a view on costs

in these times when shoppers are scarce we are often looking for ways to cut or fix costs. this allows companies to guarantee the percentage return for shareholders. i was recently reminded of two ways to do this.

a friend of mine works for a company that totally “zero-bases” their budgets every three to four years. this stops costs from growing just because they were there the year before. the slightly more controversial part of this process is that it is accompanied by a condition that the new budget includes a 10-15% decline in headcount.

the other way, which may sound simplistic, could also be used to motivate staff. the objective is to compress your costs and revenue into a work day. then calculate at what “time” you start to make a profit. a recent example showed profit generation starting at 4:55 pm…pretty scary

i find this method useful as it implicitly associates costs with time. the biggest costs stand out when put into something as finite as one work day. projects can then be initiated to address specific costs. for staff, targets can be set to move the “profit time” by for example 2 minutes, which in turn is linked to an increase in profitability…

traders and whitecoats

just spent an amazing evening with two principal scientists from oracle retail's optimisation solutions group in cambridge massachusetts, usa. their names however, would not have been out of place in the line-up of the rajasthan royals, or any other of the ipl teams for that matter.

they both had phd's from ivy league schools and work in a team of 35 phd's...wow!
their grasp of inventory theory and levers that affect retail sales was fantastic. their ability to systematically break down a complex problem into its component challenges and put these challenges into a logical order to solve, was simply brilliant. the intelectual intimidation factor was high.

we discussed size curve optimisation , markdown optimisation and replenishment optimisation, over some great food and red wine. for any person who enjoys intellectual jousting and floyd, it was heaven.

i am discouraged by the gap between these guys and the people who run retail. the retailer is notoriously "technology-phobic", and instead of recognising this, the technologist has filled the world with three and four letter acronyms, and gave the world the dot-com and bomb. as a result, technology is often seen as a neccesary evil.

the tragedy of this outcome was evident to me tonight. here were two guys who could save/make a retailer a large amount of money, without changing store, product or people. someone who trades just needs to guide them, listen to their logic and trust their solutions.

i challenge you to find the "propeller-head" in your i.t. department, or even an oracle scientist, call her in, and really try to understand what she would like to do...it could mean a lot of money in these lean times.

the job of the techies amongst must however be to make themselves "understandable" to the person who sells the goods...no more tla's!!!

Chocolate chicken?

i saw this in the pick ‘n pay store in willowbridge a week or so ago. those chocolates are R60 a box and yes, those are fresh chickens and dustbins beside them.

a wise person once told me that you cannot complain about your shoppers’ perception of you…you gave it to them.

we give them these perceptions by consciously and unconsciously telling them stories (recent post). we tell them in adverts, windows, store fittings, staff greetings, product range, pricing, the events we sponsor, radio interviews…even product adjacencies. what perception does the scene above create?

i am a big fan of pick ‘n pay, and raymond ackerman in particular. mostly it is because of the consistency over years, of the story he has told. we now “inspire him”, but he has always been “on our side”. he has been relentless in telling this story. we believe him too, as is evidenced by the massive support pick ‘n pay received during the extortion incident.

this week he penned an article in the cape times. in it he outlines what has to be done by the suppliers, retailers and the government to help us deal with rising food prices.

my concerns about the new story and the attempt to chase the wealthier consumer are twofold.

firstly, is it possible change mrs jones’ view – she totally buys that pick ‘n pay is on her side and i am not sure she wants a new story.

secondly, it is going to require a huge effort to get the story consistent across all the communication channels.

i am rooting for you mr ackerman and so, i am sure, is mrs jones (we always support those on our side!).

for the foreseeable future though, i will be getting my luxury food items from woolies….

who's that lady in the umpire's chair?

welcome back!

it'll be interesting to see what all those public holidays did for retail sales...i was in cavendish today and was completely underwhelmed by the amount people shopping. during my time off i spent some time building a website for ker!ching. it's not going to win any awards but it is better than "the future home of..." that was there before. let me know what you think.
now for today's post...

i am a firm believer in concentrating on your offer and making it unique, rather than worrying about the competition. there is something i want to write about competition though. i have been into more and more stores recently where there is an elderly lady sitting on a tennis umpire's chair just inside the door.

these stores invariably have the word "china" in their name, and this old lady is their equivalent of the cctv camera. by way of example, i have been in two stores in particular, one in port alfred in the eastern cape and one in belville, between the middestad mall and the taxi rank. their assortments and pricing are very similar - and yet they appear to be family run businesses. mom is behind the till, the kids on the sales floor and of course, gran up on high in charge of shrinkage prevention. the question i have is "what is the relationship between these stores?"

bigger retailers know their competitors... their stores have similar signage, employees cv's come across their desks, their results are published in the press. people like raymond ackerman, whitey basson, doug murray, steve ross and many others have media profiles.

the problem with the "china shop" is not that we don't know anything about it, it is that we aren't trying to find out. who's doing the buying? who's doing the planning? where are the dc's? if they are family businesses, who is financing them? (i have even heard rumours of mafia involvement) what are their maintained margin targets? etc etc etc.. my point is simply that we study our traditional competitors very well, sometimes only because they are visible.

i hope to learn more about the "china shop" retail chain but encourage all retailers to look beyond their "old foes"...