In any discussion about successful businesses, areas such as “customer service” and “supplier arrangements” are mentioned as essential ingredients. Relationships, good or bad, can make a huge difference to profitability for retailers.
Why is it that some retailers get better deals than others with suppliers? Why is it that some outlets have a bigger turnover than competitors? Why is it that some have a high staff turnover? There are several factors, but relationship management plays a critical role. Three groups where good relationships play a crucial role are suppliers, customers and staff.
Suppliers
Good relationships with suppliers can make a significant contribution to operating costs, as well as improving cash flow.
A major challenge for retailers is reducing the working capital cycle; that is, shortening the time between paying for goods and selling them.
One way to help is to have stringent purchasing practices and avoid over-ordering. Large inventory is simply cash on the shelves, or even worse, in the warehouse.
Both of these factors can be influenced by the relationship retailers have with their major suppliers.
Smarter retailers are forming stronger partnerships with suppliers to extend payment terms, enable them to bring in product more frequently in smaller quantities, and allow them to ship direct to store.
Having a good relationship with suppliers is critical in this. Suppliers are more likely to extend payment terms, or change standing arrangements, for people they like to do business with.
Smart retailers put significant time and resources into building relationships with key suppliers over a long period of time. Retailers and suppliers who adopt a long-term strategy of working together in a ‘win- win’ relationship usually come out on top. Retailers who chop and change suppliers, with the total emphasis on price, usually lose over the longer term.
Spending the time at a senior level to know what suppliers are looking for out of the relationship, beyond margin, in an alignment of business objectives enhances relationships quickly.
Good relationships are also of great help during difficult trading periods when a supplier is more likely to be sympathetic with a retailer they understand and who has shown commercial judgement in the past.
Customers
The importance of creating good relationships with customers can never be overstated. I have written before about customer service. It is such a critical aspect of retailing and many owners simply don’t get it.
One of the major mistakes made is that retailers adopt a standard approach to everyone who walks into the shop. This cannot work. Everyone is different and ideally everyone needs a different approach.
One example is a clothes shop I frequent, where I am always greeted with: “And what brings you into the city today?”. A good gambit once, but three or four times over six months? Yes, I like the clothes range but more often than not end up not buying anything because of this artificial friendliness. By now I would have hoped for a glimmer of recognition when I walk in and a: “Hello how are you”, would be much nicer – indicating a relationship.
What floor staff must learn is to be flexible and aware. They must also be skilled at closing the sale. Nothing is worse for a customer than waiting at a counter to pay for the goods they want to buy, only to be ignored. Some staff seem to think that the friend on the phone, or the problem with paperwork they are trying to solve, are more important than making a sale.
Another killer in creating relationships with customers is insensitivity. Staff walking over to push a sale saying “that’s a lovely colour on you”, “that’s a very popular line”, or “that would look good on you” almost always sounds insincere, and the customer sees through it and is not influenced.
On the other hand, using the name on the credit card to say : “Thank you for shopping with us Mr James” can be friendly.
Smart retailers are also looking at electronic communication much more, enhancing the relationships with customers by sending them offers or information they are interested in. However, the use of email and social media can damage relationships if overused or not done properly. How many retailers actively change preferences for people who are not responding, or constantly bombard them with the same info and offers?
Staff
Another group where good relationships can pay dividends is staff. Retailers frequently complain about staff difficulties – good people are hard to find; they don’t do as they’re told; they leave for better jobs as soon as they are experienced.
Much of this is true, but retailers can do more to generate professionalism and loyalty by investing in relationships with staff.
Everyone needs training and ongoing development and retailers need to build training programs into their own employee relationships – it will make them better at their job and help establish stronger ties. Imaginative incentive programs that reward floor staff for increased sales and enhancing relationships with customers will also help prevent them looking for other jobs.
Simon James is a partner with accountants and advisers HLB Mann Judd Sydney. http://www.hlb.com.au.
