What Will the Future of Retail Business Look Like in a Post-Pandemic World? – Dr. Patrick Fulbright

Welcome to another episode of The Playbook with Mark Collier, an original ASBN series that highlights Atlanta’s emerging entrepreneurs, seasoned business owners, and resource experts. Mark Collier is an experienced business consultant in Georgia, and a faculty member with the University of Georgia Small Business Development Center.

On today’s show, we welcome Dr. Patrick Fulbright, area director at the UGA SBDC Gainesville office. Fulbright is a former retail executive with The Home Depot, and in this segment, he discusses the future of retail business and how it is going to be conducted post-pandemic.

Transcription:

Mark Collier:
Welcome into The Playbook, Patrick.

Dr. Patrick Fulbright:
Hey. Thank you, Mark. Glad to be here.

Mark Collier:
All right. Well, first of all, congratulations on your PhD. That is phenomenal accomplishment, and you just add greater value to the UGA SBDC with that credential.

Dr. Patrick Fulbright:
Yeah. Took me a while, but I finally got through it this past August, so thank you.

Mark Collier:
All right. Well, fantastic. I’ll tell you what, man, last year’s pandemic has forever changed the retail sector and savvy retail businesses understand the need to pivot and shift, and we’ve experienced what I like to term a seismic shift from brick and mortar to click and order.

Dr. Patrick Fulbright:
Yeah. I love that.

Mark Collier:
Reinventing retail is a catchphrase that I believe you use. So kind of let’s begin there with your five Ps of reinventing retail.

Dr. Patrick Fulbright:
All right, Mark. So I’ll take not full credit for that. I think you and I both are big fans of McKinsey.

Mark Collier:
Yes, we are.

Dr. Patrick Fulbright:
So McKinsey actually brought forth this five Ps concept, and I’ll go through the five Ps. All I did was take that concept and I expanded on it, and because of my background, most of my career was in retail. And so I looked at what they were talking about and I brought it forward to look at how can this work for our clients with SBDC? So the very first one of the five Ps is portfolio. And what it really means is taking a look at your skew mix or your merchandise mix. One thing that I’ve run across with a lot of my, if not all my clients in retail is that they don’t spend enough time on their inventory management looking at really what is putting more gross margin dollars and profit. A lot of them have inventory that is stale. You might be able to ask them, what is the velocity or the highest selling item, they can talk to that.

Dr. Patrick Fulbright:
But when you ask, what is providing you the biggest return on your investment? And in retail, we call it GMROI, Gross Margin Return On Investment.

Mark Collier:
One more time.

Dr. Patrick Fulbright:
GIMROI, Gross Margin Return On Investment. Most of that’s a foreign concept, but it’s really looking at what are you doing as far as the purchase price compared to that turn or what is that return on those sales? So we work with clients to talk about that and that’s something that I’m close and dear to my heart to help them understand is, look at some of your inventory mix, especially during the pandemic. A lot of their foot traffic was stymied, or well, in the early days completely stopped because of protocols. Well, when they came out of it, they still had this inventory they couldn’t really move because one, some of our consumers or the customers were only looking for things that would stabilize their family during this period of time. So some of their other items is still sat on the shelf.

Dr. Patrick Fulbright:
So that’s another problem that we have to look at, or I would call an opportunity, how do we move that old stale inventory? Because you’re having carrying costs every month holding on to it. So it’s a strategy we work on. The second P, which is really prevalent right now is people and culture. If you think about people, we’re in, to me, a labor crisis, because some of the things that we were experiencing such as partial unemployment, unemployment, labor has dried up and some of these retailers are really struggling. I was on the phone yesterday with a restaurant that the husband and wife, they’re in their fifties, they’re kind of sunsetting their business. They’re enjoying how their business has grown, they’re in a upper scale restaurant. Both of them now have had to enter back into the business.

