(13min 06) Are you using the economic crisis as an excuse for a big drop in your own retail revenues? Brian Walker, Managing Director of consultancy firm The Retail Doctor, says smart businesses are feeling the effects less than most and some are continuing to see retail growth. He talks to Phil Dobbie about his three step fitness program – it’s designed to make your business healthy, so no need for the spandex!

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• Transcript

Phil Dobbie: Hello I’m Phil Dobbie and welcome to BTalk Australia. Today, why you shouldn’t use the economic crisis as a scapegoat.

Brian Walker is the managing director of Consultancy Firm, the Retail Doctor and the author of the “Three Step Fit for Business” program, which we’ll talk about shortly here. But first of all, Brian, you believe the economic crisis can be a time of opportunity. You can actually grow your retail business at times like this. How is that so?

Brian Walker: Hi Phil. Essentially we’ve come from a period of great growth in retail. You know if we look back in the last period of time from February ‘01 to February ‘07, retail businesses were selling for 10 times profit multipliers and we still then have experienced a very healthy landscape. And for many of these businesses, the underlying framework of their retail operations and their businesses are still very strong. What we’re seeing is an uncertain consumer and the research bears that out. What we’re also seeing in the retail sector is uncertainty amongst retailers. We’re also seeing a change in customer set. We’re seeing much more focus on where we need to be seeing more focus on different retailers. We’re seeing a more aware and intelligent and educated consumer with far more choice than ever before. And smart and clever, as we call them, fit retailers are taking advantage of this and actually even in these times growing their business, concentrating a lot more along the business basics, doing the simple things very, very well, focusing in on their selling, their brand proposition, their point of difference.

Dobbie: So someone’s going to be losing out on that, of course. So you’re saying that the smarter retailers are grabbing more market share.

Walker: They are indeed. The smarter ones are and they’re focusing in on the leaders of their business field that make the difference. That are real for the customers so, for example, we’re seeing a lot more smarter marketing to customers. More direct customer need and relationship-based marketing. CRM programs used well arising to the fore. We’re seeing less of the, if you like, the herd mentality in advertising and more of the hunter. We’re seeing a lot more multichannel retailing. We’re seeing that up to 50 percent of consumers pre-research their larger item retail purchases these days and smarter retailers are understanding that. And where we had a few years ago, online and offline offers, we’re having the inline offers. Smarter retailers are seeing the mandatory nature of having a good, compelling, aligned retail offer.

Dobbie: Right so you’re saying offering the same deal online and through retail, and through stores?

Walker: Absolutely and seeing also that the online presence is migrating slightly from a pure research tool to a selling tool. We’re seeing the boundaries of online and physical retailing change, smarter retails are seeing that. You know for example, not that we wear Top Shop clothing but we could order clothing from Top Shop from the UK and have it delivered to our home within seven days for under 20 pounds. So there’s a whole new world of retail smarts coming through.

Dobbie: And you know what? My wife does that.

Walker: There you go.

Dobbie: She’s become a Top Shop fan and she’s buying from the UK so it does show how the world’s changing. But a lot of what you’re talking about are long-term trends. The smart businesses are doing all this stuff and if they’re doing that do you think that’s making them, no one’s recession proof, but do they have to change their ways for the economic times they’re in or will just doing that stuff see them through this year?

Walker: On the basis that their brand proposition, their segmented point of difference, is fundamentally sound but customers know what their business is. The retailer themselves know what their business is and there’s an alignment. They don’t try to be all things to all people. They play within their sector and they do what they do particularly well. Sure most are 5 to 10 percent possibly in sales, possibly. But many of them are growing in sales. And there are a few levels to this conversation, the ones that go out, target their consumer, target their market and are very smart with the way they go to market, is level one. Level two is that their financial affairs are in good order, they’re not too laden with debt. If we see the businesses are very, very smart and fit and do well in these times, they are fiscally very prudent managers. If we look at some of the retailers that have gone into trouble, if you like, or as we call them unfit in the last 12 to 18 months, one of the commonalities you see is that they run out of cash and that their cost to debt has been too high.

Dobbie: So that becomes how the business is being run rather than what it is you’re physically selling. And it is all about fitness, isn’t it? You have what you call a three-step fitness program, which you won’t lose weight doing this but your business is going to be a lot healthier from it. So first off you say being fit for business, for retail business. What does that mean, being fit for business?

Walker: It means it is the platform of the program and it is very much understanding the customers, strategic issues, their business model and then essentially understanding and diagnosing the fitness in every one of the key leaders of that business that form the basic operational framework consistent with the business.

Dobbie: Right, so when you’re saying customers, you’re talking about your customers?

Walker: Correct.

Dobbie: So what are examples of areas where businesses might be going wrong here and making themselves unfit?

Walker: Well they might have a good strategy but they’re people who aren’t aligned to it. They might be sound in their strategic intent but their people don’t know how to sell. They’re not in the merchandising world. They don’t have good inventory profiles. Their store layouts poor, their formats aren’t working. Those are some examples, there are many others. They’re not using correct information technology.

