Quick Insights: Which Retail Segments Are Thriving? Or Not?

The Retail Owners Institute®  is proud to be the exclusive provider of Key Ratios Benchmarks - the true "vital signs" of retail businesses - in our unique Five-Year Financial Trend Charts.

Available exclusively from The Retail Owners Institute • www.RetailOwner.com

And now, the latest results - including 2014 - are ready! All updated, and published on The ROI site.

Nowhere else can you find such easy access to this insightful management information. And The ROI makes it available for free! Just go to this page on The ROI site to choose from 53 retail segments.

On each segment's page, you will see The ROI's Five-Year Trend Charts for the 6 key benchmarks The ROI has identified as most important and meaningful for retailers to monitor:
  • Pre-Tax Profit %
  • Gross Margin %
  • Inventory Turns
  • Debt-to-Worth Ratio
  • Current Ratio
  • GMROI 
Please take a look at these latest retail financial trends. We believe they offer invaluable perspective on your own stores' performance.

Then, by all means, be sure to take advantage of The ROI's Retail Benchmarks Resource Center.  Whether you are a retail owner, an aspiring owner, a student of retailing, a store manager, a buyer, or simply(!) want better financial results, this is the place for you! 

Available online, 24/7, and FREE! Discover all of its useful and time-saving tools.  

The ROI's Five Year Financial Trend Charts are based on data from Risk Management Associates Annual Statement Studies. RMA gathers financial statements from banks across the country, and compiles those numbers for every business category, not just retailing, all based on the North American Industrial Classification System. 

Is it just us? 
Or does the 5-Year Trend for e-commerce profits look hauntingly similar to the Amazon packages??

Now Look Who's Reinventing the Grocery Store

No one goes into a hardware store to buy a 3/4” drill.
What they want is a 3/4” hole!

That basic Marketing 101 concept applies to grocery stores, too. Who goes to the grocery store to buy, well, groceries? What we want is DINNER! 

  • But, can you go into a grocery and find “dinner”? Or “breakfast”? Or, “great lunches”? No. Instead, there is a produce section. And then a canned goods section. And then the frozen foods section. Plus, an overwhelming assortment of choices, whether it is mustards or pickles or pasta or….
Meanwhile, consider the shoppers, who are increasingly purposeful. They have a shopping list, and they stick to it. They are spending less time (and money) in the grocery stores. And, a greater proportion of their in-store time is spent simply navigating the store (what they want is on the perimeter), or checking out. 

This is an industry that is ripe for disruption. And sure enough, that is happening. Consider how the meal-in-a-kit delivery services – e.g., Blue Apron, Plated, HelloFresh  – essentially are re-inventing the grocery store.
  • You sign up online; they deliver to your doorstep a box that contains the fresh, raw ingredients for 3 to 5 meals, all in the proper proportions (no wasted food or languishing jars of spices), along with explanatory recipes (with pictures) from their in-house chefs. 
  • You do the chopping, cutting, and cooking.
  • In 35 minutes or so, you sit down to a home-cooked meal.
  • All without the time-consuming demands of meal planning or traditional “grocery shopping”

Yes, This IS Retailing!

Alas, these new businesses do not regard themselves as retailers(!) But to us, everything they are doing is what retailers do: 
  • Selling to the ultimate consumer
  • Sourcing product from carefully-selected suppliers
  • Editing the selections - limited meal choices each week
  • Educating about new products or cooking techniques
  • Engaging the customer in an experience - in this case, home cooking
But Wait...There's More!
Very High GMROI
Plus, they do it all essentially on special-order. That is, customers sign up for next week’s meals; these services don’t carry inventory, but instead, buy only what they already have sold. 

High Growth Potential with Low Fixed Costs
And, as a web-based delivery service, they can grow their customer base at a faster rate than fixed costs. The 3 services we cited can deliver to 85%-95% of the continental U.S. (And HelloFresh also operates in Australia, Europe, and the UK.)

Remember, “value” for customers is benefits received for the burdens endured. 
In our view, these meal-kit delivery services are delivering great burden-reducing value to the customer! And, whether they realize it or not, they are reinventing the grocery store in the process.

We believe this offers, ahem, much food for thought for all retailers. 
  • What are the burdens that your shoppers must tolerate
  • How might you relieve those burdens?
  • How can you increase the value they receive from your stores?
  • And how can you do that before some “disruptive” competitor steals their hearts away??

Be Ready! New Patterns for Peak Shopping Days

You noticed it, right? That traditional lull in shoppers, between Thanksgiving Weekend and the 10th of December.  

That is just one of the predictable patterns within the Holiday shopping season. Next up: the surge this weekend, and then of course, next weekend, the last one before Christmas. That's when the shopping malls ask many stores to be open till midnight, right?

