As part of a retailer consultation program, I used to conduct a simple exercise designed to get store owners to think about their businesses in a different way.
I drew a large box on a white board and then segmented it into smaller sections, usually six boxes. I then asked the retailer to imagine that he or she was starting their business from scratch that very day, and to insert into each of the “Six Boxes” what brand or product story he or she would want, and to tell me why.
The exercise enabled the retailer to think about their business in a new way, absent the distractions and noise they typically had to contend with in their own stores.
So, if you were starting your business today, what would you insert into those Six Boxes? The very idea of a clean slate–of imagining that you are opening your store now, today–can be a very powerful catalyst in focusing on what really matters, recalibrating your business model in a way that sheds the conventional and cultural norms that often keep us rooted in old habits.
It is, at its most basic, a way to strip down your business to the metaphorical studs so that you can rebuild it again, only better.
Of course, the very real and somewhat disconcerting notion of electing just enough stories to fill Six Boxes (maybe even fewer) presents another very big challenge: What do you do with all the other stuff?
I’ll get back to that in a bit, but first let’s figure out how you might fill in your Six Boxes.
A good place to begin is by turning the business upside-down and giving it a good shake. You can do that with a Sharpie and a whiteboard or flip chart.
Start at the top of the page or board and list your No. 1 vendor/brand by sales, then proceed to Nos. 2, 3, 4, etc. As you list each vendor (and note, I don’t mean your favorite vendor, or the vendor you have the most inventory from, I mean the top vendors by retail sales) put the dollar sales next to each one and stop when you reach 80 percent of your annual sales. While you can do this exercise using data from the previous full-calendar year, the best scenario would be trailing 12 months.
Unless your business is a complete mess, I would guess that when you have listed all the vendors/brands that account for 80 percent of your sales, you will be looking at a very small list.
Once you have identified the 80 percent of sales, everything else that falls below that should be considered a strong candidate to be eliminated, and fast. I would predict that the bottom 20 percent of your sales are being generated by a huge army of vendors/brands/suppliers, most of which are not really important to your business, and many that you might have trouble even identifying.
You are, no doubt, wondering how anyone can suggest giving up 20 percent of your business at a time when you are working harder than ever for every sale. That’s a reasonable question, but there are many reasons to believe that it is the right thing to do. Some of them include the following.
1. The more you have in your cases, the less your customer sees.
2. Freeing case space gives essential breathing room to your best brands.
3. Your time is best focused managing your top vendors/brands to better performance.
4. Your marketing outreach will be more focused with fewer stories to tell.
5. Your team will have an easier job embracing your core messages.
6. Your target customers will understand what you stand for more easily.
The benefits derived from all of the above points would more than compensate for the 20 percent of lost sales. Eliminating a ton of underperforming and distracting products/vendors/brands would bring real clarity to what you have decided to prioritize and establish a roadmap for the future.
It would also create an energy around the things that you should be selling more of, advertising more, training more, giving more case space to, etc. You will, in effect, do more with less.
As you begin to examine the vendors that contribute 80 percent of your sales, there will be other considerations that come into play before deciding which of them to put in your Six Boxes.
Your decisions may include brands/vendors not currently represented in your current mix. You might have a brand/vendor that is among your top producers but no longer aligns with your new vision. You might have a vendor that gives you a lousy return on your investment and/or might just be too difficult to work with. You might have a vendor that produces good top-line returns but fails to deliver the necessary margins for the investment of inventory, case space, marketing and other resources needed to drive your business to the next level.
It is reasonable to assume that your Six Boxes will be made up of at least some of your current vendors/brands. They will give you the foundation from which to reimagine and relaunch your vision and, coupled with a potential addition or two, you should embrace, assertively and without delay, implementing that vision.
I meet retailers all the time who say they have great plans to do something once they “sell down” some of the accumulated inventory acquired over the years. Here’s a newsflash: The time to act is now! We do not live in a world that is going to stick around and wait for anyone to get relevant at a pre-2007 pace.
We’ve seen enough copy on the accelerated closings of retail stores (760 in the United States in 2015 and, according to a recent National Jeweler story, trending at a 100 percent increase through June of this year). We have seen 21 percent of specialty jewelers close their doors since 2007. The time to re-set your business is now, and understanding what you want to have in your Six Boxes has never been more important. The marketplace isn’t waiting around for the tortoise … it’s time to be a hare.
The “Six Boxes” exercise asks jewelers to imagine they are starting their business from scratch today, and asks them to insert into each of the boxes the brands/vendors they want to keep as part of their store’s story.
Once you have made the decision about your future (and yes, you need to make that call; having it defined for you by the marketplace is not a plan), you should immediately begin to work the plan.
While both elements of the plan (new vision/liquidation) might appear to be connected and intertwined, your Six Boxes (your future) and the bottom 20 percent (your past) are, to a large extent, unrelated, and they ought to be viewed as such.
You cannot afford to wait until the worst-performing products in your store find a new home before fully implementing your strategy for your future. Your liquidation plan should be very aggressive and devoid of the emotions that sometimes makes it difficult to rid yourself of “old friends” (easier said than done, I know). There are, of course, other reasons why retailers struggle to rid themselves of old and/or non-performing inventory including:
- Not willing to take the loss from an aggressive liquidation through third parties;
- Ignoring the fact that your market has voted and that product isn’t getting any prettier
- Not making the liquidation project a priority;
- Convincing yourself that you can wait it out until it sells through; and
- Not wanting to disappoint vendors with whom you do business.
