W. Frank Dell II, CMC

1
EXPANDING RETAIL

• W. Frank Dell II, CMC
• September, 2004

2
AGENDA

• INTRODUCTION
• READY
• CHANGE
• GO

3
Questions

• 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?

4
Growth Is Good

• Shows progress
• Measured
• Per Square Meter
• Comp. Stores
• Percentage increase
• Benchmarks
• Inflation
• Market growth

5
Profits Are Better

• Sales
• Cost of Goods
• Gross Margin
• Store (Labor, Occupancy Inventory)
• Transportation (Labor Equipment)
• - Warehouse (Labor, Occupancy Inventory)
• Direct Profit

6
Caution

• Uncontrolled growth
• Over-leveraged growth
• Management ability
• Growth for growth
• Forgetting the customer

7
AGENDA

• INTRODUCTION
• READY
• CHANGE
• GO

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Honest Evaluation

• Use an independent approach
• Set pride aside
• Focus on reality not
• Wishes
• Hopes
• Dreams

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Reasons For Success

• Lucky location
• Lack of competition
• Unique merchandise
• Exceptional service

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Are Customers Ready ?

• Increasing customer count
• Repeat customers
• New customers
• Increasing transaction size
• Excluding inflation
• Increasing category participation
• Shop the store not the aisle

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Is Financing Ready ?

• Increasing profits
• Sufficient ROI
• Greater than interest rate
• Sufficient cash flow
• How financed
• Internal cash
• Borrow

12
New Store Models
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Are Associates Ready ?

• Adequate operational controls
• Discipline in process execution
• Training ability
• Available management time and talent

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Are Suppliers Ready ?

• Sufficient merchandise range
• Sufficient merchandise supply
• Consistent supply
• Delivery capability
• Ability to supply
• Fixtures
• Displays

15
Is Your Plan Ready ?

• Defined target customer
• Site selection criteria
• Location strategy
• Pro-type store format
• Rational financial estimates
• Sales
• Profits
• Capital

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AGENDA

• INTRODUCTION
• READY
• CHANGE
• GO

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Important Question

• Question
• When do you stop making changes to the store?

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Important Question

• Answer
• NEVER

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Resistance To Change

• Change is difficult to effect
• Associates resist change
• To varying degrees
• Unless conditioned
• Customers only accept some change

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Change Is Good

• Keeps the store fresh
• Entices consumers
• Creates merchandise excitement
• Creates reason for store visit

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Change Can Be Bad

• Increased costs
• Confuses the customer
• Difficult to
• Manage
• Execute

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Degree Of Change

• Seasonal
• Items
• Categories
• Pricing Promotions
• Departments
• Layout
• Store Name

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Implementing Change

• TEST
• Set Goals
• Implement in select stores
• Evaluate

• ROLLOUT
• Develop plan
• Communicate
• Stores
• Logistics
• Supplier
• Execute

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Prototypes

• Dont exist
• Everyone has one or more
• Cannot expand without one

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AGENDA

• INTRODUCTION
• READY
• CHANGE
• GO

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Overall Process
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How Many Stores ?

• Too aggressive
• Likely failure
• Poor execution

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Build Vs Lease

• BUILD
• Advantage
• Maximum control
• Builds asset base
• Disadvantage
• Longer time

• LEASE
• Advantage
• Smaller capital
• Faster time
• Disadvantage
• Landlord control

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Store Plan

• Site requirements
• Size
• Layout
• Merchandise services
• Labor requirements
• Forecast
• Capital
• Profit Loss

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Headquarters Resources
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Organization Structure A
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Organization Structure B
Expansion Task Force
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Information Technology

• Transaction projections
• Processing capacity
• Hardware
• Software
• Communication
• Capacity
• Backup
• Dependability

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Merchandising

• Workload
• Suppliers
• Items
• Transactions
• Inventory Pipeline
• Opening coordination

35
Logistics

• Processing
• Storage space
• Warehouse Equipment
• Transportation
• New store
• Fixtures
• Equipment
• Merchandise

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Finance Accounting

• Expansion financing
• Banking relationship
• Monetary Control
• Construction
• Operations

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Human Resources

• Personnel policy
• Hiring new associates
• Training associates
• Phase-in staffing

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Store Operations

• Standard Operating Procedures
• Succession planning
• Promote from within
• Improves morale
• Provides consistent service
• Builds company cultural

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Construction
1 2 3 4 5 6 7
Foundation
Frame
Outside
Utilities
Walls
Flooring
Equipment
Finishing
Fixtures
Signage
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Hard Vs Soft Opening

• Hard
• Advantages
• Greatest impact
• Focus spending
• Disadvantages
• Exposes weakness
• Risk of failure

• Soft
• Advantages
• Easiest to execute
• Controlled recovery
• Disadvantages
• Limited impact

41
Multi-Format

• Annual plan determines number stores
• Adjust for opportunities
• Site evaluation
• Size
• Target customer

42
Summary

• 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?

43
Thank You
44

• W. Frank Dell II, CMC
• President
• DELLMART Company
• 125 Hardesty Road
• Stamford, CT 06903 USA
• Tel [phone]
• Fax [phone]
• e-mail Frank_at_Dellmart.com
• Web Site www.Dellmart.com