W. Frank Dell II, CMC September, 2004 EXPANDING RETAIL.

W. Frank Dell II, CMCSeptember, 2004

EXPANDING RETAIL

DELLMART & COMPANY 2

AGENDAAGENDAINTRODUCTION

READYCHANGE

GO


QuestionsQuestions How to recognize the store is ready to

replicate? What should be replicated? When to stop changing the store? What is the best approach to

expansion? What is different with multi-formats?


Growth Is GoodGrowth Is Good Shows progress Measured

– Per Square Meter– Comp. Stores– Percentage increase

Benchmarks– Inflation– Market growth

020406080

100120140

1st 2nd 3rd 4th

Company IndustryInflation


Profits Are BetterProfits Are Better Sales- Cost of Goods= Gross Margin- Store (Labor, Occupancy & Inventory)- Transportation (Labor & Equipment)- Warehouse (Labor, Occupancy & Inventory)= Direct Profit


CautionCaution Uncontrolled growth Over-leveraged growth Management ability Growth for growth

– Forgetting the customer



READYCHANGE

GO


Honest EvaluationHonest Evaluation Use an independent approach Set pride aside Focus on reality not

– Wishes– Hopes– Dreams


Reasons For SuccessReasons For Success Lucky location Lack of competition Unique merchandise Exceptional service


Are Customers Ready ?Are Customers Ready ? Increasing customer count

– Repeat customers– New customers

Increasing transaction size– Excluding inflation

Increasing category participation

– Shop the store not the aisle


Is Financing Ready ?Is Financing Ready ? Increasing profits Sufficient ROI

– Greater than interest rate Sufficient cash flow How financed

– Internal cash– Borrow


New Store ModelsNew Store Models

0

10

20

30

40

50

60

70

1 2 3 4 5 6 7 8 9 10

Break-EvenAB


Are Associates Ready ?Are Associates Ready ? Adequate operational

controls Discipline in process

execution Training ability Available management time

and talent


Are Suppliers Ready ?Are Suppliers Ready ? Sufficient merchandise

range Sufficient merchandise

supply Consistent supply Delivery capability Ability to supply

– Fixtures– Displays


Is Your Plan Ready ?Is Your Plan Ready ? Defined target customer Site selection criteria Location strategy Pro-type store format Rational financial estimates

– Sales– Profits– Capital



READY

CHANGEGO


Important QuestionImportant QuestionQuestion

When do you stop making changes to the store?


Important QuestionImportant Question

Answer

NEVER


Resistance To ChangeResistance To Change Change is difficult to effect Associates resist change

– To varying degrees– Unless conditioned

Customers only accept some change


Change Is GoodChange Is Good Keeps the store fresh Entices consumers Creates merchandise excitement Creates reason for store visit


Change Can Be BadChange Can Be Bad Increased costs Confuses the customer Difficult to

– Manage– Execute


Degree Of ChangeDegree Of Change Seasonal Items Categories Pricing & Promotions Departments Layout Store Name


Implementing ChangeImplementing Change TEST Set Goals Implement in select

stores Evaluate

ROLLOUT Develop plan Communicate

– Stores– Logistics– Supplier

Execute


PrototypesPrototypes

Don’t exist Everyone has one or more Cannot expand without one



READYCHANGE

GO


Overall ProcessOverall Process

Plan

Build

Revise

Evaluate


How Many Stores ?How Many Stores ?

0%50%

100%

Expansion Resources

Too aggressive– Likely failure– Poor execution


Build Vs LeaseBuild Vs LeaseBUILDAdvantage

– Maximum control– Builds asset base

Disadvantage– Longer time

LEASEAdvantage

– Smaller capital– Faster time

Disadvantage– Landlord control


Store PlanStore Plan Site requirements Size Layout Merchandise & services Labor requirements Forecast

– Capital– Profit & Loss


Headquarters ResourcesHeadquarters Resources

0

10

20

30

40

50

60

70

StoresHdq.


Organization Structure AOrganization Structure AManagingDirector

Operations Accounting &Finance

HumanResources Expansion

RealEstate

Construction

Buying

GovernmentRelation

Engineering

StoreOperations Distribution Merchandising

Design


Organization Structure BOrganization Structure B

ManagingDirector

StoreOperations

Accounting &Finance

HumanResources Merchandising Distribution

ExpansionTaskForce


Information TechnologyInformation Technology Transaction projections Processing capacity

– Hardware– Software

Communication– Capacity– Backup– Dependability


MerchandisingMerchandising Workload

– Suppliers– Items– Transactions

Inventory Pipeline Opening coordination

0

5

10

15

20

25

30

1 2 3 4 5 6 7 8

Inventory


LogisticsLogistics Processing

– Storage space– Warehouse Equipment– Transportation

New store– Fixtures– Equipment– Merchandise


Finance & AccountingFinance & Accounting Expansion financing Banking relationship Monetary Control

– Construction– Operations


Human ResourcesHuman Resources Personnel policy Hiring new associates Training associates Phase-in staffing


Store OperationsStore Operations Standard Operating Procedures Succession planning Promote from within

– Improves morale– Provides consistent service– Builds company cultural


ConstructionConstruction1 2 3 4 5 6 7

Foundation

Frame

Outside

Utilities

Walls

Flooring

Equipment

Finishing

Fixtures

Signage


Hard Vs Soft OpeningHard Vs Soft OpeningHard Advantages

– Greatest impact– Focus spending

Disadvantages– Exposes weakness– Risk of failure

Soft Advantages

– Easiest to execute– Controlled recovery

Disadvantages– Limited impact


Multi-FormatMulti-Format Annual plan determines number stores

– Adjust for opportunities Site evaluation

– Size– Target customer


SummarySummary How to recognize the store is ready to

replicate? What should be replicated? When to stop changing the store? What is the best approach to

expansion?


W. Frank Dell II, CMCPresident

DELLMART & Company125 Hardesty Road

Stamford, CT 06903 USA

Tel: 203-968-8609Fax: 203-968-8613

e-mail: [email protected] Site: www.Dellmart.com

W. Frank Dell II, CMC September, 2004 EXPANDING RETAIL.

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