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The retail weather today is characterized with a multitude of storms, namely: increased global competition, unstable economic and political environments, and increasingly demanding and fickle customers, employees and real estate developers, to name only a few.

No wonder a number of you are feeling like George Clooney (a.k.a. captain Billy Tyne) in The Perfect Storm. Like Billy, you haven’t had much luck with your catch (i.e., comp sales). So with cash tight you continually set out to sail (i.e., you keep the stores and the website open) because you hear the fish (customers) are running.

To refresh your memory, click on the attached while you think about your current experience in retail while you watch! http://www.rottentomatoes.com/m/perfect_storm/trailers/10899639/

So why do you stay in retail? It is because either you love it or you have no choice. Either way, you have to do something to survive. Unless you want to sink like Billy and his crew and these UK retail examples: http://www.retailresearch.org/whosegonebust.php.

Here are a few rules to help you outwit, outsmart and outlast the perfect storm in retail:

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Rule 1: Leadership has to Keep Calm and Carry On

http://en.wikipedia.org/wiki/Keep_Calm_and_Carry_On

In 1939 during the beginning of the Second World War, the UK produced the propaganda poster above in order to raise morale. Unfortunately it was not widely distributed, thus it was little known and hence not effective. You and your leadership team have to consistently propagate that you are able to calmly but energetically carry on leading the team through the storm. Calm does not mean treading water. Some people think that they can tread water and ride out the storm. If you try that, you will sink.

Rule 2: A simple relevant vision of how you will survive, executed well
When times are tough, some people think that there is no time to create or update your vision of where you need to go. Nothing can be further from the truth. You have to have a clear and simple sense of where you need to go, and like the GPS that many of you use to travel today, a constant stream of dynamic updates need to occur to constantly re-optimize how you get there. Peter Drucker once said, “Strategy is a sense of direction around which to improvise.” Mickey Drexler, when he walked into J.Crew to turn it around, gave very clear and simple direction when he said, “I look at companies as price-players or quality-players. The only way to go with J.Crew was quality.”

McDonald’s in the last decade has executed one of the most notable turnarounds by essentially going back to Marketing 101. They created their “Plan to Win,” which emphasized the 5 P’s: People, Product, Place, Price, Promotion. They changed their previous decade strategy of “adding sites to customers” to “adding customers to sites.” They then executed some of these simple changes extremely well. Coffee is one example whereby they took a simple product, improved it, and integrated many elements in the organization around it. The insulated cup and lid with closure is even better designed than that of Starbucks.

Rule 3: Know where you stand compared to industry competitors

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David definitely knew where he stood with Goliath. It was all a question of positioning and agility. We all know how that story ended, with one small stone in the one right spot. Your business is no different. What you need to know is where your segment of the industry stands and how strong or weak your strategic and financial positioning is compared to your competitors within that segment. Then act accordingly.

Rule 4: Know where you stand with your loyal customers
Do you regularly say that you know what your customer wants? When was the last time you listened to them and acted on what you heard? Listening and acting on what you hear is a question of respect. If you haven’t been doing this, then maybe one of the reasons your sales are hurting is that your customers don’t feel you are respecting them.

In 2002, Starbucks’ stock was reaching an all-time high and it was opening outlets every day, as the loyalty of Starbucks’ core customers was eroding due to increasing waiting times to be served. Customers expected baristas to engage in a conversation with them, to show them the respect that they felt they deserved for paying $3.50 for a cappuccino. They were at least doing customer research that indicated these problems, but no one was acting on it. Customer visit frequency began to decrease resulting in lower comp sales growth. Speed and barista engagement were non-negotiable customer respect issues. Do you know where you stand with your loyal customers?

Terry Leahy, ex-CEO of Tesco plc, the global UK retail chain, called it following the customer. He was in stores two days each week, listening to customers and front-line employees. He understood that peoples’ habits could change overnight and he didn’t want to be prisoner to an outdated business model.

Rule 5: Consider how to get non-loyal customers
Why should you focus on these customers? In our recent blog Fashion and Sporting Goods Market Share – a New Dawn is Breaking we talk about the battle for market share. The issue is whom do you focus on? Loyal customers are hard to get and hard to take away from someone else. Who is left? The non-loyal or more commonly called the “switchers.”

McDonald’s and their McCafé product are a great example of leveraging the “switcher” customer. Starbucks had a very strong group of loyal customers, but they also had a number of “switchers.” McDonald’s came in with product, pricing, a concept, packaging, and advertising that appealed to this group and picked up a significant share of Starbucks’ “switcher” customers while enhancing the experience for its loyal customers. At one point in the process, Starbucks customers were only spending 40% of their coffee-related dollars at Starbucks. The rest of the money had “switched.”

In your sector of retail, do you know who the “switchers” are and what they need?

Rule 6: Simply innovate

http://www.aboutmcdonalds.com/content/dam/AboutMcDonalds/Investors/Investors%202012/2011%20Annual%20Report%20Final.pdf
You hear constantly about how important innovation is. A lot of time and money is spent with few relevant profitable innovations being found. Sometimes they are so simple they are right in front of your nose. McCafé is a good example. In the last decade, McDonald’s has executed one of the most notable turnarounds with a few simple relevant changes, which have been extremely well executed across the organization. They have created a series of VIP products, which have resulted in significantly incremental volumes, image and profits. These products included coffee, salads and smoothies!

For your sector of retail, where is your coffee, salad and smoothie?

As you can see, these survival rules are relatively simple. You just need the discipline to follow them.

As part of this series, we are sponsoring a conference on October 31, 2012, with the Canadian Apparel Federation entitled Quebec Apparel Retailing, Ensuring Survival in a Hyper-competitive Market. Click here to register http://www.apparel.ca/cgi/page.cgi?date=2012-10&_id=65&evt=257.

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