Retail Revenue Planning

The Retail Environment:

The retail environment changed rapidly at the start of the first UK lockdown. It has been changing consistently since, albeit at a slower pace, but this means that the historic seasonal trends that many retailers relied on, no longer offers accurate guidance during extra-ordinary times like these. The truth is that the retail environment constantly changes

Given your revenue is directly driven by customer behaviours, simply opening the shop doors and relying that customers will do what they always did has never been the best option – but particularly now that customer behaviours are potentially so different from pre-covid, which was different to during covid, which is again different to post-covid behaviour.

The reality is that “last year +” is an easy way of tracking revenue growth, but it is not a very useful planning tool as it assumes that customer behaviours have stayed the same, which they haven’t. It also assumes that your cost base has remained stable – which has also changed significantly.

It is also worth noting that a total figure for revenue (for a year or a month) is not a plan. It is an objective or goal, but on it’s own does not guide you day to day. A plan should outline how you will achieve that objective for both top and bottom line revenue.

So the question to ask yourself is do you have an annual retail plan to track against or are you waiting to see where you end up? In other words are you a passenger on a magical mystery tour, or the driver of the coach?

The passengers have no control over how the journey unfolds or whether you reach the destination – some don’t know (even roughly) where the journey will end.  

The driver however starts with a planned route to a destination.

In this short article we focus on the three stages to creating a retail revenue plan.

Stage 1: Setting the Objective. 

As an example, in January 2020 sales totals were £100k revenue and £35k net profit – Your aim is broadly to exceed one, or both of these but this, as an objective, has no real measurement yet.

• How much more revenue and profit do you want to / need to make (by week, month, year)
• Your objective can (and should) be taken down to department level – the sum of the smaller parts making the total.

Stage 2: Set realistic targets / measures:

• Look Back:
• What were the customer behaviours helped you to reach this figure, last year (at total and department level) – in this example, there were a total of 5,500 transactions of average spend £18.18 and average profit per basket of £6.36.
• Now you have a framework that you can start to build your revenue plan around, which covers key customer behaviours (transactions, average spend) and business metrics – profit per transaction.

• Look Forwards:
• There are only 3 ways to increase your revenue from last year
  • Increase customer base – to the shop or a department
  • Increase basket spend – quantity of purchase in regular transactions
  • Increase frequency of purchase
• How are you planning to change customer behaviour to meet your objective? More transactions (customers / frequency)? Increased spend? A combination of the two?
  • Answering this will then enable you to start putting meat on the bones of your objective.
  • If you’re not planning to change customer behaviours, then you’re not planning to grow.
• Set realistic objectives –
  • Assess whether these are possible, based on current / expected behaviours – are you going to increase basket spend by £10 per customer? How will you attract 1,000 more transactions per month? Incidentally Both are achievable…..

You now have a series of measurable variables that you can track against actual customer behaviours – a plan!

Stage 3: Start the journey

You now have your journey mapped out and away you go! But there are two types of coach driver, which one will you be?

• Driver A – sticks rigidly to his route, irrespective of what they encounter en-route.  Some days he arrives at the destination on time, on other days he is held up by unexpected obstacles and arrives late, or not at all. They justify the under-performance by external factors – weather, road works, congestion etc
• Driver B – they track the journey and may revise their route if the Sat Nav (EPOS) gives them some warning of changing conditions, they also drive a little faster at times to make up for lost time.  They often reach the destination early and if they run out of time, they normally finish closer to the final destination than driver A.

Both drivers have a plan, but driver B reacts to changes and is willing to change the route or do something different in order to reach the destination – which are you?

Data Strategy Consulting work with our clients to help them build and deliver strategic plans that grow revenue and profits. 

If you’d like to see an example of a retail revenue plan, or for a no obligation discussion to find out how we might be able to help you, please get in touch.