The current issue of Harvard Business Review is one of the best I can remember. In a retail-focused section, "Curing the Addiction to Growth”, the researchers conclude "mature companies should rely on a strategy that focuses on growing revenues of existing stores faster than expenses”. This sounds rational and easy but, while logical, I’ve found it difficult for 3 reasons:
- It can be challenging - especially in today’s tough retail earnings climate - for mid and senior managers in retail companies to get investment requests approved, even when the payoff seems to be there
- It’s often unclear how much revenue lift an investment will generate, and even more difficult to estimate the timing with enough confidence to say expense growth won’t outpace sales growth at any point
- Because most retailers manage e-commerce and brick-and-mortar P&L statements separately (and with different leaders for each) and tend to overemphasize the 4-wall profitability of stores, sales attribution - which is necessary for justifying investments and for measuring their ROI - may be unclear and best and misleading at worst
These organizational and reporting frustrations don’t even address the unpredictability of sales and consumer behavior in these fast-changing times.
Photo above is from the HBR article to which I've linked.