Retail and wholesale in Australia are getting increasingly difficult with more International brands entering the market and a slow retail environment. This is putting pressure on sales and margins and in turn is triggering shareholders and banks to demand tighter controls to mitigate their risks.
Businesses are coming under pressure to increase ROI through increased sales, controlled expenses and properly managed cash flow. For most retailers and wholesalers, inventory is one of the key assets (if not THE key asset) that directly impacts all three levers – sales, expenses and cash.
Retail going through a tough time
In general, Retail throughout the world is going through a rough patch. The U.S. is on pace to have more store closures this year than any year in recent times. The list of brands / retailers who have experienced hard times (often attributed to poor inventory management) is staggering. Some of the big names in the US include JC Penney, The Limited, Circuit City, American Apparel, Payless, Sears and Radio Shack. Even Macy’s is having to shut stores.
In Australia, we have seen too many retailers struggle and often succumb to the difficulties of running a successful retail business. Dick Smith and Retail Adventures (Crazy Clark and Sam’s Warehouse) were two high profile failures that had inventory issues that contributed to the businesses being liquidated. To name a few in an ever-growing list, other Australian retailers that have seen some rough times recently include Herringbone, Howards Storage, Payless Shoes, Laura Ashley, Perfume Empire, Robin’s Kitchen, Marcs, Pumpkin Patch, Borders (a while ago), David Lawrence and Rhodes and Beckett. Many of these could have been / could be saved with better inventory controls.
Early warning signs
There are simple warning signs of a company that has potential inventory issues. These signs can develop on their own or more often as a group of signals.
Causes of Inventory Problems
There are three main areas of interest when looking at the reasons behind the problems:
How to fix the Problem
Unfortunately, there is no silver bullet when tackling inventory problems. It is necessary to address several areas to get the wheel moving in the right direction. Typically, a process will tackle a handful of issues from the list below:
Benefits of Strong Inventory Management
The impact of well managed inventory is wide reaching and highly beneficial to all aspects of the business:
If you would like to learn more about how you could improve your inventory management to benefit your business, please contact us at firstname.lastname@example.org
Mike Holtzer – Owner, The Retail COO Group
Challenging, questioning, confronting! Experienced Retail / Wholesale CEO, COO and CFO with over 25 years of International Executive Management experience in public and private companies spanning over four continents: Australia, North America, Asia and Europe.
His proven leadership and operational management skills have assisted multiple wholesalers and retailers around the globe. His no-nonsense approach gets things accomplished quickly and efficiently. With his experience and pragmatic approach, Mike is able to identify the source of an issue and develop clear and concise solutions.
You’ve landed the management gig. Let me start by saying congratulations. But before you get too carried away, it’s important to remember that (at this time) you’re nothing more than an outsider. That means you’ve got a lot of impressing and learning to do.
It’s also worth pointing out that resignations can follow structural changes, so you might find a few unwanted letters on your desk when you walk into your new office. Combine that with figuring out what’s what, and you’ve got one hell of a challenging road ahead.
In any event, there are some things you can do to bring yourself up-to-speed quickly and ensure your team accepts the recent change.
Start by gathering information
You can’t just walk into your new role and act like you know everything because we all know that isn’t possible. Plus, that fancy title you’ve just been awarded isn’t going to be enough to win over an existing crowd. If you want respect, you need to earn it.
The one thing you can do is gather as much information as possible and start teaching yourself about your organisation and team. You should learn:
It’s crucial to start off on the right foot and be prepared to ease the transition period for everyone involved.
Make a great first impression
Management changes in any company can make existing members of staff feel uncertain and apprehensive. When you first walk through the door, you can’t blame your new team for questioning whether or not you’re going to be a great person to work with. There’s only one person that can prove you are worthy of the role and their approval – and that’s you.
It’s likely that your personality and management style will differ from the person’s shoes you’re filling. That’s perfectly fine. Having said that, you need to show everyone that you’re happy to be there. Make sure your body language reflects that of a leader who genuinely wants to learn the ropes. You also need to keep your eyes and ears open and your mouth shut in terms of making important decisions early on.
