Important Retail Questions ~ And Answers!

Last week I asked for any situations that my readers would like to share with the group to discuss and although I received quite a few, there were three topics that I felt we all could learn from. First, thanks to all of those people who made a contribution and please keep sending them in. I will eventually get to all of them.

Now, let’s get started with the first issue. I am including these questions in the article, but the easiest way to answer them is to just click here and go to a survey page where the questions are listed and you can answer them right there. Next week’s newsletter will give you the breakdown of the answers that I have received.

1.  When should you markdown slow selling merchandise?
Here are your choices:

1. After two weeks on the selling floor
2. After one month of no activity
3. Wait as long as you can but make sure you take the necessary markdowns within the current season.
4. Depends on when the item is received. If it comes in at the beginning of a season, you do have extra time to sell it.
5. The second you realize it’s a DOG. If you have a piece of merchandise that arrives on a Monday and you show it to as many customers and employees as you possibly can and everyone HATES it (you can tell by their reaction), then reduce the price immediately and get rid of it as fast as you can.
6. Any other ideas? ___________________

Now the perfect follow-up question:

2.  How much should the first markdown be?

1. 10% off
2. 20% off
3. 25% off
4. A third off
5. Half price
6. Any other ideas?  ___________________

3. What do you do when one of your top line’s sales rep sells the line to a competing store?

1. Drop the line completely
2. Cut your order back significantly
3. Buy more and then discount the line deeply
4. Carry the line but look for a replacement for the line and slowly faze out of that line
5. Call the company’s Sales Manager and plead your case
6. Any other ideas? ___________________

The next series of questions are a very interesting way of using this forum. My reader asked the following question:

Average dollar per sq foot, Average dollar sale, and the percentage of returns to sales are numbers that are readily available for big box stores, but not for us independent retailers.  I would love a poll asking how many stores were up, flat or down this year, along as personal insight as to why.  While I am at it, I would also love to hear what independent stores are paying their part time help, their managers and themselves.  It would be best if these answers also reflected the stores gross sales,  i.e.,  stores generating $500k +  do this ….  Stores between 250K -499K etc.    Do more successful stores pay help more?

I think it is important and would love to see how we stack up  … Just a thought!
-  Lynne Freedman

The technology we use to take surveys is really the perfect tool to collect this type of data for everyone to see but offer complete anonymity. It also has a safety utility that can trigger when someone is trying to rig the results by entering too many times. Understand the results will not be a scientific report but it should give all of us some indication of how things really are.

I am going to separate the survey answers just as Lynne suggested by financial size. Please indicate on the survey the size of your store.

So here are the questions again which can be answered at www.RickSegel.com/Survey .

4. Average sales per square foot

1. Less than $100 per square foot
2. Between $101 and $150 per square foot
3. Between $151 and $200 per square foot
4. Between $201 and $350 per square foot
5. Above $351 per square foot

5. How was Christmas business?

1. Same as last year
2. Less than last year by less than 5%
3. Less than last year by more than 5% but less by 10%
4. More than last year by less than 5%
5. More than last year by more than 5% but less than 10%

6.What percentage of your sales were returned?

1. 5% or less
2. 6% to 10%
3. 11% to 20%
4. More than 20%

7. What is the average hourly wage you pay for a FULL TIME sales person?

1. $7.50 to $9.00
2. $9.01 to $10.50
3. $10.51 to  $12.00
4. $12.01 to $14.00
5. $14.01 to $16.50
6. Above $16.50

8. What is the average hourly wage you pay for a PART TIME sales person?

1. $7.50 to $9.00
2. $9.01 to $10.50
3. $10.51 to  $12.00
4. $12.01 to $14.00
5. $14.01 to $16.50
6. Above $16.50

9. Do you pay commissions?

1. No
2. 2-3%
3. 3-4%
4. 5-6%
5. 7-8%
6. 9-10%
7. more than 10%

10. Do you give cash bonuses for Christmas?

1. Yes
2. No

11. What do you pay for a store manager?

1. $20,000
2. $20,001 to $30,000
3. $30,001 to $40,000
4. $40,001 to $50,000

12. What do you pay yourself?

1. $20,000
2. $20,001 to $30,000
3. $30,001 to $40,000
4. $40,001 to $50,000
5. Above $50,001
6. Whatever is left over

