The Four Areas of Focus

About the Four Areas of Focus

Throughout my career, I used a value-added, consultive sales process that enabled me to play a vital role in building one of the world’s largest distributors of consumer products in our industry.

As a key supplier to almost 3,000 retailers throughout North America, I worked closely with independent retailers of all sizes, which allowed me to sponge up the best practices of many highly successful retailers.

Over time, a retail framework emerged, developed from thousands of sales calls, customer meetings, store walk-throughs, and category and line reviews that I conducted.

My framework encompasses the activities that drive retail success. From assortment planning to inventory control and sales & marketing, these activities, done well, produce superior results.

My framework became how I managed my customer relationships- it accelerated my business because it accelerated my customers’ businesses!

Eventually, what I learned evolved into The Four Areas of Focus.

I appreciate the simplicity of The Four Areas of Focus because they are the keys to retail success.

I saw firsthand how building operating processes around The Four Areas of Focus could increase sales, produce a high-performing inventory, improve in-stock position, and improve cash flow.

The Four Areas of Focus are the most critical activities retailers can engage in to succeed.

This framework is so essential that neglecting any of the four areas will negatively impact your business, just as gaining mastery of all of them will enable you to grow profits and exceed your goals.

Now, I want to share The Four Areas of Focus with you.

The Four Areas of Focus- a framework for retail management.

First Area of Focus: Assortment

The assortment plan is at the center of every activity in retail. It defines the value proposition, is the financial engine that drives sales and runs the business, and is the number one measure your customers will judge you by.

Rule #1- You either have what they want when they want it- or you don’t.

There is no shortcut to creating a winning assortment plan. Getting it right is best done by first knowing who you serve. Who your core customers are, what do they like and dislike, what’s important, and what’s not?

Assortment planning also requires a deep understanding of the market, competition, and internal and external trends. Having good data and the ability to interpret it is necessary to see the emerging trends that will impact your business tomorrow- not what’s happening now but what will happen tomorrow.

There is an old saying in Ice Hockey: don’t skate to where the puck is; skate to where the puck is going. Adopt this mindset for assortment panning, too.

Internal and external sales trends matter, but so do market trends, shopper behaviors, and preferences; really, anything that happens on the path to purchase is critical to making well-informed decisions about your product assortment.

Being able to interpret data and tease out changes, trends, and shifts is also essential to a good planning process. You need to think about and plan for tomorrow, not today.

What got you here will not get you there.

Lastly, this is more than just a one-and-done activity. Your product assortment must be revised regularly and objectively. Conducting line and category reviews is critical to success and must be addressed annually.

Reviewing the assortment plan allows you to leverage your supplier relationships by recruiting suppliers to help. If they believe in your success as much as their own, or better still, believe their success is only possible if you succeed, make them your category captains.

A good category captain will provide objective data on industry and product trends and candid, objective feedback.

Second Area of Focus: Inventory

Once you decide what to sell, you must establish rules and processes to manage your inventory.

Retailers’ three most significant expenses are inventory, people, and rent. The size of your inventory and how it performs will impact your balance sheet and cash flow, so it must perform. By performing, I mean good turns, an acceptable return on investment, and minimal markdowns.

Rule #2- Managing inventory is simple- sell it or get your money back.

Properly managing your inventory will also have a significant impact on customer service. Being in stock is the number one objective (remember Rule #1). Having enough is essential. So is having the proper “presentation quantity.”

Presentation quantity is the quantity of product on the sales floor at any given time and plays a vital role in sales volume.

Maximizing sales opportunities is achieved by setting presentation quantities based on velocity-of-sale. Not space, aesthetics, or other criteria.

Last thoughts on inventory: Balance is as important as being in stock. Old, slow-moving, and obsolete inventory will kill cash flow, GMROI, and margin. It is essential to have a process and discipline to keep the inventory fresh by weeding out the dead wood.

It takes courage not to overthink your opportunities to sell products at full margin. If it did not sell this year, this season- what makes you think it will next time around? If it didn’t sell, get rid of it as quickly and profitably as possible.

Returning to the vendor is best; markdown is the last resort. But do not procrastinate inventory reduction. Dead is dead. Say goodbye and move on!

The bottom line is that good inventory performance makes a good business perform. It takes process, people, and technology to get it right.

Third Area of Focus: Point of Sale Merchandising

The point of sale display is where the tire meets the road. Your displays either help make sales or kill sales.

Rule #3- With too many choices, customers will choose nothing. Less but better is easy to say yes to!

The POS display and visual merchandising is the silent salesperson that explains the features and benefits, branding to enable your customers to picture themselves owning your product.

