News

Tips for Operational Excellence

BY CSA STAFF

Ask retail operations executives what their priorities are, and the answer comes down to the two T’s: Talent and Technology.

At the National Retail Federation’s Annual Convention & Expo, experts discussed how they are positioning their companies to for the economic comeback and the efficiencies learned from the downturn.

Sharon Leite, executive VP stores for Pier 1 Imports, Fort Worth, Texas, said that in the downturn, Pier1 turned its focus to its associates and the resources they needed to do their jobs in order to prevent a negative impact on the chain’s customer service delivery.

“It all starts with the talent,” Leite said. “We had to continually make sure that our associates were really connecting with our customers.”

Other top operational tips presented by Leite, along with Ben Teicher, senior VP and CFO of the Ratner Cos., included:

To tune up your talent, narrow the expectation gap. “Put in place customer feedback mechanisms so that you can close the gap between what you and your associates think the customer expects from you, versus what the customers are really expecting,” said Leite.

Dive into your data. Both Leite and Teicher support traffic counters in stores, in order to provide enough information to drive conversion rates. “Combine internal feedback from stores with the external feedback from your customers to ensure that you’re delivering a service experience that is spot on,” said Teicher.

Add discipline to your supply chain, reducing the number of times product is touched before it reaches the selling floor.

If it doesn’t add value, eliminate it. “We streamlined what we asked our field personnel to do,” said Leite.

Build partnerships, both internally and externally.

Make sure you make the right hires. “Finding top talent became even more critical over the last three years,” said Teicher. Tools such as pre-employment screening solutions can serve to up the talent quotient.

Leverage the knowledge and capabilities of your internal IT staff.

And, above all, make sure your business process works, then layer on the technology tools to help drive costs down.

keyboard_arrow_downCOMMENTS

Leave a Reply

No comments found

TRENDING STORIES

Polls

Are you hiring seasonal employees this year?

View Results

Loading ... Loading ...
News

Focus on Global Retailing

BY CSA STAFF

More than one-third of the world’s 250 largest retailers suffered a decline in sales in fiscal 2009 (encompasses June 2009 through June 2010), according to the Global Powers of Retailing 2011 report, whose results were revealed at the National Retail Federation’s Annual Convention & Expo in New York City. The annual report, from Deloitte Touche Tohmatsu Limited, identifies the largest 250 retailers around the world, provides an outlook for the global economy and an analysis of market capitalization in the retail industry.

The aggregate sales of the Top 250 totaled $3.76 trillion in fiscal 2009, down from $3.82 trillion in 2008, giving them a 25% share of global retail sales ($15 trillion).

“Those figures signify how important retail activity is its significant can’t be overstated,” said Richard Hyman, strategic advisor, consumer business, Deloitte, in a presentation at the NRF show.

Hyman noted that the 250 largest retailers in the world have been losing share of total retail sales since 2003, when they garnered 27.4% of total global sales.

“These retailers have massive scale advantages but they are losing share,” he said. “It appears scale may be a bit less important going forward. Retailers who relied on superior scale for their competitive advantage may have to think about adding a few more ingredients to their strategic armor.”

The world’s 10 largest retailers, led by Wal-Mart Stores, saw their share of total Top 250 sales slip in fiscal 2009, and their composite sales growth was stagnant at 0.2%.

“The top 10 fared less well than the total group of 250,” Hyman said.

But while sales for the global power players were down, profitability showed a marked improvement in fiscal 2009 as retailers tightened their belts.

“Costs have been very well managed, which has improved margins,” Hyman explained. “In fact, the Top 250 composite net profit margin rose to 3.1% in 2009 from 2.4% in 2008. But continuing to keep a lid on costs going forward will be a major challenge for retailers.”

The report also included analysis of the Q ratio of publicly traded companies on the Top 250 list. The Q ratio is the ration of a publicly traded company’s market capitalization to the value of its tangible assets. The higher the Q ration, the greater the share of a company’s value that stems from such intangibles. The composite Q ratio for the Top 250 retailers is 1.144 by comparison, Swedish fast-fashion retailer Hennes & Mauritz (H&M) had the highest Q ratio in fiscal 2009, with a 7.852 score, followed by Turkish discounter BIM (7.475); Coach (6.803); Amazon (5.760); and Apple/Apple Stores (5.362).

“It’s a tremendous testament to the strength of these retailers that they have received such a high rating in this added value metric,” Hyman said.

Future Growth: Hyman noted that retail consultancy Planet Retail has forecast sales growth of $6 trillion during 2011 to 2014, with the majority — 66.2% — of the growth coming from developing/emerging markets.

“The growth in developed markets has peaked,” Hyman explained. “There are too many retail mouths to feed, and too much capacity in most developed markets, which has led to a lower returns from floor space. The global prize is in developing markets.”

Hyman said that solid and effective local partnerships are key to doing well globally.

“Local knowledge and local credentials are increasing important,” he added.