But, sure enough, especially this year, these "traditional" patterns are subject to another trend, the "digital disruption".
  • First, accept that the shoppers will certainly be busy doing their thing; it just may not be in your stores yet.
  • Instead, more folks will rely on the web for their window shopping, browsing, price comparisons, etc.
  • When they do show up in your stores, they are on a mission! Not browsing; just buying. 

This Year's Peak In-Store Shopping Days

So, when will in-store shopping peak? Not on the traditional last weekend before Christmas. Instead, watch for it to peak on Monday the 22nd and Tuesday the 23rd, and of course Wednesday, Christmas Eve. 

Why? Two main reasons:

  1. The "traditional" reason: those are the days when most men (and women who shop like men) actually do their buying.
  2. The "digital disruption" reason: the deadlines for buying online and having guaranteed delivery by Christmas will have passed. At that point, the customers will show up, and depend on stores to come through!
Those retailers who are anticipating these changes will be better able to effectively schedule their staff. You can likely schedule in anticipation of the Monday-Tuesday crunch.
  • And therefore, having "paced" yourself and your staff, you will be well positioned to deliver great customer service on those crucial, crunch time shopping days and evenings.
What better way to keep the Ho! Ho! Ho! in the Holiday Season?

Start Now to "Beautify" Year-End Financial Statements

For most of you, your fiscal year end (i.e., 12/31; 1/31; 2/28; etc) is rapidly approaching.

"So what?", you ask.

Well, whatever your year-end financial statement says about your business, you will have to "live with" for the next year or longer. And each vendor, bank, or landlord you share it with will judge your business by it. So, now is the time to dress it up! 

Is there a beauty parlor for retail businesses? Yes!

We just conducted two workshops at a huge trade show in Chicago. We taught those retail dealers how to financially beautify their businesses. (And some of these retailers are already making "dress up" plans.)

How Your Business Is Judged for the Next Year

Always remember: your debt-to-worth ratio is the #1 measurement of the financial strength (or weakness) of your business. So, how can that be improved? Here are 3 choices.

  1. Obviously, the more net profits that are added to your retained earnings from your P&L, the greater your equity/net worth will be.
  2. But, shrinking your liabilities (any and all debt) is the most impactful and controllable way to improve your year-end debt-to-worth ratio.
  3. "Controllable?" Yep. Shrink (sell off; liquidate) any assets you can (especially excess inventory) and apply that cash to paying down debt.

If you take these steps vigorously, there is a Miss or Mister America Pageant you can enter!! 

And best of all, this "financial beautification" is far more than skin deep. It makes for a much healthier business as well. 

The ApplePay "Wow!" Effect

 Consider these early experiences with ApplePay:
  • Both cashier and customer say "Wow!" as transaction completes.
  • Cashier explains "I haven't yet processed a return, but let's try it. Oh, it's done. That was easy!"  
  • The really telling sign: customer admits to feeling giddy(!) when paying.
Talk about a new "Wow! effect" in retailing. But for paying?!

Apple as "Enabler" of Online Retail Success

With the iPhone and iPad, Apple pioneered the user-friendly devices for accessing the web. In our view, Apple thus became the enabler for the success of Amazon and all online merchants.

Now, the ApplePay "Wow! effect" may make Apple the enabler for brick-n-mortar retailers as well. 

Seems only fair, doesn't it?

That Haunting Halloween Question (and January Payables....)

As Halloween arrives, here's a really spooky thought:
Will you have enough cash to get you through the next 3 months? 

How to answer that? With a quick cash flow calculation. No retailer should ever be without it! 

And don't worry. This does not have to be hard. A Cash Flow plan has just 3 parts:

  1. Cash coming in
  2. Cash going out
  3. The difference
And now, any retailer can know in minutes whether they will have enough cash to get through November and December and those January payables. 

  • Go to our online "Speedy Form for Cash Control." It is available free at our Banks4Retailers.com microsite. 
  • Then, fill it in for the next few months. It's like shining a light on that (Halloween) monster in the closet!

Then, one of two things will happen:

  1. You'll discover that you will be "cash flow positive"! Sweet! You can sleep at night!
  2. Or - gulp! - you will see that you will have a cash shortfall. But, better to know in advance, isn't it?! 

In either event, you still have time to make some adjustments.

Yes, You Have Choices

  • As you start filling in our Online Speedy Cash Flow form, you will see that you can put in numbers for up to 6 months
  • Or, choose to focus on a shorter time frame.
  • Or, disregard the column labels and have each column represent a week.
  • Or, you could choose to do it with The ROI's 3-in-1 INTEGRATED Cash Flow Calculator.  The choice is yours.

Depend on The Retail Owners Institute

Whenever you are haunted by cash flow questions, depend on The ROI. 

Nowhere else can retailers so easily look ahead, and "Turn on your financial headlights!" 

