Visual Merchandising – A Silent Salesman in Retail.

As I embark to write this article on visual merchandising which is often kept at last number in the priority list of Retail CEOs, COOs or is often left to Operations team to decide & manage along with store operation. I feel it is important to highlight the importance of Visual merchandising in brand building initiatives and developing loyal customers for the brand.

During the course of my retail journey, I got hands-on experience in managing VM teams and leading VM functions for a couple of middle-eastern brands in my retail career and I have often considered it and have given this function more priority than Marketing or advertising functions in retail mix.

It is my sincere attempt to clarify some fundamental principles of Visual Merchandising to brand owners, retailers and retail professionals so that they can re-energize their brands using Visual merchandising strategy.

Visual merchandising, also known as the 'silent salesman', suggests selling by display and presentation. Visual merchandising focal points are situated strategically to circulate the customer in the store and communicate the capabilities and advantages of the merchandise.

This is completed by converting a passerby to a browser with an successful window display, a browser to a spender via the process of 'conversion', a spender to a major spender by increasing the 'ticket size' assisted by the method of cross-merchandising.

Extension of Brand’s Identity and communication: Visual merchandising is an extension of Brand’s image and should be in sync with brand’s communication strategy.

Imparting outstanding Shopping Experience Visual merchandising enhances the shopping experience by creating suitable ambience, producing an image of the store in the minds of the customers via a combination of colors, display presentations, graphics, lighting, forms and fixtures. If completed in an exciting and dynamic fashion, the shopping experience would be pleasurable for the consumer and make him/her come repeatedly.

Communication Tool Visual merchandising communicates to clients the right message about the merchandise by projecting the latest trends, colors and fashion in apparel retailing. Visual displays are the great communication drivers & deliver an opportunity for retailers to sell a variety of merchandise.

Theme displays based on a season or an event is employed to promote a proper product range.

Coordinated displays contain items that are typically utilized/ sold/ consumed together, growing several purchases besides educating or informing the customer. Classification dominant displays contain all varieties of 1 item, are used to convey the impression of a wide selection.

Importance of VM strategy in Purchase cycle: Consumer’s perceptions, aspirations, motivations and memories play an important role in purchase cycle.

VM alters the perception and attitude of the consumers, forcing them to buy the product in a way that he/she enjoys purchasing goods thus leaving an everlasting shopping experience.

31% of the consumer’s purchases in lifestyle products are impulse purchases thus a store with good displays and theme and décor attract eyeballs, thus increasing footfalls and thus converting footfall into sales.

78% of shoppers recall store name when they liked store window display, interiors or music

How well the store presents its merchandise using displays relates to the generation of brand imagery. Involvement of sensory, emotions, attitudes during the buying process decision provides enjoyment and satisfaction to shoppers.

Visual merchandising help in following ways:

Exterior presentation: sign boards, store exteriors, store signage, window displays and banners.

Store layout: merchandise flow, category zoning, ease of accessibility of merchandise, lighting concept.

Store interior presentation: Merchandising principles, color coordination/ stories, merchandising techniques using mannequins, lighting, music etc, using props to highlight product, pricing signage’s to communicate “Hot deals”, floor and wall coverings, space design to ensure proper circulation of customers across the stores, defining hot and cold walls in store layout process.

Visual Merchandising offers a Multi-sensory experience for the store to its customers.

Live Displays are used sometimes for product displays at the entrance of the store to demonstrate the use of products. Children’s stores often use people dressed as cartoon characters to attract kids’ attention.

Island Displays are displays of merchandise found generally at the entrance of stores to announce new arrivals, special offers, etc. A display podium is erected and decorated suitably.

       Dynamic Window displays using Holographic projections

I would like to end my article with a video of my interaction with Mr Anand Kumar, Executive Director- ABRA VM&SD as he shares his wisdom of running a company which specializes in creating a visual retail environment for some of the biggest luxury brands in the Middle Eastern region. Anand shares a couple of tips for Visual Merchandising managers and Retail CEOs which is very relevant in current times of economic downturn and would help retailers develop their Visual merchandising strategy in sync with overall brand strategy.

Contact me on riteshmohan@yahoo.com in case you are looking at getting the fresh perspective of your business strategy, I would be glad to share my wisdom with my industry friends and connections.

About the author:

Ritesh Mohan is a passionate Retail professional with over 20 years in the Retail sector, handling some of the biggest brands in beauty, fashion and fragrances retail & FMCG sector. He has been instrumental in the growth of some of the regional brands as well in Middle East region. He specializes in Retail management, Product development, Brand management, Retail Operations, Sales Management, Business Management & Empowering business owners with his wisdom & experience of around two decades in the industry.

 Disclaimer: All images used are for illustration purpose only.

Why does 70% of family-owned businesses fail when they make transition to second generation?

My Inspiration to write on this topic came from one research study conducted by one of leading Management advisory group who had highlighted the reasons pertaining to failures of family-owned businesses as they approach their 2^nd or 3^rd generations.

