What’s The Story Behind That Product?

 Email Article |  Twitter |  digg it |   delicious |   LinkedIn | 

Increase the Perceived Value by Sharing the Why of The Buy

Have you ever gone to a store, looked at a piece of merchandise, and not bought it because you thought it might be an inferior product?  That just happened to me.  I was shopping at a store in the Boston area that is known for everyday bargains.  It is the type of store that people rarely go to for a specific item.  It’s the type of store that you end up buying a bunch of stuff that you never knew you needed.  Their prices are extremely low and their advertising slogan is “don’t you just love a bargain?”

I affectionately refer to this store as an old fashioned five and dime store on steroids.  They sell lots of party products, kitchen items, gift items, books, packaged foods, cosmetics and probably another thousand categories.  It is a chain of 20 plus stores that is not necessarily the neatest and most organized, but no one really expects it to be either.  You get the feeling you are getting a great deal on everything you buy.

One of the reasons for some of the great values that they offer is that many of the time dated products will have closer expiration dates, which is perfectly OK as long as you aware of that.  The majority of the items are not this way.  What I am saying is you are looking for reasons why something might be such a great deal.  That was the case with me.  Let me explain.

Again, remember I went into the store not looking for anything in particular and just killing some time.  I did, however, have a shopping cart which I was filling up with a bunch of useless items I had to buy.  Then I came to the men’s personal item area and picked up a can of shaving cream and noticed a razor from Gillette.  I had never heard of this type of razor; it was a Fusion ProGlide Power Razor that was only $8.99 which seemed cheap enough to make me buy it.  BUT where I had never heard of this razor, I was afraid that it might be a discontinued item that Gillette had experimented with, didn’t work out, and were dumping the balance of the products into this discount store.  That was OK because I go through a lot of razors since I travel so much and I have a tendency of leaving them somewhere.  So, I figured since I probably wouldn’t be able to get the blades for this in the future, I would purchase the 8-pack of blades.  I was a bit surprised that the 8-pack of blades sold for $26.99, but I happened to need a razor so I bought it.  I want you to know I did have buyer’s remorse because I felt I had bought a discontinued product.  The reason why I felt that way is because these razors and blades were thrown into a bin.  Then two things happened to me.

First, I used the razor.  It was the most unbelievable shave I have ever received and with a bald head this is an area I am expert at.  I am still believing and questioning why they would be discontinuing such a great razor.

Then, I went to CVS to pick up a prescription where right there in front of me was this beautiful display on an end cap announcing the newest and greatest razor by Gillette, the Fusion ProGlide Power Razor.  It was selling for $12.99 and the blades were $29.99.  It is not a huge discount, but it is still a substantial discount, especially on a brand new product.  Here is the interesting part.  I happened to ask the cashier, who I believed was some type of manager or assistant, how those new Power Glide Razors were selling?  Her comment was “we keep them in stock”.

I will go as far as saying that CVS is doing a far superior job on selling these products than the store that is known for lower prices.  There is an old expression that says “its worth is what it looks like it’s worth”.  CVS increased the perceived value of the product by featuring it, signing it and supporting it with professionally prepared displays by the vendor.  The discount store didn’t even have a hand written 3 x 5 card saying “new product” or “great buy”.  It got so bad that even though I purchased the item, I actually considered returning it.

Are you doing the same thing in your store?  Are you making it easier for the customer to understand the products you are selling?  I was at an airport shop the other day that sold art by the artist, BRITTO.  The products were posters, framed art, t-shirts and ceramic pieces.  It was OK, however, the value of those products skyrocketed when I saw the artist pictured with various world leaders, including President Clinton and an announcement that he was selected to create a new stamp for the United Nations.  That’s credibility!  That’s the story behind the product.  Share the story and you will increase the value of your products.  Try it, it works!

Are You a Picker or a Buyer?

 Email Article |  Twitter |  digg it |   delicious |   LinkedIn | 

There is a trump card for the recession. There is and will always be the HOT item. The item you can’t get enough of. Even during the great depression, there were vendors and retailers that did very well. Why? Because they had products that customers wanted and could afford. Yes, there were fewer buyers, just like now, but these vendors and retailers capitalized on every opportunity they had to make a sale.

So what does that have to do with being a picker or a buyer and what does that mean anyway?

Let’s first define both words. The picker is the type of buyer who can go into the marketplace and pick the items that will sell. They just have that uncanny talent to pick items that sell. However, that does NOT mean the store can make money on the item, be good for the store’s image, be the type of brand that the store should be associated with, or even the right category of merchandise that a store should be carrying. (I once saw a better jewelry store sell portable outdoor chairs. Yes, they sold them but were they right for the store?)

When Calvin Klein jeans just started to peak, I carried them in my store for a total of 3 hours. I sold 24 pairs of jeans in those 3 hours. (Not bad out of 84 that were received.) HOT item? You bet, but it wasn’t right for our store. At the end of the day, I called a friend of mine who owned a jean shop and sold him the balance. If I had ever continued to sell jeans, I would have destroyed my business.

A buyer makes sure that everything is in alignment. They know who else is carrying the line and what the competition is going to be like. They also know the optimum price they can charge in order to make money. They know when to promote it, advertise it, and even mark it down. They love the title of being a true merchant.

Now let’s take an unexpected turn here. You see you are expecting me to continue telling you the virtues of the role of the buyer. WRONG!

