How affected are you by these hurdles? And can you change the way you manage your business to overcome these pitfalls?
1. COMPETING ON PRICE ALONE?
How many times over the last 25 years have I heard about stores that have had to shut their doors because they have structured their business on the false premise that consumers and tradies base their buying decision on one and only one thing – price.
If this was actually the case you would not be in business. Yes there are consumers who spend their whole day on the phone ringing around to get a price on paint but fortunately they are in a minority.
So how about developing a unique selling offer so that the customer wants to deal with you? Everyone has a unique selling feature – you just need to discover what it is and condense it to handful of words.
Next time, while watching the television, just look at the advertising from nationally based organisations and note the unique selling proposition at the tail end of the ad.
2. LOCATION, LOCATION, LOCATION
If turnover is falling because you’re too close to a competitor, there are two things you can do. The first thing most retailers do is cut their price.
The only problem with this is that you will probably not sell enough to get back the Gross Profit you have lost – particularly if the competitor matches your price or goes below it.
So, if you do need to relocate, make sure it is for the right decision and not just because the weekly rent is cheap.
If moving is out of the question it is important to drive your unique features by way of service, staffing, product range to name just a few.
3. CUTTING PRICES – WHOSE FAULT?
I find it amusing in that every workshop I have conducted in this industry over the last 25 years (and I mean every one of them), competitors get a mention.
And guess what is said to me in every workshop? “How can we get our margins up while they are undercutting us on paint, tools, fasteners etc, etc etc. We never do this it is always them!”
Everyone points the bone at everyone else in this industry. Of course you need to be competitive but you also need to cover overheads or go under.
If you need to be competitive on price then get your product mix correct and make sure you understand the importance of stock turns, debtor control, and negotiating with creditors – in other words, understand your cash cycle (a subject I have previously written about in this publication)!
4. TRADING IN THE UNKNOWN?
It is quite incredible in 2015 that many businesses are competing in a marketplace of which they have no real time knowledge!
Today, more than ever before, information is available to develop marketing plans to make sure your sales mix suits the customer mix.
The internet is an excellent tool and suppliers are also a useful tool to give your local market data in the products they provide.
These are just four hurdles which need to be jumped. In my next article I will complete the list of challenges and offer some simple strategies to overcome them.
Peter Cox is a senior consultant for Macquarie Advisory Partnership based in Sydney. He has over a decade of experience training and consulting in the retail hardware industry. He conducts key-note addresses, and management and sales workshops, which are aimed at improving profitability and liquidity in one of Australasia’s most competitive retail environments. Phone 0061 438 712 200 or visit www.petermcox.com.au