Tales from the Great Recession for Retailers

Now is the ideal time to analyze what you did right and what you did wrong and plan accordingly for hopefully improved post-recession times.  Having gone through the busiest season of the retail year, your point of sale or retail POS system should be loaded with valuable data for your examination.  But data is only valuable if it is actionable.  If you don’t know how to retrieve that data or interpret it, ask your IT provider to assist you.  Knowledge can help you avoid costly and possibly fatal mistakes in the future.  To begin your analysis, you might want to consider the following points:
  • Did you buy the right merchandise?

Most retailers went lean and mean this season so it was critical for them to choose merchandise that was going to move at reasonably high margins.  By running a “what’s hot, what’s not” report in their retail POS system, retailers could see what categories were the most profitable in the past and what categories should be kept  to a minimum or discontinued altogether in the future.  Lean and mean will continue to be the strategy in the foreseeable future as long as the unemployment rate remains high and discretionary spending is tight.

  • Did you order enough merchandise?

This might sound contradictory to the lean-and-mean strategy, but many retailers ordered so lean and mean that they experienced “stock-outs.”  Customers with cash in hand were forced to go to other stores or shop on-line because retailers ran out of merchandise early in the season.  Not only did these “stock-out” stores lose sales, they probably lost all future sales from these disappointed customers as well as the referral customers retail management system they would have recommended.  To further complicate the situation, “stock-outs” weakened post-holiday shopping and gift card redemption.  Although overstock can be costly, it rarely results in the loss of customers.  Careful planning and regular stock balancing among multiple locations is essential.  Running regular sales, on order and on-hand reports in your will keep you on top of this potential problem.

  • When you ordered merchandise, did you anticipate the sell through, profit margin and the markdowns properly?

Savvy retailers anticipate their sell through, profit margins and markdowns before they order merchandise.  They examine historical data and key performance indicators from past sales and make educated decisions whether or not to buy similar merchandise.  They also look at trends.  A category that was hot yesterday might have run its course and not be hot today.  Does anyone remember Beanie Babies?  Will the same fate be true for Zhu Zhus next year?

  • Did you leverage your vendors to get the best deals and the best terms possible? 

In hard times, everyone needs to share the pain.  Getting a lower price from a vendor is not the only way to get some relief.  You could ask the vendor to take back unsold goods after the holidays, or you could ask for extended terms.  If you don’t ask, you won’t get.  Run a report on vendor performance in your POS solution to find out who performed best for you.  High performing vendors delivered on time, enabled you to maintain anticipated margins, and produced the fewest returns.  They have earned your future business.  You cannot afford to squander your limited dollars on poor performing vendors.


  • Was your customer service remarkable?

Another strategy used by many retailers this year was to “make do” with as few personnel as possible to cut expenses.  While seemingly reasonable at first blush, this strategy often resulted in poor customer service.  Limited floor personnel could not help customers and lines at point of sale were long and frustrating.   These two problems alone could have long-term negative impacts on future sales not only from frustrated customers but from all those potential referral customers who were eagerly informed of the customer service nightmare.

 Additionally, this strategy can result in a substantial increase in inventory shrink.  The fewer personnel on the floor to watch customers as well as each other, the more likely theft will take place.  Although dishonest store personnel are the biggest source of shrink, today’s retailer is quickly becoming victim of well-organized retail crime rings.  The potential problems caused by not properly planning staffing patterns will likely far outweigh the payroll dollars saved.  There are simple reports in your retail management system which will quickly provide you with accurate data on the busiest and most profitable hours and days during the week.  These reports will help you to plan an efficient and productive staffing pattern.

  • DO YOU HAVE A MARKETING PLAN FOR THE NEW YEAR?

Your customers fall into many different segments.  Some may come into your store only once to purchase a special gift for a friend or relative.  Some may come in frequently and buy only markdown items.  Some might come in with less frequency and purchase fewer items.  Then again, some might be regular full-price shoppers with outstanding customer loyalty.  Unfortunately, the highly profitable customer is in the minority.  At most, they make up 20% of your customers.  Why then do most retailers keep spending promotional dollars equally for all of their customers if only 20% or less of the entire customer base is the life blood of their store?  Lifetime customer value is an increasingly important statistic in retail. The best customers are not only personally profitable but are also a great source of referrals.  When planning your promotional dollars, focus on the most-profitable customers instead of the “bottom feeders.”  The “bottom feeders” are opportunists and will always sniff out a good sale.  Again, your retail management system will provide you with quick and easy reports which will identify your best and worst customers.

DID YOU HAVE A SUCCESSFUL  E-COMMERCE STRATEGY?

While traditional “brick and mortar” stores were shaking in their boots this holiday season, successful e-commerce stores were experiencing unprecedented growth.  Many variables such as a flu pandemic, transportation costs, and weather concerns caused grief and consternation for traditional “brick and mortar.”  These concerns were not shared by e-stores.  Customers could shop in their pajamas and often received free shipping right to their doors.  To be successful, you need to dedicate resources to an e-store to keep it fresh, competitive and profitable.  If e-commerce was not part of your overall retail strategy this past season, at least consider it for the New Year.

The New Year is usually a time when most people either make resolutions or look for fresh beginnings.  Very few retailers are sorry to see 2009 come to an end.  Consumer buying habits have changed dramatically over the past couple of years, and it appears that consumers will continue to be thrifty, price conscious, and discerning in the foreseeable future.  This new reality, however, does not mean they will stop buying altogether.  If retailers want to thrive in this new 2010 economy, they need to take advantage of the vast amounts of valuable information collected daily by their retail business systems.  Actionable and timely information is the now the name of the game.  Don’t you think it’s time to stop using POS as nothing more than a very expensive cash register?

ABOUT THE AUTHOR
Don Capman is President and co-owner of J.D. Associates, one of the largest distributors of retail POS software in North America. With Retail Pro, Retail-1, Microsoft RMS  and  QuickBooks Point of Sale in the company portfolio, J.D. Associates offers retail POS software solutions for specialty retailers. He can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it.

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