These are unconventional times and we need some unconventional thinking. This is the time for the Picker but with some guidelines and marching orders. We need the Pickers to uncover the new trends that will sell. Not anything that can sell but those items that aren’t yet recognized as winners. The Beanie Babies before the world knew about them, Calvin Klein before the jean, and Ralph Lipshitz before he changed his name to Ralph Lauren and the rest is history. (Yes that’s true.)

Let the Picker pick the hot new items that will turn your store into the sought after place that customers clamor for, talk about, and become a true destination. Am I asking for the impossible? NOT AT ALL. Stores that are different, unique, and happening do business.

Actually, I just shared a history lesson in retailing. Think of the chains today that came from nowhere to become giants. Why? Because of something different. No one needed The Limited in 1970, or the Gap, Victoria Secret, or even Starbucks but they didn’t listen to conventional thinking. I’m sure that each of the founders of these companies were probably told that they were nuts for doing what they did. But they believed in what they were doing. Some people call them “Fruitcakes” and that’s OK because some of those “fruitcakes” become visionaries. So, to quote my inspirational leader, Jimmy Buffet, “We need more fruitcakes” in this world.

The next time someone asks you if you’re crazy for buying something, you might just be on the right path. But of course it might end up on the markdown rack as well. I never said it was going to be easy. Let the Picker out in you and PICK ON.

How Stupid Can A Company Be?

 Email Article |  Twitter |  digg it |   delicious |   LinkedIn | 

A reader sent me a story this week that I just had to share with you. Especially, since we are focusing on sales skills this month. However, before I get to the story, I want to share a couple of lessons first. Due to the current business climate, more retailers have been complaining about how cranky and irritable customers have become. That’s not a big surprise because people are upset with the economy, the losses in their worker’s 401K accounts, the fear of losing their jobs, and just the uncertainty of not knowing what to do. Is the economy rebounding or not?

Couple that with customers telling us that they aren’t going to buy anything, just because they aren’t in the mood. Well, the question is how do we get customers in the mood? The first rule is to control every time a customer has any contact with your business. Our past experiences with businesses set the tone and our mood. If the sales team is overly aggressive or pushy, then the next time the customer comes in they will have their guard up. If the sales people were upbeat, friendly, and helpful, then our attitudes and expectations change.

That is something we all know. We don’t always practice it but that’s just one of those accepted facts about business. What has changed is that our impressions to our customers are no longer limited to their last visit to the store. Now we have to worry about our Facebook entries, our Twitter comments, our emails, our websites and the impressions they give, and then the process the customer has to go through if they want to buy merchandise from your website.
Now let me share a reader’s tale. This person is a big sports fan living in the Cleveland, Ohio area. However, being a fan of Cleveland teams has not been very rewarding. There has been nearly a 50 year drought of any major league team, The Browns, Indians, or the Cavs in basketball, winning any type of championship. But now the area has a true super star in the person of LeBron James. He just won the MVP Award from the NBA but what makes him so special is the level of maturity of this young man. He is only 24 years old, and is truly remarkable. LeBron is a true leader and a very astute business man. He negotiated a contract $92 million contract with Nike when he was only 19 years old, without an attorney. (He fired the one he had)

A couple of days after LeBron won the MVP honor, Nike came out with an MVP Award T Shirt with the word Witness on it. LeBron made a statement a couple of years ago that he wanted the fans to “Witness Greatness”. So Nike, being the great marketers that they are, jumped on that statement and made the word “Witness” as part of the LeBron James mystique.

At the first game of the semi-final series, Nike gave away thousands of these shirts. Well it did exactly what Nike wanted. Everyone watching on TV wanted to buy one of these unique looking T Shirts. They were not being sold in stores yet and you could only buy them directly from the Nike website. The selling price was $30, plus shipping and handling. The worst part was that 2 days after the game, the Nike site was quoting 21 to 30 days for delivery. The orders must have been flying in. My reader went on line, ordered the T Shirt. The next morning the confirmation of the order was emailed. He was shocked that the cost of the shirt with shipping and handling came in just under $50.00. He rethought his purchase and decided to cancel the order. It was less than 12 hours after the order was placed. He found a phone number for customer service and called.

He was informed that he couldn’t cancel the order. He was also told it had been shipped. He questioned that because it said that there was a minimum of a 21-day delay. When he asked for the tracking number there wasn’t any tracking number. Then he was told that this shirt CAN NOT be cancelled or returned. He then asked for a supervisor and was told he couldn’t help and the shirt could not be cancelled. But the good news was that they found a shirt and would be sending it out immediately. Overnight delivery at the buyer’s expense. There were actually 6 calls made until he finally spoke to someone who understood what was happening and informed the buyer that they could return it.
At first the buyer was relieved but then he realized that he had to pay freight both ways and one was overnight shipping. Well the shirt was shipped and received the next day and he shipped it back on the same day. It cost him $28 for this adventure. I asked “Why didn’t you just keep the shirt?”

“That is the whole point of the story” he went on to explain. “I will never buy or wear anything Nike ever makes. How sleazy can they get?” He is right. I can’t look at Nike quite the same way ever again. All of this great brand building to have some overly aggressive middle manger type do a good job in destroying it. All over $30 T shirt. That’s dumb! Why did they have to lie?

Are your image and brand consistent? Are all of your contacts with your customers in alignment to what you believe?

Just as an FYI, I was asked to share this story. But I am only one of many people who were asked. No one knows how many publications this might appear in. This is a person who knows how to make things happen. I applaud you for being proactive and sharing and exposing a really horrible customer service. Have a great week.

