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Learn how to use Benchmarks to make your Bicycle Business perform more effectively today.
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Creating Financial Success For Your Bicycle Business: Understanding and Using Retail Benchmarks
September 13, 2011
The Marketplace is Complicated; Consumers And Retailing Have Changed• Buying Patterns Are Shifting
• Consumers Are No Longer Loyal
Without Cause
• Competition Is Fierce; Differentiation
Has Is Increasingly Difficult
• Optimizing Performance Is Critical To
Business Success
Successful Retailers Must
Improve Both External AND
Internal Performance In Order
To Stay Competitive And
Deliver Bottom Line Profits
Internet, Mail Order And Mass Merchants Are Biggest Perceived Retailer Challenges in 2011
NBDA 2011 Dealer Survey
Ask Yourself: What Are Your Businesses’ Biggest Challenges? (Internal Or External)
Does Your Business Review It’s Annual Performance To Maximize Sales and Profits?
How Can Your Bicycle Business Improve It’s Performance? By Comparing It’s
Performance To Like
Businesses In The Same
Industry22
�� called Benchmarking
What Is A Benchmark?
A measured “best-in-class” achievement,
recognized as the standard of excellence
for a particular process
A reference point or a standard against
which other performance may be
measured against
• Examples may include:
� Cost Of Goods Sold
� Average Gross Revenue
� Sales Per Square Foot
� Sales By Classification
� Inventory Turnover
Why Should a Retailer Understand And Utilize Benchmarking?• Identifying Internal Weaknesses: Provide
Guidance For Improvement Planning
• Verify Internal Strengths; Expand and Exploit
Them To Grow Business
• Determine Best Practices To Improve Internal
Operations
• Spur Innovation And Development Of New
Product And Merchandising Concepts
• Improve Cost Structures And Competitiveness
• Recognize Opportunities For
Outsourcing And Strategic
Alliances
Benchmarking Can Provide Information To Drive Maximum Business Improvement�Raises The Level Of Potential
Performance
� Sharing Of Best Practices
� Understanding World-class
Performance In-depth
� Encourages And Stimulates
Innovation
�Broadens Organization’s
Perspective
�Exposes Employees To New
Ideas
Industry General
• High Level And Industry Broad; Offers Macro-
economic Business View
• Focuses On Where And How Your Business
Compares To The Broad Group
Industry Segment Specific
• Represents Data From “Like Firms” Operating
In The Same Business Environment;
Generally In The Same Manner As Your Firm
• More Comparable Database And A Higher
Level Of Credibility
Operating Metrics
• Very Specific, Typically Financial Line Item;
Provides Details That Can Offer “Eye
Opening” Perspective When Significant
Variances Are Discovered
Numerous Types of Benchmarking Exist; Perspective Will Drive Your Choice
Retailers Must Be Focused On Building Value By Seeking Out Improvements In Performance
Selling MoreKeeping More of Every $ Sold
Tying Up Less Capital for Every $ Sold
Growing Value
Change in Business Valuation
Investment GrowthReturn On Investment
Costs/Margin Working CapitalSales Capital Expenditures
Sales Effectiveness
Are You Optimizing Sales?
Merchandising Effectiveness
Are You Buying and Using Inventory
Effectively?
Marketing Effectiveness
Are Your Marketing Investments Paying Off?
Management Effectiveness
Are Investments In Non-sales Generating
Overhead Appropriate?
Capital Effectiveness
Are Working Capital And Assets Generating
Market Comparable Returns?
Benchmarks Enable Retailers To Examine Aspects Of Performance And Effectiveness
Combining Benchmarking And Best Practices Enable Optimum Improvement Opportunities
Best Practices Are:
• Outstanding Business Practices
Which Have Been Identified As
Contributing To Significant
Improved Performances In
Leading Companies Within An
Industry
• Industry Publications,
Organizations, Trade Shows,
Webinars – Be A Continual
Learner And Seek Ways To
Apply To Your Business
Retail Business Strategy Creates Necessary Key Performance Indicators
Key Performance Indicators
Key Value Drivers
Strategy
External and Internal
Benchmarks
What Benchmarks Does Your Business Need?
Specific Benchmarks Enable Identification of Implications, Solutions And Business Impact
Obtain Benchmarks
Identify Implications
Design Solutions
Desired Impact
Continuous
Business
Improvement
Improvement Cycle Should Repeat Itself Periodically
For Instance: How Do Your Location Sales Compare With Other Parts Of the Country?
How Would Improving The Performance To The Benchmark Impact The Overall Sales and Profit Of The Store?
