How to increase retail productivity and profit

fODAY,more than ever, produc- I tivity improvement is required for survival in the retail business, but the required gains are not likely to happen through a bits and pieces approach of dealing with problems as they arise, according to Alton F. Doody, president of The Doody Co., Columbus, Oh., specialist in store planning and renovation.

"Gains will come only from a comprehensive effort," he says, "which deals with the store as a whole including employees, inventory and the physical plant itself." To be truly successful, sales volume must be improved while operating costs are lowered and a reduced investment is maintained.

He maintains that this can be accomplished almost exclusively through changes in a store's physical plant and equipment, recommending a five step procedure dealing with physical planning and design. Each step is intended to build increased productivity.

First, he recommends adding new selling space at little or no cost to accommodate the merchandise assortments which have exploded in size and space requirements. He calls for reallocation of space in one, two, or three ways:

(l) Turning non-selling space into selling space.

(2) Putting more merchandise on the floor.

(3) Reallocating department sizes to give more selling space to the most important categories.

Often it is possible to decrease the ratio on non-selling backroom space in favor of the sales areas to add new selling space. These reallocations move large portions of merchandise directly onto the sales floor, eliminating double handling and backroom storage.

"Putting more merchandise on the floor," he explains, "means increased use of the cube which is basically a fixturing decision."

Reallocating department sizes to give more productive departments increased space can be a better solution to a productivity problem than enlarging the store, Doody claims.

Story at a Glance

Comprehensive five step plan deals with store as a whole... most changes are to the phys. ical plant and equipment, some costing little or nothing.

His second step to increased productivity is engineering the store layout for increased traffic flow to high gross margin areas. It is important to have a layout that brings large numbers of shoppers through the high gross margin departments on their way to other parts of the store. This can be done by creating merchandise areas which are wide and shallow with merchandise frontage on major traffic aisles. The reduced distance to the perimeter walls gives dominance in presenting merchandise effectively and drawing people into the departments.

All of this increases the value of space both within the total store and within each department. The consumer who sees more has a tendency to buy more. "The concept of best adjacent departments should be coupled with wide, shallow departments for maximum results," Doody explains. Related merchan- dise in adjacent departments leads to increased sales.

The third point to be dealt with is the merchandise presentation within the department. Doody Co. plans often specify merchandise sections of a store in 4ft. x 4ft. segments including precise fixture accessories and detailed presentation for each item.

Presentation of merchandise is important because today competing stores have essentially the same merchandise, Doody points out. What makes customers shop at one store vs. another has to do with how easy it is to shop and how comfortable they feel in the store. Creating an easy shopping environment depends on determining the proper classification impact for each area with the proper fixtures and merchandise presentation to excite, educate and motivate the customer to buy.

Fourth step in increasing productivity involves employee utilization. Store layout plans, fixture plans, height plans, traffic flow and positioning of cash/wrap stations should enhance self-service and area-wide security supervision with a minimum of personnel on the sales floor. Well-planned, coordinated systems of informative point-of-sale signing enhance self-selection and self-service substituting for one-onone personal service, Doody stresses.

He cites cases in which with such careful planning they have increased customer service and security surveillance while cutting 5-1090 of actual payroll costs.

Fifth and final step is master planning to assure keeping the store current at lower costs. Well thought out flexibility should adapt store layouts and fixtures to seasonally or trend determined expansions and contractions of key departments. Although flexibility is there, the look must be of stability with an ambiance of cohesion and perman- ence, all at low, front-end costs, Doody emphasizes.

Under any circumstances, Doody concludes, investment control is a fundamental concern in retailing. The elimination of unnecessary investment costs and savings on subsequent remodeling are two dimen- sions which can not be overlooked. The greatest opportunity for eliminating unnecessary investment is in determining which items do not generate sales volume and eliminating them altogether. His company follows a l18 point investment review schedule referred to as FAT

(fixed asset trimming) to cut fat from building and interior costs while maintaining all the muscle required for sound merchandising.

Productivity improvement is a matter of careful analysis and planning on a long range scale, concludes Doody.

Money Managing Strategy

"One common view in modern corporate life is that money management is the responsibility of a modern day specialist, the money manager; ours is that every manager is amoney manager."

This is a major point stressed by Dr. William R. Davidson,chairman and chief executive of Management Horizons, Inc., a market research and management consultant firm, Columbus, Oh.

He makes it clear that there are specific strategies each manager can work with to provide grofth capital for the expansion of his company. "The old ideas of money management," he explains, "are no longer effective. In fact, we can no longer predict what our short term capital costs will be-therefore, we need to maximize financial leverage to do more for less."

He proposes:

Inventory Investment Strategies o The manager must be aware that every purchase order is an investment decision. It is important to maintain a complete stock of fast moving items and always price them competitively. r Seek information on inventory purchases and mix from your suppliers through ship-to reports, velocity code reports, departmental analyses, gross margin analyses and summaries of area top movers.

Payroll Strategies o Keep payroll tax accruals in high-yielding investment accounts; and develop employee incentive programs.

Covernment Approved Tax Saving or Deferment Strategies r Such practices as LIFO accounting, leasing and accelerated depreciation help the manager avoid taxes and free up funds-critical during an inflationary period.

Vendor Financing Strategies o Negotiate terms of sales; coordinate inventory handling with vendors.

Accounts Payable Strategies o Develop a cash management system; fully utilize services of financial institutions; and reexamine vendor payment policies.

Accounts Receivable Strategies o Examine alternative methods of converting sales to cash. o Analyze your customer mix to determine additional sales opportunities.

Energy Strategies o Save money by examining energy uses to identify areas of improvement.

Employment Financing Strategies o Explorethepossibilitiesofborrowing from employees.

Delivery Expense Strategies r Review needs and cost of alternative delivery strategies.

With the advent of computerized management information systems, managers can "implement many of these new ideas in money management in a manner not possible in a former era," Dr. Davidson concludes.

ITOUR SUPPLIERS are used to

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Why? Because you're the best friend they have in the world. If it weren't for you, in fact, theY wouldn't be able to exist. So, when you bill them for money, their immediate instinct is to put the money in the mail.

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(1) What you did.

(2) What you paid to do it.

There are two reasons they must know both things. The first is the practical reason of needing to get an advertising return for the co-oP dollars they're investing. The second is a matter of law. Your supplier can reimburse you only for advertising he knows was done and only at the actual rate he knows you paid.

How does he know such things? Through third-part documentation. He needs to see the advertising You did and the bill you paid.

You get your co-op moneY faster by filing the claim pronto. And bY making sure it includes what's needed.