Establish rapport one-on-one
Getting to know each employee as a person will help to form some trust and enable you to learn the fundamentals of his or her job. It also helps to put your new team members at ease with you as a person. Meet one-on-one and start by asking questions about their current tasks and responsibilities within the company. You can even ask about what they’d like you to bring to the table as a manager and any issues that have been hindering them before you arrived.
Once you’ve established a bit more about their role, ask them about their family and hobbies. You can also share some of your own stories and personal interests. It will show that you care about getting to know them, which in term, can lead to staff members being more open with you. Just make sure you make the time to meet up often with every person, especially in the first few months.
Hold team meetings
It’s a great way to grow your team and bring in fresh thinking, which are two things everyone in your organisation can benefit from. Holding regular team meetings also gives your team the opportunity to speak off the record and in front of each other. You can encourage interaction with some simple questions, such as:
These are all important questions to ask when taking over an existing team. You can add to them and ask your staff whether there are any other things they’d like to discuss in your meetings. As time goes on, your brainstorming sessions will change – but always ensure your meetings are about work only and not the personal traits of any employee.
I should also point out that you absolutely must take notes during group meetings. You might find that certain individuals make comments that would be good main topics for future meetings or valuable points that you’d like to follow up on in one-on-one sessions.
It’s a lot of work, isn’t it? However, you’ll be amazed at how quickly you can build a strong and loyal team when you manage your staff well from the get-go. Good luck.
Recently, I came across this article about the Leadership Lessons You Can Learn From Clemson’s Dabo Swinney. Some of you may not know this but I graduated from Clemson University so I was interested to see how the coach of Clemson’s football team applied the principles of Good to Great to achieve success.
There are great leaders and there are bloody awful leaders. As for the rest, they’re merely inbetweeners. Now, I don’t know about you, but I know which part of the bench I’d want to sit on. Not the left or the in the middle. I’d only want to be on the right side of that leadership bench.
While you can’t get a degree in great leadership, you can learn valuable lessons through experience. Even better, you can learn the fundamentals of leadership very early on in your career. And – quite frankly, the earlier you learn, the more likely you are to have a better and more successful future.
Did you know that when he became Clemson’s permanent head coach, it was Dabo Swinney’s first head coaching job? Obviously, the man had a lot to learn and that’s what he did. In his first three seasons coaching the Tigers, Swinney lost 16 games. In the following five years he’s only lost nine games. And in the last two years he has only lost one game each year and has vied for the championship one year and won it the next.
A great leader will continuously develop and improve in many ways throughout their professional career. However, you need to have a real desire for constant self-improvement. As a COO or Director, there will always be new things to learn that will help you mature and evolve. But that’s not all. You also need to challenge every member of your team to keep improving.
I mean – how else do see your company reaching new levels of success when you don’t allow room for growth? When you push yourself and your team, you’ll also notice a boost in positive energy, which will motivate everyone to keep reaching for excellence.
Surround yourself with star players
One thing that Swinney is famous for is accepting a lower starting salary so that Clemson could afford top coordinators. Here’s a man who was willing to sacrifice his own paycheck to ensure that he surrounded himself by the best and brightest minds. The best part though is that Swinney took advantage of those minds. He didn’t micromanage or try to tell them what to do; he just let them do what they did best.
The same rules apply to your business. Surrounding yourself with the best tech, marketing and operations experts means that you won’t need to constantly worry that everyone is doing their job. You can trust that everything is running as it should.
That doesn’t mean you should have favourites by the way. The moment you make it obvious that you prefer your top performers and start to ignore everyone else, you are going to land yourself in tricky territory. It’s perfectly fine for your employees to make mistakes and slip up every now and then. You just need to help these lower achieving individuals become star players.
Set expectations for your team and offer guidance to anyone who struggles. A great leader will know how to bring out the best in every member of their organisation. Plus, it shows that you care about them being happy in their work. Yes, surround yourself with star players, but don’t ever be put off by helping others to get their bums on that bench too.
