Times are tough for retailers. Consumer confidence is down. There’s an excess of retail space. Retailers are indebted. Competition is hyper-fierce. January’s UK retail numbers were the second-worst on record.
But the best can succeed, as long as – fundamentally – you really understand your customer.
Some vital areas to consider:
1. Planning the structure of the business
Today, it’s either niche specialists and the best generalists who survive. The mid-market, commoditised retailers struggle. Retailers need to do more than simply understand their target market; they need built-in flexibility so they can adapt quickly to customers’ changing needs. Any tools, initiatives and internal processes that support a more agile and flexible business model will be key.
2. Adopting a multi-channel strategy
The internet is not a panacea, but a fully integrated, invested and appropriate multi-channel offering is vital. Customers want the 24/7 levels of service that the internet can provide, and are fickle; if they have difficulty accessing goods or services from one retailer, they’ll simply move on to the next.
3. Harnessing the power of social media
Communications between consumers on social media sites are increasingly dictating purchasing patterns. Retailers must engage with consumers through social media. It’s the only way you’ll understand the trends and be able influence customers’ purchasing decisions.
4. Effective working capital management
Retailers need to obtain as much flexibility as possible in whatever credit facilities they choose, and also develop a deep understanding of how different seasonal cycles are likely to affect the business. Any cashflow pinches around rent quarter days – especially in June and September ahead of key trading periods –need to be planned in and managed carefully.
5. Coping with inflation
Input prices will continue to rise. So focus on supply chain management to control costs. Deploy forward purchase agreements, or similar initiatives, so you can focus on day-to-day selling, rather than battling unexpected price rises and changes in leasing contracts.
6. Choosing the right property – or dealing with existing limitations
Some retailers will not be able easily to exit unprofitable site. Turnover-based rents are helping to drive competition in the older retail property market, and may help retailers in the long run.
7. Encouraging greater footfall
Year-on-year footfall continues to decline. Pay greater attention to creating fun and creative “destination locations” that offer consumers more than just an opportunity to purchase their goods and leave.
Dan Coen is a director of corporate advisory business Zolfo Cooper.
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