Posted on Mon, Jan 26, 2009
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.
Posted on Sun, Jan 18, 2009
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.
Posted on Mon, Jan 05, 2009
Some ideas to think about
The vast majority of websites created for businesses don’t work! Well, maybe they work technically but they don’t pull their share the way a fixture, a sign, a display, or salespeople pull their weight in contributing to making the cash register ring. That’s why we hear business people refer to their websites as “It’s in progress”, “It’s being done”, or “It’s not finished yet”. Websites are never finished. There is no finish line when it comes to websites. Websites are constantly being updated, revised, and improved upon.
So how did all these businesses spend all sorts of money on something that is as useless as warm winter boots when you live in South Florida? This happened because businesses didn’t know what the web could do or not do for them. Things have changed, and we now have a variety of successful business models that work. The key word there is WORK. What type of work do you want your website to do?
Do you have to sell things from your website to be successful? No you don’t but why not sell something? Save that thought and I will address it in a minute. Let’s first describe some successful ecommerce models. Notice I went from website to ecommerce? That was done on purpose because there are many businesses that might not have the best website but they do have a very strong ecommerce presence.
Idea #1. Use email marketing, text messaging, and even blogging to keep in touch with your customers. After all business today is about building relationships with your customers. Out of site out of mind.
Idea #2. Alignment: Does your website look and feel like your business? It should. There is a new term called FSE, First Shop Elimination. It means that the first place people shop today is online. Customers do their homework. If your website looks bad, then you probably have no shot of having that customer walk through your front door. But if your site is good and your stores reinforces the look, image, and feel that your website delivered, the chance of that customer buying your products increases exponentially, even with high ticket items.
Idea #3 Interactive Tools. Do you have any fun or interesting tools such as the jeweler who has a tool to create your own ring? The website has a cool mix and match ring and stone tool that’s fun to play with.
Idea #4 Contact Information. This is so simple, yet so important. Make sure your contact information is on every page.
Idea #5. Be the Source, Position yourself as the Expert: This is the sweet spot in retailing today. There are margins here. We pay extra when we buy from a place we trust. We trust expertise. If you want some great models and ideas about creating expertise status, check out Amazon or Blue Nile. They are the source of information. Teach your customers, make them better consumers and watch what happens. As the quote of the week goes, “Know something about everything but know everything about something.”
Idea # 6 Selling from Your Website. No you don’t have to sell from a website but there are two simple alternatives. Stores have an impression that you have to put all of your products online. NO. Start with 2 or 3 items that the manufacturer/supplier can drop ship for you. That means you don’t even have to get involved with the packing and shipping. More vendors are jumping on the opportunity here because it’s a win/ win for everybody. There is another option and that is being part of an affiliate program.
There are over a million different affiliate programs today but if you are not aware of the potential of an affiliate program, let me explain. It started with Amazon. If you allow Amazon to go onto your site with books you select, (it can be as little as 4 or 5 books of benefit to your readers) and someone purchases a book, Amazon will send you a commission of at least 6 or 7%.
These are just a few ideas that can turn your website into a cash register ringing machine. Watch for more simple ideas over the next few months. Have a great week and Happy New Year!