Always be positive
Unless you’re a Vince Lombardi, Nick Saban or Bill Parcells, it’s unlikely that you can inspire and lead your team with fear and intimidation. If you can, that’s great, but otherwise, keeping a positive attitude like Swinney is the best approach.
Even when your company is going through a rough patch, kick the bad times in the teeth with some fighting spirit. If everyone else around you can feel your negative vibes or see that certain obstacles are getting to you, then they’re likely to behave in the same way.
Think about it. Can you picture a great leader who is well-known for being negative and fearful? Would you want to hire or work with someone like that? Always be unfailingly positive, regardless of how good or bad the situation. Of course, you need to be realistic and understand the brutal facts – the tough times are there to challenge you, but when you smile in the face of your troubles, you’ll learn how to navigate the bad times, and in turn, become a stronger leader.
Leave the ego at home
As Theodore Roosevelt once said; “Nobody cares how much you know until they know how much you care.” This statement is absolutely true. If you’re only concerned with getting credit when things go right, then you are never going to be a great leader. And anyway – no one expects you to be perfect. Nor should you expect your team to be the same.
Make sure you always put your self-interest at the back of your mind and show your people some support. This is especially important when your team has achieved success, even without your help. The same can be said for when something goes wrong. Have a little compassion and take responsibility for any bad decisions and anyone affected by them.
Have you ever thought about the stories behind the great retail businesses you see? Many people think great organisations are often overnight successes with outstanding facilities and teams to make it happen. I can assure you that very few great retail businesses get to where they are now without persistence. Their transformations come from persistently and consistently building their retail empires for many years.
With so many Australian retail companies clueless to the fact that fads and gimmicks rarely work to jump-start their success, it’s no wonder they fail miserably in business. If you aren’t prepared to put in the time and effort it takes to go from good to great, then you’ll just end up in a cul-de-sac.
Don’t be a doom loop fool
Author on the subject of company growth, Jim Collins discovered during research that good to great transformations never happen in one fell swoop. So why are an alarming number of retail companies taking all kinds of detours in the hope of reaching their desired destination? It makes no sense to me. However, there are a few things that you need to look at.
The doom loop is a concept created by Collins that involves reaction without understanding, new direction, no build-up of momentum, and disappointing results that lead back to reaction without understanding. Think of it as a vicious cycle. You frequently attempt to launch new promotions with great fanfare to motivate your team and fail to produce sustained results because of the underlying problems. Waste of time, right? You bet your last dollar it is – and there’s your doom loop.
When you combine superficial solutions (such as promotions) with no understanding of your underlying issues, the doom loop occurs. Often, short-term solutions that have a temporary impact just end up making the primary problem worse. Don’t be a doom loop fool.
Be a persistent flywheel
Collins uses the metaphor of a flywheel to represent great companies that have momentum. A flywheel requires many small pushes to get it running in the beginning, and with every push, it gradually increases in speed. The breakthrough moment is when the speed begins to work for the organisation. No significant push can be identified as the one big push that makes a good company launch into greatness. Instead, it takes daily persistence and discipline.
The flywheel will only continue to move when your retail company:
It’s all about every member of your organisation wanting to be on a winning team while contributing to producing sustainable results that keep them motivated and excited because their hard efforts pay off. When your co-workers see that you have a plan developed from understanding, they’re more likely to want to be involved and help you achieve great things over time.
Companies that fall into the doom loop try and skip all the key steps to achieving the breakthrough moment and jump in blind. All quick fixes result in is a forward and backward movement that can’t deliver and last. Ultimately, you need the right people on your bus to begin with and the discipline to follow the flywheel approach to set a path for greatness – and stay on the right track.
Never Succumb To the Technology Trap
The experience most consumers will have with a digital retail service is a self-service check-out (like many major supermarkets); however, over the past couple of years, there have been a number of amazing technologies for retail businesses. This could include anything from the collaboration of Myer and eBay to launch the first virtual reality department store, Neiman Marcus’ “Memory Mirror”, Afterpay’s online payment instalments or Temando’s intelligent fulfilment solutions.
