Perspectives

From The Co-Founders

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Strategic insights and commentary from The ROI Co-Founders, Pat Johnson and Dick Outcalt
Outcalt & Johnson: Retail Strategists LLC; Retail Turnaround Experts


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Say "Yes!" to Growth? Maybe...

As we emerge from the pandemics, many retailers are eager to grow. (How's that for an understatement?!)

  • For some, that simply means having a better year than 2019 (because 2020 was such a disaster), and they relish having survived.
  • Others are looking to expand by adding locations, whether by acquisition of existing stores, or taking advantage of vacated retail sites. 
  • Still others are focused on expanding their newly-established e-commerce capabilities. 
  • And, for some, still other imaginative ways.

Trade shows are opening up with great success and eager buyers. Landlords are eager to fill vacancies, and in many instances, to cut deals. Vendors are eager to quit thinking about supply chain problems and start selling their merchandise, especially at trade shows. Plus, the continued growth and expansion of online wholesale marketplaces makes far more product available to retailers. 

Then there is the access to capital. Lots of money is floating around out there

All in all, it creates an environment of exuberance. "Seize the opportunity" is the rallying cry. Indeed, for some retailers, FOMO – that Fear Of Missing Out – is pushing them to make some major decisions. 

Here is a three step process for retailers to get some Big Picture perspective on this. 


Step #1: Be honest with yourself when answering these three questions:

  • Do we have the CAPACITY to grow? (Financial strength (check your debt-to-worth ratio and current ratio); people; systems; vendors; locations; customers; etc.)
  • Do we have the APPETITE to grow? (And a strong mid-management team?)
  • And now the key question: Especially after 2020, do we have the STOMACH to grow?? 

That final question, of course, has to do with your tolerance for risk. No matter how much money someone will lend you (and there are many folks eager to extend credit right now) how much debt are you comfortable taking on? How much of your personal capital are you willing to put into the business?

  • Re-check your debt-to-worth ratio, both where it is now and, importantly, where it would be.
  • What about other risks, whether finding people, locations, customers, whatever? 

After all that, do you have a resounding "Yes!" to those three questions? Okay, on to the next strategic decision.


Step #2: What do you choose as your growth strategy? 

You see, for retailers, there are Four (Only!) Ways to Grow, based on the two fundamental variables for managing growth. One is your Merchandise; the other is your Customers. 

See the chart above that shows how those intersect (and see a more detailed discussion here on The ROI site.)

No matter which growth strategy you choose to pursue, there are implications on all of your resources, especially human and financial capital. 

All this need not be a time consuming process. We know that retailers can think fast! Just make a conscious choice of which one of the basic four ways to grow you intend to pursue. 


Step #3: Revisit the three questions in Step #1

  • What will it take to have the CAPACITY to pursue that growth strategy? Anything beyond what you already have in place?
  • Given that, do you still have the APPETITE?
  • And the STOMACH

For those who are definitely in that resounding "Yes!!" camp, more power to you!

You can proceed with more confidence; you have a clear strategic choice in hand. You now have a basis for all the forthcoming hard decisions. And tools for explaining your decisions to staff and family. 

 



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