A couple of columns back, I promised to discuss the insightful message given by PRA Cebu Board member and Golden ABC CEO Bernie Liu on how to survive the crisis. It was a very well delivered speech and caused many a retailer to sit up and take notes. In fact, Bernie was deluged with requests for copies of his speech. I would like to share the key points:
Business cycles are just that, cycles : Irregardless how bleak the situation might look, it will correct itself. The key is , “How do we ride it out until the cycle corrects itself?”
1st Priority – Conquer The Fear : “Do not let fear paralyze us into inaction” The worst thing to do is to close our eyes and ignore the problem hoping it will go away. “Use this fear to spur you into action. Use this fear to heighten your senses. Use this fear to innovate.”
Use Fashion’s First Aid Kit : According to Rick darling of global sourcing giant Li & Fung, “The time to make changes is now when everyone is going through tough times and bad numbers. There are no sacred cows. This is not the time to hunker down. This is a time to be aggressive and make change.” The First Aid Kit is from Women’s Wear magazine, an industry staple read. It’s insights however can be applied to all industries.
First, Manage Cost and Overhead – “By controlling costs and overhead, profits can be saved from going the way of sales in hard times.” “ To cut costs, consultants recommend working backward. To make say 8% of sale as profit, figure out what the overhead must be to achieve that and then assess every line of expenses.” There are three ways of achieving this : Cut on capex, reduce expansion and renovation plans, close unproductive stores. Human Resource Rationalization, eliminate redundant jobs, consolidate functions. Outsourcing, outsource what is not your core competency.
Second, Be Conservative With sales & Inventory – “Profit is a function of inventory”. Vendors should undersell and retailers should underbuy, based on the theory of sales reduction over margins. High inventory levels causes retailers to massively discount to preserve cash flow, causing margin erosion as well as creating a discount effect on future merchandise, thereby creating a vicious cycle.
Third, Step Up Leadership – “The company needs to be at the top of its game to maintain market share and leadership is essential.” It is essential that a leader provides a vision and communicates it always. It is also essential to begin staffing the best people in order to train new leaders that can learn from the crisis and can adapt the learning to future cycles.
Fourth, Provide More Value And Differentiate – “Value can come from two avenues: price and product innovation.” According to William Lauder, CEO of Estee Lauder Cosmetics, this can be done in three ways: One, Focus on the consumer. Two, Create brand distinction. Three, Be price sensitive. For smaller companies that cannot compete on price, they can provide value through adding more design, integrity, versatility and longevity. “There are two types of business: one sells by price and the other by design. Companies should focus on design to create distinction and newness that can excite or inspire consumers.” Focus on branding and marketing, with special attention on developing trust with the customer.
Fifth, Deliver Customer Service - “Cut your expenses where you can, but don’t cheapen the customers experience.” More than ever, it is very critical to provide the extra service and the experience necessary to keep the customer loyal and happy.
Sixth, Expand Strategically - Retail expansion allows unique opportunities to negotiate better prices on rent. A broader consumer segment can leverage your risk. In this difficult times, opportunities exist for strategic expansion as well as capitalizing on more concessions from landlords.
Seventh, Follow the Demographics – “A good retailer is a person who serves their clientele. They have to be aware of what’s motivating, what’s changing the lives of their customers and adjust their inventories to accommodate.” We need to identify the target market better and adjust our product lineup to suit that market.
Eight, Exploit Technology – It is important to begin an online strategy. Internet sales allow for added volume at very little overhead. The cost of setting up a internet site is 1% of a brick and mortar store.
Bernie conclude, “Times are hard, but definitely times are not hopeless. It’s just a business cycle, and right now, we should just all focus on surviving this cycle. When we are able to do this, we will definitely reap the rewards after.” This was an appropriate message and showed that PRA Cebu President Melanie Ng made the right call when she asked Bernie Liu to be the keynote speaker of the Second General Membership Meeting of PRA Cebu. Thank you Bernie for sharing with us your insights and expertise, and allowing many retailers in Cebu to dream higher and bigger and hopefully like Penshoppe, continuously think of new ways to “Express Yourself”.
Let’s follow the examples of these ordinary individuals as they strive to make a difference. Each week, let’s all get together and share knowledge, stories, experiences, information, all for the sole purpose of getting One Step Up.
For comments, suggestions or stories that you want to share, email me at stirspecialist@gmail.com , or visit www.stirspecialist.blogspot.com .