W. Frank Dell II, CMC September, 2004 EXPANDING RETAIL.

transcript

W. Frank Dell II, CMCSeptember, 2004

EXPANDING RETAIL

DELLMART & COMPANY 2

AGENDAAGENDAINTRODUCTION

READYCHANGE

QuestionsQuestions How to recognize the store is ready to

replicate? What should be replicated? When to stop changing the store? What is the best approach to

expansion? What is different with multi-formats?

Growth Is GoodGrowth Is Good Shows progress Measured

– Per Square Meter– Comp. Stores– Percentage increase

Benchmarks– Inflation– Market growth

020406080

100120140

1st 2nd 3rd 4th

Company IndustryInflation

Profits Are BetterProfits Are Better Sales- Cost of Goods= Gross Margin- Store (Labor, Occupancy & Inventory)- Transportation (Labor & Equipment)- Warehouse (Labor, Occupancy & Inventory)= Direct Profit

CautionCaution Uncontrolled growth Over-leveraged growth Management ability Growth for growth

– Forgetting the customer

READYCHANGE

Honest EvaluationHonest Evaluation Use an independent approach Set pride aside Focus on reality not

– Wishes– Hopes– Dreams

Reasons For SuccessReasons For Success Lucky location Lack of competition Unique merchandise Exceptional service

Are Customers Ready ?Are Customers Ready ? Increasing customer count

– Repeat customers– New customers

Increasing transaction size– Excluding inflation

Increasing category participation

– Shop the store not the aisle

Is Financing Ready ?Is Financing Ready ? Increasing profits Sufficient ROI

– Greater than interest rate Sufficient cash flow How financed

– Internal cash– Borrow

New Store ModelsNew Store Models

1 2 3 4 5 6 7 8 9 10

Break-EvenAB

Are Associates Ready ?Are Associates Ready ? Adequate operational

controls Discipline in process

execution Training ability Available management time

and talent

Are Suppliers Ready ?Are Suppliers Ready ? Sufficient merchandise

range Sufficient merchandise

supply Consistent supply Delivery capability Ability to supply

– Fixtures– Displays

Is Your Plan Ready ?Is Your Plan Ready ? Defined target customer Site selection criteria Location strategy Pro-type store format Rational financial estimates

– Sales– Profits– Capital

CHANGEGO

Important QuestionImportant QuestionQuestion

When do you stop making changes to the store?

Important QuestionImportant Question

Answer

Resistance To ChangeResistance To Change Change is difficult to effect Associates resist change

– To varying degrees– Unless conditioned

Customers only accept some change

Change Is GoodChange Is Good Keeps the store fresh Entices consumers Creates merchandise excitement Creates reason for store visit

Change Can Be BadChange Can Be Bad Increased costs Confuses the customer Difficult to

– Manage– Execute

Degree Of ChangeDegree Of Change Seasonal Items Categories Pricing & Promotions Departments Layout Store Name

Implementing ChangeImplementing Change TEST Set Goals Implement in select

stores Evaluate

ROLLOUT Develop plan Communicate

– Stores– Logistics– Supplier

Execute

PrototypesPrototypes

Don’t exist Everyone has one or more Cannot expand without one

READYCHANGE

Overall ProcessOverall Process

Revise

Evaluate

How Many Stores ?How Many Stores ?

Expansion Resources

Too aggressive– Likely failure– Poor execution

Build Vs LeaseBuild Vs LeaseBUILDAdvantage

– Maximum control– Builds asset base

Disadvantage– Longer time

LEASEAdvantage

– Smaller capital– Faster time

Disadvantage– Landlord control

Store PlanStore Plan Site requirements Size Layout Merchandise & services Labor requirements Forecast

– Capital– Profit & Loss

Headquarters ResourcesHeadquarters Resources

StoresHdq.

Organization Structure AOrganization Structure AManagingDirector

Operations Accounting &Finance

HumanResources Expansion

RealEstate

Construction

Buying

GovernmentRelation

Engineering

StoreOperations Distribution Merchandising

Design

Organization Structure BOrganization Structure B

ManagingDirector

StoreOperations

Accounting &Finance

HumanResources Merchandising Distribution

ExpansionTaskForce

Information TechnologyInformation Technology Transaction projections Processing capacity

– Hardware– Software

Communication– Capacity– Backup– Dependability

MerchandisingMerchandising Workload

– Suppliers– Items– Transactions

Inventory Pipeline Opening coordination

1 2 3 4 5 6 7 8

Inventory

LogisticsLogistics Processing

– Storage space– Warehouse Equipment– Transportation

New store– Fixtures– Equipment– Merchandise

Finance & AccountingFinance & Accounting Expansion financing Banking relationship Monetary Control

– Construction– Operations

Human ResourcesHuman Resources Personnel policy Hiring new associates Training associates Phase-in staffing

Store OperationsStore Operations Standard Operating Procedures Succession planning Promote from within

– Improves morale– Provides consistent service– Builds company cultural

ConstructionConstruction1 2 3 4 5 6 7

Foundation

Outside

Utilities

Flooring

Equipment

Finishing

Fixtures

Signage

Hard Vs Soft OpeningHard Vs Soft OpeningHard Advantages

– Greatest impact– Focus spending

Disadvantages– Exposes weakness– Risk of failure

Soft Advantages

– Easiest to execute– Controlled recovery

Disadvantages– Limited impact

Multi-FormatMulti-Format Annual plan determines number stores

– Adjust for opportunities Site evaluation

– Size– Target customer

SummarySummary How to recognize the store is ready to

replicate? What should be replicated? When to stop changing the store? What is the best approach to

expansion?

W. Frank Dell II, CMCPresident

DELLMART & Company125 Hardesty Road

Stamford, CT 06903 USA

Tel: 203-968-8609Fax: 203-968-8613

e-mail: Frank@Dellmart.comWeb Site: www.Dellmart.com

W. Frank Dell II, CMC September, 2004 EXPANDING RETAIL.

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