Sounding Board: Time to build

While the economy has some retailers stuck in survival mode, many of America’s top companies were conceived in tough times.

By Len Lewis

Time for one of those business riddles!

Question: What do Procter & Gamble, Federal Express, Microsoft, Walt Disney, Apple and CNN have in common?
Answer: All of them were born during or in the aftermath of severe economic crises and invested in the future when common sense might have told them not to.

Clearly, the U.S. economy entered 2011 on the upside but battered and bruised and there is no guarantee that consumer spending will not hit the skids again. Consequently, some chains and independents I have spoken with lately remain in survival mode—meaning cut spending and keep your head down.

Obviously, this is not the time for frivolous expenditures. But neither is it the time to put the future on hold. When I recently asked several industry experts for their assessment of 2011, the answer I expected was “cautious optimism.” But the answer I most often got was “time to rebuild.”

Some of this positive thinking was based on better than expected Christmas sales. Personally, I see holiday sales as snapshots in time not true reflections of longer-term consumer confidence. True empire builders in any industry know that success is not the result of a short-term sale but of long-term growth strategies designed to extend your reach in the marketplace thereby showing off a competitor’s weakness.

There is an army of consultants out there who can do complex analyses of your business and tell you why you only need to carry one brand of fig jam instead of three. For brevity’s sake, I just want to limit this conversation to three key elements common to everyone—human resources, store expansion and new technology.

There is a natural tendency, especially post-holiday, to reduce staff and put a freeze on hiring at both the corporate and store levels. However, you may be missing out on a wealth of talent that might not be available to retailers under normal circumstances.

On one front, we are seeing what has been called the “silver tsunami”—baby boomers who might have been marching toward retirement but whose thinning retirement funds are keeping them in the workforce longer.

There are companies that feel older workers are less productive and more expensive. But keep in mind that when you hire older workers, you are buying experience, lower absentee and turnover rates than younger workers and superior customer-service skills. This group can actually lower a company’s health care costs, since they often don’t have dependent children and may be eligible for Medicare.

Additionally, it has been suggested that companies be wary of simply hiring people with the most glittering resumes. They may have simply rose with the tide during good times when it was a lot easier to look brilliant and promotable. The better hire might be the person who helped stabilize or turnaround a failing company during difficult times.

Store expansion is a tricky subject given that the industry is already considered overstored, thanks to past expansion binges and multi-channel competition. Nonetheless, now is the time to look at where you really need to be. Do you maintain your store base in suburban or rural areas? Or is it time to shed an emotional attachment to stores that will never really be productive enough and make the move to newer population centers like the exurbs or urban areas. Moreover, with an excessive amount of commercial real estate available, it is time to renegotiate existing leases or sign some very favorable new ones for prime locations with mall operators and landlords who are hungrier for tenants than they like to admit.

Finally, technology expenditures should be up in 2011 simply because of pent-up demand. In fact, 55% of companies in a recent survey by Information Week expect IT budgets and spending to rise this year and only 19% expect these budgets to be cut. There has rarely been a more important time for using technology to reduce costs and improve operations whether you operate one store or a thousand.

On another front, it is essential that retailers become more familiar with the potential of customer facing technology like smart phones, social media and other websites. Tesco Direct in the UK has already launched apps that enable shoppers to order food and household items from their mobile phones. I guess the question to answer here is whether you really want your customers to be smarter than you.

Of course, there is a price for doing everything we have discussed here so proceed with caution. But there’s a bigger price for doing nothing.

Len Lewis, a regular Grocery Headquarters columnist, is a veteran industry journalist, commentator and editorial director of Lewis Com­munications, Inc. He is the author of The Trader Joe’s Ad­venture—Turning a Unique Approach to Business into a Retail and Cultural Phenomenon. He can be reached at lenlewis@optonline.net or at www.lenlewiscommunications.com.

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