That said, when you hear about a new technology that claims to be the latest and greatest ever made, do you rush out and invest in it in the hope that it may add value to your retail business? If you’re the type of company with a habit of investing in technology for the sake of it, then you need a reality check. It’s time to turn your back on the technology trap and start using your common sense.
In his book Good to Great, Jim Collins it wasn’t a surprise that more than 80% of great companies do not rank technology as one of their top five reasons for making a great company. So, unless a technology fits squarely in with your Hedgehog Concept, you should ignore it.
Does the technology you use fit in with your Hedgehog concept?
Good retail companies often look to technologies to help take them to the next level, whereas great companies always use technologies as an accelerator to enhance their Hedgehog Concept. When a technology aligns with your Hedgehog Concept, you need to act like a great company and become a pioneer of it. If your Hedgehog Concept doesn’t drive the use of a technology, you either have to settle for parity or ignore it completely.
I’ve seen leading edge technologies that have been pioneered by great companies. However, I’ve also seen the same technologies in “comparison organisations” and witnessed them fail to produce the same results.
Before jumping on the technology bandwagon, you need to ask yourself:
If you answered no to both questions, just forget the bloody technology and move on. It’s so easy to panic in fear of being left behind, but you need to stop worrying about what technologies your competitors may or may not be using, as they will never be the answer to making you great.
The bottom line
Technology should only be used as an accelerator, rather than a creator of momentum. While I understand that it can be hard to dismiss the hype of current technologies, you need to have absolute discipline and steer clear of any technology trends that don’t support your Hedgehog Concept.
As Norwegian politician, Christian Lous Lange once said, “Technology is a useful servant, but a dangerous master.” Never use technology as a primary means of igniting transformation – but if you can, always become a pioneer in the application of carefully selected technologies.
Why You Should Create A Strong Culture Of Discipline
Have you ever worked for an organisation and wondered if it’s the lack of leader and worker discipline that has prevented it from rising to the next level? I have – and I’m not alone in my thoughts. Business expert and author of Good to Great, Jim Collins has stated: “a culture of discipline is not a principle of business; it is a principle of greatness.” After all, great retail companies that grow and continue to succeed are led by self-disciplined leaders who encourage a deeper culture of discipline.
I’m not talking about dictatorship or forcing behaviours and rules. No one likes a tyrant. It’s about creating processes and systems within your company that keep your workers motivated and focussed on ensuring you build a strong foundation of discipline as a team.
However, the breakthrough point can only be reached when you achieve a seamless culture of disciplined people, disciplined thought, and disciplined action.
Regardless of how small or large your organisation and your management structure, discipline must start at the top of your retail chain. If there’s a lack of discipline at the head of your team, problems among staff can easily escalate. It’s always up to leaders and CEOs to set the right tone and culture of a business – which is why it’s crucial for you to adopt Level 5 leadership qualities.
Level 5 leaders are humble with huge ambition for their organisation rather than themselves. Not only are great leaders proven to be better at creating a culture of discipline, but they also praise their workers and take personal responsibility when the shit hits the fan.
As a leader, it’s up to you to build discipline in both thought and action by setting clear expectations, reviewing performance, and rewarding disciplined behaviour. You also need to provide those who are unwilling or even unable to help you sustain such a culture of discipline with a one-way ticket off your bus.
In my last article, I talked about the Hedgehog Concept – and how retail businesses who are like hedgehogs are able to transform the complexities of a business into simple and profound solutions. The Hedgehog Concept also involves setting a simple business strategy to ensure accelerated growth through three key questions including:
You need to be honest and disciplined in answering all three questions without being distracted by outside opportunities to find your Hedgehog Concept and stay within the three circles. It takes disciplined thought to understand the three circles and say no to anything that doesn’t fit within them. Without disciplined thought, you won’t create anything great at all.
To ensure you successfully execute your main business focus and strategy, it’s essential that you take disciplined action. Be sure not to confuse reactive action for proactive action, though, or you’ll end up like many good and average companies that struggle to see long-term growth plans succeed. Start with a ‘to do’ list and a ‘stop doing’ list.
Ask yourself – which actions best support the Hedgehog Concept and which ones don’t? It’s up to you to figure out and strengthen the discipline to do the right things and eliminate anything that falls outside of the Hedgehog Concept’s three intersecting circles.