Again, everything will be done anonymously. There will be no way to tell who is answering so therefore the results may NOT be scientifically accurate. However, they should be a pretty good benchmark of what is happening in the marketplace.
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If anyone would like to take this process to the next level where we form Benchmarking Groups of like-sized retailers from the same area of retailing (such as just gift stores, jewelry stores, men’s or women’s apparel or even garden shops), please let me know. The way it would work is the member stores (no direct competitors allowed) send their information to my office and we will create actual benchmarks for every expense. Again no other store would ever see your financial information but everyone will see the percentage ranges. You know what your percentages are, so you know if you are doing a good job or not.
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I can also expand it to where the members of the groups could meet either electronically or live once a year. This is the best way of learning and staying ahead BUT you must have at least 8 stores per group to make it work. If anyone is interested, just email me and we will see how much interest we receive. It could be eye opening. Let me know what you think.

Visual Merchandising for the Artistically Deprived and the Financially Handicapped

That is the title of the visual merchandising chapter from my book, The Retail Business Kit for Dummies. It is also the title of a seminar I did last week at The Los Angeles Gift Show.  I happen to be in the middle of updating and rewriting the Retail Business Kit for the new edition of the book that will be released this summer. It’s been 6 years since the first edition was released and it’s amazing how many things in the retail business have changed since then. Of course the obvious changes are related to technology, the internet, and methods of marketing and advertising. The one area where the core beliefs haven’t changed significantly is in the area of visual merchandising.

Although the core beliefs remain the same, the way retailers are interpreting their visual presentation are only limited by their imagination. However, there is one big overriding belief that wasn’t present in 2001 and that is the emphasis on creating positive shopping experiences. The days of “here are the goods, come in and buy them” are over. We now have the responsibility of putting the customer in a good mood and enticing them to buy by touching all of their senses.

We didn’t have sporting goods stores like Dick’s or rule breaking retailers such as the Apple Stores. There are even supermarket chains that have made their visual presentations on the same par as some Hollywood sets. I was in one such store where there were pictures of cows in the dairy department with the sounds of cows mooing in the background. That might have been a bit over the top but I never forgot it and I’ve shared it with many audiences.

I decided to write this week’s column about visual merchandising to share some of the old and new rules that are the core of great visual merchandising.

1. Color is King! Weak displays can be saved with a well coordinated use of color. An all red display looks inviting and works as opposed to a mish-mosh of colors. If you can’t match, contrast.
2. Customers don’t bend, stretch, or reach but that doesn’t mean their eyes aren’t looking both up and down. That is the perfect segue way to the next point.
3. What the eyes will see, the feet will follow.
4. Change for the sake of change is good. Change your displays often. Make your store an exciting place to be because there is always something different happening. Just rotating older merchandise can make it look new.
5. Have a store layout that encourages customers to be exposed to as much merchandise as possible. That’s why layouts that zigzag or circle work so well.
6. Most customers will enter a store and turn right. If you want them to turn to their left, you better make a path for them or create a strong display that will entice them to go left.
7. The store should always look full. It is better to have empty floor space than to have racks or shelves that are half full.
8. Realize the benefits of “planned congestion”. Sometimes we want to focus traffic in a certain area to create a buying frenzy. It would be great if the whole store were that busy but if you just direct traffic to one area, it can put customers in the mood to buy now. That’s why accessory items at the checkout counter become an impulse sale and a way to focus extra customers to that area.
9. Lighting and signage are the 2 most neglected areas in retailing. Great lighting can make your store and your merchandise come alive. It doesn’t cost that much and makes such a difference. As for signage, it allows the store to talk to the customer. (I have written a lot about signage and most of you know how passionate I am about it. So I won’t go into many details now.)
10. Lastly (although there are many more tips but I don’t want to make this article too long) is the creation of a Close Out or Markdown Section. One of the biggest problems in retailing today is moving slow sellers at sale times. Sales just don’t draw the way they once did because of the amount of discount options the sale customer has today. That’s why establishing a Markdown section helps to keep the slower sellers moving. This section should be celebrated with good signage and clever names. I like to use The Last Call Wall but Close Out Corner works just as well. Put these sections in the slowest part of the store. The bargain hunter will seek them out.