Source: NBDA 2011 survey
Internal And External Benchmarks Can Be Utilized To Measure Retail Performance
• Annual Average Revenue
• Sales Per Square Foot
• Sales Per Transaction
• Average Inventory Turn
• Average Gross Margin %
• Operating Expenses
• Operating Margin
• Operating Margin Per Sq. Foot
• Marketing Expenditures
• Return On Invested Capital
Key Measures:
Benchmarks Should Be Selected Based On Operational And Strategic Objectives
Results Vary By Store Size; Obtain The Proper Benchmark Before Assessing Performance
Make Sure You Obtain The Appropriate Statistic For Your Store Size and Type
Source: NBDA 2011 survey
2011 Bicycle Industry Key Performance IndicatorsCategory Industry
Average
All Shops High Profit
Sales $866,817
Cost Of Goods Sold 54.7% 53.1%
Operating Margin 45.3% 46.9%
Payroll 22.35% 22.56%
Occupancy 7.45% 5.81%
General & Administrative 9.51% 5.58%
OperatingOperatingOperatingOperating ProfitProfitProfitProfit 4.56% 13.11%
Source: NBDA 2011 survey
Cost Of Goods Sold Benchmarking
Areas To Assess
• Merchandise Selection• Vendor Negotiated Agreements• Store Pricing Strategies• Seasonal Markdown Process• End of Season Liquidation
Process• Promotional Support from
Vendors• Negotiated Shipping Terms
Source: NBDA 2011 survey
Store Type Benchmark
All Shops 54.7%
High Profit 53.1%
Potential Profit Improvement (54.7-53.1 ) X $866,000 = $13,800
Average Inventory Turn Benchmarking
Potential Working Capital Savings: ($866,000/2.5)-($866,000/3.0) = $57,773
Areas To Assess
• Product Selection And Assortment • Merchandise Planning Process• Purchase Delivery Strategy • Seasonal Markdown Process• Marketing Strategy • Sales Training/Vendor Support
Strategy
Source: NBDA 2011 survey
Store Type Benchmark
All Shops 2.5
High Profit 3.0
Marketing Expense Benchmarking
Potential Profit Improvement: (2.44-1.53 ) X $866,000 = $8,000
• Advertising Effectiveness Measurement• Assessment/Use of Lower Cost
Mediums (Social Media)• Company Collaboration Around
Marketing Activity • Allocation Of Resources To Various
Advertising Media • Cycle Times And Number Of Iterations
To Develop Creative Content
Areas To Assess
Source: NBDA 2011 survey
Store Type Benchmark
All Shops 2.44%
High Profit 1.53%
Operating Profit Benchmarking
Potential Profit Improvement: (13.11 – 4.56) X $866,000 = $74,000
Areas To Assess
• Payroll Expense• Employee Productivity• Selling Revenue/Productivity • Operating Margin Per Square Foot• General and Administrative Expense• Location Expense
Store Type Benchmark
All Shops 4.56%
High Profit 13.11%
Source: NBDA 2011 survey
Other Benchmark Considerations
Benchmark Areas To Assess
Sales Per Transaction Employee Training And Incentive Plans
Sales Per Employee Hour Employee Training, Incentive Plans And
Scheduling
Average Inventory Shrinkage Security, Inventory Processes, Point Of Sale
Reconciliation System, Shipping And Receiving
Sales Per Promotional Investment Marketing Effectiveness, Promotional Tracking
Systems, Marketing Strategy
Overhead Percentage Of Sales Staff Capacity And Utilization, Real Estate Costs,
Utilities, Unnecessary And Unproductive Services,
Outsourcing Opportunities
Return On Invested Capital Inventory Turn, Dated Inventory, Markdown
Procedures, Receivables And Credit Policies
Sales Per Working Capital
Invested
Inventory And Receivables Policies, Sales Training,
Pricing Strategies, Marketing Effectiveness
Sources For Retail Benchmark Data� National Bike Dealers Association
� National Sporting Goods Association
� Outdoor Retailer
� Retailbenchmarks.Com*
� Retail Forward
� Census.Gov
� Retail Owner’s Institute
� Consulting White Papers
� Trade Show Seminars/Associations
� Webinars
� Networking With Other Retailers
Some Sources Are Free, Some Are Not*. However All the Information is Priceless For Your Business
Benchmarking Outlines Opportunities; Solutions Require Strategy And Execution
Don’t Let The Past Be The Guide To Your Businesses Future
Creative Business Consulting Group www.cbc-group.net
CBCG Is Here To Help
Lynn Switanowski, Founder and President
Creative Business Consulting Group
• 25 Year Retail Industry Veteran
• Former Senior Executive at Liz Claiborne, Reebok and Aramark
• Areas of Expertise include:
� Sales & Marketing: Strategy, Planning and Implementation
� Social Media Strategy Development and Implementation
� Open To Buy and Inventory Planning Program Development and Implementation
Email: lynn@cbc-group.net 617.437.9191
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