Top 10 Global Retailers

The composition of the Top 10 retailers in the world remained the same in fiscal 2009 as it did the previous year, according to the Global Powers of Retailing 2011. However, sales declined for four of the chains: Carrefour S.A., Metro AG, Costco Wholesale Corp. and The Home Depot.

keyboard_arrow_downCOMMENTS

Leave a Reply

No comments found

TRENDING STORIES

Polls

Are you hiring seasonal employees this year?

View Results

Loading ... Loading ...
News

Supervalu looks to Save-A-Lot banner for growth

BY CSA STAFF

MINNEAPOLIS — There were three takeaways to come out of Supervalu’s third-quarter analyst call Tuesday morning: the deep discount banner Save-A-Lot will be the most significant catalyst for growth going forward; Supervaluaggressivelyis addressing pricing issues that have had consumers who are more accustomed to the “hi” in the grocer’s "hi-lo" pricing strategy shopping elsewhere; and while traditional Supervalu banners ACME, Shaw’s and even Jewel-Osco do not have a “For Sale” sign on their respective front lawns, at least not yet, they can be had for the right price.

However, following Supervalu’s disappointing fiscal 2011 third-quarter results and a second consecutive quarter announcing reduced full-year projections, the question many analysts seemed to be posing was not what if Supervalu begins parceling out its numerous grocery banners, but how soon?

“We do not feel stressed that we have to do anything [with regard to divesting assets],” Craig Herkert, Supervalu CEO and president, assured analysts Tuesday morning. That’s not to say Supervalu won’t entertain offers, though. “We will always look at our asset base and make appropriate decisions for our shareholders,” Herkert said.

But today’s market is a buyer’s market he added, suggesting that Supervalu is not yet in a position where a divestiture has become a necessity to avoid violating any financial covenants, at least not at a reduced value. “Within each of these banners … we have very successful stores,” Herkert said. And these banners are market-share leaders across several markets, he added.

The more immediate issue being addressed by Supervalu is its failed holiday-season promotions, particularly across carbonated beverages, soups and frozen foods, and a "hi-lo" pricing strategy that has many consumers cherry picking promotional deals but satisfying their day-to-day shopping needs elsewhere. “If three weeks out of four [our pricing is] out of line with what the market is, she’ll split her basket and get those products somewhere else,” Herkert said. “What we are trying to do is minimize that delta we have between our regular price [and promotional] price,” he said, and potentially recapture some of those lost baskets.

Repairing consumer perception that Supervalu banners are overpriced (save for Save-A-Lot) is not going to be easy, especially in the near term. Consumersstillare struggling in a difficult economic environment, and supplier prices next year are expected to increase between 3% and 4% on the low end to as high as 14% on the high end, Herkert said. “We are passing these [price increases] along to our consumers,” he acknowledged.

Another challenge in repairing any pricing gap is doing so without impacting EBITDA. However, Herkert maintained that when done right, lowered everyday retail prices do not necessarily mean a reduction in profit on the item level. Price corrections could increase turns, for example. “As we get those prices in line … we do see that [the consumer is] willing to buy that product from us on a regular basis,” he said.

However, in spite of the poor performance, Supervalu’s deep discount banner Save-A-Lot has proved promising, Herkert reported, and will benefit from the lion’s share of some $700 million in capital investments in fiscal 2012. “For our traditional banners, capital spending will go toward investments in technology to support our business transformation and store remodels,” Herkert said.

Another promising development associated with Save-A-Lot is the alignment with Rite Aid across several South Carolina locations. “This is a promising relationship for us,” Herkert said, that exposes Save-A-Lot to some prime retail locations and expands the banner’s demographic reach. The Texas Save-A-Lot co-branded stores targeting Hispanic shoppers — El Ahorro Save-A-Lot —alsoare performing well, Herkert said.

Save-A-Lot’s footprint has grown by 8.5% sq. ft. in the past four quarters and currently stands at 1,236 stores. The deep discounter carries more than 1,800 SKUs and represents a “full shop” Herkert said, as compared with the fill-in trips to convenience stores and the treasure-hunt opportunities available at dollar stores. Private-label penetration at these stores is as high as 60%. Those consumers receiving Electronic Benefit Transfers represent 40% of all transactions, up from 27% two years ago.

Following the call, Supervalu stock dropped to $7.54 in mid-morning trading from the closing price of $8.59 on Monday. Supervalu reported adjusted net earnings of 24 cents per diluted share, falling well short of analyst consensus expectations of 32 cents. Net sales for the third quarter ended Dec. 4, 2010, dropped 2.3% to $8.7 billion. Supervalu lowered its full-year guidance to a diluted net loss in fiscal 2011 ranging between $7.19 and $7.09 per share from previous guidance of a diluted net loss ranging between $5.94 and $5.74 per share.

keyboard_arrow_downCOMMENTS

Leave a Reply

No comments found

TRENDING STORIES

Polls

Are you hiring seasonal employees this year?

View Results

Loading ... Loading ...