Why is "Off-Price Retail" so Successful?

WHY is "Off-Price Retail" so Successful??

I receive calls from investment advisors and analysts regularly and they are astonished at the continued success of the "Off Price Retail" category. They are frustrated beyond measure because they don't understand HOW some retailers in this category can continue to churn out increases in same-store sales, improved margin, reductions in expenses, and grow their shareholder equity month-after-month, season-after-season, and now year-after-year even in the midst of the financial malaise.

Ø  "Will the Off Price Retailers have difficulty finding enough product to sustain growth??"

Ø  "Won't they suffer reduced margins soon, since the glut of merchandise that was on the market last year has now been consumed??"

Ø  "How can these retailers expect to continue to grow profits when they come up against the prior year's terrific successes??"

Ø  "Why are Off-Pricers able to retain and grow their customer base even when consumer confidence is so weak??"

There are scores of answers to these questions; some simple and some complex.  Here are just a few answers I would bring forward based upon my decades of experience within the industry:

1.     The business model for Off-Price is perfect for times of uncertainty.  Customers from Mid-Range retail like Sears, Penney's, Kohl's, and even some Department store chains found them trying Off-Price for the first time during the recession.  They liked what they found, and the premium Off-Price Chains (Ross, TJX) learned how to RETAIN this customer.

2.     Suppliers have learned that Off-Price is "not a dirty word".  In fact, it's a huge "insurance policy".  Historically, suppliers have a huge gamble when planning production; they must produce enough product to sell every possible unit to the full price department stores (where their profits are), while at the same time not OVER-producing which will drain margins.  With the success of the Off-Price category, suppliers know that they have a ready market for their excess production, even though they will have to sell it at a greatly reduced price. which allows them to product more product to sell to the full price department stores.

3.     The premium Off-Pricers have simply managed their business better than most of the rest of retail.  When the recession began, they sat around tables in their Board Rooms, and "hunkered down" just like the rest of retail.  But they soon discovered that by operating like they were in a recession (reducing inventories, increasing turns, watching headcount, etc) they would not be impacted in the same manner as most other retailers.  Because they are "street fighters" by definition, they didn't return to their old ways..... they continued to operate as though it could fall apart at any moment.  They allowed only CAPX projects that could demonstrate a ROI in the first 24 months.  They watched headcount.  They challenged every expense. They rewarded innovation and problem-solvers within the organization.

4.     They were  not burdened by unproductive locations.  The premium Off-Pricers have made it a practice to close locations every single year, in good times or bad, if those locations are not contributing EBITDA.  The "old line Department Stores" are burdened even today with scores of locations that have to be carried by the rest of the organization because Sr. Management didn't have the vision, foresight or guts to simply recognize the cancer and cut it out.

5.     They know what they stand for, and their customers do too.  I believe however, that there is one large dynamic that is a huge driver in the success of the premium Off-Pricers as WELL as premium full price retailers.  Here's the easy way to understand what I'm driving at:

a. Ask ANYONE you know to tell you what Nordstrom's stands for.  They will likely say, "Wow, well, excellent customer service, broad selection, the BEST designer labels and major manufacturers."

b. Ask ANYONE you know to tell you what TJMaxx, Marshall's, and Ross stand for, and they will likely say, "Treasure Hunt! Great designer labels and major manufacturers at fantastic prices!"

c.  Ask ANYONE you know to tell you what Wal-Mart stands for and they will likely say, "Great prices, friendly associates, clean stores, LOW prices, great selection!"

d. Ask ANYONE what Sears or JCPenney stand for and they will most likely say "Kenmore, Craftsman, Penncrest, Towncraft, and... uh..... I don't know." 

There it is.  If you have not clearly defined yourself to the customer and made obvious what you stand for, you LOSE.  Most of the retailers "in the middle" that are struggling have a huge list of problems with which to deal, but I submit there is one central concept wherein they've failed; customers just don't know what they stand for.  They have huge brick-and-mortar stores filled with categories which the shopping public does NOT recognize or give them credit for.  Let's face it..... when you say "Fashion" or "Fashion at a great price", or "Fashion broad assortment", or "Designer labels", customers just don't name those "stores in the middle".
  

You'll notice that I referred to "Premium Off-Pricers", because just like all categories, there are some operators in this segment that simply cannot get out of their own way, and they will be part of the continued consolidation.

2012 will be another exciting year of growth for the Off-Price sector, and I know why. 

1. The customer knows what they stand for, (and so does their Sr. Management)!  They don't stray from the model.
2. They know how to control inventories.
3. They know how to manage real estate.
4. They know how to manage expenses.
5. They know how to manage headcount and payroll.

