Manufacturers and retailers have been scrutinizing the ongoing out-of-stock (OOS) problem for years. As we know, this OOS dilemma is hurting revenue growth for both the retailers and manufacturers involved. The average 8% to 10% OOS, which soars to around 15%, even 20% during promotions, leads directly to lost revenue.
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In recent years the British retail sector has been working to reduce their environmental impact. Consumers are becoming more environmentally conscious, and as retailers follow this trend, they stand to gain invaluable customer loyalty. Many retailers are quite rightly championing their green credentials as part of their competitive advantage.
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When retailers fall short of their expectations, whether it be a measure of same-store sales or not meeting profit goals, a common practice in the industry is to completely reorganize their business plan. Falling behind same-store sales can be attributed to factors like increased competition, or an expansion in the number of stores that could negatively impact the bottom line of existing stores, or even wrong assortment or missing services. Regardless of the cause, the main goal of a reorganization is always to increase revenues to lead to higher profit margins.
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In basic terms, private equity firms are much like venture capitalists and angel investors. By this I mean they are interested in making successful investments in private companies. There are differences though, between the types of investments and the types of companies these investors work with. The most distinct difference is the fact that private equity firms tend to buy majority control of already existing companies, while the other investors normally look for emerging companies with the potential for success, and may not invest enough for majority control. Private equity firms are looking for success by investing in established companies with positive cash flows and the potential for rapid growth.
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With all due respect to the analysts, journalists and consultants who make a living keeping track of all the companies that comprise the retail industry, it has been my opinion for some time now that the popular measures reported on the first Thursday of every month known as comparable store sales, which so many of us spend at least a day per month thinking and talking about, are like George Clooney’s S.A.T. scores. They just don’t matter.
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Last week more than 1000 companies, from all over the world, representing different areas of retail came together for the 101st NRF Big Show in New York City to share ideas, innovations and information. Covering several days, NRF showcased the latest ways that retailers can look to improve their business.
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In the past 16 years I have spoken with a variety of leading retailers. Some had good data, others great processes, some with well organized teams, all with various operational efficiency. In their own way, each of these retailers are successful, but they all have potential for additional growth and profit opportunities. Profit amplification is the solution that enables retailers to best utilize their data, people and process to increase growth and improve profits.
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It’s that time of year again, when everyone begins to make New Year’s resolutions, and it should be no exception for retailers. I know that 2012 forecasts have already been made, and the sales goals have been submitted, so the bigger questions becomes, how do you plan on reaching the 2012 goals.
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The traditional ways of looking at retail profitability considers customer purchasing behaviors as well as product costs, costs to serve the customers, operational expenses and other such factors.
Grocers profitability is affected even more by secondary factors, typically related to the complexity of the vertical: Perishables and short shelf life—from a daily newspaper to crispy lettuce; relatively high level of DSD—ranging from bulky products to local fresh; the unique costs of operations—high utility bills of refrigerated displays, labor intensive replenishment and more. Service departments such as bakery, butchery, and deli are adding sales and customer traction yet they have so many inherent threats to profitability.
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Traditionally, retailers view shrink as the only form of “loss” they experience. However, there are more aspects to it then realized. Damage, waste and margin erosion all contribute to a company’s margin pressure. High utility bills, cash handling, register errors, general carelessness, cost inaccuracy, and pricing errors can also turn bottom-line profits into losses.
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