As Darren Topp, CEO of BHS, explained in an interview with Retail Week, BHS do not have a sales problem, but they do have a cost problem.
One of the biggest cost that any High Street retailer has is rent and the fact that BHS plans to enter into Company Voluntary Arrangements with many of its landlords is evidence of that, fix the biggest problem first. The other major cost is payroll. BHS is looking at its payroll and making big cuts in head office and in stores, cuts that might be necessary but may be misplaced.
At Retail Remedy, we have designed a productivity modelling tool that takes the operations of each store individually, identifies ‘What Good Looks Like’, and then models resource to deliver it. Our model has a proven track record of savings which are either used to boost profit or are reinvested in customer service to build the business further.
We understand that the rent needs to come down for some BHS stores, but the other opportunity available to BHS for those struggling stores, but also for the stores that are profitable, is productivity modelling, to safeguard against future store closures and job losses.
The productivity and process improvement model starts by looking under the bonnet, identifying what you have and relating that to what you want to have. We identify where the inefficiencies lie through financial analysis and then relate that back to front line retail teams, distributing resource fairly against real tasks in real stores with each store’s individuality considered. Budgets are set and outputs specified to deliver operational consistency across the business.
At BHS, there is a risk that the business has assumed one size fits all, which it rarely does. Profitable stores could be more profitable, mediocre stores could be high performing with a rent reduction and consistently allocated resource, and poor stores could be closed for all the right reasons, not just because rent is too high.
It is reassuring that there is a clear strategy that BHS is pursuing, with store makeovers in progress, rolling out of convenience food offers and cafes supported by Bookers and Compass. According to Topp, ranges are being reviewed and rationalised where needed, price architecture is being overhauled to offer great value, and there is a focus on ecommerce.
What might have been considered a purely financial transaction by the conglomerate that bought BHS, looks like it is more for the medium term. We would like to see BHS reach its 100th anniversary in a healthy position, not for nostaligia’s sake, but because there is a place on the High Street for a department store offering relevant everyday ranges at good value. The Retail Remedy productivity model could be just the answer.
Watch the productivity and process improvement video and then give us a call to see how it could help your business be more profitable.