Dr. Patrick Fulbright:
They’re working 60 to 80 hours a week. The wife is now bussing tables, waitressing again. He’s in the kitchen. He’s also kind of the [inaudible 00:05:01]. So they’ve had to force back in because of lack of that labor. I think that’s going to move probably from a crisis to a labor war, meaning that a lot of retailers are going to go after that same talent to pull in and they’re all going to be in probably a bid war with them.

Mark Collier:
Won’t that lead to some measure of wage inflation, if that happens?

Dr. Patrick Fulbright:
Absolutely. In fact, that same couple has had to pay additional to retain some of their employees. The other part of it is we don’t know about the minimum wage. That’s going to play in that labor and that wage increase also. So culture is also big there. Sometimes we always worry that incentives to keep people is through wages, but there could be other strategies and we can help with that, come up with some creative ideas.

Mark Collier:
All right. So the third P.

Dr. Patrick Fulbright:
Third P is really on what we call process, systems. In this day and age with retailers, the cash flow is a concern, protect your cash, but there needs to be reinvestment. And these processes and systems, one, can they talk together? Does your point of sale and your accounting system, they work together, or your order fulfillment, does they work together? Same thing with onboarding, because one, you don’t have the time to pull people off the floor to teach them or shadow. You might have to go on online training. So these need to be reinvestments into the business.

Mark Collier:
Yeah. Process, I’m a big fan of process maps. I believe that all retailers and all businesses should map their processes and walk them through each one of those individual and discrete steps and try to rebuild them in the most effective and efficient manner.

Dr. Patrick Fulbright:
Absolutely. I encourage a front door to backdoor audit on retail. You really need to look at all those processes, now more than ever because of the cost and the sales down and stuff like that. All five of these Ps really are related. You can’t really do one without the other, they’re all interrelated, so is performance metrics. Peter Drucker says, what is measured is managed, and I’m a firm believer in that.

Mark Collier:
Well, I like to add to that, what you cannot measure cannot be improved.

Dr. Patrick Fulbright:
Exactly. And so there’s an awareness that needs to take place. And again, with retailers, one of the questions I already ask them is at the end of the day, how do you know you’re winning? What are the tools that you have, your key performance indicators, a dashboard? So this is a great time to work with our business owners in retail to help them understand and understand like a financial. A lot of time, it’s the top number or bottom number. Well, really the thing that we really need to look at is the meat in a sandwich. The two breads are holding that meat together in the middle, that’s where you need to be paying attention to, and we’ll talk about cost control probably in another segment or down low. But the final one, and I really work with this with retailers is positioning.

Mark Collier:
Yes, absolutely.

Dr. Patrick Fulbright:
And it ties into your position in the marketplace, kind of back to those skews and stuff. Well, what is your mission or what are you trying to sell? What is that brand of yours? How do you merchandise? How is it set up for signage? Because of labor issues, signage is going to be more valuable for some of these smaller retailers as a silent sales person, meaning that can I describe features and benefits without having a person in that aisle? And that’s going to be something that’s going to be changing and needs to evolve.

Mark Collier:
Well, I’ll tell you what, all of those five Ps roll up because there have been two major macro economic shifts that this pandemic has brought down, and those are related to consumer spending and the explosive growth of the e-commerce, which has dramatically changed the retail sector. So kind of talk a little bit about that, those two macro economic trends and how they really just changed retail forever.

Dr. Patrick Fulbright:
Yeah, it really has. And I think a lot of times, we hear doom and gloom, but I think what we’re looking really at is an evolution. We’re moving to a different state of retail. So on that consumer spending, just like we saw in the recession, people were pulling back, meaning that they were being really protective of their cash, being smarter about what we’re going to spend on, but we did see a rise in some things that were unexpected. And one is because folks were living or staying at home more, they started looking around their home and saying, hey, we need to fix that, or why don’t we remodel this? So in some segments of retail, we’ve seen spikes going on during the pandemic.

Mark Collier:
Well, I have a client who I interviewed here on my show. He owns an Ace Hardware business and his revenue grew by 40% last year during the pandemic because of that very shift that you’re discussing now.