Response to Patty’s Predicament

 Email Article |  Twitter |  digg it |   delicious |   LinkedIn | 

Everyone amazed me again with the amount of responses that we had and the comments that were made. There are a couple of overriding themes that I just want to point out:

1. Over half of the people who responded started off by saying “we had a similar situation happen to us”. So Patty is not alone!
2. We asked 12 questions and there was an overwhelming response to statement #3 as to what should be done. This one stated that the vendor should offer a discount on the original order. Most people felt as if the vendor did something that was inappropriate and it should be corrected on the existing order. And by the way, the vendor had already rejected that concept.
3. The second most popular response was statement #1 which said that the vendor should offer off-price packages to all the existing accounts. Yes, they can be sold on a C.O.D. basis.
4. Coming in at 3rd place was option #5 which stated that the vendor should offer markdown money as they do for the big stores. However, the second and 3rd responses together equal the first response about the vendor offering a discount.

I have highlighted some of the responses for review. One last thought. The majority of the people who went through this before rarely continue to do business with the vendor. And as one store put it, when a vendor starts this discounting practice, it always seems to be the beginning of the end for the vendor.

A sampling of your responses:

• Offer the same deal on already-purchased goods, as the vendor did to the liquidation outfit, even if the liquidator took much more volume of goods. Yes, this will cost the vendor…but vendor owes that, and more, for past loyalty and past profits.
• I would also ask them to keep them informed of things like this in the future which would give them the opportunity to decide if they could handle that size numbers… Send merchandise back to manufacturer.
• Clear the vendor out of your store! We did this with our #1 supplier about 8 years ago. This company represented about 30% of our inventory.  They were purchased by a national retail chain, a major competitor of ours! I decided to do without. It was challenging, it forced us to examine our inventory. our reasons for choosing item x over y and which products we promoted to customers. I didn’t want to cut off my nose, but I had a feeling it might be a healthy change and it worked out that way. Eight years down the road we have a better product mix, the “big vendor” is a has-been, and customers never knew the difference. It isn’t a mistake that I chose 1 for each item. I believe that all of these ideas should be utilized.
• If vendors want to service the specialty sector, then they need to be accountable to us and offer these clearance discounts to worthy accounts. Not sell us out to discount stores who are putting the specialty sector out of business. I also want to say that my new mission is to make sure that my vendors are selling to the right people. The three major questions, among the many that I ask prior to purchasing are:
  • Can I place product on my ecommerce website? I have put a lot of money into a quality site and will only purchase from vendors who assist in this venture.
  • Do you sell to Amazon and do you police ebay for reselling at discounted rates? If they sell to Amazon I will not do business with them…(Melissa & Doug) Just as an fyi, this seems to be the new revelation…Cloud B announced last week that they will no longer be selling to Amazon. I rewarded their commitment by placing an unscheduled order.
  • Must offer co-op advertising
• She should get the same price as XYZ, or drop the account. Lots of suppliers want into our stores, make them work to keep her.
• I am having a similar issue: I have an exclusive brand, and my rep sold to my 2 closest competitors! I have always bought all seasons, more than the minimums, for the last 4 years. I have slowly developed a niche and have enough stock to successfully merchandise the product. The rep’s response is “sorry” and “they’ve raised the msrp, so you all should be able to sell it”. Yeah right…… both my competitors are bottom feeders: One sells at keystone (product is suppose to be 2.25 mark-up), and the other offers myriads of free product and service give-aways. I await with baited breath to see the response…..
• Present the Vendor with the facts about the loyalty of the Retail store. Ask the Vendor what they are going to do to keep the Retailer as a client. Then the ball is in the Vendors court ~ let them sweat about what its going to take to keep the Retailer happy. And the Retailer can always say “are you kidding me?” after the first offer.
• I disagree that a discount or anything you mention will change or do anything. Seems like crying over spilled milk. A retailer needs to add value to a product and make it something that a person wants to buy from them. If they cannot, than why sell it? Do that and deal with vendors that want to make you successful! Build your business rather constantly repairing it.
• If you look at history most companies who make it big in one market (such as specialty and then undercut to the mass are not around long) On season of discounting and no one really wants the line.
• Then if the relationship with the vendor is or can be mended, perhaps and only perhaps, she could consider ordering from them again. Tough to trust them again, though — well, other than to do the kind of thing that they did — thus the promise for the vendor to contact retailers about other locations where the merchandise might appear becomes important, I think and future benefits, as well. IT IS ALSO A TRUST ISSUE NOW. WILL THIS VENDOR DO THIS AGAIN.
• Never discount your goods to an outsider , someone who has never carried your goods, before they are offered to your best customers. We understand everybody can get in a situation where you have to raise cash fast. By offering it to your regular customers first with a letter of explanation you have an opportunity to both liquidate your excess inventory while maintaining or increasing your goodwill with the people that have supported you all the way.
• 1) Patty should ask the vendor to take back her inventory (and they should pay for the shipping and handling). 2) She should certainly not do business with them again (why give them a chance to screw her twice?). Find a better line elsewhere, guaranteed one exists.
  This happens all the time in our Industry. The power of the pen is the only way to combat this.
• I wouldn’t bother with the President, the damage is done. I would work from the bottom up. If the reps and sales managers keep getting ear fulls and smaller orders (these are the people most economically affected by smaller or no orders), they will be constantly feeding the higher ups the negative messages and they will eventually reach the top. Slow drips are more effective than a quick dousing.
• I don’t need COD discounted inventory. Why would I want all their horrid goods that didn’t sell anywhere else for less money? What guarantees do I have they will sell now at any price? Why would I want to turn our store(s) into a discount house – that devalues everything around their liabilities.
• What I would ultimately ask for is a swap, I mean afterall they have found the golden ticket with this discounter and they can apparently afford to sell them anything at any price – so they can have all of ours back and sell them to the jobber for whatever price they want. Apparently they value their business more than mine.
• Yes, it’s a tough economy but we don’t need our vendors making it any harder than it already is. I don’t know who the vendor is, but with practices like that, they are not likely to make it through this recession.
• Patty should not have all of her eggs in one basket or vendor.
  1. Discount the products at or below the local competition. Take the lost find another vendor.
  2. Ask the vendor for compensation on the next order. The compensation should be equal to difference in what she paid for the product and what the vendor sold to the competition.
  3. If the vendor does not want to work with Patty send all the merchandise back to the vendor.
  4. In business we need to work work with people we can trust to include customers, vendors, employees, lenders and advisors. If our instinct gives us that oh,oh feeling fire them and move on.
• I would want a discount on the original order and extented time to pay. I would never order goods from this company again. I am a small business and there are plenty of small manufacturers to order from. If a company sells seconds to the “down and dirty discounters” that’s another thing. Vendors have to make a decision are they marketing to the “boutiques” or the outlets, they can’t have it both ways, it is two totally different businesses.
• Rather than as a stop-gap ‘apology’, window & in-store signage and web content should be provided by the vendor to the retailer up front when the merchandise is ordered. When ‘times are hard’, then vendors should help retailers sell their product by offering resources that work. Perhaps that would have helped to prevent the ‘losses’ that necessitated selling to close-out discounters.
• Purchase all the stock from the discount store and stop buying from your normal vendor. Make sure you tell the vendor company’s president that this is what you are doing. Extract a promise for the future.
• My initial response to Patty is to cut your losses and run from this vendor. However, Patty has spent the time building and promoting the product line to her customers. Let the owner of the company know how you feel and what you’ve done for their product line and that you feel he has jepordized the integrity of the product line. Take any and all discounts and financial perks, run a promotion comparable to XYZ while offering exemplary customer service and product knowledge not available at XYZ. With the added discounts more people may be introduced to the line it may work in her favor in the long run. Put this vendor on probation and give him the chance to prove himself as an honorable person/company to do business with.
• The supplier has done something they felt best for their business. Now you must make the same type of decisions. The first thing is to assess how much damage this move has done to the image of the products in your area. If the outlet has a high visibility, then the line will be associated with “discount” in your customer’s mind for some time to come. Whatever the supplier might give you now – you will still be operating in a discount environment.
• I think your Good Business Doctrine is a Fairy Tale in my book of life. In my 15 years in business this has only become a concern in the last 5 years. I ask my reps to inform me if I’m purchasing anything that the discount chains are. Some reps will and some will not. Well — the will nots are not longer in my store!

