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.
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.