Please leave me your comments!  I'd love to hear from you!

What's Your Definition of INTEGRITY?

Imagine a Corporate Board Room scene:  A meeting is taking place with a group of business people who are discussing strategies to achieve success in taking on a large new project.   (This is a fictitious story meant to drive home my point, however scenes like this take place DAILY around the world.)

The opportunity is wonderful and exciting, and holds the promise to grow this company and take it to the next level.

The conversation is passionate and highly energized, but after a few minutes, one individual begins to dominate the conversation intent upon getting the entire team to adopt his world view, his perspective.  His tone becomes more and more harsh, and finally he shouts, "Business is WAR!!", and begins to rail on about how the team must overcome their adversaries and defeat the enemy!  When he finally ends his diatribe, the team just sits there, silently accepting this person's outrageous statements as though he must be tolerated because he is some sort of knowledgeable  "warrior" of the business world.

War?   Enemy?   Adversary?  .... Really??

I've pondered this sad mentality; the jaded and harsh view of this pathetic type of individual, and the responses his audience might make.    

What this individual would want the group to assume is:

• Customers are somehow the adversary because they want them to do things in their contract that might cost money and cut into possible profits!  He believes the team should try their best to cut corners and "outsmart" the client.
• Suppliers are the adversary because they want us to pay our invoices on time and within terms.  He believes the team should try their best to "outsmart" the supplier.
• Even other employees in their company are the adversary, because they try to spend money to satisfy the client and they don't adopt this warped view. 

Successful companies, and more importantly, successful PEOPLE have a very DIFFERENT view of their business, their clients, and their life in general.

• Customers are WONDERFUL! They bring opportunity and prosperity to those companies and individuals who value them!

• Vendors and suppliers are WONDERFUL!  If we negotiate with them in good faith and strike appropriate and honorable deals, they will favor us with special offers and will agree to be excellent references!

•  Employees, Co-Workers and Peers are WONDERFUL!  We need them as much as they need us!  Without them, we will fail!  We should seek to ADVANTAGE our co-workers, and to help them be totally successful in their jobs!  We should be saying "What can I do to help you be successful" to them daily.

No, business is NOT "war".  Business is a wonderful endeavor wherein honoring your word and with integrity, and acting in the best interests of your customers will always pay huge dividends. 

These dividends might not always be "cash", but might come in the form of having an excellent reputation in the marketplace, or in knowing that you have a large list of excellent references that you can use when seeking new business.

The very most important benefit of the wonderful world view and the actions you take because of it,  is the character you build.  Seek to build character with your every action, your every deed and word.

Character, honor, integrity.  Don't we all hope that when others are asked to describe each of us, these words will be used?

Think about it; are your words and deeds aligning to build character, honor, and integrity in your personal life and in your business?  If not, what steps can you take today to move in the right direction?

Life is short.  Do it right.

Cheer Up! Get on your feet! Take Courage!

That's right; get up on your feet and get moving!  Make positive steps to make your situation better!

When I reflect upon my career of 40 years in Retail and Consulting, I recognize that I was always happiest when I was DOING something to solve a difficult situation either personally or professionally.  Taking specific, positive steps toward solutions.

It is SO EASY to allow the people around you, the pressures of the job, the stress of deadlines, and your own high standards to cause you to lose focus.

RIGHT NOW, as you read this, stop and consider the following facts, reflect on them, and then reassess your priorities, your schedule and your "to-do" list:

1. You know more today than at any other time of your life.
2. You are better trained and have more experience than at any other time of your life.
3. You know more people now than at any other time of your life.  People who can help you!
4. You are more savvy today than at any other time in your life about "how things work".

Just IMAGINE the ADVANTAGE you would have had when you were 18 years old, if you knew THEN what you know NOW!   Well, GUESS WHAT?   You DO know it now!

You are advantaged.  You have knowledge.  You have experience.  You are savvy.  You have friends who can help you.   


Move forward like the knowledgeable, experienced, savvy, connected person that you really are!


Feel free to leave a comment!!

"A Billion here and a Billion There, and pretty soon you're talking about REAL MONEY!

A Billion Dollars.  It seems that lately we don't even speak in terms of Billions anymore; it's Trillions.  I thought it would be intriguing and sobering to look into what a Billion dollars would purchase in goods and services in the Retail Sector.  That should put some serious perspective on things, next time you hear government officials tossing around the "B" word.  


