Re-Boot The System

Open Letter to Chief Merchants, GMM's, DMM's and VP's of Planning

Dear Sirs and Madams

Probably, most of the merchants and planners in your company failed to anticipate the extent and degree of the downturn in consumer spending. Almost certainly, at the item level, forecasts and sell plans have become virtually meaningless almost overnight. No matter what anyone tells you, none of the last minute adjustments, promotional activity or other "triage" applied to this disaster are going to get you back to what you thought were conservative plans and forecasts. Your people are not alone, nor are they in the minority. Culturally, very few of us in retail could have sold anyone on such a dire prediction.

The one thing your organization can't afford is spiraling failure and a sense of personal ineffectiveness. In many cases, this is going to look like a series of missed estimates, forecasts and plans. It's almost humanly impossible for mid-level merchants to present a real "we've hit bottom" forecast...unless you make it a requirement. What is needed right now is a forecast or estimate that the company CAN make, and perhaps, even exceed. Missing numbers at every level, for a sustained period of time, is like feeding yourself rat poison and expecting to be energetic. So what if every single ad projection failed to reach the expected lift? Is there anything in your modeling designed to describe the current consumer spending environment? I doubt it! The last 6 weeks, however, have given you enough data points to start developing a better set of numbers....but only if you have the ability to extrapolate the trend! Will promotional responsiveness be the same, better or worse in late November as compared to early November? Bet on worse!

Re-Boot your System. You can't re-set back to a calendar point before the world changed....but you CAN reset today so that your expectations become realistic. Realistic expectations clear the way for your talented merchants to focus on doing something which will alter your circumstances in the future. If I am spending all my time trying to explain why I missed yet another forecast, estimate or projection (which represented my best guess but also probably met your guidelines for volume and profit) I am not spending time adapting, learning, and revising my assortment, promotional planning and margin structure for the future.

Re-Booting the System means taking a step back and saying "how bad can it get"....and then making THAT the baseline for the next 7 weeks. The inherent value in this approach is that your executives aren't going to stop doing everything in their power to do better than this "bottomline" forecast....while freeing up additional time and energy to be focused on altering next Spring's probable results. From a PR point of view, by creating an expectation, no matter how bad, that you can actually BEAT, you establish credibility and generate optimism. Moreover, you allow the people what can make a difference to make that difference. There is nothing more debilitating than being a merchant responsible for a business which starts to slide into the abyss of comp store decreases....no matter what you seem to do about it. I know...I've run businesses when trends radically changed or technology went through a revolution...and nothing I could do would change the value of the inventory I owned. (In that case, since at least one competitor DID see the change coming, I was quite rightly held accountable for my inability to anticipate the market).

If you've already made every attempt to forecast a "worst case scenario".....wonderful! Lock it in, encourage aggressive attempts to improve from that, celebrate any "wins" you have, and then focus your time and energy on changing what you can.