I hope this served as a great refresher course in some basic visual merchandising rules. I think next week is time for our first case study of the year. I do have a couple of topics that have been sent in but if you have an issue that you would like discussed, please send it along and we will pick one that is the most universal. Have a great week!

What’s the Most Important Decision You Could Make This Year?

What decision could you possibly make that could effect your business, your success, and your financial ability to do all the things you have ever wanted to do? It’s simple. It comes down to the people you hire. Great people make great businesses. Having said that, we can’t rule out the effects managers and supervisors have on turning average employees into superstars. Yet the greatest of coaches can only train and motivate so much—they have to have the right talent to succeed.

I know what you’re saying– “I can spot a great employee but I just don’t see enough of them to hire”. When was the last time you interviewed someone you thought was going to be great but turned out awful? I have on way too many occasions. On the other hand, we have all probably hired someone just because they were the only one who applied and this employee turned out staying with us for 20 very productive years. That has happened to me as well. I once hired 3 ninth grade girls as stock clerks and they stayed almost 10 year with me. They were bright and had a wonderful way of looking at the world. One became a journalist, another a doctor, and the third is a senior buyer for TJ Maxx. They inspired me and produced great work. However, if you asked me when I hired them how long I thought they would last, I would have told you, “Just till the end of the school year.”

We are in the middle of the National Football League playoffs and already Tom Brady, from The New England Patriots, has won just about every award a football player can earn. He is now being called the greatest quarterback who has ever played the game. He has also broken all of the existing quarterback records. So if he is so good, why did 32 professional scouts, general mangers, coaches, and owners not hire Tom Brady– not once but 6 times? They all had the opportunity. Tom Brady was a 6th round selection in the draft and the 199th  pick overall. Another interesting fact is that he replaced a quarterback who was the number 1 pick in the first round, Drew Bledsoe. Poor Drew ended up retiring early because no team wanted him.

Now for all those people who are saying, well for the money he makes he should be that good. There are 8 other players on the Patriots roster who make more money than Tom Brady and a few of them earn twice as much. He is not only great, but a bargain.

Well I can’t help the National Football League out but I do know a little bit about business and retailing.  The more I work for larger retailers, the more curious I have become about asking them what their hiring process is?  I have been getting similar responses and one thing keeps popping up. That is the use of assessments. Assessments have been around for a long time but rarely used by many independents. Today, using assessment tools has never been easier and there is also a much higher degree of accuracy than ever before. These tests are so sophisticated today that they even score the probability of errors and can determine when someone is answering questions the way they think you want the answer to be. They can tell when someone is trying to rig the test.

Let me explain the process a business goes through in order for assessments to work. First, they ask you, the retailer, what you want in an employee. What do you want them to do or not do? The assessment wants to find out what are the acceptable and preferred behaviors.

Second, they assess your current successful employees to determine what their characteristics are and then compare these characteristics to the desired ones, checking for alignment. Here’s a simple example: many retailers want to hire bubbly outgoing personalities to have customer contact. Yet many of the most successful customer service and sales people are NOT always bubbly or outgoing but rather very efficient task oriented people.

The third step is when the prospective employee takes the assessment. Does the applicant fit into any of the molds you have already established? Many times they don’t but that is not necessarily a reason not to hire them. Wouldn’t it be so much easier leading or coaching a person that you understand better? Some people learn from just reading something, some people need to be told what to do, while others need to do it hands on.

These assessments will actually suggest questions to ask perspective employees to find any areas of concern. The results will also suggest the best way to work with the employee if you end up hiring them and what would be the best job for them. In addition, these assessments will uncover hidden talents or skills you might not have known. They ask questions in the 6 Behavioral Characteristics that are critical to retailing: Trust, Tact, Empathy, Conformity, Focus, and Flexibility. Then they evaluate a person’s proficiencies in communication and produce the Job Match Percentage. That tells you how good a fit for the job they are. BUT you still must make the decision whether to hire or not.

