Retail benchmarks Interbike sept 2011
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This document discusses how benchmarking can help bicycle businesses improve performance and maximize profits. It provides examples of key performance indicators and benchmarks for metrics like cost of goods sold, inventory turnover, marketing expenses, and operating profits. The document recommends bicycle retailers compare their performance to industry averages and "high profit" businesses to identify areas for improvement. Benchmarking can expose best practices, weaknesses to address, and opportunities to increase sales and profits. Sources of benchmark data are also provided.
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Retail benchmarks Interbike sept 2011
- 1. Creating Financial Success For Your Bicycle Business: Understanding and Using Retail Benchmarks September 13, 2011 The Marketplace is Complicated; Consumers And Retailing Have Changed ⢠Buying Patterns Are Shifting ⢠Consumers Are No Longer Loyal Without Cause ⢠Competition Is Fierce; Differentiation Has Is Increasingly Difficult ⢠Optimizing Performance Is Critical To Business Success Successful Retailers Must Improve Both External AND Internal Performance In Order To Stay Competitive And Deliver Bottom Line Profits
- 2. Internet, Mail Order And Mass Merchants Are Biggest Perceived Retailer Challenges in 2011 NBDA 2011 Dealer Survey Ask Yourself: What Are Your Businessesâ Biggest Challenges? (Internal Or External)
- 3. Does Your Business Review Itâs Annual Performance To Maximize Sales and Profits? How Can Your Bicycle Business Improve Itâs Performance? By Comparing Itâs Performance To Like Businesses In The Same Industry called Benchmarking
- 4. What Is A Benchmark? A measured âbest-in-classâ achievement, recognized as the standard of excellence for a particular process A reference point or a standard against which other performance may be measured against ⢠Examples may include: Cost Of Goods Sold Average Gross Revenue Sales Per Square Foot Sales By Classification Inventory Turnover Why Should a Retailer Understand And Utilize Benchmarking? ⢠Identifying Internal Weaknesses: Provide Guidance For Improvement Planning ⢠Verify Internal Strengths; Expand and Exploit Them To Grow Business ⢠Determine Best Practices To Improve Internal Operations ⢠Spur Innovation And Development Of New Product And Merchandising Concepts ⢠Improve Cost Structures And Competitiveness ⢠Recognize Opportunities For Outsourcing And Strategic Alliances
- 5. Benchmarking Can Provide Information To Drive Maximum Business Improvement Raises The Level Of Potential Performance Sharing Of Best Practices Understanding World-class Performance In-depth Encourages And Stimulates Innovation Broadens Organizationâs Perspective Exposes Employees To New Ideas Numerous Types of Benchmarking Exist; Perspective Will Drive Your Choice Industry General ⢠High Level And Industry Broad; Offers Macro- economic Business View ⢠Focuses On Where And How Your Business Compares To The Broad Group Industry Segment Specific ⢠Represents Data From âLike Firmsâ Operating In The Same Business Environment; Generally In The Same Manner As Your Firm ⢠More Comparable Database And A Higher Level Of Credibility Operating Metrics ⢠Very Specific, Typically Financial Line Item; Provides Details That Can Offer âEye Openingâ Perspective When Significant Variances Are Discovered
- 6. Retailers Must Be Focused On Building Value By Seeking Out Improvements In Performance Change in Business Valuation Return On Investment Investment Growth Sales Costs/Margin Working Capital Capital Expenditures Selling More Keeping More Tying Up Less of Every $ Sold Capital for Growing Every $ Sold Value Benchmarks Enable Retailers To Examine Aspects Of Performance And Effectiveness Sales Effectiveness Are You Optimizing Sales? Merchandising Effectiveness Are You Buying and Using Inventory Effectively? Marketing Effectiveness Are Your Marketing Investments Paying Off? Management Effectiveness Are Investments In Non-sales Generating Overhead Appropriate? Capital Effectiveness Are Working Capital And Assets Generating Market Comparable Returns?
- 7. Combining Benchmarking And Best Practices Enable Optimum Improvement Opportunities Best Practices Are: ⢠Outstanding Business Practices Which Have Been Identified As Contributing To Significant Improved Performances In Leading Companies Within An Industry ⢠Industry Publications, Organizations, Trade Shows, Webinars â Be A Continual Learner And Seek Ways To Apply To Your Business Retail Business Strategy Creates Necessary Key Performance Indicators Strategy External and Key Internal Value Drivers Benchmarks Key Performance Indicators What Benchmarks Does Your Business Need?
