Creating Financial Success For Your BicycleBusiness:Understanding and Using Retail Benchmarks September 13, 2011The Marketplace is Complicated; ConsumersAnd 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 ANDInternal Performance In Order To Stay Competitive And Deliver Bottom Line Profits
Internet, Mail Order And Mass Merchants AreBiggest Perceived Retailer Challenges in 2011NBDA 2011 Dealer SurveyAsk Yourself: What Are Your Businesses’Biggest Challenges? (Internal Or External)
Does Your Business Review It’s AnnualPerformance To Maximize Sales and Profits?How Can Your Bicycle Business Improve It’sPerformance?By Comparing It’sPerformance To LikeBusinesses In The SameIndustry called Benchmarking
What Is A Benchmark?A measured “best-in-class” achievement,recognized as the standard of excellencefor a particular processA reference point or a standard againstwhich other performance may bemeasured against• Examples may include: Cost Of Goods Sold Average Gross Revenue Sales Per Square Foot Sales By Classification Inventory TurnoverWhy Should a Retailer Understand And UtilizeBenchmarking?• 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 ToDrive 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 IdeasNumerous Types of Benchmarking Exist;Perspective Will Drive Your ChoiceIndustry General• High Level And Industry Broad; Offers Macro- economic Business View• Focuses On Where And How Your Business Compares To The Broad GroupIndustry 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 CredibilityOperating Metrics• Very Specific, Typically Financial Line Item; Provides Details That Can Offer “Eye Opening” Perspective When Significant Variances Are Discovered
Retailers Must Be Focused On Building Value By Seeking Out Improvements In Performance Change in Business Valuation Return On Investment Investment Growth Sales Costs/Margin Working Capital Capital ExpendituresSelling More Keeping More Tying Up Less of Every $ Sold Capital for Growing Every $ Sold Value Benchmarks Enable Retailers To Examine Aspects Of Performance And Effectiveness 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?
Combining Benchmarking And Best PracticesEnable Optimum Improvement OpportunitiesBest 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 BusinessRetail Business Strategy Creates NecessaryKey Performance Indicators Strategy External and Key Internal Value Drivers Benchmarks Key Performance Indicators What Benchmarks Does Your Business Need?
Specific Benchmarks Enable Identification ofImplications, Solutions And Business Impact Desired Obtain Impact Benchmarks Continuous Business Improvement Design Identify Solutions Implications Improvement Cycle Should Repeat Itself PeriodicallyFor Instance: How Do Your Location SalesCompare 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 BeUtilized To Measure Retail Performance Key Measures: • Annual Average Revenue • Operating Expenses • Sales Per Square Foot • Operating Margin • Sales Per Transaction • Operating Margin Per Sq. Foot • Average Inventory Turn • Marketing Expenditures • Average Gross Margin % • Return On Invested Capital Benchmarks Should Be Selected Based On Operational And Strategic ObjectivesResults Vary By Store Size; Obtain The ProperBenchmark Before Assessing Performance Make Sure You Obtain The Appropriate Statistic For Your Store Size and TypeSource: NBDA 2011 survey
2011 Bicycle Industry Key PerformanceIndicatorsCategory Industry All Shops High Profit AverageSales $866,817Cost 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%Operating Profit 4.56% 13.11%Source: NBDA 2011 surveyCost Of Goods Sold Benchmarking Store Type Benchmark All Shops 54.7% High Profit 53.1% 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 Potential Profit Improvement (54.7-53.1 ) X $866,000 = $13,800Source: NBDA 2011 survey
Average Inventory Turn Benchmarking Store Type Benchmark All Shops 2.5 High Profit 3.0 Areas To Assess • Product Selection And Assortment • Merchandise Planning Process • Purchase Delivery Strategy • Seasonal Markdown Process • Marketing Strategy • Sales Training/Vendor Support Strategy Potential Working Capital Savings: ($866,000/2.5)- ($866,000/3.0) = $57,773Source: NBDA 2011 surveyMarketing Expense Benchmarking Store Type Benchmark All Shops 2.44% High Profit 1.53%Areas To Assess• 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 Potential Profit Improvement: (2.44-1.53 ) X $866,000 = $8,000Source: NBDA 2011 survey
Operating Profit Benchmarking Store Type Benchmark All Shops 4.56% High Profit 13.11% Areas To Assess • Payroll Expense • Employee Productivity • Selling Revenue/Productivity • Operating Margin Per Square Foot • General and Administrative Expense • Location Expense Potential Profit Improvement: (13.11 – 4.56) X $866,000 = $74,000Source: NBDA 2011 surveyOther Benchmark ConsiderationsBenchmark Areas To AssessSales Per Transaction Employee Training And Incentive PlansSales Per Employee Hour Employee Training, Incentive Plans And SchedulingAverage Inventory Shrinkage Security, Inventory Processes, Point Of Sale Reconciliation System, Shipping And ReceivingSales Per Promotional Investment Marketing Effectiveness, Promotional Tracking Systems, Marketing StrategyOverhead Percentage Of Sales Staff Capacity And Utilization, Real Estate Costs, Utilities, Unnecessary And Unproductive Services, Outsourcing OpportunitiesReturn On Invested Capital Inventory Turn, Dated Inventory, Markdown Procedures, Receivables And Credit PoliciesSales Per Working Capital Inventory And Receivables Policies, Sales Training,Invested 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 BusinessBenchmarking Outlines Opportunities;Solutions Require Strategy And Execution
Don’t Let The Past Be The Guide To YourBusinesses FutureCBCG 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: email@example.com 617.437.9191 Creative Business Consulting Group www.cbc-group.net