over the UK. Heaven
knows how much they are spending on those advertisements in prime locations all
over the country. Yet when customers frequent their stores, there is always fewer
store associates to serve them. Furthermore, the store associates on duty lack any
knowledge about the merchandise in the store.

When you enter Harrods you think you are in communist China, with their store
associates visible in every corner of the store. People go to retail stores because
they want to interact with other human beings. When they enter the fitting rooms to
try on clothes they want to know that there will be another human being there to tell
them how beautiful they look on them. They want to know that when they need help
they can speak to somebody.


Great Employees:

Retail success formula 103: Recruit great people.

I relayed the story of my Tesco Manager friend who knows the profit margin of every
product in his store. I consulted a large multi-billion dollar retail organisation. As I
ploughed through their books I noticed that they had a profit margin of about 10%
and a shrinkage level of 0.8% or something around that figure.

I thought to myself: this company has pretty impressive figures; better than the best
retailers in the world. However, as I investigated further, I came to realise that not a
single individual within the entire organisation knew how to calculate their shrinkage
percentage which rendered their profit figures inaccurate.

When a retail middle manager is incapable of calculating figures as essential as
profit margin and shrinkage level, that organisation is in serious trouble. No business
can succeed without great people, the industry needs to recognise this simple fact
and get to work on recruiting the right people for their organisations.

Quality Merchandise:

Retail success formula 104: Stock good quality products.

It goes without saying that having quality merchandise is fundamental in retail. One
of La Senza‟s biggest sins is the design of their lingerie. Their products are so boring
and tasteless it makes you wonder who would want to buy them.

People buy emotionally and justify their decision logically. A piece of lingerie that is
attractive and pleasing to the eyes provides women with the confidence that it would
look good on them. When you have lingerie that is not very attractive you are already
out of business.

Jane Norman got into trouble because they kept recycling their product lines every
season. Instead of refreshing their stores by displaying new product lines each
season, they store old stock, that is then displayed the following season.


Attractive Yet Secure Store Design & Visual Merchandise Display:

Retail success formula 105: Retailing is showbiz.

Most retailers forget that retailing is about sales and marketing. The most effective
marketing strategy a retailer has at his disposal is a well-designed store and
attractive merchandise displays. When there are two or three hundred stores in a
shopping centre, the difference between someone deciding to enter or pass by a
retail store can rest on the storefront design.

When customers are in the store there needs to be reasons for them to stay longer
in the store because the longer they are in the store the higher the chances are of
them purchasing. The three main aspects of a store that keep customers engaged
for longer are:

1. A store design that enables good customer flow.

2. An attractive and good lighting system.

3. Overall atmosphere of the store.

Apple stores are always packed as customers just love hanging out in their stores.
The Early Learning Centre is a children‟s toy store. I have been to a few of them and
noticed there is no space for the children to sample toys and play with them. You
cannot have a toy store that is compact; you lose the potential for sale.

Trained Employees

Retail success formula 106: Business is not common sense.

To leave a store in the hands of an untrained person and hope that they will use
common sense to manage it well is not a particularly smart move. Simply because
everyone can kick a football does not mean that everyone can play football.
Business is a skill and like any skill, it must be learnt. Selling is a skill it cannot be
learnt by osmosis. There is nothing like a natural born salesman. The best salesmen
have some form of training in addition to their talents.

The retail industry is at a crossroads. A lot of changes are going to be forced upon
the industry in the next few years. The industry can either master those changes or
be a victim of them. We can reinvent our industry, or we can decide to go the way of
the manufacturing and automotive industries.


I have given the retail industry cement and a bucket they can choose to build a
stepping stone or a stumbling block. It is my hope that we make the right choice.
One thing I can absolutely guarantee is those retailers that choose to implement my
recommendations, will be celebrating at the end of 2012 and those that don‟t will
hear the fat lady sing for their organisation.


About Romeo Richards

Romeo Richards is the founder of The Retail Education Center, a division of The
Business Education Center. The Retail Education Center provides the most in-depth
and comprehensive retail profit protection training.

He is also the creator of the Retail Success Hexagram, a framework that teaches
retailers how to:

 Increase sales
 Increase staff productivity
 Reduce shrinkage
 And ultimately increase profit.

He is the author of:

 84% Most Effective Strategies for Increasing Retail Profit
 48.8% The Most Effective Strategies for Reducing Retail Receiving
Shrinkage
 43.5% The Most Effective Retail Profit Protection Strategies
 27.9% The Most Effective Retail Shrinkage Reduction Technologies
 27.8% The Most Effective Retail Employee Theft Reduction Strategies
 24.5% The Most Effective Non-Perishable Shrinkage Reduction Strategies
 15.6% The Most Effective Perishable Shrinkage Reduction Strategies
 14.3% The Most Effective Shoplifting Reduction Strategies
 12.24% The Most Effective Retail Employee Error Reduction Strategies

Romeo has also written numerous articles, whitepapers and best practices on retail
loss prevention and profit protection. In addition to more than one hundred
instructional videos on retail profit improvement that can be found online.

Romeo has worked with some of the UK‟s largest retail organisations such as Tesco,
Marks and Spencer and Brantano. He has provided training and consultation to the
largest retail organisation in the Middle East.


His forthcoming books on store design, Store Design Blueprint – How to Design an
Attractive But Profitable Store, and visual merchandising, Visual Merchandise – How
to create a Beautiful yet Profitable Display, will be published in February 2012.


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