It’s all about the merchandise

MYERThis is a true life case study.

A department store group with about 15 stores had been trading for over 120 years and the third generation of family was in control – always a danger sign.

Business was going from bad to worse year after year. The model was antiquated – a buyer for each department in each store, who was also a salesperson. The buyer was paid a modest salary – barely more than the sales people – and as the old adage goes, you get what you pay for.

Top management decided that things had to change. Buying had to be centralised which was pretty obvious.

Mistake #1

Rather than centralise which was too dramatic, it was decided to be half pregnant and regionalise. There would be a regional buyer for say 4 stores and a regional merchandise manager.

Mistake #2

There were no systems in place to provide feedback to the regional folk regarding what was selling in the stores, what stocks were on hand et al.

Mistake #3

Because of mistake #2, these people had to visit each store once a week which really took care of four days. They had one day a week to do their real jobs which was impossible.

Mistake #4

Because there was no accountability, the regional people had free reign. One regional merchandise manager thought it would be a good idea to stock electric razors. Because he was responsible for kitchenware, that is where the razors were stocked. (Please remember every word of this case study is 100 per cent true).

Mistake #5

Surprisingly, business didn’t improve so it was decided to renovate some stores. At vast cost the ground floor of the flagship store was transformed into a magnificent retail space.

Mistake #6

Again surprisingly business didn’t improve so it was decided to change certain policies. Customers would be allowed to ask for anything to be sourced. The question was raised whether this would include, for example, a Porsche. The CEO was emphatic – anything meant anything.

Mistake #7

Another policy decision was made. The stores would accept all returns regardless of the circumstances. The word got out in ‘customer land’ and little old ladies would scratch through their drawers and bring in stuff they had bought years before. There was one case of a bottle of Estee perfume that had a few drops left. It must have been 40 years old because it had oxidised and turned dark brown. The credit or exchange was given.

Again I must stress that every word above is true. How a company, which had been trading successfully for 120 years, could end up with such incompetent management beggars belief. Needless to say the company folded shortly thereafter which was terribly sad because there were some mature staff members that had been working there since leaving school. The family drifted off in different directions. The MD became a retail consultant – heavens forbid. The CEO became a lecturer in business. Some, unkindly said that his key area of expertise was, “how to stuff up a retail business really quickly”. These were the top two decision makers who incidentally had been asked to step down by the board but had refused.

What could/should have been done? They should have hired a top executive from a company already practicing centralised buying. He/she would have ensured that there were adequate systems in place. Rather than regionalise, they should have centralised. And… they should have focussed on the life blood of any retail business – the merchandise!

No – you didn’t miss it. Nowhere above had anyone done anything to improve the offering. The moral of the story would be clear to a seven year old. People go shopping to buy stuff. Yes – the environment is important and so are store policies but if you don’t have the right merchandise you ain’t going to be in business for long.

Stuart Bennie is a retail consultant at Impact Retailing and can be contacted at stuart@impactretailing.com.au or 0414 631 702.

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Comments

1 comment

  1. Krishnamurthy Venkatraman posted on May 18, 2016

    Excellent article Stuart - How to kill a retail business in 24 months Merchandise is the blood line for any business and how merchandise planning can determine the success or failure of any retailer. Good point on the policies and procedures also - doing things without thinking of the consequences will lead to failure only. This case is also showing extreme negligence or foolishness on part of top management. Probably a regular review and some corrective action on a timely manner by the Owners and Board would have made a difference.

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