You will know how they compared to yourself, your existing employees, and the rest of the retail or business world. An assessment company can only do that if they have been in business a long time and have the data from hundreds or thousands of other similar businesses and situations.

I am sharing all of this information because I am in the middle of writing the second edition of the Retail Business Kit for Dummies, updating all of the information in the book. Just as the internet has changed retailing so dramatically, so has the use of effective assessments. They are being used in the most positive of ways: to put the applicant in the right job, with the highest probability of success, and to know how to deal and manage that person after you hire them. I still think the most fascinating aspect is knowing the type of person who succeeds in your business.

I interviewed 6 different testing firms for the chapter but fell in love with one company that really had their act together. They understood retail, customer service and sales better than any other company I interviewed. The company is Profiles International and I am even creating a link from my website to theirs (which I have never done before) because I believe this is the future of hiring and managing people. It will be ready soon. So watch for the announcements.

Is Retailing More than Four Walls?

Isn’t it amazing when you say something that you think is harmless and someone takes it the wrong way? I had a few retailers take me to task, in a very nice manner, about last week’s article. I talked about how I did all of my Christmas shopping online this year. So I was challenged about why I would buy online when I make my living from working from brick and mortar stores. Shouldn’t I, the retailer’s retailer, at least shop in a store?

My response was: I did!

I can honestly say every purchase I made was from a brick and mortar store that allowed me to buy online. NO, I did not do business with any internet only businesses and I might add that over 75% of the merchants I did business with were independents.

So I want to thank the people who wrote to me because they are teaching us one of the most valuable lessons of them all. Retailing has changed more in the last few years than in other time in recorded history. That is because of the internet. I am able to buy my dress shirts from a men’s store in Virginia, my sport coats from a merchant in Connecticut, my casual apparel from a zany men’s and ladies shop in Louisiana.

We bought kids clothes from a shop in Indiana and my daughters got gifts from about 4 different stores; one was located in Portland, Oregon, another in San Diego and two were from New England. We even uncovered a great little toy store that has set up shop on Amazon but they are located outside of Chicago. My question to you is why am I not buying from YOU?  I wanted to do business with this wonderful gift shop outside of Buffalo that had their merchandise on line but the only way you could buy it was to go into the shop. I even tried to buy the merchandise over the phone with a credit card but they wouldn’t even accept that. They said they had had problems with that type of transaction in the past and I would have to come in. I tried to explain that it was 22 degrees in Buffalo and it was 82 degrees in Florida and the chances of me going there were slim to none. They still wouldn’t budge. I bought the same product elsewhere.Does your store have the ability to keep in touch and service your customers (that’s the same as selling)? If not, why not. You can create shops on EBay and Amazon and countless other places. It’s time to make it happen. There is a revolution taking place and it is being won by the little people. The giants are coming but right now it is very fertile soil.However, there was one thing I need to share because of one jewelry store owner who was among the three businesses that took me to task about my position. This year was one of those special birthdays that represent more than a number. You know those plateaus we all face. Considering my wife’s birthday and my birthday are just 30 days apart, we decided to celebrate this passage of life by purchasing each other better watches. So we bought a Rolex and a Breitling watch. No, I did NOT buy the watches online. I did look online for some ideas on styles but went to Longs Jewelers in Boston and made the purchase. Longs was the retailer of the year a couple years ago in the RAMAE  Awards (Retailers Association of Massachusetts Awards of Excellence) and I was so impressed with the company and its president that I felt secure about my purchase.

No, I didn’t ask for any discount and the president didn’t even know about my purchase until after the sale, if he even knows at all. Would I have purchased these watches online? NO! Absolutely not. Why?  It was just too big a purchase and I didn’t know enough about what I was buying to feel comfortable enough to buy online. What does that mean?  There are still some areas where we must go to the store. Those times are always about security, the size of the purchase, and expertise. Having said that, there are still thousands of people who wouldn’t hesitate buying the same watches online. I am just not one of themSo here is the bottom line.

• Is your store ecommerce savvy?
• Can your good customers do business with you online?
• How are you making your store so that people feel an obligation to shop with you?
• How do you make your customers feel more secure?
• How do you increase the level of expertise you provide?

I hope that I gave you something to think about and thanks again for the people who gave me something to think about.