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Business Today = Change
Doing Business in a Difficult Economy

October 2008

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Page 1 of 3 It seems that everything you thought you knew about how to succeed in business just doesn't work. Today everything in the world is interconnected and what happens in Europe, Asia, America or the Middle East affects everyone. Very few business leaders fully understand what is happening, why it is happening and what they need to do to respond as business changes from prosperous to difficult, competition increases and margins shrink. Your customers vote with their dollars and with your business behavior, your budgets, and your strategies you hope that something will work.

Strategies must be developed that address the current situation and how to move your business forward. You must understand your leadership's mindset, employee's behavior and your customer's response. You must also honestly assess your operational foundation. If there are weak operational structures you chose not to address in good times, when business get tough, these operational weaknesses might determine if you make it or not through a downturn. What was successful yesterday may not work tomorrow. Underlying problems must be understood and addressed. Both large and small businesses must take an honest assessment of their business model, brand position, the current reality and then embrace change. What is going wrong?


No clear strategy

Many retail businesses today are the shape and size they are today more by accident than by design. The company has grown and evolved with a life of its own, rather than being driven by a clear corporate strategy.

Too many retailers are not prepared to make hard decisions when it comes to rationalizing their company, their brand and value propositions. Unproductive stores remain open even though they are not profitable because they feel it is too expensive to close down, pay off the lease and move to a better location. What was a great location 10 or 20 years ago may not be the right location now. The hard reality is that there is no room for sentimentality in retail. If a location is not viable, it is not viable. A location that is making just enough money to pay the rent is not a good enough reason to keep it open. If you consider the amount of management attention required, labor expense, logistics costs, marketing support and potential brand busting of a bad store, the return may be much better if you relocate to a better location or close the store altogether.

If a customer does not clearly understand your value proposition, you have lost. When you invite customers into the store and disappoint them because of poor presentation, sterile environment, excessive out of stocks, poor customer service or non-competitive prices... your customers will evaporate.


Upside down structure

When the corporate office becomes the center of the universe, you are far removed from the day to day realities of retail and have lost sight of why you are in business.

When you ask your corporate employees what they do for a living, they say, "I work in marketing, HR, logistics, buying, advertising". The answer should be retailing. These responses are symptomatic of a very common attitude - retail exists to provide money to keep the corporate office running rather than the corporate office exists to help the retail stores satisfy their customers and make money.

Everyone subscribes to 'the customer is king'. For every corporate employee the most important customer is the store manager. Unless he buys into what you are doing, your business plans will never get executed properly.

Ultimately everyone working in the corporate office needs to understand that they are directly responsible and accountable for retail store performance.


Poor management

Field management is the critical link between the corporate office and the retail stores organization. It is the conduit through which strategy is transformed into action. Frequently field managers are not well managed themselves. They sit comfortably between retail operations and the corporate office and may not be held directly accountable by either.

Field managers must be accountable for implementing basic retail disciplines and also supporting and coaching to increase standards, maximize sales and profitability and assure that the customer experience is the best.


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