Here is a random sampling of what ONE BILLION U.S. DOLLARS WOULD PURCHASE.  (Naturally, these figures are huge generalizations based on certain types of bags, fixtures, shopping carts, supplies, or labor types, but accurate enough to make you stop and think!):

• Ten million (10,000,000) shopping carts (buggies) for retail or grocery stores.
• Forty Two million case of plastic shopping bags.
• Thirty Five million cases of plastic garment hangers.
• Forty Thousand Full Time Employees, working 40 hours a week at $12 an hour for a year.
• Enough Store Fixtures (Floor Racking) to fully fixture 5,000 big box Off-Price stores
• Round Trip Airfare San Francisco to Dallas 3,875,000 times! (think of the airline points!) 
• Thirty Eight million cases of toilet tissue.

I could go on and on because the imagination soars when you start putting a calculator to it.  

I'd be interested to know what ONE BILLION U.S. DOLLARS WOULD PURCHASE in OTHER industries!  If you are reading this and would like to provide me with some feedback from other industries like Medical, Hospitality, Property Management, etc... I would love to hear from you!

PLEASE FEEL FREE TO LEAVE A COMMENT!

Inexperienced Procurement Departments have a Dilemma!

As we head out of this recession, there are some historical realities that will occur again in this recovery cycle, just like they have in all past recoveries. What's interesting is that our US economy has been on such a long roll that most of the teams working in Sourcing/Procurement/Purchasing Departments today have never managed their way out of a recession. They will most likely be surprised by the two big supplier responses that we'll see in coming months:

1. Even after a recession has "bottomed-out" and is headed back the right direction, suppliers tend to continue to cut production and inventories for a few quarters into the recovery.

2. Then, it could be another two quarters before most suppliers begin to rebuild the capacity that was reduced.

This means that the buyers no longer have the advantage they did a year ago when suppliers are bloated with product and capacity and need to sell "quick and cheap".

Right now in April, we are already seeing increasing costs in container fees, steel prices and corrugate prices based on supply-demand issues. Just wait another few months!

Last September, I advised my readership that the time was right to renegotiate all steel products (like store fixtures) for longer term contracts. Container costs were at historic lows, steel prices were bottomed out.  If you followed that advice, congratulations!  If your current steel product contracts are due to expire this year, you are in for a tough discussion with your CFO!

In any case, 2010 will be a great year to "Watch your P's & Q's" and play your cards close to the chest.


Phil Leichliter
President,
J. Philip Group L.L.C.
http://www.jphilipgroup.com/

PLEASE FEEL FREE TO LEAVE A COMMENT!

Common Threads, from What I'm Hearing "Out There"

In conversations with senior management across a broad spectrum of business segments in the past 30 days, I’m hearing a number of “common threads”.



1. More with Less. Businesses large and small have become accustom to doing “more with less” and most have no intention of layering back on any of the expense areas they’ve eliminated or reduced just because they see a little light at the end of the tunnel. Expect to see very lean organizations prosper.

2. Many senior Finance Executives are “hunkering down” while they determine the impact of business-hostile programs like “Cap & Trade”, new tax structures, and the cost to employers of the “Health Care Reform” measures. Many are already putting away cash reserves to deal with them. In the past, this cash would have been available for investment in equipment, facilities or human capital.

3. Long Road Ahead. Very few Senior Executives I’ve spoken with believe that the current stock market performance or retail upsurges are a trend that will continue without significant hiccups. They believe there is a very long road ahead filled with swings in the market, additional business consolidations and failures.

4. Consumers are gun-shy. They continue to pay down debt and save, rather than spend because they are uncertain about their future. They believe that out-of-control government spending means hyper inflation, tight money, continued low home values, and high unemployment which will be the “norm” for a long while to come. In short, they don’t trust, and I don’t blame them.

5. “Genius’ Beware”. Executives of companies which have benefited from the current economy should beware the false sense of “genius” that many mid-to-lower level managers are feeling. They are being lulled into believing that they are “excellent” at what they do, just because their market segment is prospering. Take stock of your team; ensure they have a firm grip on reality, both of the overall business environment and of their actual contribution to the success of the firm.

We must be flexible, patient, and use our resources wisely, but the future IS very BRIGHT for those who interpret the times for what they truly are. The consumer has always been ready to recognize and reward those providers of goods and services who do the best job!

Please feel free to leave a comment!!

Phil Leichliter

Respect in the Workplace

If you ask a dozen people to define "respect", you will get a dozen different answers.

One time, I ask my teenage son to tell me what it was that he DID (actions) to demonstrate respect. He was so frustrated! I was supposed to just UNDERSTAND that he DID respect me. (He shouldn't have to DO anything to DEMONSTRATE respect, right?) I'm delighted to report that a few short years later, he is standing tall, honorable, and RESPECTFUL. (Well... mostly respectful.)

