Retail entered this crisis in bad shape. The industry was bloated with too many stores, too many websites and oversized ranges. The inevitable consequence was deteriorating trading economics. Restarting will be slow and phased. But when the phasing is complete the dust eventually settles, we will have a materially smaller non-food sector.
Many will not make it but being just a survivor will not be enough. The constant threat of extinction is likely to ensure the leadership team’s eye is more on costs than the imperative, revenue. Revenue should determine what costs are in any business. It defines what is needed, what can and what cannot be cut, and where investment is required. And getting this right is about addressing core customers above all others.
Becoming progressively bloated is the result of decades chasing growth at any price. Many need to jettison the fat: far fewer stores, smaller footprints and the central, pivotal issues – edited ranges. This must be demand-driven and is the heart of any retail business – your core customer and what they want and expect to buy from you.
Looking at the state of the retail nation pre-Corona identifies the winners once the dust has settled. They are businesses that entered this period financially strong with distinctive offers like Primark, Selfridges, Costco, TKMaxx, Reiss, B&M, Home Bargains and Hotel Chocolate. All have very clear customer focus which in turn determines ranging. They have resisted the lure of expanding their offers to attract a wider customer base and generate incremental sales. They understand these incremental sales would adversely impact stock turn, inventory carrying costs, availability, and lead to higher mark downs, all hitting margins.
Whatever your current SKU count, you cannot afford slow-moving items your peripheral customers might want. Ignore your peripheral customers and start giving your core customers the attention they deserve. This is the business that your future depends on. Understanding what they want must drive range editing built around the key price points in each product segment.
Choice is not a function of quantity, but of relevance. The tyranny of too much choice is bad for your customers and your financials. A core part of customer engagement is them trusting the retailer to make the initial choices for them. This is a fundamental prerequisite of success in the emerging market.
** Optimising range editing must be evidence based. I support retailers and stakeholders in areas like this, and with strategic advice. If you think I can help, drop me a line – email@example.com