Dr. Patrick Fulbright:
Yeah. Your big box retailers, they’re enjoying it. I mean, sometimes you hear they’re recession proof. I don’t know if they quite are, but they are enjoying that. Same thing with interior designers. They have retail showrooms, they’re exploding. So that’s a big part. The other part of the e-commerce, if you weren’t doing it, you need to do. And back to our friends at McKinsey, they wrote an article that said that we have advanced 10 years to the future with virtual and e-commerce and it’s perforated everything, what we do. So I think a lot of the retailers, if they weren’t doing it, well, they really need to focus on it and we can be there to help them look at those different omni-channels, things that we can incorporate, that makes sense to their business. And then we’ll talk about it a little bit, about what has shifted there, especially in the restaurant industry.

Mark Collier:
Yeah. Yeah. All right. So speaking of changes, what changes have you seen in terms of brand loyalty across the pandemic? Because the customer experience is now front and center. So what what’s happening with brand loyalty right now?

Dr. Patrick Fulbright:
This is a strange one. We’ve seen a retraction from what we call apparel, footwear and luxury. Some of that has been retracted and more things are moving to businesses that have proprietary items or store bought items or their own brand items. Okay. So there’s been a move there to stretch that dollar, and also when we had all this scarcity, supply chain interruptions. So there’s been a shift to alternative products or substitute items. So that’s a big growth in that segment too that was different, and the brand loyalty has somewhat been diminished, meaning that in some cases, it was a little bit of survival mode. Hey, we need toilet tissue and we need paper towel, we need paper goods. So I’m not going to go after maybe the higher dollar one. I’m just going to get what we can get right now because of either supply or pricing.

Mark Collier:
That makes sense.

Dr. Patrick Fulbright:
So that’s still going on. So I think we’ll see a rebound, but I know our luxury companies, Hermes, Burberry, all are posting down sales just because of that. People are watching that dollar.

Mark Collier:
So with the explosive growth of e-commerce, how can retailers now best position themselves to kind of right size their brick and mortar operations and as well as their supply chains?

Dr. Patrick Fulbright:
Yeah. That’s a great topic. We saw a lot of pivoting and a lot of pivoting that moved into things that made sense. Some of the retailers, and I’ll pick on restaurants again, order ahead, curbside pickup, delivery, maybe scaling down the menus, looking at possibly outdoor seating or alfresco seating. The other part with brick and mortar is something we talked about earlier with merchandising, take a look at how your store is set up. Yes, we are moving hopefully post-pandemic, but still there is that need for probably wider aisles. Maybe not so much stuff in the store that you are cluttering the aisles up. I mean, I was in Lowes last night… I guess, I can say Lowes. I shopped at Lowes last night and one of the things that was interesting is that the aisles were really cluttered.

Dr. Patrick Fulbright:
And I started looking at why are they cluttered? Well, they were doing online orders. So they were full of their carts and stuff and we couldn’t find really a wood cart to move things around afloat because they were all taken out with online orders and they were lined up ready to go out that morning or for pickup probably for contractors and regular folks that are ordering through their e-commerce site. Yeah. So you wouldn’t think about that, but that’s part of it. And I think that’s a great look for other smaller mom-and-pop retailers and say, I need to think about that. If I’m doing this, how do I navigate through that store? Also, how do I set it up that’s more conducive to maybe online or their pickup or I’m doing curbside delivery.

Mark Collier:
Well, that’s part of how the entire ecosystem of retail has changed. I mean, contact lists, digital and virtual are now the key buzzwords and what is driving retail, and a lot of that will probably remain in place once the pandemic kind of sub-sites.

Dr. Patrick Fulbright:
Well, I totally agree. We’ve evolved already there and that’s going to have to be part of that business mix for those retailers.

Mark Collier:
All right. So as brick and mortar stores kind of move to reopen, there’s going to be increasing costs related to protecting both customers and employees from the effects of the pandemic. So how can retailers best prepare for this and best strategize to face these increased costs of PPE?

