Strategizing Retail Sales for 2018

Don Harris - Retail Perspective

Don Harris - Retail PerspectiveWith the arrival of a new year‭, ‬it is always wise to review what has happened before and apply the experiences gained to the challenges that lie ahead‭. ‬The New Year always brings a new plan by management to attain their goals in terms of profitability‭. ‬These plans are drawn up to meet the goals that are set forth for company success and the expectations of upper management‭. ‬These projections are carved in stone and are not flexible‭, ‬and management will follow them without exception‭, ‬regardless of the needs and necessary support for the individual operations within the store‭. ‬With this attitude‭, ‬once again‭, ‬they are proving that‭ ‬‘they just don’t get it‭!‬”

When 2018‭ ‬starts‭, ‬good retailers will look at their operation and evaluate its strengths and weaknesses to determine what strategy to use to accomplish the goals set for the operation‭. ‬The better retailers follow this course to the highest degree‭, ‬and look‭ ‬at any and all other alternatives that might be able to accomplish their goals without following a standard course‭. ‬The most prevalent course in retail today is to merchandise and sell product at a price that provides the required gross profit to make the‭ ‬targeted profit goals‭. ‬Given the results of the past few years‭, ‬it seems this strategy is a bit shortsighted and misses the target of every operation‭, ‬which is successful growth and sustainability of the operation‭. ‬Pricing product to gain gross profit margin at the cost of stagnant‭, ‬or even negative‭, ‬growth of volume is a recipe for failure and is a very difficult proposition to sustain growth‭. ‬This strategic direction is popular due to the financial point of view of upper management so they can report glowing profit numbers to the industry‭. ‬It is not a strategy designed to move a produce operation to the next level‭.‬

To gain the kind of sustainability that will be needed in the future for a produce operation‭, ‬successful retailers will look to‭ ‬lessons learned in the past‭, ‬including some of the basic‭, ‬successful concepts in retail‭. ‬The top adage in retail is that‭ ‬“Top line sales are the life blood of all retail operations‭.‬”‭  ‬Number two is‭ ‬“the purpose of retail is to sell things‭.‬”‭ ‬These two guiding principles allow for the sustainability of an operation by generating more sales by selling more things‭. ‬This‭ ‬strategy also generates additional profit dollars‭ (‬not percentages‭) ‬that can be applied to the departmental goals‭. ‬The‭ ‬“more product you sell‭, ‬the more profit dollars you make‭,‬”‭ ‬is a simple assumption to be drawn from this strategy‭. ‬The key here is to price your items to sell‭, ‬and not to make margin‭. ‬This action presents your customers with a‭ ‬“value”‭ ‬proposition that encourages additional consumption‭.‬

It would seem to be the smart play for successful retailers to avoid the trap of arbitrarily raising prices to make margin percentages and move to a strategy of consistent pricing and sustained growth.

This is a path to sustainability by maintaining and utilizing consistent pricing to drive sales volume and thereby reach major profit goals‭. ‬The alternative‭, ‬which we have discussed previously‭, ‬is an unsustainable‭, ‬upward spiral where prices continue to increase to provide the needed margin at the sacrifice of volume‭. ‬This could eventually reach a point that places fresh produce out of the reach of the average consumer‭. ‬There are some indications that this situation is happening in some areas in Europe‭, ‬where the middle-class believes fresh produce is priced out of their reach in terms of weekly consumption‭. ‬It would seem to be the‭ ‬smart play for successful retailers to avoid the trap of arbitrarily raising prices to make margin percentages and move to a strategy of consistent pricing and sustained growth‭.‬

A shift to this sort of strategy goes against the flow presently utilized by most retail produce operations‭. ‬However‭, ‬such a switch is necessary to provide sustainability of operations and help to ensure future growth‭. ‬Increasing consumption would be supported by a strategy that seeks to sell more products at consistent prices‭, ‬thus generating the needed profit dollars and maintaining access to fresh produce for as many customers as possible‭. ‬Produce operations presently utilizing this type of strategy and‭ ‬pricing consistency seem to be enjoying growth and success on a consistent basis‭. ‬It seems that a good look at what has happened‭ ‬before and a review of what we are trying to accomplish would provide the basis for a sustainable‭, ‬successful growing produce operation‭. ‬Actions in this vein would go a long way in providing the base for a sustainable retail produce industry‭.‬

Don Harris is a 41-year veteran of the produce industry, with most of that time spent in retail. He worked in every aspect of the industry, from “field-to-fork” in both the conventional and organic arenas. Harris is presently consulting and is director of produce for the Chicago-based food charity organization, Feeding America. Comments can be directed to [email protected].


(Visited 82 times, 4 visits today)