“For starters I’ve no idea what digital is. And secondly I’m pretty sure I don’t need it.” So says a wholesaler friend I’ve have known for years. This wholesaler, let’s call him Billy for now settled in the UK in 1999. He acquired a shop, then another and so on until he decided to sell them all and open a cash & carry. He’s done well building his business to £30 million turnover garnering a raft of loyal retailer customers along the way. Many of whom he knows personally and counts as friends. Billy knows his stuff. He understands the market, buys intelligently, sets competitive prices and runs a decent operation. I’m sure he would agree that he manages his business intuitively running things by gut instinct. This has served him well over the years. That said, he has all the financial controls you would expect to find in a company of this size but for him cash is king. He checks the cash position on his banking app every day. This is his key metric which he lives by. Only one problem – the cash in the business is diminishing and he’s sinking.
He calls me up to chat through the situation. “Billy you will have to share some numbers with me if this discussion is going to be worthwhile” Billy’s not comfortable with sharing sensitive information but goes for it. “Here’s the last three year’s P&L accounts, check these out.” Not a pretty sight. Sales trending down with operating margins falling. Worse still – costs rising. Of course Billy can see this too and he is quick to tell me that he’s pumping up the promotions and deals to get the top line turned around. It’s not really working. “This information is descriptive only. I need to look under the bonnet at the customer file and the transaction data. I think we need to take a digital approach here.” This is when Billy goes ape and gives forth with his digital rant. But he decides to roll with it – not much to lose. I focus on his top fifty customers. It becomes apparent that many are buying less goods but with the same frequency. A deeper dive reveals that a large proportion are not buying across the mix but purchasing mainly tobacco, alcohol and goods on promotion only. None of this is great for margin. Most are buying less in value and volume than in previous years and cash profit per transaction in this customer group has seriously declined.
The top customer is “Five Star Supermarkets” where sales have dipped and profit has plunged. “This is Imran, my oldest and most loyal customer. He has six stores but he tells me that he’s finding trade tough going. I give him an additional 2% retro discount off invoice to keep his business.” Says Billy. This doesn’t sound like a great business decision to me. We drive over to meet Imran at his highest turnover store. Wow! The place is jumping. Packed full of customers and stocked to the rafters. Most of which he isn’t buying from Billy. This is not going to be comfortable. Imran lays it on the line: “I can’t buy most of this range from you. Either you don’t stock it or it’s never available.” Not much Billy can say to this other than listen and take notes. It’s a similar story at the other top customers’ stores we visit during the week. “And I thought these guys were my friends” moans Billy. I also decide to be straight with him. “I’m sure they are. But they’re business people first and you’re not giving them what they need. They’re cherry picking from you”
We eventually move out of the denial phase and into a more positive plan to turn things around. It’s clear that Billy needs to fix the range and sort out his stock availability. He’s going to need support from his suppliers on this. We determine to get all of his top customers using his app which up to this point has been sadly neglected. Then we set up a schedule of push notifications highlighting breadth of range, special promotions and added value across the entire assortment just for this top customer group. Although it will require months of iterative marketing the good news is that this approach is agile, responsive to weather/seasonal events, easy to set up and much lower cost than printing brochures and flyers. A number of suppliers are keen to connect with this customer group and have offered to contribute pricing and deals specific to them. The entire venture soon becomes self-financing.
To date sales and margins are improving and cash profit is beginning to flow stronger. It will take time and we’ll have to keep at it but an upturn is very welcome. This is Billy’s first foray into the digital world. We’re just scratching the surface and there is loads more he could be doing. Maybe we’ll get around to that in the months ahead. He could have happily carried on as he was and would probably have stayed afloat. It is undeniable that he doesn’t need digital. But he would be totally bonkers to ignore the opportunities that digital offers. I think Billy’s getting on board with that and we're on a roll.
Article written by guest author David Gilroy, co founder & managing director Store Excel.