Dr. Patrick Fulbright:
Well, I’m big on, let’s put it in the budget. It needs to be part of your strategy going forward. You got to plan it and plan the work, work the plan. It has to be there. And it’s also going to impact possibly onboarding training. It needs to be signage again coming into the store, it needs to be perforated all the way through that business. It’s going to be, how do we absorb cost? Now, one topic around that that is sometimes not digestible with some of these businesses, you might have to take price increases to maintain your margin enough to cover this expenditures because they are going to have to be added, whether you use it internally or you incorporate a service, your costs are going to increase.

Mark Collier:
Yeah. And when you talk about cost increases, you’ve got to be very wary of that because you’ve got competitors out here, you’ve got price resistance by your customers and consumers. So again, that is an entirely different subject that has to be strategized as well. We talked about right sizing for retail operations. You’ve also got to be right pricing to remain competitive.

Dr. Patrick Fulbright:
To your point, one of the strategies I incorporate a lot of my clients is to walk their competition, whether it’s physically or virtually. Stay on top of it, learn. I mean, you don’t always have to be the go to your own well to figure things out, better way of saying just steal some ideas or incorporate it. If it works for them, pay attention to that. And also I always have this saying, I tell my clients [inaudible 00:16:35] is be the pro in your sport. Meaning that stay up on innovation, stay up on what’s going on in that economy and what’s going on in your industry.

Mark Collier:
Sure. Well, that’s a tried and true tactic is benchmarking. You take the best of the best of what your competitors are doing and either imitate it or try to improve upon it.

Dr. Patrick Fulbright:
Absolutely. Absolutely.

Mark Collier:
All right. So as retailer’s digital capabilities are now front and center, kind of what future trends have you seen them play during the pandemic and what future trends do you see playing out as we move forward past in our post-pandemic economy?

Dr. Patrick Fulbright:
Well, I think this whole move into e-commerce needs to have a data set. You need to understand what you’re seeing and how you can quickly manipulate if something’s working or not working. How can you regroup using, we talk about the rise of services. If you can’t do it internally, look at some other opportunity that can help you do this. I think we’ll see mergers acquisitions, I think we’ll see strategic partnerships, and you can do that even at a micro level with businesses. What can I incorporate? The other part is take time to learn things like your financial statement, take time to learn what is my SEO optimization on these different channels I’m trying to incorporate? It may be that you’re going after a higher or older demographic. Well, maybe you need to stay with Facebook.

Dr. Patrick Fulbright:
Or if that market is changing for you, maybe it is Instagram, or do you have a LinkedIn? How are you pushing people back to the website? What neat stuff are you incorporating? Who would have known a few years ago TikTok would have been such a popular thing?

Mark Collier:
I like TikTok.

Dr. Patrick Fulbright:
Some of the stuff on there is fantastic. And I think that’s part of it too, embracing the newness, something new, that innovation so you can incorporate it. Even if you start at a small level, being able to entice, because you’re really battling for time in front of people’s screens. It’s pivoted that much. And I encourage a lot of my clients to really look at that and stay informed and incorporate some of this as tests. You don’t have to go full bore into it, but if it starts to work, then put time, energy and effort into it, and typically money too. But yeah, there’s some neat stuff that was occurring and I think it’s going to be resurgent around with virtual reality, augmented reality, all that kind of stuff, geo-distancing, with geo-fencing, with beacons in stores that when you come in, it picks up your cell phone and it’ll shoot you a coupon. All those cool stuff are still going to occur. It’s going to be a little slower and I think it’s going to be a rebound.

Mark Collier:
All right.

Dr. Patrick Fulbright:
Yeah, man.

Mark Collier:
Dr. Patrick Fulbright, area director at the Gainesville office of the UGA SBDC, really appreciate you coming in and sharing your wealth of knowledge. The retail sector is a sector that’s going to continue to evolve. So I certainly want to have you back in in the very near future and let’s talk some more about what’s going to be happening in the future of retail.

Dr. Patrick Fulbright:
Well, I enjoy it and I love to share what I learn because I’m, as all of us are, students of business and we are kind of nerds and so this is dear to my heart. So thank you for the opportunity.

Mark Collier:
You’re welcome.


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