Dobbie: So a lot of that relates to process doesn’t it? Where your tendency would be: what is it we’re selling and who are we selling it to? What you’re saying is you might have got that right; it’s actually the processes that are letting you down.

Walker: And the systems and the frameworks, absolutely. You know if we start with one basic principle here that every business is ultimately for sale and that it’s true value is increased when it’s a fully fit business that has independent systems and frameworks and is independent from the owner and the board. In other words, tracks are built and it can run on the tracks.

Dobbie: That’s the final step of your three, isn’t it, being fit for sales? So you’re saying, we’ll get on to number two in a second, we’re doing these in the wrong order, so you’re saying that you should be thinking about your exit strategy right from the beginning?

Walker: Correct, absolutely. If you look at the businesses that sold 10, 12, 14 times multiplied and so forth, in the last few years, one commonality you see is that the owners absolutely knew their exit strategy. They knew what they wanted the business to be worth, what its distribution model would be and who their perspective buyers would be and everyday was about building the business to that goal.

Dobbie: And do most people realise that or does it take them down a different path? I guess it doesn’t matter so long as you’ve got some sort of direction.

Walker: It can take them down a slightly different path, but you know if I come back and fix a business model to start as a platform, if we have all the systems and frameworks in the business, such as training, selling and things I’ve touched on, Phil, we have a fundamentally sound operating framework and system and that is critical, critical for a number of reasons.

Dobbie: They become assets for the business.

Walker: Correct, precisely.

Dobbie: Your second stage is fit for growth, now every business wants to grow. Not everyone’s good at it but I guess again isn’t that just related to your first point: it becomes having those processes in place.

Walker: Well it does, although it talks a lot about the first real question about a business that’s fit for growth or wants to be fit for growth. Is this proposition leverageable, is it replicable, is it defendable, does it have a unique proposition? Where is it best positioned? What sort of structure should it be, company, franchise or whatever, is looked at or diagnosed and then what are the systems, the frameworks and processes that we need to put in place to make this business replicable? So we’ve looked at clients who had no retail stores to clients that have 20 stores and want to grow to 60 stores. We assess market conditions. We assess target company and then we build all the frameworks and processing systems to make sure that the growth model is in place during success.

Dobbie: Sure, are you seeing any major changes in terms of the retail landscape in terms of the way the business is being operated?

Walker: Yes absolutely, you know at a broad level I think there’s increasing focus, you know if we look at the last period of time, plenty of money around, plenty of credit, there was a lot of confidence, consumer confidence, so as a result you could literally open a retail store and if all things went well, generally speaking you’d make money from it. That’s less so the case now for the reasons we’ve touched on so I think there’s more focus on differentiation than there has been, more focus on speed to market through all the processes and being innovative. I think we touched on this point about the customer and the successful retailers are zeroing in on micro marketing as distinct from the macro.

Dobbie: A lot of this relates to technology, doesn’t it really and you’re talking about micro marketing you’ve got to be pretty technically savvy to really corner that and process improvement technology driven as well. So being technology savvy I guess is crucial in this game, isn’t it?

Walker: I think it is because if we look at technology it’s so much about speed of light information. It’s so much about understanding at the macro level, global trends, benchmarks, performance and competitors, consumer migration trends, who’s my market, so much about what product, where, when and how into market and then right down to the how do I measure my sales people? How do I measure the performance of my merchandise? How do I measure my productivity and profitability? It’s absolutely technology under pensive without a doubt.

Dobbie: Just finally, going back to a point you made earlier, businesses that are smart may well see a decline. I think you said 10 per cent, but a lot of businesses are going to be having a lot more than that and really it is play smart and grab market share and that’s the opportunity right now.

Walker: Well it’s two-fold, that’s exactly right. For those that can grow market share and are growing market share, absolutely. And it’s also, as we talk about growing the muscle in your business, getting fit, stripping out the fat in your business and getting a better return out of the business you have. We see a lot of businesses that lose valuable sales, lose valuable profit by not doing what we’ve said and some things you and I talked about, their overhead rates raise proportionately. The business struggles yet the opportunity was always there. It’s how they grasp it.

Dobbie: I guess at times like this as well it’s very easy to make excuses, isn’t it really, to accept a big drop in sales and blame the economy rather than saying well look we need to fix this problem and it can be your problem rather than the economies problem.

Walker: Well that’s exactly right because you know once in a past life I financed a very large regional shopping centre and I used to have about 15 million visits a year and some of the retailers have said, we need more people. Well we couldn’t possibly put them in the car parks. And I would say simply, sell more to the ones you have.

Dobbie: It makes a lot of sense. The shopping centres I’ve been too, absolutely, I don’t want anymore people in the car park. It takes me forever to get in as it is. Listen Brian, thanks very much for your time today. It’s been a pleasure talking to you.

Walker: Phil and likewise and thanks for your time.