What Could Your Best Vendor Do?

 Email Article |  Twitter |  digg it |   delicious |   LinkedIn | 

WARNING! This Could Happen To You!

Ok, we all know that these are difficult times. They are definitely on the climb up. I am seeing more activity in stores than I have seen in a while. Don’t they know there is a recession going on?

BUT this isn’t about the recession or business conditions. It’s about something that can happen to you and it’s not that last computer scam. This is something that makes business conditions  even worse. It’s a situation that can simply turn your stomach into knots. WARNING! I am about to use a verb I have never used in any article, speech, or book I have written but frankly after trying to find a replacement for the next 30 minutes, I elected to go with it.

It is when a retailer gets screwed by one of their best vendors and the vendor does nothing to rectify the injustice. Here is the scenario: You buy a line when the vendor is either relatively new, the company has only been in business less than a few years or it is brand new to your area or region. Now you carry the line, season after season, and you grow with the line. Every season you buy a little bit more than the season before. The line becomes an important resource to your business. You never discount it, you never do anything that would hurt the integrity of the line.

You place your order for the season and as the merchandise is coming in, you are calling or sending cards to your best customers to let them know about the new arrivals. Then you overhear a couple of customers talking about the line. You hear one say to the other, “You can get this line at XYZ Bargain Warehouse Outlet Super Store for more than half off.” Your first reaction is “THAT’S IMPOSSIBLE. IT MUST BE A KNOCK OFF, A COPY!”  Or, “MANY LINES LOOK A LIKE.”

Then some of your best customers come in and tell you the same thing. Now you drive over to XYZ Bargain Warehouse Outlet Super Store and find that it IS being sold for less than you paid for it.

What do you do? You quickly write a letter to the President of the company looking for some help and guidance. Then you get a quick response from the president. It is very well written note explaining how the company had to make commitments a long time ago in order to get the shipments in from the Orient in time for the stores to have the merchandise. They explain that they never predicted that business conditions would deteriorate that quickly and the amount of stores that are having problems.

So for the sake of the health of their company they decided to liquidate their excess inventory. Then they proceed to explain that they sold all of this to one resource and they must have inadvertently sold it to a discounter in your area. But there really isn’t much they can do now and they took these steps to strengthen the line so that they could design and deliver the best possible products for all of their retailers in the future. Oh yes, then they always end these letters with something like this. Thank you for your understanding during these troubled  times in manufacturing and retailing worldwide.

