6 Weeks /
After several decades of operating as an off-price wholesaler, this client determined they could more effectively grow enterprise value by shifting their focus to retail. The retail sector was experiencing headwinds from inflation, and the client first wanted to quickly improve profits without increasing capital needs. Over the past three years, the client doubled its stores to 17 and wanted to grow even faster. However, they needed more appropriate expertise, so they engaged Rapid to provide a comprehensive solution for strategy, merchandising, marketing, finance, store design, and store operations. In just four months, store labor costs were reduced by 35%, flowing a 6.25-point improvement to EBITDA, realizing $1.5 million in profit improvement in the first year.
Step 1 – We studied the financials, the owners, the team, and the customers to identify strengths to protect and areas needing urgent improvement. We studied competitors. In a few weeks, we shared a list of opportunities for fast profit improvement across buying, distribution, planning, loyalty, promotion, and pricing. However, labor management (running stores) offered the most compelling profit benefit over all other efforts. Our plan was simple (but not easy): improve customer experience, store execution, eliminate wasteful tasks, reduce hours, and increase wage rates.
Step 2 – Leveraging decades of experience managing large, complex businesses, we introduced new actionable reporting and KPIs in just one week. Functional leaders saw daily and weekly performance trending for the first time. We then introduced training for the team to strengthen business acumen— a process that bridges review, analysis, insights, and action.
With the fundamentals of reporting and management review in place, we focused on improving stores. We visited stores and saw issues confirmed in the numbers: a need for more attention to detail, accountability, and an insufficient focus on customers and merchandise presentation. Management did not deploy labor against traffic or promotions. Many low-value tasks were occupying the team. Stores needed leadership, a plan, and simplification – do a few things well, and eventually, an across-the-board talent upgrade.
Step 3 – In one week, we introduced a detailed plan that would improve customer experience and enhance role clarity for the team. The plan called for accountability and rewards linked to the sales plan, task elimination, supplemental training, and competencies-based criteria for recruiting, coaching, and counseling. We asked EACH store manager to assist in developing a zero-based staffing plan that would match up to customer traffic. Once adopted, we offered across-the-board wage increases competitive in the top half of the labor market.
Market wage parity helped us to sort out weak team members and replace them with experienced and capable staff who could grasp and manage a thoughtful plan. This process achieved a 35% reduction in selling costs, even after absorbing wage rate increases. It only took six weeks to roll out the program and gain full financial benefits. To sustain and build on these savings, we followed up with training, coaching, promotion, and continuous edits and upgrades to the remaining team.
Three months after implementing the plan, we hired two professional district managers; we have turned over 1/3rd of the store managers. Unintended turnover is at an all-time low. The savings versus last year confirm that we are sustaining improvements and running the business with 35% fewer hours. Customer experience has improved, as has accountability and morale. The company is now ready for modifications to merchandising, pricing, promotion, allocation, visual presentation, and store navigation. With a more capable store organization, those efforts will have a better chance of success.