Economizing the Store: In a recessionary environment, how are retailers maximizing resources and doing more with less?
Source: DDI Magazine – February 1, 2009
By: Jessie Bove
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This article is the first installment of a two-part series titled “Weathering the Storm.” This first article focuses on how retailers can economize the store during a downturn, while the second installment—coming in March—will zero in on the opportunity for innovation during an economic recession.
We have all read the headlines of doom and gloom, store closures, layoffs and bankruptcies. We have all heard the experts’ negative predictions and forecasts of turmoil—and that dirty “R”-word (recession) one too many times. And we all know that the current economic climate, to put it simply, sucks. But enough is enough. Let’s temper the complaining and ease the worrying, and let’s actually do something about it. In tough and uncertain economic times, we can either choose to sit back and nervously watch from afar, or we can take control and seize the opportunity for change. Now is the time.
Prioritize and simplify
The main challenge in weathering today’s economic storm has become: how can retailers do more with less? With less resources and fewer personnel, retailers are tasked with creating the same end product with less money, and the first step to solving the riddle is prioritization. “Only work that is critical to the business or project that will produce return on investment is considered,” says Jane VanAuken, vice president of store planning and design for Shopko Stores Inc. “The nice-to-have projects are being set aside. Prioritize workload and do only things that create value.”
Janis Healy, associate vice president, visual merchandising of Orchard Supply Hardware, echoes the same sentiment: “Look closely at your expenditures and focus on the need-to-have versus the like-to-have—what will the customer notice versus what are you doing to satisfy your own creative ego?” Healy also emphasizes the need for simplification. “Look at every process and simplify where possible,” she says. “If there isn’t a process in place, now is the time to put one in place and document it. Simplify any project rolling out to stores to minimize labor at the store level.”
Ron Wince, CEO of Guidon Performance Solutions, offers up minimization tips, such as improving check-out processes to lessen customer hassle. “Make it easy to say ‘yes’ to shopping,” he adds. “Begin with the customer in mind. Eliminate non-value-added activity that store employees have historically been responsible for or minimize their work content so they may focus on serving the customer.”
Wince also advises against blanket headcount reduction efforts. “Make sure you filter cost-cutting efforts from the perspective of the customer,” he says. “This can be done very quickly to allow rapid response to the current market conditions.”
At Collective Brands Inc., the company has responded to the downturn by reviewing every department and realigning many areas to make sure they are able to respond quickly to every turn of events, says Mark V. Looper, director of store planning and design for the company. “Challenge expenses and every aspect of capital costs spent in stores; make sure that what you are proposing is cost-effective and also supports enhancing the customer experience in-store,” he advises. Looper also suggests that there is no such thing as overcommunication. “Keep open and honest dialog with staff and associates to quell the rumors,” he says.
Along with efficiency and resource consolidation, retailers also need to focus on the best locations—as well as proper design and merchandising—to capture consumers’ attention and respond to their needs, explains Navid Maqami, principal, architecture, for Atlanta-based GreenbergFarrow. “This is also a good time to cut costs that do not have an impact on operations, such as energy usage,” he adds.
Most importantly, prioritization and decisions must be made swiftly. Responding quickly and efficiently to make needed adjustments to plans and business expectation is crucial. “Make the tough decisions now—don’t wait until it’s too late to recover,” VanAuken stresses.
Focus on the brand message
In a downturn period like this one, retailers would be wise to focus on basics, rather than excess. At the core of this idea, the most basic element should be a renewed focus on the brand. Retailers must not forget who they are and what they stand for, and must continue to communicate this message to their customers. VanAuken details that value and brand presence are the key marketing and in-store messages that Shopko has concentrated on to speak to today’s consumers. “Stay the course and maintain your brand identity,” she says.
Retailers faring well in the current economy, such as Urban Outfitters Inc., understand what makes their brand unique and are able to reinforce the value of the brand, Wince adds. As Healy reiterates: “Be true to your brand in all that you do—let the customer know that you know who you are and what they should expect from you, and don’t waver. Build relationships with them to gain loyalty.”
In this difficult economy, the brand message that a retailer sends out should be timely and relevant, both in-store and elsewhere. “Retailers should re-examine their prototypes and design standards to make sure they are as efficient as possible, and to make sure they effectively convey value,” Maqami notes. “Interesting and new design strategies can play a key role in communications shifts in consumer attitudes.”
The fact remains that money is tight—for consumers and companies, alike—so projecting a message of value has become the successful hot button to entice those consumers who have lost the confidence to buy. “For shoppers, ‘needs’ are more important than ‘wants’ in today’s climate, and any retailer equipped to convey this to the consumer will do better,” Maqami explains, highlighting Wal-Mart, BJ’s and McDonald’s as examples. “The best way that retailers can attract cash-strapped consumers is to make sure [they are] perceived as offering the best value,” he notes. “Keep in mind that perception is more important than the reality.”
The in-store message needs to project value and quality without clutter and confusion—reiterating the theme of simplicity and efficiency. Over the holidays, many retailers—from Saks Fifth Avenue to Tiffany to Target—introduced gift tables merchandised and grouped in attractive price-point levels in order to create that perception of value for price-conscious consumers.
Advertising “Specials of the Day,” or other visual callouts highlighting products that may help consumers save energy, water or money, are small changes that can dramatically impact the in-store environment. In addition to emphasizing value, Looper says Collective Brands has placed focus on the family. “That is where Americans are the most concerned in these times,” he adds.
Store design will play an ever-increasing role of importance in creating the perception of value moving forward. “In contrast to recent design approaches that convey a sense of luxury and opulence, we need to shift to a vocabulary of basics,” Maqami explains. “Consumers need to feel that they are walking into an environment where they will get the best deals—signage and display are key in communicating this attitude.”
The supplier relationship
Retailers are not alone in their quest to economize the store—manufacturers and suppliers are working on it, too. In order for manufacturers to be better suppliers for their clients during the current economic crisis, Brad Somberg of B&N Industries, who also is chairman of NADI and an A.R.E. board member, emphasizes the need for manufacturers to understand the client’s business first and foremost. “If you have an opportunity to sit down and talk with your clients and get a reality check on their business and their internal initiatives, then you have an opportunity to partner with solutions to support those initiatives,” he says.
Somberg recommends value engineering, as retailers are looking either for a lower price or for increased longevity in products and services. He also adds that creativity is key: “You need to set yourself apart from others that are just selling capacity. Find the services you are experts in and offer them up.” Through some of the industry associations, Somberg says he has been able to create alliances, outsourcing to companies and working in partnerships when it makes sense. Clearly, having a large support system lessens some of the burden during a downturn.
To succeed, not just survive, during unpredictable economic times, retailers should focus on taking action quickly, creating value and maintaining brand identity. Meanwhile, the lines of communication should remain open—between the company and its employees, as well as with its consumers—and be ready for the next step. “You cannot afford to bury your head in the sand and pretend this is not happening,” Somberg says.
Now, more than ever, is the time to break away from the mold, to conquer the fear and to take advantage of the situation. Now is the time to make the future happen.
All contents © 2009 DDI Magazine. All Rights Reserved.
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