Isn’t that nice. Sorry, the store just got screwed. (sorry again) BLAH BLAH BLAH. It’s a bunch of crap. First, they could have offered the off price merchandise in prepackaged groups at deep discount prices rather than selling it to the off price jobber who doesn’t give 2 hoots to whom they sell it. If you got the cash you got the goods. A vendor that offers these packages to their retailers can require that the packages CAN ONLY BE SOLD on a C.O.D. Basis. That’s fair.
By offering it to the stores first, you are helping your retailers in these troubled times plus it’s also a heads up or a defensible position when and if the goods show up in one of these down and dirty outlets. All we want is to eliminate the surprises.

However, doesn’t the store deserve something for the damage this vendor has created? The Good Business Doctrine indicates that some type of financial consideration would be appropriate, such as offering at least a 25% to 40% extra discount for the damage done. Or extending a significant discount on the store’s for next season’s orders. Maybe even a lucrative advertising allowance or supply direct advertising material in the forms of direct mail pieces, branded emails, window and in store signage. Even offering to supply an insertable page for the store’s website.  It would be nice to have another well written letter from the president to the store’s customers and include a discount coupon just for their brand. Lastly, at least extend the payment terms for the current goods, even if the vendor sells their receivables to a Factoring company.

Now the rest of the story,

This scenario is REAL. It is currently being played out by one of the BEST CHILDREN’S RETAILERS in America, Patty Bergstrom who owns the Velvet Goose in Gardner, Massachusetts. Gardner holds a very special place in my heart because it was one of the very first communities I ever worked in. It still amazes me the amount of the material I wrote for my work in Gardner that ended up in so many of my articles and books.
Patty is a member of The Retailers Advantage and asked for help with this situation. I will NOT mention the name of the vendor. (I am not looking for a needless law suit. But trust me attorneys are checking this piece as you are reading it.)

But this is what I want to do. I am going to ask all of you what Patty should do, what she should ask for, what the vendor should do or offer. So take this survey and we will be posting the results on The Retailers Advantage and will allow non-members to view the results. This is going to be fun. Can’t wait to read not only the responses but some of your ideas. I will promise you one thing. I will send all of the results to the president of vendor in question. Oh yea, I will also send him a free copy of my Vendor of Choice book and maybe even a couple of retailing books.

Take the survey here.

Where Are You Getting Your Advice?

 Email Article |  Twitter |  digg it |   delicious |   LinkedIn | 

On Friday morning we had our first Teleconference of the expanded team from The Retailers Advantage. We are now up to 6 people working at The Retailers Advantage and soon to be 7. Anytime you hire new people, you spend some time training and sharing your philosophies, procedures, goals, and just the way we do things.

As I shared my mission about being a true advantage to retailers and how important it was to be able to offer the best and most accurate advice, the latest trends, strategies, and tools available. I then shared a story that I rarely tell. It was not a high point in my career but certainly helped shaped who I am today.

In the late 70’s, woman’s specialty store discounting became the concept of the day. The stores were 2000 to 4000 foot stores that were very visually appealing and didn’t look like the traditional bare bones, no frills, off-price store of the day. I had a salesman who was a partner in an off-price jobbing company and every time I would see him, he would brag at how well he was doing in the “Off-Price” business. He kept encouraging me to get involved because I knew what I was doing and the money was so much better than the traditional way that I was retailing.

He then shared with me some of the numbers that these stores were doing. He told me that the average 3000 square foot store did between $600,000 to $750,000 in ITS FIRST YEAR. Then in the second year, it did over a million dollars. Now at that time my store was doing a little less than $900,000. And the business was 35 years old. So after a couple of years of listening to these stories, I decided to jump into this concept.

I did everything top shelf; a great location, an excellent manager, wonderful employees, a well respected buying office, and my friend, the salesman, to advise me. Well, the store started off strong and was profitable from day one.  I took a salary right from the beginning and had no problems at all. Except for one minor point that drove me crazy.

The first year we only did $400,000. Instead of being happy that I launched a successful and very profitable business I was depressed that we didn’t come close to $600,000 to $750,000. Of course my advisor made me feel even worse and he kept on telling me I was the only one with such weak first year results. So instead of celebrating, I started changing everything. The layout, the merchandise, the advertising, the people and eventually even the location. Dumb, Dumb, Dumb! I literally killed a good business.

Please learn from me and be careful whose advice you are taking. Get different opinions, different perspectives, and then do what makes sense to you. The reason why I LOVE The Retailers Advantage is because I get to interview so many interesting people who bring so many different ways of approaching retailing. Within the next few weeks, we will be interviewing Elly Valas from Denver who is the co-author of Guerilla Retailing. Elle served as the major technical advisor for The Second Edition of the Retail Business Kit for Dummies. We disagreed in so many ways and I am referring to our session as the great debate.

While I am sharing mistakes I have made that we can all learn from, here is another. What good is having the greatest product in the world if you don’t tell anybody it’s there? At The Retailers Advantage we did a terrible job of letting people know what was new and different. Again Dumb. If you add things to your store, pick-up a new line, when you announce an event or sale in the store, or even when you hire someone new, let your customer know in a vehicle that will reach them. It will make all the difference.

Let’s Talk About Visual Merchandising

 Email Article |  Twitter |  digg it |   delicious |   LinkedIn | 

One of the chapters of my Retail Business Kit for Dummies book is titled Visual Merchandising for the Artistically Deprived and the Financially Handicapped. That is also the title of a program I do. The title describes a big majority of retailers. Most of us (yes I’m including myself) understand the importance of visual merchandise but unfortunately don’t have an artistic flair and don’t want to spend a lot of money on props that have limited use or value.