As you think about what vendors/brands ought to be in your plan, I would offer two pieces of advice:
a) Stop treating brands like they are the enemy; and
b) Don’t delude yourself into believing that self-branding is merely the absence of national brands in your store.
If a brand aligns with your strategy, then embrace it fully and without reservation. There will always be complaints about the various demands coming from the big boys, but it either works or it doesn’t. Don’t pretend to carry the brand and yet fail to replenish the best-selling inventory. Don’t carry a brand so that you can sell against it, and make sure it is featured appropriately on your website, that you are utilizing the marketing collaterals and embracing whatever training initiatives are offered. Most of all, treat the brand like a respected partner, not the enemy.
Don’t, however, allow yourself to be bullied into taking inventory that you don’t need (and if that’s a resistance to replenishing best-sellers, then you are the problem) and if a given brand does not align with your new strategy, kill it immediately.
Try to work with companies that deliver added value, not a discounted price or a mountain of memo. (Don’t get me started on that!) If a brand does not deliver the requisite margins needed to run your business, get rid of it! What’s the point?
With respect to self-branding, a strong self-branding strategy can be very effective but it must stand for something beyond just being generic. Too many retailers believe that they are self-branding simply by not carrying national brands … eh, no, I don’t think so. Self-branding is not an assortment of generic and irrelevant products sitting where national brands otherwise would have sat. It is not pointing to your name on the door and saying “That’s my brand!”
Your name is your brand if the consumer (not you) knows what it stands for. If they can say about your store that they have a clear sense of what your store stands for, then you are on the right track. Self-branding has to have a point of view–consistency of products and language, and recognizable qualities that are distinct from other generic offerings in your store.
A strong diamond story means everything diamond, not just loose or bridal. Pictured here are Vibhor’s private label comfort-fit bands in 18-karat white gold and platinum.
Your people should be able to identify it and speak to it in a way that is fundamentally different from generics. If you are going to put your name on it, make sure it is the story that you are most proud of in your store. Do you really want to put your name on a cheaply made product that can be purchased just about anywhere?
There are retailers who do a very good job of self-branding. There are retailers who do a good job combining national brands and their own well-thought-out, and well-executed, private-label brand. You alone must decide what the best strategy is for your business and when you do, commit to it completely. Half measures don’t cut it in today’s retail environment.
I visited with a retailer in Michigan recently and he told me that he was desperately trying to secure a particular watch brand (not the “Crown”). His excitement and passion in describing his efforts to get the brand were infectious, and I sincerely hope for his sake that he gets it. What was remarkable, however, was that the same excitement was not there about the very pressing need to construct a strong diamond story for his business.
Whatever direction you choose to take your business, whatever brands/vendors populate your Six Boxes, whatever the make-up of your plan, it absolutely has to include a strong and profitable diamond story at its core. Diamonds are 55 percent of our business. If there is anything more important for our business than getting that right, I cannot for the life of me imagine what it could be.
Diamond jewelry can be bought as a gift for virtually every occasion. Pictured here is Vibhor’s private label Illusion pendant in 18-karat white gold.
I would further argue that if you can’t make healthy margins on that diamond story (which includes everything diamond, engagement rings, bands, pendants, earrings, etc.) you will be in trouble. With watch margins becoming ever tighter, we simply can’t afford not to have a healthy diamond business.
My friend Cindi Rottermond asked me during a recent training about how I would handle a customer walking into the store who might ask for something that the store doesn’t carry. I believe she used an opal pendant as an example. The question was a much more profound than it might appear, as it really gets to the very heart of the evolution of our business. Do we need to have opal pendants? Must we have aquamarines in March and peridot in August? The answer is absolutely not. Those days have gone, and for every customer that asks you for an opal pendant, there are 100 more who are not coming into your store because they don’t know what you stand for.
I responded to Cindi’s question by imagining what I might have said to that customer.
“That’s great. Thanks so much for coming in, tell me, who you are buying it for?”
“What is the occasion?”
“What kinds of things have you bought for her in the past?”
“Tell me why you believe an opal pendant is the right choice?”
The point is, if I do my job right, I’m selling that customer a diamond pendant. I’m selling the aquamarine customer a diamond pendant, and I’m selling the peridot and amethyst customers diamond pendants, too.
That doesn’t mean that we can’t have beautiful colored stone jewelry in our cases, but a strong diamond story must be the foundation for every jewelry store. If your Six Boxes included a great colored stone story then fully embrace it, make it great and differentiated, really get behind it.
What you cannot do is continue to be all things to all people by offering a little bit of everything, without having a strong story in anything. Robin Lewis and Michael Dart wrote in their book The New Rules of Retail, “In the future, retailing will be about narrowing assortments and reducing vendors and wholesale brands to drive greater control, productivity and profitability.” A strong diamond story can take a business to another level if it is executed well.
Our industry is in a battle for relevance and, like any evolving business model, that means we must make changes and fast.
Identifying what you want your future to look like, and mapping it out as a top priority, has never been more important.
Having established that plan, there must be a strong sense of urgency, and an unemotional and dispassionate commitment to getting rid of any and all products/brands/vendors that do not align with your vision.
As Steve Jobs once asked Disney Chairman Bob Iger, “If a store could talk, what would it say to people entering it?” What would your store say?