Target Setting - for Store Managers

Targets for a typical store are like rains - they land from heaven and leave you wet (read sweat) all over !

In the absence of managers who are on top of their nos - area managers and operations manager use this as an excel sheet exercise to please their bosses at the start of the month (knowing that they will be able to come up with one reason or other by end of the month).

This is the start of mistrust and buffer at every level - and hence variable pay as a concept not being accepted in India.

Need of the hour is proactive store managers who can challenge this way of target setting.

An ideal store manager will set the targets in a simple three step manner :

Step I – Set Like for Like Growth objective
Look at the best of x% LFL (like for like) growth over last year same month and average of last three months.
(For eg - Last year Dec was 100 and company is targeting 15% LFL this year. On comparison of Sept to Nov achievement, LFL is at 18% - this automatically should give a confidence for 15% LFL achievement)

Once the broad no is agreed, move to step 2.

Step II – verify sales equation
Look at the sales equation – (refer previous blog.)
Sales = walk-ins * Conversion * UPT * AUV * (1-disc)
Put your achievement for last year same month in this equation and see what parameters that you will want to change.
For eg last year equation was
100 = 200 *10%*1*5((1-0)
From last three months, we have seen that Avg unit value has already increased for this season by 10%. Also our UPT for last three months have been 1.2. If we use same walk-ins and conv, it will lead us to achievement of 132 (32% growth over last year with same walk-ins and conversion)

Step III - Look at category mix
Once the broad no and KPI that will deliver that no has been agreed, deep dive into stocks.
Look at category wise sales and stock mix for the same month last year. Compare this with stock mix projected at the start of the month this year.
This is the most important tool with a store manager to keep brand and head office teams on their toes and also to serve the customer correctly at his/ her store.
Do not accept targets if the stock mix is incorrect. If I was the store manager, I will not only stop at broad category mix, but will deep dive into sizes for top three categories.

I hope – we will see more intelligent, proactive and assertive store managers in future. It is critical for success in retail

If someone wants to discuss formats for these , you can feel free to write to me at purohitvikas@gmail.com

Great by Choice - Jim Collins

Just finished reading "Great by Choice" by Jim collins.
Very simple read -with loads of numerical data supporting three basic "fundas"

1. 20 mile approach - talks about how imp it is to focus on doing what you have decided to do on a daily basis. if you have decided to run 20 miles a day - data supports the guy who runs just 20 miles per day (whether he is tired and not fit, or feeling extra energetic and fit - he does not reduce or increase the distance) v/s a guy who runs 30 miles when he is feeling great and 10 miles when he is not in the mood.

The illustration of how southwest airlines opened 3 sectors every year - year after year - for three decades v/s United and continental who opened 10 in good times and 0 in recession.

There will be critics who will say that with favourable tailwinds - why not run 30 miles. But I am sold on the 20 mile concept with my current experience.

2. Fire Bullets and then cannonball - How imp it is to try with bullets to set your aim correct and then accumulate all gunpowder to go for final charge. the importance of low cost, low risk and low exposure (to org) of experiments - and then pick the winners with data and fund/ fuel/ support them.

3. Oxygen Canisters - The guy who worries about oxygen when he needs it, v/s one who worries about it from day one. The funda holds true for insurance, SIP, early savings in life as well as cash/ debt exposure for the company.

In current retail scenario - one needs the leadership that can motivate teams to march 20 miles - in good times and bad times - one who can keep firing bullets and evaluate results without bias and ego, and one who do not risk future of entire organisation over egoistic store openings or so called "gut calls"

Retail Mathematics : One basic equation

Over last six years, i have conducted over 1000 interviews for store managers and store teams. To my disappointment, 99.99% of the people have been found lacking on basic retail understanding. It looks like we are creating a set of machines who know just two numbers - targets and achievements.... and nothing beyond that.
Simple questions like - "if you have been given a task to increase sales for your store by 20% over last year, what will you look at" - meet with the standars answers like "i will ask company to spend more on marketing" or "i will ask buyers to buy correctly for my store" .
For benefit of all others, who will go through interviewers like me, here is the equation

