Know your customer
What are the key retail indicators? Why do your customers buy what they buy, and why do they not buy some of your other products? Understanding these drivers will help you make the right adjustments. Look at what products you stock – if you’re offering too wide a range of an item, your customers might find the buying process confusing and some items may never sell, therefore taking up valuable retail space.
Make use of lead and lag indicators – these are very useful for stock control and will help you buy products that will sell, and stop wasting resources on products that don’t.
Cash is king
Focus your management information on cash – having immediate visibility of cash and working capital will help you with forecasting and making adjustments to strategy, stock or promotions before it’s too late. Examine your debtor and creditor days regularly and implement strategies to ensure your payment is received before creditor invoices are due, or at least ensure that the cash to pay creditors is available when you need it. You may even want to consider invoice discounting.
What does the future hold?
The use of scenario planning is vital not only in corporate strategy, but also in short-term retail strategy. What if there’s a natural disaster in the area where your key supplier operates? What if a component manufacturer goes into administration? What if a container ship with any of your supplies is captured by pirates or has an accident?
While some scenarios are more likely than others, planning for any eventuality will help you put an action plan in place and minimise damage. The earthquakes in 2011 pushed many supply chains into disarray.
Also ensure that you consider internal elements – if your management team is not focused and engaged, some clear indicators may be missed and contingency plans will not be put in place.
How KPMG can help
KPMG’s retail experts have helped many retailers during the downturn – not just with company restructuring and cost cutting, but also making sure the right management information is put in place. We have also recently helped a major retailer increase profits significantly by analysing their management information, stock levels and footfall, advising them on store layout, merchandising and ranging.