This week I decided to dedicate this article to the basic rules of display that might help you better understand the mindsets and tricks of the trade.  We have been working on an entire program on Visual Merchandising for The Retailers Advantage Group consisting of some great interviews and webinars. So while my brain is focused on visual merchandising, let me share The Top 10 Rules to make you a better visual merchandiser.

1. Know what Displays are supposed to do.

a. They help define the business in the mind of the consumer

b. They create interest in the merchandise and  makes you want to buy

c. It is your silent salesperson

d. They create the foundation of the “Customer Experience”

2. Color is King

A display that is carefully coordinated with either the same or blending colors always performs better than the greatest prop of artistic flair in position of placement.

3. Customers don’t bend, they don’t stretch, and they don’t reach.

That means customers are not going to put their bodies into contortions to hold merchandise that is too difficult to get to. However, Rule #4 explains why we display in hard to reach places.

4. Where the eyes go, the feet will follow.

If the display is strong enough, the customer will subconsciously walk toward it.

5. Know your Hot Spots.

Hot Spots are places on your selling floor that always generate the greatest amount of sales. An average display in a Hot Spot will outperform a great display in an area that is just so so. Be aware of these areas.

6. It’s about the merchandise AND the benefit of the merchandise to the customer. It’s not about you.

Make sure the displays are at the customer’s eye level not yours.

7. Customers will generally enter a store and go the right.

That is just a natural tendency. If you want the shopper to go to the left, you must have a powerful display to pull them away.

8. The store should always look full!

I can hear the groans now. You are probably saying how can you look as full on January 15th as you did on December 1st? You can by taking racks off the selling floor. Open space is much better than racks that are half full. It’s all in the display fixtures you use.

9. Planned congestion is good.

People like to buy in stores that are busy. If you have large store, it’s hard to make it look busy all of the time. However, it can be done by focusing the traffic in to one area. We expanded our store from 4500 square feet to 10,000.  We could have 10 customers in the 4500 square foot store and we looked busy and were busy. But in the 10,000 square foot store,  it looked like we weren’t busy at all. The remedy was focusing the traffic. That meant putting the cash counter closer to the entrance and putting dressing rooms closer to the cash counter as well. It created a feeling that we were really busy, even though there were parts of the store that weren’t busy at all. It didn’t matter because the first impression and the last impression the customer got was that we were busy.

10. Change for the sake of change is good.

How many times can we ever say that? Rarely! But in the retail business it’s different. Customers want to see different merchandise and looks all of the time. Sometimes all we have to do is exchange the places of two displays. Move the display on the right side to the left side of the store and them move the display on the left to the right side. Then watch the customer’s reaction. ” Oh you got a lot of new things in.”  No you just moved two racks.

BONUS: Every store today needs a markdown section. Sales just don’t work like they once did. Place this section in a cold spot and it becomes a hot spot. Brand it and celebrate it.  One more thing, don’t use percentages like 24% off. Mark every item down individually. It makes a difference.

I hope this helps. It is just a beginning of ways to display and lay out your store to maximize every customer and customer experience. Have a great week.

How Much Merchandise Do You Need?

 Email Article |  Twitter |  digg it |   delicious |   LinkedIn | 

During economic times like these, we are forced to look at every expense we have to be able to find spots where we can save money without hurting sales. As we know, Inventory is not a true expense but rather an asset. However, we spend more money on merchandise for resale than any other area of our business. So the question that retailers have asked for years is how much inventory/merchandise do we need in order to make money? It is a relatively simple question and I have a very direct and simple answer. BUT before I share it, I want to discuss two issues that have always muddied up the waters.

First, is a system referred to as Open to Buy. It is a system that has been around for almost 100 years and it really doesn’t work. (It takes guts to poke shots at a retailing stable.)  Why?

First, it is based on the current inventory levels. If your inventory isn’t accurate, then the system doesn’t work. Rarely will you ever find a retailer who claims their inventory to be accurate within $500. As a matter of fact when I ask an audience in a live seminar if their inventory is accurate within $500, they chuckle or laugh. So right off the bat it’s doomed. Next in an Open To Buy System every markdown must be reported. Sounds good but it’s time consuming and never quite accurate. Next everything must be converted into retail dollars opening up even more opportunity for error.

Lastly, a true open to buy report contains no mention of operating expenses at all. So the system can recommend that you buy $50,000 of merchandise but you don’t have a penny to buy anything.

The other issue is about your Stock to Sales Ration of which I am a proponent. This is how it works. If you want to do $25,000 in sales for a given month, how much inventory (at retail) do you need? If you have a stock to sales ratio of 3 to 1 that means you have $75,000 in stock. If it were a 2 to 1 ratio then you would have an inventory of $50,000. That’s a pretty big savings. Plus customers tend to buy the newer things so having a 2 to 1 ratio keeps your inventory pretty clean. That also means that in theory you would run out of inventory every 2 months and you would be turning your inventory 6 times a year.  Your customers would love it because your inventory would always be fresh and exciting.

Unfortunately, many retailers have a stock to sales ratio of 6 to 1 which means it takes 6 months to get rid of all the merchandise. Not very fresh here.  The other factor is how high are the margins? I often talk about one store that does only $150,000 in sales volume but the owner drew a pay check of $1,000 a week and only visits the store 1 day a month. Why? Because she sells only jewelry from Mexico, buys direct from the craftsmen, and won’t buy anything that she can’t mark up 7 times. If she buys it for $10, she retails it at $69.95. The best part is she is not price gauging at all because there are layers  of distributors that all take their piece of the action. In many cases her price is actually even cheaper than other stores that carry the same product.