Net Sales = (Walk-ins) * (conversion)* (Average Unit Value) * (Units per transaction) * (1-Discount %)

hence to increase net sales :
1. Work on walk-ins - and DO NOT depend on marketing to drive walk-ins. Calls from customer database, acquiring new databases, better service resulting in increased frequency of customer visit - is what a store manger is supposed to drive.
2. Conversions - Most neglected aspect and a non measurable one too in Indian scenario. have never trusted these figures till date (be it guard with click timer or automatic walk in counter). Every single customer walking out, is a loss of sale - present or future.
3. Average unit value - if i have a store in the most premium mall of India - why will i want to drive sales through my entry  price points? One should understand how better understanding of consumers can help suggesting and selling higher price point items - which will result in increased AUV
4. Units per transaction - basket size as it is sometimes called. a dogged determination to increase this beyond two is required in every store. Whenever we have announced incentives, we have seen increase in AUV by 20-30% which clearly shows how much sales one looses in every transaction if employees are not completely motivated.
5. Discount - i have seen trigger happy brand heads who have "promo" as the solution for all increase in sales. It does not work that way. Control on discounts during peak season as well as judicious discount during EOSS is critical to optimal sales and profits.
And see how all of these can be done by people in the stores and not a marketing manager or buyer sitting in some office.

Career in Retail - Why ?

Career in Retail - a tough rewarding choice!

I was at a Management Institute on Friday, talking to students why they should consider a career in retail in today's economy.

While i will get into different options within retail in a separate blog, am trying to put together top 3 reasons why one should get into retail :

Reason No 1 - " there are no set rules still " - If you are one of the dreamers, who believes in old fashioned "create a dent in the universe theory" - this is the field. With hardly any work done on processes and management capabilities in Inian retail - the field needs people who hate to work with SOP's from day one in their job. No wonder, that people who deliver grow really fast. it took me 8 years to head a company, one of my friends became head of operations for one international brand in 5 years time.

Reason No 2 - "Young, fun and learning industry" - In one of my earlier jobs, i have stayed at a plant where average age was 50, and trust me - it was helll of a month for me. This industry is young, this industry enjoys college kind of culture at work - loves to see people making mistakes and learning from them.

Reason No 3 - "There is money - enough and more" - Yes, i have seen salary jump from Rs 2 lacs per annum to 28 lacs per annum for the friend of mine mentioned in point no 1. I have seen jump of 60 times for another friend who started her career with selling on shop floor. I have myself seen 15 times salary jump in these 9 years of my career.

In a nutshell - Learn, Earn and Fun - summarise three reasons to be part of this wonderful industry!!

Looking out for people who dream to create that famous dent in the universe.

Vikas

Retail Profitability - What is the answer ?

For the first five years of my career- the holy grail in retail was psfpd (per sq ft per day sales). All the numbers, buying plans, profitability projections, rental decisions - centred around what the psfpd projections were. The fact that India was shining (as they wanted to believe us) has something to do with this optimism (get the topline, profits will follow)
My next five years have seen shift to the level of obsession - towards Full price Sell Through and gross Margin % as the indicators of retail performance. Again - the recession, failure of many a retail ventures, and the perception that it is impossible to make money in retail has fuelled 180 degree shift.

In the last six months - working with arious teams- I have come to realise that age old "Rupee gross margin per sq ft" - is the term that will offer way ahead to people looking at profitability in retail.
While rupee gross margin per sq ft has always been the focus for bog box retailers, EBO's never looked at this as the concept to follow. No wonder there were missed opportunities on higher sales (trying to chase better gross margin %, or there were unprofitable ventures even after achieving stupendous psfpd's)

I am working on a matrix that can correlate the three. if the Disclosure policy of my organisation allows me to upload the results, should be able to do it in a months time.