Underperformance: How Identifying and Solving it Leads to Growth
Here’s a question for retailers…
Do you feel like you have hit your ceiling?
or…
You are not sure what to do next, and everything feels like a risk?
This can also bring about a sense of being overwhelmed and therefore, not being able to focus on what will take your business to the next level.
One solution that I have found is to look for low hanging fruit. And where to look for that is in places that are underperforming.
Let's review some common reasons where and why underperformance might exist. The best place to start is in your people and in your products…
People
Motivation
Long time employees may have lost interest.
Leadership from owners and managers is not providing the motivation to impact performance.
Employees feel undervalued for their contributions.
Wrong job, wrong person, or right job, wrong person, or right person wrong job. This concept is further discussed in the book Traction by Gino Wickman on pages 83 and 84.
Conflict between team members and or other interpersonal issues that go unresolved.
Solving for the above is assisted by a 2-step process:
Step 1 is Identifying and acknowledging that motivational issues exist.
Step 2 is to do something about it.
A manager once brought to my attention a great football analogy, she said we have great ideas, except we take them to the 50 yard line and then leave them there, forgetting about them, and thus never scoring. So if you know you have an issue, resolve to fix it. These can be managed in several ways including seeking outside coaching and professional guidance.
Product or Category
There are two sides of the coin. One is underperforming from underbuying products and categories that have demand. The flip side is continuing to buy into products, vendors, and categories that are underperforming in sales and profit.
Underperforming due to under buying is not only losing profitable revenue, but also means you are turning business over to your competition. We discussed some flags to look for, in last week's blog analyzing stock to sales ratios. Stock to sales ratios that are 2 or under for several months indicate it is time to take some risk and go deeper. Additionally, running reports looking at weeks in stock, sell through and margin along with turns are important to analyze with your team. Discuss the opportunities and consider strategies to grow based on discussing your data.
Underperforming from poor performance also requires some questioning. Was it fit, poor delivery, the wrong assortment, over buying, remembering the good old days when it blew out, or perhaps the product, vendor, or category is just not trending. Reinvesting those dollars into underperforming classes that have real growth potential is a great strategy to build some momentum and energy.
Business is a series of activities. Sometimes you just get stuck doing the same things over and over and enthusiasm wanes. Changing things up, making some decisions you and your team can get behind will improve attitudes, create motivation, and raise the ceiling that was once locked into place.
Onwards and upwards,
Marc
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