By Ronald Margulis

Last year, it was supply chain efficiency; this year, it’s growing the top line. According to a survey by the National Retail Federation (NRF) Foundation and BearingPoint released earlier this week at the NRF Annual Convention in New York, retailers will be focusing on accelerated growth this year. The fourth annual study, Retail Horizons: Benchmarks for 2005, Forecasts for 2006, revealed that the majority of retailers cited their mission of growth as a priority initiative. Close to three-quarters (71 percent) of retailer executives stated that growing existing comp store sales is their top priority.

“In today’s increasingly competitive environment, retailers understand that there is a heightened importance on accelerated growth and differentiation in order to set themselves apart from the pack,” said NRF President and CEO Tracy Mullin. “We are now seeing retailers refocus their efforts on growth initiatives in an effort to increase sales, expand their consumer base and retain customer loyalty.”

Other key findings of the study:

• 41 percent of respondents are making 11-40 percent of their purchases through private label sources, with plans to increase that number to 49 percent in 2006;


• Retail companies with an online presence nearly doubled to 94 percent in 2005, up from barely 50 percent in 2004;


• Customer-focused decision-making continues to gain momentum, as 13 percent of respondents had more than a quarter of their field management compensation tied to customer satisfaction results.


• Within the next 12 months, nearly a quarter of respondents plan to add e-training and another fifth plan to implement hiring technologies and self-service kiosks.

The study suggests several approaches retailers can use to provide competitive advantage and generate robust prospects for profitability:

• Differentiate product assortment;


• Understand customers to earn their loyalty;


• Target the more valuable multi-channel shopper;


• Invest in emerging information technology.

Moderator’s Comment: What issues will get the lion’s share of the retail CEO’s attention this year?

First off, the NRF show this week was the picture of what a trade show should be – vibrant; great speakers; new stuff on the show floor and several networking
opportunities. Congrats to all at NRF. After talking with retailers and others at the show, one observation was nearly universal – the projects that retail CIOs are finding it
easiest to get through the executive team are those designed to help grow sales. This was not lost on the tech vendors on the show floor, many of which featured applications and
services designed to drive top-line growth. –
Ronald Margulis – Moderator

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7 Comments on "NRF Study: Growth is Key Issue for Retailers in 2006"

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Mark Lilien

15 years 1 month ago

Excessive staff turnover is the elephant in the room. It stems from poor recruiting, training, motivation and compensation. It holds back sales more than poor technology, assortments, advertising, pricing, or locations. Many retailers act as though their staff is a bunch of uncaring temps who aren’t worth proper screening, training, communication or motivation. Many other retailers treat their staff as if they have no intelligence, wishing they’d simply act like robots duplicating repetitive tasks. Retailing is labor-intensive, yet most retailers act as if their staff will always be low quality. This impression isn’t based on what management says, it’s based on results. I was told by one CEO, “Everyone these days says he’s a people-person. If Joe Stalin was alive today, he’d say he’s a people-person.” I wonder if a ratio could be developed comparing turnover reduction to comp sales increases. In addition to testing a new assortment or new store design or new technology in a given isolated market, why not test every possible way of improving recruiting, training, motivation, etc. in a given… Read more »

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M. Jericho Banks PhD

15 years 1 month ago

While Ron’s report is accurate and insightful (as always), he can’t be blamed for the fact that it belabors the obvious. If the biggest news coming out of the NRF study is that retailers intend to sell more stuff in 2006, then count me among the seriously unexcited. I’ve never been associated with a retailer whose #1 goal was anything but selling more stuff.

That said, I believe a new, major effort by retailers in ’06 will be the integration of their internet business with their store business. Huge advantages will accrue to retailers that can seamlessly merge these businesses to meet customer needs. Customer-friendly services will include ordering from the internet while inside a store, internet ordering from home with delivery to a store, and returning/exchanging/repairing/servicing internet-ordered items at a store.

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Bill Bishop

15 years 1 month ago

From our perspective, the survey really got it right, i.e., Job 1 and, for that matter, Jobs 2 & 3 for the CEO will be to find ways to grow the top-line. That, by itself, isn’t really new news or surprising, and when we look more closely, we realize that the magnitude of the challenge is really significant. >Retailers are running out of ways to control increases in their operating costs, so moving the top-line is really the only way to maintain profitability, i.e., it’s an imperative. >At the same time, there has been been a significant increase in: >>Selling capacity, e.g., square foot of selling area, that has tended to limit increases in sales per square foot, which leads to profit problems. >>Clearly defined shopping choices that have encouraged consumers to use different outlets for different shopping occasions. These fundamental challenges will make it more difficult than ever to drive top-line sales, and I’m not very confident that the four prescriptions listed in the survey will be enough to make a real difference. We… Read more »

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Race Cowgill

15 years 1 month ago

It intrigues me that we all see something that we apparently feel top retail management is not seeing in how to grow the top line. Does this simply boil down to a difference of opinion or priority within the overall goal of increasing the business? Or is something else going on here? We will be releasing in the next few weeks the new report on the study I have mentioned so many times in these discussions, which looks at how retail organizations identify and address their largest problems. And the overall finding is that, as in many, many other industries, they don’t. Why? Not because they are stupid or lazy or inept. But because they have an organizational information system (non-IT systems) that mis-processes the most important information about their markets and their organization. And they don’t know it. In our analysis, retail operates under a cloud of hundreds of missed opportunities, wasted efforts, poorly executed but great concepts, well executed but poor concepts, and seductive activity that distracts from addressing fundamental problems. We found… Read more »

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Karen McNeely

15 years 1 month ago

Michael –

Amen

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George Whalin

15 years 1 month ago

For the past several years, performance improvement for retailers has come from investments in technology. While using the latest technology to improve how a retailer does business is important, there are far more benefits from improving performance in the stores. As Micheal said in his comments, “Job #1 is the shopper.” Far too often retailers focus their efforts on everything but the shopper. In today’s fiercely competitive retail environment, those companies that are taking steps to understand the shopper better are consistently improving the experience in their stores. And by offering a selection of merchandise that is different than what is found in every other store, are thriving and will continue to do so in the future. The problem with the NRF study is that improving performance by focusing on top line growth is not a “program” that is rolled out for 2006, but a way of doing business that is part of the culture of the organization. Those retailers who start 2006 with the goal of differentiating their product assortment; understanding customers to earn… Read more »

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Michael Richmond, Ph.D.

15 years 1 month ago

The number 1 issue or opportunity to growth was not on the list: What the CEOs need to do is put a greater effort into understanding the shopper. All the other bells and whistles are nice but job #1 is the shopper! Yes the other issues are important but with the move from media to consumer marketing, Retail needs to understand the shopper. That is one of the reasons P&G created the First Moment of Truth Department (FMOT) and staffed it with a director and 15 people at HQ and I think another 50 off-site. FMOT is about understanding the first 3 – 7 seconds when the customer first sees the product (which is really the package!) on the shelf, with competition, and at its SRP. This is not about testing anymore – it is about the real life buying experience. And most retailers and, for the matter, most CPGs just are not all the way there yet. So the focus in 2006 should be on better understanding the shopper and what the package can… Read more »

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