The British retail market has been badly hit over the recent years, with a number of failures of famous high street brand names. Famous names such as Woolworths, British Home Stores, and historic menswear chain Greenwoods have all disappeared after liquidation. Now Debenhams is facing closure after more than 200 years of trading, to be joined by the failing Arcadia Group which includes famous names like Burton, Top Shop and Dorothy Perkins. Why has this happened and what can the commercial manager learn from this situation?
A cursory glance at the details would suggest that over a long time, these businesses had failed to invest and adapt to meet the changing and evolving requirements of their markets
In any business large or small, the commercial manager has the task of producing and maximising profitable income for the long term future of the organisation.
While their initial priority will be the maximising of current profitable income, their major concern will be the source and production of future revenue. In consumer markets in particular, changes in fashion, technology and economics occur more quickly than ever. Product life cycles in many cases become shorter, so that the opportunity to produce profit is reduced while the costs of development, bids and proposals increase.
In a volatile commercial market, smaller companies can have an advantage over their bigger rivals by being or becoming more agile and adaptable. It is easier for small businesses to innovate and adapt quickly to changing markets and circumstances than it is for larger organisations. However to become more agile and adaptable in a volatile business world requires an element of analysis and foresight by the commercial manager.
In order to secure business income for the future, the commercial manager has to have a detailed understanding of the vagaries of the market and the changing needs of the customer base. Changes in the customer base may be indicative of the level of demand for the type of product in general or the acceptability of the company’s product in particular. A falling customer base may indicate a reducing market, but a reduced customer base may result in an over reliance on specific customers.
Necessity is the mother of invention. A slowdown in demand can bring new opportunities by enforced radical thinking. Being responsible for producing the profitable revenue for the business, commercial managers should not be afraid to question what they do and how they do it, and look for new opportunities to develop financial contribution.
Every management decision has a consequence which may be good or bad for the business, and this is especially so with decisions for change. Why change? “If it isn’t broke, don’t fix it”. Any change should be assessed on the way that it will assist in achieving improved efficiency, reduction of costs, or improved customer service. However, a change that benefits in one area might be detrimental to another. The commercial manager must ensure that when considering the potential consequences of change, the response of the customer should be paramount, as it is they that provide the business income.
Commercial managers should consider several questions, before embarking on any change, however small because of the potential consequences.
* If change is thought necessary, where is the evidence?
* If problems have been identified and understood, what sort of changes would be necessary to resolve them?
* Do the changing needs of the customer require a change in the product or the business organisation? Where is the evidence? Is the evidence valid? How do you know?
* A change to a product or service may improve efficiency and profitability, but what would be the effect on the customers’ satisfaction or their perceived image of the business? How do you know?
* What will be the positive consequences of the change?
* What will be the negative consequences of the change?
According to the Pareto Principle, generally known as the 80/20 rule, in any customer base, approximately 80 % of the profitable income comes from about 20% of the customers However, it may be that the 20% are at maximum capacity for sales, and so more effort and resources concentrated on them would produce disproportionately little result. Alternatively, the other 80% might produce more with more attention, but equally, might be an indication of declining demand and different requirements.
In many ways, a business is like an organism, if it is to thrive, it needs to be fed with investment, in order to develop and change to meet customer demand to produce profitable income. Knowing where and how to invest to effect change in order to advance the business is of major importance. While it is important not to invest in failed projects, it is equally important not to let potentially successful projects fail through investment starvation.
© N.C.Watkis, Contract Marketing Service 16 Dec 20