Now... let's talk about this concept in the workplace. There are scores of signals we send and receive daily, indicating our level of respect for people, institutions, bosses, co-workers, subordinates, and just "people in general". Most of our actions have two sides; what we "mean to convey" and what OTHERS perceive. Guess what? What we "mean to convey" is irrelevant. The only perception that really matters is what OTHERS believe. How others perceive you determines how successful you will be.

What are some of the "small things" we do that have a huge impact on the perception others have of us?

• Showing up to meetings late.
• Accepting phone calls while engaged in conversation with others.
• Texting on your BlackBerry during meetings.
• Not abiding by "office rules".

These may sound like small things on the surface, but just like the Bible says, "Out of the abundance of the heart, the mouth speaks." (In other words, the way we are inside always shows up in our actions and words.)

When you have a reputation of showing up late for meetings, what you are saying to others is, "My time is more valuable than yours", or "I really don't respect you."

Next time you are invited to a meeting, arrive early, and engage. Be THERE for the people who called the meeting. ADD VALUE. Remember, you're just NOT as important as you think you are.

Please feel free to leave a comment!

Phil Leichliter
President
J. Philip Group L.L.C.
www.jphilipgroup.com

The Thrill of the Hunt

Conference calls with the team until late at night, pots of coffee, "Version 16" of the PowerPoint presentation, graphs that won't quite fit on the PowerPoint Page, trying to peer into the mind of the client, corporate intel research..... ah, the joys of putting together a bid presentation!

Finished the final draft of the presentation for a huge bid opportunity for a client on Saturday night, then did last minute intel research.

NOW, to catch up on the scores of other projects that were put on hold during the "presentation crunch"!

I LOVE MY WORK!!

Feel free to leave me a comment!

Phil Leichliter
J.Philip Group L.L.C.
www.jphilipgroup.com

Working at HOME how to MAKE IT WORK!

Working at HOME! Is it what it's cracked-up to be? YOU BETCHA! Coffee from your own coffee pot, breakfast, lunch and dinner with your family, home when you are NEEDED, spending time in the Jacuzzi that you USED to spend commuting.... yes, it's ALLLLL good.

There IS a CATCH, however...... and MEN have an especially hard time dealing with this "catch". Ya gotta WORK when you are at home, doing your "home office" thing! Sounds obvious, but it's so tempting to stop for 30 minutes to do this, and stop for an hour to do that, and run a few errands, and before you do it, the day is shot and little-to-no work has been done!

I can honestly say I've not struggled (much) with this issue. Before I began working from home, I "read-up" and worked on tactics that make the likelihood of success far greater.

Here are PHIL'S TIPS for "Success Working From Home":

1. Create a workspace that is absolutely, positively designated for your work. NOT the kitchen table, NOT the recliner in the family room with your laptop... if you have a spare room then capture it, and turn it into your office. DON'T FOOL AROUND with this one; paint it like an office, decorate it like an office, and equip it like an office. Once you go through that door in the morning, you are "at work". (By the way... the I.R.S. absolutly requires that any space you claim as "Home Office" on your taxes must be fully dedicated to your employeement.)
   
2. "GO to WORK". That's right; get up early, shower, shave (men...*grin*), get dressed and "go to the office". This is far more important for men than women typically. Women seem to be able to get work done in their fluffy slippers and robe, but not men.
3. Get the family to cooperate. They MUST allow you to work. Put a sign on your door, or close the door if necessary to make the point that you are truly working, and that your ability to earn a living depends on their cooperation.
4. No, you CAN'T have your game system hooked up in your office. You just can't, because I SAID SO. *grin* (Honestly, do you think anyone BELIEVES you are actually working in there if your game system is hooked up?

Working at home has changed my life, and my wife's life, completely. It is a total blessing from God to be able to work from home. I treat it as a sacred trust!

FEEL FREE TO LEAVE A COMMENT, OK?

I LOVE what I do! (You should too!)

I LOVE what I do! After decades of developing a career within the "safety" of Fortune 500 companies, I'm now entering my second year in private practice, with my own consultancy.

Getting started was "easy". I was so SURE that I could bring to market the skill sets and experience I'd gained over years of developing and executing strategies for these huge companies! After ALL.... I could point to scores and scores of successful projects which I'd handled, any of which should be worth a train-load of cash to any company!

I developed a website, a newsletter, and began the process of reaching out to my network. I began to get "traction", but NOT in the areas I was so SURE would be fruitful. After months of working hard within the assumptions I'd established for my new consultancy, I came to realize that what was needed "out there" were PROBLEM SOLVERS, not "Consultants".

