March 2020 - 50

POHMER ON
KEEPING IT
FOCUSED!
Focusing on your sales potential and
initial margins will go a long way toward
keeping your operational costs and
expenses under control.
By Stan Pohmer
M
anaging a garden center today is challenging
in a dynamic, complex, market-driven, highly
competitive environment that changes at warp
speed dictated not only by external factors, but by weather.
While you can anticipate and plan for some of these, others
you have no control over and just have to adapt to.
Add to this the reality of dealing with the demands and
expectations of your shareholders - those who expect a
return on their investment, as well as your stakeholders -
your employees, lenders, trade partners, and customers,
all of whom are different. This creates another layer of
management considerations.
Monitoring the Numbers
Thankfully, with the aid of computer programs, you
can input, manage and review your costs, expenses and
inventories by category against plans, as well as capturing
Point of Sale data to track sales and help maintain
a perpetual inventory to factor buy plans. With this
information, you're able to generate the financial information
demanded by your lenders in order to get operating loans and
funds for capital improvements, the cash flow projections
required by your trade partners to obtain the most
advantageous terms, and stay in stock for your customers
while minimizing retail shrink due to overstocks - and
better manage your entire retail operation.
Most likely, you spend time reviewing the key ratios such
as payroll, expenses like utilities and rent, marketing, and
inventory turnover and shrink. And seasonally, among other
information, your lenders ask you for your historical returns
on invested capital, cash flow and other ratios to ensure you
are financially stable before they extend loans.
Reviewing and comparing expense ratios to plan is a quick
and easy way to get a snapshot of performance, highlighting
those areas of opportunity while there's still time to make
the necessary corrections. When operating and variable
expense ratios are higher than planned, the quick fix is
often to cut the finite expense investments, cutting payroll
50 | LAWN & GARDEN RETAILER | MARCH 2020
and marketing dollars, as an example, to get the ratios back
in line. In the heat of battle, we sometimes forget that most
of these ratios are measured as percentages to sales.
There's an old retail adage: " sales cure all evils " - and
this still rings true today! If sales increase above plan, then
ALL operating costs and expense ratios improve. Likewise, if
sales are below plan, then all expense ratios are under water
and all must be cut in order to maintain ratios to plan.
In my long experience, I've learned (the hard way, in many
cases!) that focusing on the key elements that have the
most impact on financials pays the biggest dividends, and
these are sales and initial markup or margin (the sales less
acquisition costs that generate your initial pool of
profit dollars).
Before I go any further, allow me to make one key
observation. You are a destination shop; customers have
already made a conscious decision to make a unique
shopping trip to your store and, as a result, have a very high
propensity to purchase. Chances are they did not come to
you because you have the lowest prices in the market, but
for other reasons, such as your assortment, quality, high
service levels, reputation, loyalty, etc. I truly believe that we
in the industry are more sensitive to raising retail pieces
than the consumer is!
How to Increase Sales
There are only a few ways to increase sales:
* Raise retail prices: Your customer is buying value,
not price. Though you may need to be competitive
on national brand image items, you most likely have
significant opportunity to increase your retails on the
majority of your assortment.
* Increase the transaction value of each customers'
purchase: Through " project merchandising " and
creative/suggestive merchandising, you can entice
customers to purchase complementary and ancillary
items. For example, merchandise orchid care books,
containers, orchid soil and fertilizer immediately
adjacent to the orchid plants. This not only leads to
increased purchase dollars, but higher transaction
margin and, as an added bonus, an improved chance of
consumer success with her orchid.
* Increase the number of transactions by increasing the
frequency of shop of your existing customers: Your
March 2020

Table of Contents for the Digital Edition of March 2020