Passing control from one generation to the next is a critical moment for a family-owned business. It can be positive, but often businesses lose momentum. It can bring a family together, but too often it drives a family apart.

Study reveals:

·        An impressive 88% of current family business owners believe the same family or families will control their business in next five years, but succession statistics undermine this belief.

·        Only about 30% of family and businesses survive into the second generation, 12% are still viable into the third generation, and only about 3% of all family businesses operate into the fourth generation or beyond.

The role that family-owned businesses play in the economy should not be underestimated. For one, they are in fact the most common type of business organizations, this becomes more complex when we talk about Middle Eastern region due to cultural and social sensitivities.

Post deep diving into this topic and post doing my own research by interviewing with industry leaders who are either from a 1^st generation or 2^nd generation of family business, following are my findings as to why the majority of family-owned businesses fail to achieve success in their 2^nd or 3^rd generation.

My few insights:

a) Lack of Leadership & strategy:

Most of the founders of successful family businesses are too overly conservative i.e. they do not have clear vision nor they know how to manage funds either internally or externally borrowed & use it for scaling the business. They lack scalability approach.

b)    Excessive dependence on founders i.e. 2^nd generation leaders often lacks hunger for success which is found in first generation founders. They look up to their first generation leaders for every petty issue.

c)     Too engrossed in the day to day activities/operations, owners often miss long-term vision or strategy.

d)   Secretive style of management :

Lack of information sharing with core management team, lack of sharing of IP (Intellectual property rights), Believes in just informing Decisions and taking control on a daily day to day operations.

2. Lack of succession planning

As per Mr Vijay Madhavan, Sales Director of Petra insurance Brokers LLC, this is one of the main reason as to why family-owned businesses fail to survive in their 2^nd & 3^rd generations.

a)    Handing over is hard. 

Company founders have often given their lives to their businesses. So naturally many feel protective and reluctant to step back.

b)    It’s also “Emotional”. 

A good handover is crucial for the business, but it can also have a big impact on relationships within the family. Where there are several children who wish to be involved, someone needs to decide who will take which role. There is always the risk that someone will feel left out.

c)     'Eldest first' rule doesn't have to apply. 

The best succession plans are based on a cool-headed appraisal of the different strengths and preferences of the next generation of potential leaders. That might mean favouring younger siblings over elder siblings, skipping a generation or going outside the family.

d)   The next generation may have a different perspective. They may want to take the business in a new direction, seek a new relationship with employees, and branch out into new markets. Their aspirations need to be understood and aligned with the overall plan – if there is misalignment it needs to be addressed.

One of the best ways to address these issues associated with Succession planning is by:

“Combining energies of new generation and experience of the older generation”.

Another way which I feel has been successfully implemented across family-owned businesses (likes of Tata group, Hindalco or in some of the Middle Eastern family-owned businesses).

 I strongly believe, “Sometimes, it's best for the family to step back”.

When the business has reached a certain size, the founder might decide it needs the leadership of a seasoned CEO from outside the family – potentially disappointing children who had hoped to take over.

Ownership and management are two different things and offer different ways of contributing to the firm's success. Family members can play an important role in the firm’s success by being good owners, putting in place strong governance and processes at the ownership level.

3)    Introduce the concept of Wealth management in sync with succession planning.

Founders can avoid failures of their businesses by:

a) By defining internal equity of family members at the entry of business and at the exit of the business.

b) Introduction of external equity or PE equity in business in order to take it to scalable levels.

c) Clearly defining compensation for participating family members & non-participating family members.

This is very important as most of the times it is found that Money divides the family and its businesses.

2) Evaluate both Management Buy Out or a Management buy-in options in ensuring the business is managed more efficiently and effectively.

I would like to conclude this article by a quote from Mr Sushant Upadhyay, Client Partner of m/s Corn Ferry who quoted:

“De-link Ownership from Management”

 I feel this concept and his quote summarizes the entire topic and would help all my readers, who are either first-generation business owners or 2^nd generation business owners to plan for their organization’s future and growth initiatives.

Contact me in case you are looking at the fresh perspective of your business strategy, I would be glad to share my wisdom with my industry friends and connections.

About the author:

Ritesh Mohan is a passionate retail professional with over 20 years in the retail sector, handling some of the biggest brands in beauty, fashion and fragrances retail & FMCG sector. He has been instrumental in the growth of some of the regional brands as well in Middle East region. He specializes in Retail management, Product development, Brand management, Retail operations, Sales management, Business Management & Empowering business owners with his wisdom & experience of around two decades in the industry.

Markdowns – A strategic business tool for Inventory planning.

As most of my readers know that I am very passionate about Retail management and have been responsible for managing some of the regional brands in terms of Retail operations, Brand management, merchandising planning, Sales, Visual Merchandising.

I have always noticed that most of Retail CEOs/ CFOs often takes a downward look when it comes to “Markdowns”. I recall, my previous boss (who is also my mentor) used to give me a very awkward and nasty look every time I proposed using Markdowns as Marketing tool/ event.