Problem Solvers. Many respected associates who were displaced during the downturn sought traditional solutions for finding new employment; they filled out hundreds of resumes and mailed them off. They called friends. They tried to get interviews. They talked to Headhunters. The problem with this approach is that they are were positioning themselves as "Operations Executives", or "Field Management", or "Marketing Executives", etc. etc. etc...

What the needed to do was to position themselves as PROBLEM SOLVERS. Target companies they like, and study them. Begin to determine the nature of their challenges.

• What are their problems?
• What are their impediments to growth?
• What are their human resource obstacles?
• What are their operational challenges?
  
• What does their competition do that creates PAIN for them?

The bottom line is that in order for us to ADD VALUE to any organization, ALL of us must find a need and fill it. Find a problem and solve it. Rarely do these "needs" or "problems" occur neatly within the confines of some specific job title. Did my extensive background and experience help? Of COURSE! My experience is what made it possible; the KEY was learning to apply my lifetime of knowledge differently.

My consultancy is growing, and I am finding ways to help people SOLVE PROBLEMS daily. What a GREAT way to live!

PLEASE FEEL FREE TO LEAVE A COMMENT!!

Networking in 2010

There is a tremendous amount of emphasis today upon the use of various “Social Networking Sites” as well as Business and Professional sites in order to “grow our networks”.

The choices are daunting! Twitter, Facebook, MySpace, Flicker, Pulse, LinkedIn, Spoke…. The number and variety of networks is almost overwhelming, so you must determine what your goals are for the use of networking sites and narrow your focus to a few which are best suited for your style and needs.

It’s easy to get caught-up in the huge amounts of information available through these sites, and in fact, I’ve found that I could almost make it a “part time job”!
For business use, a very good rule of thumb is to look upon the use of these sites as just another task; a tool you use in your business. Dedicate a specific amount of time you are willing to spend weekly using the sites, and then stick to it. Many people need to evaluate the amount of time they spend now, and ensure they are being productive with that time.

Depending upon your vocation, your goals might be to locate and connect with others in your industry, make sales contacts, or find prior business associates and friends. I’ve even located people I had worked with *ahem* 30 years ago!
I want to challenge you in 2010 to view networking a little differently than you may have in the past.

These sites provide an unprecedented opportunity not only for growth of your business, but more importantly for the growth of true RELATIONSHIPS.
All those “names” on your “connections” lists are people. People with challenges, people with problems, people with families. They are people who have jobs or people who are currently between jobs. This is your chance to actually make a difference in people’s lives at very little cost of time or effort on your behalf.

I’m a firm believer that what you sow, you reap. There are so many things you can do professionally and personally that cost you nothing, yet add tremendous value to relationships, and oh, by the way will add value to your business as well!

Here are some examples of ways you can benefit others and add value to your life through the use of Networking Sites:

1. Actively seek to do “recommendations” for people deserving of your praise. Don’t be gratuitous; but when you discover a past associate, take a moment to do a recommendation of their work, if deserving.
2. When you come across someone you know who is between jobs, reach out to them. Have a brief conversation. If possible, get a copy of their resume and pass it along to colleagues for their possible consideration.
3. In general, let people know that you are not “just” gathering names, but that you are interested in advantaging others; not just advancing yourself.
4. After visiting with someone, actively watch for opportunities that match the goals of that person. When you find something that might be of interest, pass it along to them.

This approach may seem “Pollyanna” or naive to many, but believe me, it’s the right way to operate.

In the past two years, I’ve had the honor of assisting a number of people connect and get new jobs, and it all started by my reaching out to them in this way. Conversely, I’ve observed the lives of some who have a reputation for stepping on the backs of others in order to get ahead, and it’s pretty amazing to watch their careers over time. Yes, sometimes the bad guys win but more often it’s the GOOD GUYS that win while the “users” meet with frustration and career problems.

Take every opportunity to help others; it is always the right thing to do. Take a principled approach to your relationships going forward, and you will reap a lifetime of rich benefits both personally and professionally.

I'm genuinely interested in getting to know you personally and professionally. Don’t hesitate to reach out to me at any time with questions or requests! Believe me, I value your “connection”! Contact me at phil@jphilipgroup.com

PLEASE FEEL FREE TO LEAVE ME A COMMENT!

Greetings! This is my first post, my first attempt at "blogging". I'm so filled with hope and anticipation for this new year! I intend to use this blog as an avenue to share insights and ideas in all the areas of my life; career, networking, I believe that my interactions and relationships with hundreds of people from a very diverse and eclectic universe of friends and associates will provide insight and items of interest to all who may honor me by visiting my "blog page".

Phil