Oliver Milman and Michelle Hammond
10 ways retailers can flourish
If you’re in retail, there’s a good chance that you’re keen to see the back of 2012 as quickly as possible.
As our sister site SmartCompany reported this week, more than 650 retail store closures have been announced since the beginning of the year, and more than 1,600 workers left without jobs.
Firms such as Fletcher Jones, GAME, WOW Sight and Sound, Dick Smith and Speciality Fashion Group have all had to downsize as consumers continue to save rather than spend. Myer has become the latest to announce cuts, with 100 staff set to leave the department store chain.
With the big retail players struggling, it might appear that any start-up operation – with a fraction of the marketing and buying power – stands little chance.
However, the shifting retail landscape isn’t all doom and gloom if you are savvy enough to recognise the trends that impact your business. Indeed, some retailers can even flourish, given the right business model and strategy.
So, how can you do it? We've picked out 10 things retailers need to focus on if they are to survive and prosper, as told to us by the experts over the last 12 months.
To read each tip, click on the tabs below.
1. Know your customer
Brian Walker, managing director of Retail Doctor Group, says retailers need to determine who their core customer is before they begin operating.
“If your key customer is a young woman, what’s her lifestyle? What does she do? How does she interact with social media? How are you relevant to that? Smaller businesses need to be particularly adroit at this and act accordingly,” Walker says.
Similarly, National Retailers Association spokesman Michael Lonie says retailers need to be honest with themselves about whether the stock they’re carrying is of value to their core consumer.
“Ask yourself whether the product you’re carrying is what the consumer wants, and not what the shop owner thinks the consumer should have,” he says.
Dr Colin McLeod, the former executive director of Monash University’s Australian Retail Studies Centre, said last year that local retailers like Lorna Jane and Aesop are prime examples of businesses that understand their customer and consistently bring them what they want.
“Even though they are a few years old now, [both retailers] started as ideas in their founders’ bedroom at home and grew into very successful retail chains,” McLeod said.
“There are lots of stores that sell women’s active wear or skincare products, and many of these stores carry some of the most powerful brands in the world, but these companies have found a way to be successful because they have a business philosophy and culture built around an outstanding experience for customers.”
2. Location, location, location
According to retail consultant Deb Templar, the basics of good retail will never change, and this includes location.
“Find an affordable location with good passing traffic,” she says.
However, don’t fall into the trap of going off foot traffic alone as you could find yourself in a busy shopping centre but an empty store – where you position yourself in a centre or street is often more important than the location.
“In major shopping centres, there are so many people walking past but retailers forget the key words – walking past. People aren’t necessarily there to shop,” Templar says.
“If you are going to operate in a shopping centre, I suggest you go and watch what people do to gauge how many stores they actually enter and where they’re located.”
3. Invest in your staff
In order to control costs, you and your staff may need to put in additional hours, particularly if you’re a small retailer.
“Staff may have to work some rosters that don’t suit their lifestyles,” Lonie says.
Additionally, Australian Retailers Association executive director Russell Zimmerman says staff training should be a key focus for any retailer, regardless of how big or small they are.
“As retail sales figures are in decline and it becomes increasingly hard for households to part with their dollars, businesses should look at training their staff in order to maximise the dollars that come through the front door,” he says.
“Staff should be adequately trained in customer service and product knowledge, and start-ups should be sensitive to consumer trends and what their customers’ needs are.”
4. Move dead stock
According to Lonie, this is an obvious strategy yet it’s one that many retailers overlook. He says businesses need to move dead stock as quickly as possible.
“If you look at the way in which some of the American and European retailers run their stores, they only display stock for a short period,” he says.
“Dead stock is dead money, so if you’re going to discount on anything, discount on that.”
“Ensure you’ve got good relationships with your suppliers, so that you’re in a position to move stock regularly, because you don’t want to be carrying excess stock on the shelves.”
Retailers are repeatedly told to focus on the “customer experience” by investing in elaborate store fit-outs and offering in-store perks such as free champagne.
But according to Zimmerman, traditional retailers will soon face a lot less pressure to fork out on these features as they seek to strike a balance between their online and offline operations.
Zimmerman says even though the retail scene is changing, he believes most traditional retailers will continue to need a physical presence.
“Although smaller retailers can establish an international presence on their website, most of them will still want a site in a shopping centre to ensure passing traffic is able to gather that trade,” he says.
“Where you’ll see a change is where retailers become savvier about their online and offline operations. For instance, they may start to keep the bulk of their stock in much cheaper places than shopping centres and therefore won’t have to pay as much rent.”
“One idea might be to divide the shop by having a display at the front, with the back half of the store used to stock items and tend to the online aspect of the store.”
6. Make your marketing count
The way in which you advertise your business to Gen Y will be different to the way in which you would advertise to retirees. It’s therefore imperative you choose the right channel for the right audience.
“Generation X and Generation Y don’t follow normal advertising channels. Social media has taken over, which means they only read what they want to read,” Lonie says.
Walker cites Australian retailer Bettina Liano as an example of a brand that failed to utilise the right channels for its core market.
“They kept too low a profile... When you operate within a niche, you need to be full-on in a social media context, have a strong CRM platform and strong viral marketing,” he says.
Rather than limiting yourself to one medium, Zimmerman says start-ups need to look at multichannel retailing as way of reaching new and existing customers.
“Our experience is that smaller retailers are embracing the opportunity to communicate with their customers online, even if this means effectively using social media sites to update loyal ‘friends’ or ‘followers’ about new stock or sales,” he says.
8. Learn from the greats
There are reasons why some retailers are successful and others aren’t, so take inspiration from the ones that do it well.
“Two that spring to mind are Zara and Apple,” Templar says.
“Zara has its supply chain in order – new product dropped to shops twice a week... They’ve taught customers to ‘buy it when you see it’ because there’s no guarantee it will be there next visit or even if it will be restocked.”
Apple has a similar approach to Zara in that it fosters a “must-have” mentality. Their customers sit on waiting lists to get the latest and greatest gadgets, making their products seem more special.
“The lessons from both are: know your customers and do things differently. Create your own cult following,” Templar says.
9. Stay focused
Lonie says the collapse of clothing and footwear company Colorado Group sends a strong message to other retailers to ensure their offering is clearly defined, particularly if they operate within a niche.
Lonie says high prices – characteristic of niche markets – must be justified with a very specific stock range.
According to Walker, businesses must be very clear about the market they wish to pursue and why they believe an opportunity exists.
“Ensure the innovation and penetration of the product is very much in that segmented space, otherwise the danger of overlapping [into another market] and confusing consumers can be quite high,” he says.
10. Set the trends
Don’t wait around for every other retailer to implement new technologies or systems before you come on board – go out on a limb and be the first; it will help you to stand out in the market.
“No matter the category, the retailers who have the most success will be able to find new and innovative ways to reach their customers and make sure their brand remains relevant,” Zimmerman says.
“Whether this is looking at customer service, exploring online possibilities, implementing new technologies or reviewing processes in their supply chain or product lines, retailers who innovate now will reap the benefits moving forward.”