Coach's Corner: What Is the State of YOUR Industry?

October 23, 2018  by HFBusiness Staff in Business Strategy, Industry   

While this is good data to have and quite often provides insight about overall trends and future forecasts, I sometimes wonder how pertinent or actionable it really is for most of us that are down in the trenches fighting for every customer opportunity and the resulting sales.

I do think it is great to know how the American consumer is feeling about their life situation, which is influenced by employment levels, income growth, home sales and other economic indicators. We use the Consumer Confidence reports to give us a feeling for how all of these factors impact people’s willingness to invest in big-ticket items like cars and home furnishings.

It is also good to know what retail channels consumers are choosing to buy from. This can tell us the relative level of service, price points and type of shopping experience they may be seeking.

Historically I have also found that national information about what products and suppliers are doing well can be very useful. I call it “Who’s Hot and Who’s Not”. With a few exceptions, an item or line that is selling well nationally is a good bet for just about any market in the country. Fabrics and finishes might vary by region, but a good frame or style will usually carry its weight on any floor.

In addition, most highly effective marketing ideas, business systems and processes that are doing a good job in one region, will also help businesses in all the other regions, as will the majority of successful training programs, Web Site improvements and other business enhancements. These things are pretty universal in their application and ROI.

Therefore, much of what we see in the big picture does indeed trickle down to the local level and knowing about it can give us a nice heads-up about what we can be doing in our marketing, merchandising, sales and service efforts to give our potential customers what they want. However, while it is very helpful stuff to know, it is not the be-all, end-all. This type of information should influence what you do, but in order to properly plan your strategy to maximize your results, you must dig much deeper to gain a thorough understanding of what is happening much closer to home, in your backyard – your local market. That is what I call “The State of YOUR Industry”!

So while “The State of Our Industry” is nice to know, the national sales numbers and performance trends do not necessarily provide solid guidance or direction about how or what you should be doing. Certainly, benchmarking and comparing your results with the overall industry or retailers in totally different markets can be a good place to start and could provide points of interest to investigate further as you study your business. But any final decisions made about actions to take should come from solid, location specific information. It must be focused on what is happening with the consumers in your marketplace, the ones you want to target to create customers. Discovering the important data for your market, studying the consumers who live there and measuring your performance within it, are key starting points for any business planning effort. You must know where you are before you can determine where you can go. Total industry numbers will not give you that, only ground level, local data will.

This is because every market is different. So many things create our consumers situations and the vast majority of them are local, not national. They may be influenced by what is happening nationally or regionally, but that is not always the main driver. As an example, Ford may be doing great in the US, but if they move production and the associated jobs from a plant in your city to Mexico or Canada, the national trend is meaningless to those left unemployed in your market. Another wild card is the weather. As I am writing this article, the Carolinas are being devastated by Hurricane Florence. When we look back next year, I am sure the statistics will show that those states had a terrible month and they will most certainly have under performed the industry. However, in September 2019, as people rebuild and redevelop the area, they will most probably outperform the industry. Such has been the case with much of Texas after Harvey.

Therefore, business opportunities and results vary across the country for many reasons. But it really boils down to knowing exactly how you are performing within your market, studying the local target consumers to determine your potential and then determining how well you are doing with them, so you can find ways to improve and attract more.

As I have said in previous columns, a professional business advisor would approach this process much like a doctor approaches a patient with medical issues. First, the physician would ask a lot of questions to gain a clear understanding of the situation and get ideas about any underlying issues. Obviously, if the patient is at risk, the doctor could decide to recommend surgery immediately or take some other drastic action, but in most cases, the doctor would perform a physical and then order tests to see what could be causing the symptoms. After getting the test results, the doctor determines how at risk the patient is, and designs a treatment course that will help him/her regain their health and perhaps improve it far beyond where they were before the ailment. Trust me, I have had a few serious health issues in the last two years, so I know this process well!

I also understand the business analysis process pretty well too, having observed or participated in many successful projects over my career. It is very similar to the doctor analogy above in that the steps are pretty much the same. It is the tests and treatments that are different. Here is how we would recommend a retail store owner—who is interested in improving the health of their business—should proceed.

 

Steps to Take

1. Get a Business Physical – Find a service that will give you reliable, accurate and consistent market share data covering your company’s performance over the past eight quarters. This will allow you to see where you have been and how you are trending. Looking at the movement of your share will tell you if you are healthy, a little sick or deathly ill. If you have been consistently growing your piece of the pie over the past eight quarters, then you are healthy and should keep doing what you are doing. Should you see a small but constant shrinkage, then you have a bug and need to get some treatment to make sure it does not get any worse, because someone is taking business from you. Most scary is when you see a dramatic reduction in your share because it could indicate that you are potentially looking at some rather dire consequences if you don’t reverse the leakage of business. It is best to drill down into your share by major category to see where your main issues might be coming from within your lineup. We have often seen losses in mattresses and/or case goods strongly influence a store’s overall results, while upholstery and motion might be doing fine. You also need to study your sale metrics to see if it is driven by a loss of traffic, lower closing rates or declining average sale. Each cause will require a different treatment.
    
2. Study the consumers available in your market and compare them to your actual customers to find opportunities for improvement. This is one of the most useful treatments for any retailer trying to reverse shrinking market share or just drive growth in their business. You must first know who your target customer is and then you need solid data on how many households fit that profile in your market. The next logical step is to define the customers you have sold over the last two years in the same manner and compare the two groups. This will tell you how well you are doing at attracting and selling those you have targeted within your market. Properly done, this treatment will also indicate which ones you are underperforming with, so you can focus on determining how to capture them in the future. The main criteria here is the age for the head of household and the total household income. While there are over a dozen demographics actively tracked by government agencies, these are the two that have the most influence on when people buy furniture and how much they are willing to spend. Knowing this information will help you accurately define your target consumers so that you can find out where they live in your community and focus your marketing efforts on getting more of them them into your store.
    
3. Find out where those that chose to buy locally are shopping and buying. This is the most critical information to have before creating any turnaround plan if you are losing chunks of market share. Remember, declining share means that someone is taking business from you. You need to determine who it is and why they are winning the battle for your potential customers in the market. Only then can you work to find out why it is happening and make changes in your marketing, merchandising, selling and/or service efforts to reverse the hemorrhaging. Most end up doing this by gut feel, but the best way is to conduct a professional survey of consumers that recently purchased furniture locally to find out who they considered, who they shopped and from whom they bought. This is the best way to get a complete picture of what is happening competitively in your market and it will give you the most insight into what you must do to take back market share.

There are more steps you can take and as stated, most depend on how sick your business is and what resources you want to invest in the process. Unfortunately, there is no Medicare or Health insurance you can use to help offset the cost of treating a business that is ill. But that does not change the fact that you must actively seek to determine “The State of YOUR Industry” before you create any plan to make it better!