Benchmarking may be seen to be good management, but it often functions as limiting belief. The world record for running a mile stood for almost a decade above four minutes. This was broken in 1954 by Englishman, Roger Bannister. Just 46 days later Bannister’s record was broken by his rival, Australian, John Landy, and than two years later, another 36 runners did it. This is an example of how limiting beliefs function. Managers love benchmarking. Except, what they often refer to when they m
mention benchmarking, is some metric of performance which indicates where the market is at. Roughly, they are concerned with the average of all competitors.
Shopping centre managers look at occupancy cost
Retailer may look at gross margins
E-tailers may look at click through rates
Marketers may look at conversion rates.
But when they do, they are interested in the average. Benchmarks are meant to be benchmarks; that is the mark to which we must aspire.
A benchmark is meant to be about best practice. Instead we have made it about mediocrity. Take stock turn for example, and let’s use Zara as a case in point.
The average stock turn in a fashion store has traditionally been four times a year (four seasons, so it makes sense). Usually department stores will turn over their stock a bit slower (bigger bureaucracies, makes sense).
The really good, national specialty chains my achieve 1.5 turns per season and get to six turns a year (better systems, specialisation, and tight management, makes sense).
The Zara came along. Some pundits argue Zara is not even in the (fast) fashion business, but in the distribution business.
According to the Economist, when Madonna played a set of concerts in Spain, teenage girls arrived to the final show sporting a Zara knock-off of the outfit she wore during her first performance (The Economist, ‘The Future of Fast Fashion’, June 18, 2005).
The average time for a Zara concept to go from idea to store is 15 days, compared to rivals who receive seasonally. Zara is 12 times faster than Gap, despite offering roughly 10 times more unique products (Helft, M., ‘Fashion Fast Forward’, Business 2.0, May 2002).
The Zara customer shops 17 times a year. Ghemawat and Nueno (2003) report that only 15 to 20 per cent of Zara’s sales are typically generated at marked down prices compared with 30 to 40 per cent for most of its European peers.
You will note from these references that the data is quite old. The scary thought is that they will have become even better. I don’t have access to actual, current performance data, but joining the dots above, one can safely assume that Zara’s stockturns are in the range of more than 18 times per year. Iy would turn over stock every fortnight instead of every season. To paraphrase, Crocodile Dundee: “Now that is what you call a benchmark”.
Application:
1. No matter what your industry, there are benchmarks available. If you can’t get it from your industry association or a consultant, get it from a sales representative for key categories.
2. Remember that these ‘benchmarks’ are usually just averages and therefore beacons of mediocrity. They should be seen as a minimum acceptable standard.
3. If you really want to have an excellent business, you should strive for more – find the real benchmark.
4. Challenge yourself to venture outside your comfort zone and beyond the norm set by the mediocre. You will be surprised with what you can achieve when you let go of what you think is possible.
Have Fun
Dennis
GANDOR: BUILDING HIGH-PERFORMANCE NETWORKS FOR BRANDS AND RETAILERS
