You Need Customers (and Profits) to Have a Business

Our 1 year Anniversary – The first “Meter” newsletter was published on October 6, 2008, so the one you’re reading now is Volume 2, Issue 1. We’re proud of the fact that we’ve received positive feedback and that you care enough to write us back with comments. We thank everyone for their interest and time. We’ll continue to adjust the format as we move forward.
Darcee and Ron

(This article was the feature in Volume 2 Issue 1 of Condevco's Meter Newsletter)

“You Need Customers (and Profits) to Have a Business”

Well, that seems like a pretty simple statement, doesn’t it? Whether you call it marketing, Sales, Advertising or Promotion, it all comes down to one thing. Getting people to become your customer (purchase from you), and getting them to come in more than once; in other words, customer loyalty and repetitive purchasing. How?

Just cutting price isn’t a competitive strategy

In terms of Convenience Retailing, that means putting customers inside the store. Hopefully they shop there more than one time. In terms of our jobber friends, that means adding dealers to your network, and making sure they want to renew at the end of the Fuel Supply Agreement. In terms of a Refiner/Marketer, that means adding and retaining jobbers, and on and on. But just getting customers by cutting price becomes a losing proposition in the long run, so there’s more to being a good competitor than being low priced.

A simple idea, but a complicated thing to do successfully. Here as we start our second year at the “Meter” we’ve talked about Customer service, we’ve spoken about respecting your customer, and in our two most commented on stories, we’ve spoken about Sprucing up your store and the Value Proposition to your customer. (The Articles are all included in this blog).

In the final analysis, it’s all about getting customers to keep your business going, and retaining them for the long run, whether you’re a multinational refiner or a single store operator. What is the customer looking for? And how do you become the person or business that fulfills that customer need?

Revenue alone isn’t an answer

Just pushing revenue through price cutting and aggressive promotion is NOT the answer to C-Store success. You need to keep margin preservation as a goal when you set your promotional calendar, otherwise, you’re trading dollars for no gain.

In the blog story on Burger King’s new restaurant design, (Article directly below) we discuss the fact that BK hasn’t been a heavy promoter of the “value menu” items, They have them, but BK has always competed on taste -“flame-broiled” and service-“Have it your way” as a primary message, with competitive pricing as a secondary factor. Just driving revenue for revenue’s sake is a feel-good tactic, but in the long run, doesn’t do you any good.

The Future

The NACS (National Association of Convenience Stores) show kicks off in Las Vegas today, where the merchandise and trends for the next year get rolled out. Oil prices are climbing again, and while we’re being told the economy is in recovery, it just isn’t feeling that way to most of us. It’s important to grow top-line revenues, but not at the expense of profit.

A more sophisticated foodservice offering and an emphasis on fresh items is the way to steadily grow revenues in a convenience setting now. Differentiate yourself from the pack in a smart and profitable way, and customers will keep your registers ringing. NPN had a nice article on Loyalty being more than just a Fuel Brand (Click to read) It’s time to think about how to make your business grow in a structured and profitable way. Id like to finish it off with the comment that standing pat is really dropping behind, because everyone else is trying to move ahead!

At Condevco, our business is helping convenience retailers and jobbers grow their business. We develop manuals and administer programs with your staff and provide analysis and input to allow your efforts to become targeted and productive. Contact us TODAY for more information on how we can help your business increase profitability.

Office Depot – NOT Takin’ Care of Business

Office Depot (NYSE:ODP) announced quarterly results yesterday, and losses exceeded estimates by a considerable amount. The other major players in the sector, Staples (NASDAQ:SPLS), and OfficeMax (NYSE:OMX), while being hurt by the current low consumer confidence and recessionary spending patterns, aren’t imploding like Office Depot. Stock prices are down, but the core businesses at the two major competitors seem more stable.

To paraphrase the slogan they used for so long, the management at Office Depot is definitely NOT “Takin’ Care of Business”, at least not theirs. It’s hard to remember when ODP was a savvy, best in the category retailer, because they used to be. They aren’t acting or getting the results like one now.

The latest management trick of getting a capital injection by selling 20% of the company to a UK based firm, after closing 9% of their stores as “underperformers”, show that this is a sad story heading down the same road as Circuit City. Surrendering markets by closing stores, and then having an accelerating sales decline, shows Office Depot is still heading for the same sad end result as Circuit City.

This isn’t an inevitable result, but they HAVE do what they need to do: get back to concentrating on retailing, taking care of the customer they service, and improving in-store experience so that same-store sales aren’t in double-digit declines. Home Depot’s (NYSE:HD) re-emphasis on the customer and store-level service delivery might be a good blueprint for Office Depot to look at. The Microsoft (NASDAQ:MSFT) Windows 7 launch may give them a bump when it occurs, but computers are about to enter a brutal discounting phase as Wal-Mart (NYSE:WMT) ramps up its laptop sales effort.

Retailing is all about customer perception and how they feel when they walk both into, and more importantly, out of your store. Pricing, selection, cleanliness and knowledge are the pillars to increasing sales, or on Office Depot’s case, stopping the declines. Unless management launches a store-level initiative to make the sales experience better, Office Depot will have a tough time surviving the balance of the economic downturn.

Goodwill Writedown on Macy's purchase of May makes sense

Source Article: See Article


Implications:
1) Macy's admits it overpaid for May merger

2) Why was goodwill valued where it was, when Macy's plan was to change all the regional nameplates to Macy's?

3) Do it now; make the move while reduced investor expectations are in place.

Analysis:
Macy's expected move to write down over $3 Billion of goodwill from the May Dept Stores merger/acquisition makes sense in light of the current economic climate and the performance of the firm.

Macy's admits it overpaid for May, but 2005 was a completely different economic climate than they are operating in now. One question about the merger, though; if you were going to take the stable of respected regional Department Store brands nameplates that May controlled (Burdine's and Marshall Field as examples), and then change the name to Macy's to create a National Department store chain, shouldn't you have looked at the goodwill valuation a little more critically?

Macy's was purchasing goodwill, and then spending to rebrand and reposition the assets that they paid to acquire the goodwill for. They "Double-dipped" on the goodwill, overpaying for brand goodwill and continuity, and then paying to remake the "overvalued" brands into Macy's.

In order to put it all behind them the writedown should be as soon and as large as they dare. Retailers, and department stores in particular, are suffering in the consumer spending slowdown. The faster and larger the adjustment made, the better position Macy's will be in to benefit from any uptick in consumption.