Wednesday, February 23, 2011

Advantages of Cloud Computing– Part II – Reduced Cost

In every marketing situation, COST always wins.

Not long after we began working in the convenience store industry, we quickly learned the three most important ingredients for operating a successful c-store are location, Location, and LOCATION! After a few years in the business things changed, and we decided IMAGE was as important as, or maybe even more important than location. Good lighting in parking areas, remembering customers’ names and greeting them at the door, clean bathrooms… we could go on and on. The truth is, there are dozens of things you can do that may increase sales, but still, we always come back to costs, because if you’re not making a profit, nothing else matters, does it?

I was having a conversation with a c-store operator last week, and to use his words, he said, “I have cut my costs until there is no place left to cut. When I think I have a handle on one expense, something else pops up. Sometimes I think I’m just a tax collector for Uncle Sam.”

Trying to find ways to increase sales is a never ending exercise. It’s a full-time job, tedious and oftentimes frustrating. It’s an investment, just like your inventory is an investment. And if you’re hard-earned labor only results in a short-term, two-percent profit, what have you gained?

We liken retail businesses as soldiers in a war in which they are constantly battling frontal assaults from forces much stronger than themselves. Their strengths come from determination, tenacity, agility and heart. You have to love this business to be successful at it. Their strengths also come from their numbers. It’s unbelievable, but true. Your competitors may play an important role in the reason you survive.

In our book, TCSICGM, we talk a great deal about  ‘costs’ and how c-stores put little or no emphasis on providing customers with “everyday low prices,” because in our opinion, the stigma of price gouging is killing the c-store industry. We also believe micro-managing inventory is an important element of reducing costs and one that no c-store operator has yet to implement completely, but there is a network of interrelated goals that forms a conundrum of sorts. How do we reduce costs to ourselves and to our customers and increase profits, all at the same time?

The costs involved in POS devices, back office computers, networks, servers, programing, software acquisition and on-going maintenance fees have reached monumental proportions and continue to increase by leaps and bounds. Alas, the race to cut costs and increase profits has resulted in MORE costs and LESS profits. You are told, properly utilizing everything you have invested in will make a system pay for itself, but you quickly learn the man-power required to accomplish this can easily outpace the profits earned. It’s a never ending, vicious cycle that cannot be broken in the current environment.

In Part III, we’ll delve more into ‘cost’ and what part Cloud Computing will play in reducing costs and creating a more level playing field for small to medium-sized retailers.


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