All Retail Management Should Know This
A recent white paper from Robling gave some very good advice on how to improve retail management in a recession, it’s worth a read. However, I want to challenge one statement – “Why compare the prior year, or even plan, when a business’s target shopper is most likely struggling?”
A core aspect of retail management is identifying a variance, drilling down on why the variance exists and adjusting your strategy or tactics to reduce it if its negative, or exploit it if it’s positive. Three common ways of creating a variance are measuring actual performance against:
• Plan
• Last year
• Most recent forecast.A common error retailers make is adjusting the plan, when the variance is material. Once in a trading season, you must never adjust the plan. Why? Because the expense budgets of the company were based on the original plan. If you lose sight of the original plan, you may not pay enough attention to expense management.
The right option is to re-forecast sales, margins and inventory levels regularly – weekly, monthly and seasonally/half yearly. Then re-forecast future expenses when the changes are material enough to dictate action.
Keeping the forecasts and the plan separately allows you to respond rapidly to current changes but also to help improve next planning cycle, when you reach the right time.
And why compare against last year? When trading performance against last year is worse, it won’t be worse everywhere. Some products or departments will be doing better. Some stores should be doing better. Identify those in your variance analysis, assess why they are doing better, and then develop tactical plans to exploit that fact. It may not eliminate the problem entirely, but it can certainly reduce the pain.
It’s important to train all your management to think like this. If you have access to our WIKI, you can read the longer version here.
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Posted by Brian Hume
7th June 2024
