It’s intoxicating! What’s not to love about sales growth?
There’s an electricity in the office when things are up; even the weekly Trade meeting is a joy.
But there’s more to growth than high-fiving at the water cooler …
Growth in Retail has many faces.
Growing sales hide many ail’s
Growth hides a multitude of sins.
The more rapid, large scale or generally impressive the Sales growth, the greater the proverbial rug under which issues can be swept (not necessarily deliberately, but also not unheard of).
Critical warning signs on process, people and the ability to scale are missed, and the internal feedback loop becomes compromised.
Continuous improvement is replaced with complacency.
Ironically, growth itself creates the vulnerability that could end the growth cycle.
When growth is hollow, pain will follow
Not all growth is created equal.
Challenge your thinking on the type of growth you are planning or achieving.
I use this term to refer to unprofitable sales - a whole lot of time and effort, for not much reward. Everyone is busy, but the ROI is lacking on every front.
Effectively “buying” sales in a margin trade off might be pretty on the surface, but the profitability required for longevity is more than skin deep.
Expansion (stores, channels) and innovation (brands, categories) are a natural and important aspect of business; key to relevance and survival, not just growth.
Strategising and monitoring growth across these layers helps protect your base.
Like for like growth affords a sober view of truly comparable gains on prior year. Growth buoyed only by new stores, not comps, should be a red flag.
Core and hero product lines pay the bills. Be careful not to drift from brand DNA while chasing what’s new and exciting, as this neglect erodes brand position.
A narrow focus is hocus pocus
Too narrow a focus on Sales growth can be misleading.
My “Right” Rights model emphasises the importance of focusing on the “right” things to get the right results.
Consider sales growth of +20% year on year.
Is it champagne-worthy in and of itself?
· What if the corresponding stock investment is up 55%, with stockturn and stock health in rapid decline?
· What if margin % has been sacrificed, without equal and opposite offset in volume to grow margin $ ?
· What if the stock investment to support these sales exceeds cash flow capability?
· What if you’re cycling on 2 consecutive years of -15% growth?
The trick is to have your eye on the full picture, not just the shiny sales number.
Too much of a good thing, and a tail with a sting
All good things must come to an end, as they certainly did for coloured denim, fidget spinners and many other loved (then hated) Retail fads and trends.
Agile supply chains and business process will position you well to capitalise on the upswing; robust Planning practice will protect you on the down swing as well.
The law of diminishing returns will prevail, so be ready, and don’t fall into the trap of squeezing out the last possible drop of growth, only to unravel all your profitability in the overstock aftermath.
Growing pains, losses and gains
The growth scorecard is well represented on both sides of the midline.
It can -
· force fixed costs into the business
· deplete teams and resources
· cause distractions and disruptions
These are simply challenges to acknowledge and prepare for.
Equally, growth fuels growth. It boosts
building momentum to drive the next round.
Growing or slowing
At the end of the day, you can’t stand still even if you want to.
Every business is either growing or declining, even if simply through shifts in market share.
There are no safe zones, no plateaus, no pause points.
Despite its complexities and paradoxes, growth is non-negotiable.