Time for Your "Inner Merchant" to Shine

As we have taught for years, anyone selling something to the ultimate consumer is a "retailer." 

However, only a small portion of these retailers are truly "merchants".

And now is the time the merchants can shine!

While we certainly are not economists (among other things), we are sensing that consumer confidence is generally stronger now than it has been in many Holiday seasons. 

And merchants recognize there is an opportunity to benefit greatly from a few carefully-selected additional markups this Holiday Season, and perhaps into the first quarter of 2015 as well. 

Don't by shy! If you have discovered unique merchandise and brought it in, do not undervalue your discerning choices!

  • Identify that unique, non-commodity merchandise you have. (Perhaps 5%-10% of the total.)
  • If you haven't already, take a markup that is bit higher on those carefully-selected items.
What's the worst that can happen? It ends up being marked down in 7 weeks?! Hmmm.

  • During that time, those 5–10 days before Christmas, all true merchants will be "dumping" (that's understood, right?) merchandise they do not want come December 26. 
  • So what if you still have some of this specialized merchandise at that time; you still are likely to generate some revenue from it.

But, between now and then, get that extra markup wherever you can! This is not the time to leave money on the table.

The merchants of the world assure you: this is not being greedy. It is being strategic

You know, like a merchant!!

Who REALLY Has First Dibs on Your Customer's Wallet?

Quick: Who are your major competitors? Amazon? Target? Wal-Mart? Other specialty store retailers in your market? 

Yes, all those and more.

But, what about the "stealth competitors" affecting every retailer – whether you are selling apparel, furniture, motorcycles, books, smart phones, or whatever?

These competitors are hiding in plain sight. And, in our view, they significantly impact – and reduce – retail sales.

What are they? The monthly recurring charges that support our digital lifestyle.

Just think about it:

  • There are the monthly cell phone data plans, for every member of the household. (Yes, even the grade schoolers. And, maybe even Grandma & Grandpa.)
  • Then, the monthly cable TV charges.
  • Plus, the monthly charges for high speed internet access in your home.
  • Of course, there are the monthly charges for "streaming" online entertainment services, such as Netflix, Amazon, now Wal-Mart, and others.
  • And, monthly online access to newspapers, magazines, etcetera
We call these kinds of monthly expenses "the enablers" of our digital lifestyles. And for retailers, each one represents a major "stealth competitor."
For many households, these monthly charges can add up to hundreds of dollars! And today, essentially no one can avoid them; they are treated like another "utility" charge. Is it any wonder consumers feel like they have less "spending money"?

The High Cost of Connectivity: Erosion of Retail Spending

All of this connectivity comes at a cost to retailers. Money that is being dedicated to these monthly enabling charges is not available to be spent "at retail."
  • Traditional "disposable income" is significantly eroded. And that happens every month, essentially out of sight. And to almost every household. 
  • Overall retail sales, by definition, are reduced. That is, "retail spending" tracks sales of merchandise, not services.
Enabling Our Digital Lives
So, given the stealth competition of enabling our digital life, can Holiday retail sales meet the predictions of some prognosticators to be up 4%-5% over last year? If so, that would represent quite a feat.

Or, more likely, consumer spending will be up, but... spending on what?!

Amazon's "Store" In New York City – Our Contrarian View

Not a Store, But a Brilliant Service Center

There has been a bit of a buzz about Amazon's plans to open a "store" in New York City, on 34th Street. This storefront will enable customers to pick up their Amazon purchases, versus having them shipped; to return merchandise; and, likely, to see and purchase Amazon products such as the Kindle Fire, etc.

  • We imagine that Amazon will have a real "Wow!" effect available at this location. Perhaps digital displays of their television programming? Showcasing of their products. Demonstrations of how to use their various shopping apps. And no doubt, a special line/faster service for their Amazon Prime customers.

Some pundits claim Amazon is trying to emulate Apple; others compare it to e-commerce specialists like Warby Parker opening brick-n-mortar locations. 

But our comments, when contacted by the American Business Journals, revealed a far different perspective. In our view, what Amazon is opening, on 34th Street, is a service center, NOT a "store."

  • That location is at the confluence of virtually all of the transit choices in NYC: Penn State, Grand Central Station, major subway stops, and of course, taxis. Perfect for commuters to pick up their items on the way to their train.
  • If Amazon really wanted to "do retail", it would have selected a retail location: SoHo, or Madison Avenue north of 57th; etc.
  • By offering this service, Amazon is able to promote "same day delivery" without having a fleet of delivery trucks entangled in NYC traffic. (NY traffic cops and – cabbies – will be delighted with that news!)

Maybe a Defensive Move?

Here's another thought: this could be viewed as a defensive move by Amazon, in response to other retailers' in-store pick up programs. (Also known as "click-n-pick", where the customer orders online, and picks up from the store.) 

As always in retailing, this will be fun to watch!