Good POS merchandising enables products to be findable, personalized, on-point brand, and trend-wise. It is the destination in the Path-to-Purchase (Search, Site, Social, Store).

There are three other must-haves- price, promotion (where applicable), and quantity/increment of sale. These basics must be communicated to make your store easy to shop and pleasing.

Last note on POS: branding is a big deal for your suppliers. They work hard to make their products stand out and will go out of their way to support your POS efforts. Use them and their marketing resources!

You’d be surprised at the depth of resources your suppliers have to support your POS programs. Take full advantage of all they offer, or ask that they contribute financially to your custom designs.

Visual merchandising is as essential to them as to you; leverage that to help defray costs.

Fourth Area of Focus: Promotion

CW Post created the first coupon to sell more breakfast cereal. Modern consumer goods promotion and advertising were born at that moment.

Every year, billions are spent to promote and advertise products to consumers. Promotions compel us to buy in print, online, in-store, and even in public places.

The idea is to offer a deal to get incremental sales increases. But this can backfire if you aren’t careful.

Rule #4- it takes a 33% increase in unit sales to cover a 10% price reduction. Any promotion that reduces prices without increasing unit sales is a failure.

When planning promotions, consider what it will take to increase the unit sales. Why are you doing it if you cannot cover the margin hit?

If you don’t buy extra inventory to support your promotion, your promotion will fail. Unless, of course, it's an inventory reduction sale.

Buying into a promo is critical to success. I cannot tell you how often I have seen retailers drop their prices without increasing their inventory. The net result is that they made some people happy at the cost of their gross profits.

Promotion and advertising are critical to attracting customers. You can entice new customers to visit your store and existing customers to make an unplanned trip, and if you’re really clever, you can increase your average sale by using promotions to make add-on sales.

Tying one product to another is one way to increase the effectiveness of a promotion.

Promotion and advertising is another area where supplier partners are willing to let go of the purse strings and participate. They have budgets to help cover your discounts, offset advertising, and supply free products and samples. Not to mention marketing collateral.

Last bit of advice- do not get caught in the MAP-TRAP! MAP, minimum advertised price programs, set restrictions on the price you can advertise, and steep penalties for violating them.

Let me be clear: they can only restrict the advertised price. What you do in your store is your business. As long as you keep it off ad, offline, and out of email and social media, you are free to do what you want.

But get copies of your supplier’s MAP policies, read them, and understand them.

Last word on promotion- promote a category whenever possible. Brand A over Brand B and C is nothing more than trading dollars.

Category promotions leverage the rule that a high tide floats all boats.

To Summarize

Assortment: Drive sales through assortment and category planning and management. Identify and leverage sales trends (internal and external), market trends, and consumer trends. 

Inventory: Maximize sales by understanding and streamlining replenishment practices and processes, assessing presentation quantities and safety stock adjustments, and eliminating under-performers.

Point of Sale: Ensure that the in-store experience allows products to be Findable, shopping to feel Personalized, and the Value/price equations are clear and compelling.

Promotion: Help plan and execute promotions, events, and advertisements to raise the entire category, not just a product or brand, at the expense of the others. Increase unit sales, attract new customers, and maintain gross margin dollars so that the promotion delivers bottom-line value. 

Next Steps

I am here to help. I am always available to discuss The Four Areas of Focus with retailers or the suppliers who sell to them.

This highly effective framework can help you if you are a retailer trying to grow your business or sell to retailers if you are a supplier who wants to be your customer’s most important business partner.

In either case, I can help you take your business to the next level!

A Parting Thought

Independent retailers are America's backbone, serving their communities in countless ways. They provide jobs, support local economies, and provide high service levels, not to mention the various ways they give back through charitable and philanthropic activities.

I have spent my career helping retailers succeed. My business is designed around my mission to help people solve problems, achieve their goals, and get sh*t done.

The Power of Local Businesses

For every dollar spent at a small business, an average of $0.67 stays in that business’s local community. —American Express

“Over $9.3 billion would be directly returned to our economy if every US family spent just $10 a month at a local business.” — The Business Journal

“Small businesses donate 250% more than large businesses to community causes.” — Score

“Across the country, small businesses employ 58.9 million people, which makes up 47.5% of the country’s total employee workforce.” — Fundera

“Local businesses generate 70% more local economic activity per square foot than big box retail stores. Your town only has so much space for businesses—dedicating that space to local businesses instead of huge warehouses or giant chains will mean your city using that commercial space 70% more efficiently.” — Huff Post

“Since 1990, big businesses eliminated 4 million jobs, while small businesses added 8 million jobs.” — Small Business Administration