TOP TEN CEO BURNING ISSUES FOR 2005

by Cynthia R. Cohen

Looking into the coming year there is one word to describe how the CEO’s in the retail industry are feeling…BURDENED. They are carrying a heavy load on the road while driving toward increased sales and profits. They spoke, I listened and here are the top ten issues contributing to that heavy load.

 #1. Excess Scrutiny the New Board Game Brought to Us by the Government
Better controls are wonderful when they really contribute to running a better business but bogging down processes falls under the doctrine of “guilty until proven innocent”. The new requirements for controls and checks on the checkers are a major source of frustration. Sometimes it feels like playing a board game where the rules keep changing as you go around the board. 

#2.Corporate Mating…Be the Pursuer or the Pursuee?
Many recent examples of major company marriages. Debt is readily available to execute deals. With overhead costs climbing faster than gross profit, maybe combinations can provide long term value and short term expense savings. Lots of people will continue to do a mating dance to examine the bigger is better option. 

#3. Any Good Names Left?
Kohl’s has Candies, JC Penney has Chris Madden, Target has Graves and Mizrahi, and even Office Depot snapped up Christopher Lowell for office furniture. It’s a name grab! There is a race on to get exclusive name brands and it takes too long to build a brand from scratch. So it is buy or license, but hurry up, the good ones are going fast.

 #4. To Outsource or Not to Outsource
The retailers’ staff knows all the nuances of the business but the vendor team has done it hundreds of times. Which knowledge base is more valuable? There is no right answer for all situations and every analysis takes the additional effort to sift through the personal biases of the staff regarding control and power, not to mention betting on whether this is strategically good or hurtful in the future. 

#5. Is RFID the New “Lojack for Products”?
It is widely acknowledged that no one has seen the financial benefits of RFID yet, but there is mounting pressure to implement. It is also widely acknowledged that internal theft makes up a large percentage of all theft. Will RFID’s “visibility into the supply chain” finally help reduce internal theft. That is one thing worth paying for… IF it is real.

 #6. Everyone is Talking About Suits, and It Is Not About Clothes
They are multiplying like rabbits, from labor issues to now costume jewelry in California, legal suits are taking more of the CEO’s time and especially the company’s money. There is no end in sight and there is no volume rebate on attorney’s fees.

 #7. “Gen Who Says We Are Not Cool?”
Yup, that is the feedback many retailers are getting from young adult consumers known as Generation Y. Even though most of their sales come from the Boomers, it is these influencers who have the nerve to declare many retailers and brands uncool...and many Boomers actually listen to them. CEO’s would like to flog them but actually it is better to blog them. 

#8. The Oil and Gas Watch
Where o where will the prices go? Where o where will consumer spending go? Forget weather, consumers will go back out shopping when it stops snowing, being too cold/hot, raining, etc. When the cost to tank up goes up, the spending goes into “I don’t really need that mode” and sales drop. And so they pray, hope and watch the prices as they do their sales forecasts. 

#9. Gotta Get More of Those Financial Types
Need one for the board’s audit committee, three for more SOX compliance and five to replace the folks burned out in the Finance organization. Demand is up and supply is constrained. They thought it was hard to hire good merchants, now there are endless staff meeting discussions about financial human resources. And oh by the way, this is more expense that does not help grow the revenue line.

 #10. Margin Feng Shui
The ancient Chinese art of balancing the Yin and the Yang is now being applied to apparel as the quotas for Chinese imports have lifted. The Yin factor is that margins are immediately improved in large measure if the retail prices remain the same. The Yang of it all is, maybe reducing retail prices on apparel and taking the same margin as before will increase market share, but that also leads to price compression and makes comp store increases harder to attain.