'Great Ideas' for Retailers Shared at CE Week Seminar
Enabling retailers to get their financial act together was the primary focus of the “Great Ideas for Retailers” held during CE Week in New York City on June 26. The session, sponsored by CEA, was presented by Pat Johnson and Dick Outcalt, co-founders of The Retail Owners Institute (ROI), an online service that provides self-help resources and information to enable retailers to do financial projections, plan for their future and improve their sales performance.
Johnson and Outcalt delivered this seminar with the goal helping the retailers in attendance improve their operations—particularly from a financial point of view—to ensure their staying power in today's competitive marketplace.
“Our goal is that you can teach what we're going to teach,” Outcalt said at the outset.
“There's really one way that retailers fail, and that's financial,” Johnson said. “So our focus is on the financial stuff. We want to empower every retailer in the world to be able to manage their finances easier. … What really drives us is to empower retailers.”
Johnson emphasized the power—and responsibility—of the owner in any retail operation. “The biggest opportunity for growth, we think, is between the ears of the owner.”
She broke down the structure of a retail operation along these lines:
• The Owner: Their No. 1 responsibility is the survival of the business.
• President/CEO: They are responsible for advancing the goals of the owners.
• Managers: They have to figure how to meet the goals of the higher-ups, along with managing sales, margins and employees.
Outcalt spoke on how all of these people need to be on the same page to run a successful business. He cited the recent history of JC Penney as an example of a company that “got off track because there was not consensus. Owners need to come up with a strategy, a vision.”
From there, Outcalt discussed what he and Johnson feel is the crucial guiding document in any business: its financial statement. He worked up an example in which a retailer had sales of $3 million for a given year, and paid out $2 million for merchandise, leaving $1 million in what he referred to as “gross margin.”
Out of that $1 million, Outcalt explained, the business must pay out for its operating expenses, including rent, salaries, advertising, utilities and taxes. In his example, these expenses added up to $970,000, leaving $30,000 in net profit for the year.
The big question, he said, was what to do with that $30,000? “What is it?” he asked the audience. “Who gets it? Is it cash? Where does it go?”
The answer, Outcalt said, lies in the balance sheet that’s a part of every business’ financial statement. “Every owner would balance the balance sheet a different way,” he said, discussing how the usage of this hypothetical $30,000 net profit would be a crucial part of the balance sheet.
Going around the room, Outcalt asked retailers in attendance how they would allocate the profits on a balance sheet. Suggestions included hold onto $15,000 in cash, and investing $15,000 in additional inventory; or just outright keeping the money.
“Could the owner take it?” Johnson asked. “Yes, but you’d have to steer it into cash.”
Ultimately, she recommended, the best plan is to reinvest profits into driving more business. “Who are the most profitable customers?” she asked. “We have to be proactive, identify who these people are, and bring them into our store.
“Because I’m focusing on our very best customers,” she continued, “gross margins are going to go up, expenses will be down, and my profit goes up.”
The key to honing this focus, she said, is for upper management to reach “a consensus on which customers we’re going after—and which ones we’re not going after.”
Once those customers have been pinpointed, she suggested investing in aggressively marketing to them, through direct mail, online promotions and other outreach efforts designed to attract them into the store and make big purchases that will drive higher margins.
For further information on ROI and its services, go to www.retailowner.com