Essentially, you need to stop:
You’ll initially need to do some experimenting to build a culture of discipline and responsibility, as well as define specific goals. On-going analysis of your strategy is also key to ensuring your retail business stays on track and you can establish any minor problems before they become too big to rectify.
Ultimately, in order for your business to work, all three concepts must pull in the same direction. But remember – a culture of discipline is not just about action. It’s about building a culture and team of self-disciplined and passionate individuals who engage in disciplined thought and ignore opportunities that fall outside the three circles. Only then can you take disciplined action to ensure the flywheel (your retail business) can really take off.
What really is The Hedgehog Concept all about?
That’s a very good question, and one I often get asked. The Hedgehog Concept comes from the book Good to Great, by Jim Collins, and it outlines three questions for organisations to ask themselves.
From understanding what drives your business, what you’re great at and where your passion lies, the Hedgehog Concept should be used to help keep everyone on your business focused and grounded. I also use the same principle to simplify my very challenging and complex work life.
Like the philosopher, Isaiah Berlin, Collins sees the world’s leaders as either hedgehogs or foxes. Hedgehogs only know how to roll up into a spikey ball – and do so without fail time and time again. Foxes try all sorts of tricks to attack hedgehogs, without success – meaning hedgehogs always come out on top. Let’s take a look at the traits of foxes and hedgehogs in more detail.
Foxes vs. hedgehogs
Firstly, you need to ask yourself if your company is a hedgehog or a fox. For example, a retail enterprise that is like a fox tends to pursue many things at the same time, try to be all things to all people and view the world as a complex place. Conversely, businesses that resemble a hedgehog focus on the one thing they are great at and simplify the world’s complexities into a basic concept to ensure they achieve the desired results.
Which one do you think makes you a great retail business? I really hoped you guessed the hedgehog. It’s ok if you’re a fox, though, as every good retail organisation has the ability to become a great business.
The three circles
By now, you’re probably wondering what differentiates a good hedgehog and a great one. The quick answer – a fully developed Hedgehog Concept. Every company has a strategy – but you should focus your efforts on one thing and doing that one thing well to increase your chances of success.
Let’s take a look at the questions from the three circles of the Hedgehog Concept and see how you can apply them to your retail business.
When it comes to the retail industry, everyone wants their products to be the very best of their kind. The truth is that there’s a huge difference in wanting to be great at something and actually being great at it. Remember, you’re not going to offer things that appeal to every individual – and that’s perfectly fine. It’s about defining the areas that aren’t working well and have little success, as well as understanding what makes your business thrive.
You have to determine the single denominator such as profit or robust cash flow and pick the one thing that has the most sustainable impact on your economic engine. I’m not talking about quick profit or fast cash here. You need to identify the bread-and-butter of your business and make it as solid and sustainable as possible and keep it that way in the long-term to ensure you stay truly great.
Without passion, you will not last in the retail industry, nor will you make a great retail company. Ask yourself if you would still go to work where you are now if you had already earned all the money you need to live till your dying day. If you answered yes because you think of yourself as the luckiest person in the world to do what you do and believe you have something that’s the best it can possibly be (and greater than your competitors), then you have winning passion.
Your Hedgehog Concept
Once you’ve answered all three questions, you need to turn your attention to where your answers overlap. Two out of three isn’t enough. Perhaps you are passionate about your business and your company is the best in what it does but you aren’t making any money from what you sell. Maybe you make lots of money from delivering great products but feel your passion lies elsewhere. Either way, it’s not worth it.
In the business, all three circles have to intersect if you want to succeed in being great. Take note of the great success of top retailer, Lululemon. Not only are they passionate about fitnesswear and make money at it, but they are also the best they can be in it.
You’ve got to have it all – including something you can be great at, the right fuel to drive your economic engine and passion about your work. Your Hedgehog Concept lies at the intersection of the three circles and fulfils all three principles. It may take some time and research, but I can assure you that greatness is only achieved by being consistent and taking a disciplined, yet simple approach.