My article will talk about as to how markdown planning can help retailers increase sales, improve margins and better manage product lifecycles.

It is my attempt to clear some concepts and convince senior management to adapt to this wonderful planning tool which can prove to be very effective in their Inventory Planning goals.

Markdowns are often associated with margin degradation and profit loss—and some companies believe that cutting prices for their products could negatively impact their brand image. Although inevitable, retailers have historically viewed markdowns as a necessary evil designed to help sell old or slow-moving inventory.

A) View Markdowns as a function of Price Elasticity: Matching Perceptions with Pricing.
An example of a markdown would be if you had a sweatshirt for sale that was originally priced at Dhs 100 and after one month of slow sales, you decide to markdown the sweater to 20% off, making it Dhs 80 at retail.

Although you just lost Dhs 20 of your intended markup on that sweatshirt, in return, you are also inviting more people to purchase it at a price they may prefer vis a vis the original Dhs 100 price. Since the shirt had not been selling well at Dhs100, offering a nice, mark downed price can often result in sales that would not happen otherwise. Hopefully a 20% discount will do the trick, however often you will find that you need to continue your markdown strategies based on slow sales, moving product from 20% off to 30%, 40% and more if necessary.

Most Retail CEOs and CFOs (especially organizations run by finance professionals and not by Retail mindset professionals) often confuse Markdowns with Discounts model.

A discount is a reduction in the price of an item or transaction based on the customer making the purchase. Many retailers offer discounts because they find that customers return to their store versus others because of the discount provided to them. Discount offers “Instant gratification”.

Customers often enjoy the advantages they feel that discounts often give, such as being a preferred customer and therefore getting special treatment. Some boutiques & Spas offer friends and families discounts, which benefits both the retailer and those getting the discounts. It’s a win-win on both sides.

Both a markdown and a discount can be temporary or permanent, depending on how you market them to your customers.

An example of a temporary discount would be "Get a discount equivalent to your waist size". If your waist size is 32 then avail 32% discount on your purchases.

A temporary markdown example would be if you had a one day sale, offering mark downed prices for only a specific amount of time.

A discount strategy is more Tactical whereas Markdown strategy is more organic in nature. Both should be an integral part of the marketing mix.
I recall the statement of Sir Martin Sorrell (CEO, WPP- an advertising agencies conglomerate), who once quipped, “Discounts are like bad cholesterol and Markdowns are like good cholesterol; there has to be less dependence on discounting model, instead push more brand-building efforts”.

B) Using Markdowns to control Inventory Ageing:

You can use both discounts and markdowns as part of your sales strategy to help make the most out of your inventory sell thru and ultimately, your sales goals.

Wasting your retail floor space with products that are not selling will not help you at all, so consider how markdowns and discounts may be able to work for you in your sales strategy.

C) Tie your Markdown planning with your financial plan- how much hit are you willing to take in markdowns?
A markdown plan means nothing if it’s not tied to the financial plan. Retailers should determine how much they are willing to spend on markdowns to hit their financial targets. This information ideally flows either from CFO/ CEOs while preparing budgets for next fiscal.

It’s equally as important that retailers are able to not only execute on the markdown plan once it’s in place but also monitor it in real time. This will ensure that adjustments can be made as the season progresses.

D) Determine early on which items you are willing to reduce in price over time and for how much:
It implies whether you want to run it on category or on specific collections. Monitor its sales-through rate and then decide the markdown %.

E) Managing Product lifecycles more effectively:

Smart retailers will leverage effective markdown planning to not only ensure that there is less stock left over at the end of the season but to also manage new product introductions and phase-outs.

Caution to Retailers who shy away from Markdowns strategy:

Retailers that avoid putting a markdown plan in place may experience increased cannibalization of new product lines and decreased sales.

The impact could even extend to the store level as new and old products are shoved together on store shelves or displays, resulting in cluttered and disorganized stores that even the most loyal customers will find difficult to shop in.

A Perfect example is “ Part Sale” that we find very commonly in retail stores these days in the Middle East, wherein new merchandise is being sold with that of discounted merchandise in separate enclosures or gondolas.

I would like to end my article by sharing a video wherein an industry practitioner and a successful retailer Mr Kamel Shaban, MD -Capacita brands, has offered one valuable tip to Inventory planners and Merchandise Managers as to how they can use Markdown strategy to keep “freshness of assortments” in their stores by avoiding discounting model trap.

           
In case if any of my readers, want to know & streamline Inventory planning strategy for their brand then I would be more than glad to share my ideas acquired while practising & closely following this topic.

You can reach me on riteshmohan@yahoo.com in case this topic also excites you.



About the author:
Ritesh Mohan is a passionate retail professional with over 20 years in the retail sector, handling some of the biggest brands in beauty, fashion and fragrances retail & FMCG sector. He has been instrumental in the growth of some of the regional brands as well in Middle East region. He specializes in Retail management, Product development, Brand management, Retail Operations, Sales Management, Business Management & Empowering business owners with his wisdom & experience of around two decades in the industry.