Now for the simple answer as to how much to buy. Fifteen years ago I developed a system that is so easy  to understand and use that I have received more compliments from retailers that have struggled for years for a path to profitability. It is so basic but just works. I  affectionately  call it  Open To Thrive  or The Inventory Control System . But neither name really captures the power of the concept. For openers I am not trying to convert anyone into an accountant but business owners need to know 4  numbers that can become their map or path to profitability.

Open to Thrive is based on a formula that I call the 40-55-5% Rule.

• What it says is that 40% of your sales should go or be budgeted for expenses. This is NOT inventory. It is heat, light, rent, packaging etc.
• 55% of your sales should be budgeted or spent on brand new merchandise.
• The 5% left over I call your Positive Cash Flow. We can’t really call it profits but it is what is left over. Now if you have a loan, the interest is considered an expense and is part of the 40% BUT the principle part of the loan comes from the 5%.

It takes about 45 minutes to plan out your entire year and maybe 10 minutes a day to maintain it. The first step is to estimate what your monthly sales would be and then you just apply the percentages. You plan it on a monthly basis but I like to look at on a quarterly basis. Monthly makes it too hard to give a true reading because we can’t always predict when merchandise is going to arrive.

Some industries alter the percentages such as jewelers that have higher expenses and spend less on inventory. So they use 42% for expenses and 53%  for merchandise. The actual numbers you use are secondary to you knowing your path to profitability.  Understand one simple concept: Retailers DON’T get into trouble when they are overbought. They get into trouble when they DON’T know they are overbought.

Here is your challenge. Go back over the last couple of years and see how your numbers fit. One word of caution: when you plug your numbers in, use the amount of purchases not your cost of goods sold. Cost of  Goods Sold will not give you the numbers you need. Trust me this system works 100%.  Let me know what you think and remember sales might be off but no one said your profits have to be down.

Members of The Retailers Advantage can access Open To Thrive Here.

Note: One of the products that I sell is called The Retail Control System: Open to Thrive (http://www.ricksegel.com/store/pc-books-OpenToThrive.htm). If you are interested in using the system to track your sales, you might find this helpful. More information about Open to Thrive is also available in the Retail Business Kit for Dummies.

I am Mad as Hell and This Retailer’s Behavior Disgusts Me!

 Email Article |  Twitter |  digg it |   delicious |   LinkedIn | 

I got suckered into a store over a very deceptive TV ad that ends up hurting every retailer. I am especially annoyed because I traveled 43 miles each way to go to this phony “make-believe sale.” A chain of men’s stores advertised that if you buy one suit or one blazer or a leather coat or jacket, you can get 2 other items of equal or less value for free. Now I have bought things in this store several times and was always pleased with their selection, their staff (very professional), and the value of the product. So it was worth the drive.

I got to the store at about 3:30 on Sunday and just from the look of the store you could tell they had been busy. I was sure I was going to do well there right after I tried on the first suit. It fit great and I loved the fabric. I didn’t focus too much on price because like I said, I had shopped there before and the price range for suits was between $200 and $450 but the $450 range was not the strong price point of the business. So I tried the suit without looking at the price. When I went to the dressing room to put the pants on, I was shocked to see the price of $995. Ya Right! This store never carried a suit for $995 in their life. Then I noticed that the price tag had been altered. There was a small piece of with tape covering the original price of $395. I couldn’t believe that any store could do that.

Then I started to look at the prices of the other suits. They did not carry any suit that was priced less than $595.  So then I started to look at sport coats. Navy blazers were all priced at $395 but someone messed up because they left the previous sale tag on some of the blazers. They were all originally priced at $159. So I asked what was going on and showed the difference in the tags. The sales associate then replied, “Since they are buying 3 sport jackets for the price of one, that means that the customer is paying approximately $133 per jacket or a savings of about $28. That’s pretty good in this economy.” HUH? Of course he had to add that, “Every retailer does that and the customers know it.” NO, they don’t!

Then it got worse. I went to look at shirts and spotted a great looking striped shirt. The price was $59.95. Although the price was inflated, 3 shirts for $60 wasn’t a bad buy so I picked out 2 more shirts from the same table and proceeded to the checkout counter. I gave the cashier the 3 shirts and she told me that I really should buy another one for the best savings. I didn’t get it. Then she showed me a sign that looked the same as the other signs but read, “Buy one, the second one is free.” Yet that was never mentioned on the TV ad or in any other advertising at all. So I told the cashier that I would only buy the 2 shirts.

I bought the two shirts and said to myself that $30 a shirt was still not that bad. They rang my credit card through and I was signing a credit card slip for $80. I just assumed that they marked up all of the shirts to $59.95 but my assumption was incorrect.  Some of the shirts were priced at $74.95, then with tax it became $80. Did I get ripped off? No, but I felt manipulated and deceived. I don’t care about every other store that does that. It is still wrong and it will catch up with them. At a time when consumer confidence is at an all time low, we don’t need retailers playing shady pricing games. It hurts the store and the industry.

You can fool some of the people some of the time but the ones you fool always seem to get back to you. Trust me, short cuts and deception never pay off in the long term. This store may have won a battle, but they are losing the war.

SPECIAL ANNOUNCEMENT: The Branding Dilemma

Two weeks ago I wrote an article about using your vendor’s brand names on your websites. I asked for feedback from you. Again your answers really surprised me. The ideas were so diverse that I wanted to delve a little deeper into the subject of Branding, Co-Branding, Private Branding, and the effects on your business. We will tackle the hard questions and uncover the Internet Branding Paradox.