- 8. Specific Benchmarks Enable Identification of Implications, Solutions And Business Impact Desired Obtain Impact Benchmarks Continuous Business Improvement Design Identify Solutions Implications Improvement Cycle Should Repeat Itself Periodically For Instance: How Do Your Location Sales Compare With Other Parts Of the Country? How Would Improving The Performance To The Benchmark Impact The Overall Sales and Profit Of The Store? Source: NBDA 2011 survey
- 9. Internal And External Benchmarks Can Be Utilized To Measure Retail Performance Key Measures: ⢠Annual Average Revenue ⢠Operating Expenses ⢠Sales Per Square Foot ⢠Operating Margin ⢠Sales Per Transaction ⢠Operating Margin Per Sq. Foot ⢠Average Inventory Turn ⢠Marketing Expenditures ⢠Average Gross Margin % ⢠Return On Invested Capital Benchmarks Should Be Selected Based On Operational And Strategic Objectives Results Vary By Store Size; Obtain The Proper Benchmark Before Assessing Performance Make Sure You Obtain The Appropriate Statistic For Your Store Size and Type Source: NBDA 2011 survey
- 10. 2011 Bicycle Industry Key Performance Indicators Category Industry All Shops High Profit Average Sales $866,817 Cost Of Goods Sold 54.7% 53.1% Operating Margin 45.3% 46.9% Payroll 22.35% 22.56% Occupancy 7.45% 5.81% General & Administrative 9.51% 5.58% Operating Profit 4.56% 13.11% Source: NBDA 2011 survey Cost Of Goods Sold Benchmarking Store Type Benchmark All Shops 54.7% High Profit 53.1% Areas To Assess ⢠Merchandise Selection ⢠Vendor Negotiated Agreements ⢠Store Pricing Strategies ⢠Seasonal Markdown Process ⢠End of Season Liquidation Process ⢠Promotional Support from Vendors ⢠Negotiated Shipping Terms Potential Profit Improvement (54.7-53.1 ) X $866,000 = $13,800 Source: NBDA 2011 survey
- 11. Average Inventory Turn Benchmarking Store Type Benchmark All Shops 2.5 High Profit 3.0 Areas To Assess ⢠Product Selection And Assortment ⢠Merchandise Planning Process ⢠Purchase Delivery Strategy ⢠Seasonal Markdown Process ⢠Marketing Strategy ⢠Sales Training/Vendor Support Strategy Potential Working Capital Savings: ($866,000/2.5)- ($866,000/3.0) = $57,773 Source: NBDA 2011 survey Marketing Expense Benchmarking Store Type Benchmark All Shops 2.44% High Profit 1.53% Areas To Assess ⢠Advertising Effectiveness Measurement ⢠Assessment/Use of Lower Cost Mediums (Social Media) ⢠Company Collaboration Around Marketing Activity ⢠Allocation Of Resources To Various Advertising Media ⢠Cycle Times And Number Of Iterations To Develop Creative Content Potential Profit Improvement: (2.44-1.53 ) X $866,000 = $8,000 Source: NBDA 2011 survey
- 12. Operating Profit Benchmarking Store Type Benchmark All Shops 4.56% High Profit 13.11% Areas To Assess ⢠Payroll Expense ⢠Employee Productivity ⢠Selling Revenue/Productivity ⢠Operating Margin Per Square Foot ⢠General and Administrative Expense ⢠Location Expense Potential Profit Improvement: (13.11 â 4.56) X $866,000 = $74,000 Source: NBDA 2011 survey Other Benchmark Considerations Benchmark Areas To Assess Sales Per Transaction Employee Training And Incentive Plans Sales Per Employee Hour Employee Training, Incentive Plans And Scheduling Average Inventory Shrinkage Security, Inventory Processes, Point Of Sale Reconciliation System, Shipping And Receiving Sales Per Promotional Investment Marketing Effectiveness, Promotional Tracking Systems, Marketing Strategy Overhead Percentage Of Sales Staff Capacity And Utilization, Real Estate Costs, Utilities, Unnecessary And Unproductive Services, Outsourcing Opportunities Return On Invested Capital Inventory Turn, Dated Inventory, Markdown Procedures, Receivables And Credit Policies Sales Per Working Capital Inventory And Receivables Policies, Sales Training, Invested Pricing Strategies, Marketing Effectiveness
- 13. Sources For Retail Benchmark Data National Bike Dealers Association National Sporting Goods Association Outdoor Retailer Retailbenchmarks.Com* Retail Forward Census.Gov Retail Ownerâs Institute Consulting White Papers Trade Show Seminars/Associations Webinars Networking With Other Retailers Some Sources Are Free, Some Are Not*. However All the Information is Priceless For Your Business Benchmarking Outlines Opportunities; Solutions Require Strategy And Execution
- 14. Donât Let The Past Be The Guide To Your Businesses Future CBCG Is Here To Help Lynn Switanowski, Founder and President Creative Business Consulting Group ⢠25 Year Retail Industry Veteran ⢠Former Senior Executive at Liz Claiborne, Reebok and Aramark ⢠Areas of Expertise include: Sales & Marketing: Strategy, Planning and Implementation Social Media Strategy Development and Implementation Open To Buy and Inventory Planning Program Development and Implementation Email: lynn@cbc-group.net 617.437.9191 Creative Business Consulting Group www.cbc-group.net