We have a lot of surprises in store for you pertaining to the issue of branding. The theme for this project is called, “Branding… Whose store is it anyway”? Watch for it next Tuesday and I want to thank the hundreds of retailers who participated in this project. Your answers were my inspiration to tackle this important issue.

How Much for Me? and How Do I Get Ready for After Christmas?

 Email Article |  Twitter |  digg it |   delicious |   LinkedIn | 

Last week I finished this year’s live speaking schedule with one of my favorite groups and people at Mon Cheri Academy. This is a program sponsored by Mon Cheri Bridal and their brilliant CEO, Steve Lang. This man has made a commitment to his retailers by offering quality retail education.

Audio Versions of this Newsletter:

How Much For Me?

(Download MP3 for offline listening)

How Do I Get Ready for After Christmas?

(Download MP3 for offline listening)

There was one disturbing tendency brought out at this program that has been around for a long time, but suddenly I realized the problems associated with it. What I am talking about is when a customer tries to negotiate a better price. Yes, they will use every tactic, strategy, or ploy to get what they want. The problem is many of us get offended that a customer asks for a better deal.

Our mood or attitude often changes toward the customer just because they asked. We become insulted and our tone of voice becomes more argumentative. It is as if we are saying to ourselves “Oh, you are one of those”, although none of us would ever acknowledge that we are doing it. We are being polite and professional but rarely warm and fuzzy.

It is as if we are now discounting that customer because they asked for a better price. If you are not familiar with the term, Discounting People, it means that we treat the person with less than full value. We are all to blame for doing this one time or another and I certainly have done that more than one time.
Now let me shift gears completely and then tie it all together.

I went shopping the other day here in Orlando at a Nike Outlet. I had just ruined a pair of my favorite workout pants and wanted to pick up another pair. I noticed a sign announcing a weekend special event of an addition 20% off your purchases. Then when I went into the store and they had a flyer that told you about the deals they were having over the weekend. It was not a slick glossy piece but just a standard one page black and white on copy paper.

The flyer said that there would be an additional 20% off your entire purchase plus any already markdown item would receive an additional 20% off. Now I went to the racks and there were rack signs that said to take an additional 30% off on these previously markdown items. I am a little confused and can’t quite figure it all out. Let give you a real example to better understand the gravity of this situation. I picked up an item that originally sold for $59.99 but it was reduced to $39.99. Now I take the 30% off and it comes to $27.99. Then there is an additional 20% off because it was a markdown item, which now brings the item down to $22.39. Now the final storewide sale of 20% off all of your purchases, that brings this item down to $17.91.

So what does that story have to do customers asking for a better price? A couple of things. First, I heard one woman talking to the manager complaining that she couldn’t use her coupon for $10.00. I wanted to yell out “Lady give me a break!”  Then the person in front of me in line asked if he could get a better price because he was a senior citizen and a veteran.

The point is even at a store that was just about giving things away customers still asked. The other point is that because stores today are having these types of sales and events almost everywhere you go, they are training our customers to ask for a better deals all of the time. I went to 3 other stores over the weekend and every single store had similar promotions.

So if you shop 4 stores and each one of them is having these wild and crazy price offerings and then you go to the 5th store, wouldn’t you just naturally ask for a better deal? I would.

So what do you do?

First, accept the fact that people will ask.

Second, make your response light and non offensive. Laugh it off or say “wouldn’t that be nice if I could do that”. Or the classic “I wish I could.” But the best approach is to compliment the person on a great try and what a great negotiator they are”. Even though they didn’t get a thing. This is the new normal—it’s time to accept that.

So after all of that how do you prepare for the after Christmas onslaught?

Yes, the week after Christmas this year will be a killer week. Customers will be out in force with your coupons, gift cards, charge cards, and cash ready to spend. Here is a check list:

It takes little fish to catch big ones. Don’t do the storewide 20% sale. (Unless you are stuck with excess merchandise. You are giving money away that might not be nesccessary.) Make sure you have at least 3 strong door buster items. Call your vendors now and ask for any WOW deals that you can make a splash. Get a great deal and work close if you have to. The game is to bring them into the store. Planned congestion is good. Sale time is NOT neat. You are trying to create a buying frenzy Make the store look different. Put tables or bins in normal walk ways. Signs everywhere. Tell the customer what to look for through signage.

Your best advertising is to your own customer list. Don’t be afraid to call. Embrace and plan your coupons. I prefer coupons with a dollar amount rather than 20% off. Make sure all of your coupons have a tight expiration date–not longer than New Years day. Have one coupon good for New Years Day. Email these coupons, run a newspaper ad, mail them quickly, or call your customers and tell them there are coupons are waiting for them at the counter.

The last bit of advice is to remember that there is business out there to be had. Black Monday saw a 15% INCREASE in sales, and if you include from the start of Black Friday to the end of Black Monday, there was a 19% increase. There is business to be had. So go get it and when someone asks you for the best deal and the item is $50. Tell them it will be $75. They will look a little confused, then tell them that is the best deal for you. Then just laugh and smile. Half the people will never try this again.

Survey Feedback from last week’s Branding Issue: WOW—my readers did it again with so many responses to the Survey! I don’t have enough room left in this week’s newsletter, but I do want to give you an update and will talk more about it next week because of all of the additional comments I received.

Here’s the results:

25% of respondents believe that you should list as many brands as you can on your website and advertising
35% of respondents believe that you should never mention any vendor’s name on your website
40% of the respondents believe that you should have 2 websites

Have a great week!