Are You Lucky?

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“He has all the luck.” What a lucky guy.” or “As luck would have it.” These are just some of the expressions that we hear all of the time. In retailing, it’s terms like “She was lucky to get that location” or “They are always in the right place at the right time” or “She was lucky buying that line when she did–it got hot.” Then we hear the classic response, “You make your own luck.” What does that mean? How much of our own luck can we actually make? Some people say that playing poker is a game of luck but why is the same group of players always winning the tournaments?

The one comment I hear almost every time I go out to speak is, “Boy, are you lucky! You get to travel all over the world, meet interesting people, and get paid to do it.”  So I guess I am lucky.  But if that’s the case, I know a lot of people who are lucky and do what I do. Then we hear the cliché “They are living their dreams”. Maybe that’s the first clue about creating luck, having a dream to work toward.

Rule 1. Dream.  If you can dream it, you will conceive it, and that is half the way to making it all happen. Maybe it should be do what you want to do and luck will come your way. The first chapter of my Dummies book is all about following your dreams.

I was reading an article in Money magazine and there was a small piece about a person who did a study on lucky people. Being sensitive to the subject about myself and about other successful (lucky) business people, I did some of my own research. It seems that experts agree that 20 to 30% can only be explained as pure luck but there are explainable reasons for the remaining 70 to 80%.

I believe there are 3 other rules when it comes to luck:

Rule 2: Observant. Lucky people are more observant of the little things than other people. They will notice or pick up the smallest of details. Yet although they are not necessarily detail oriented, they are generally more aware of the little things that are going on around them.  They recall some of the stupidest facts that I wonder how it even got in their brains.   I asked some of my “lucky” friends about that phenomenon and they all agree. They can remember parts of conversations from 10 years ago. Things that can shape your thinking and your luck. It’s the ability to pick up on trends.

Recently a main street manager asked me if I remembered his downtown. I had spoken there 7 years ago. I have only worked in about 200+ downtowns since. I said, “Yes, your downtown has a night just for merchants to shop other stores and have a dinner at one store and desert in another.” How did I remember that? And then I described an advertising campaign for one of the merchants. I can even picture the TV spot. Lucky people make their own luck by having this natural ability of being highly observant.

In a recent interview with Bill Gates, the interviewer asked why he quit school and what made him so successful. His response was his belief in the importance of software. He quit school because it was so clear to him that everyone would see what he called “so obvious.” He was so observant he could see things that others didn’t. He admits that he was ahead of the curve and could have finished school. That is another common occurrence of “lucky people”. Many times they are a few years ahead of the curve because of that ability of being observant.

Rule 3.The next part about being lucky is being an opportunist. Maybe it can be described as even having an entrepreneurial mind. If you have the greatest idea in the world but don’t act on it, you will never be considered “lucky.” If you don’t play, you will never win.

Rule 4. The last and most powerful part of being considered lucky is just expecting good things will happen to you. The best selling book, The Secret, talks about the Law of Attraction. If you believe good things will happen to you, they will. Yesterday, I played golf with a very good golfer who would self-sabotage himself by telling himself the things he shouldn’t do as opposed to the things he should do. He would see a big sand trap on the right and say, “I don’t want to hit it to the right.” Guess what! It always went to the right. He had multiple opportunities of getting Eagles (2 shots below par) but he didn’t believe he could do it. There was one time he jokingly said, “I will chip this shot in from 30 feet away”.  And he did. However, that bragging type of attitude wasn’t him so he reverted back into his level of comfort.

So, yes, we can make our own luck but we just need the tools to make it happen. Dream, Observe, Be opportunistic, and Expect success. Then you will be considered lucky as well. But I think I am really preaching to the choir because if you are reading this article you probably doing many of these things already. You just didn’t know how important they are. You lucky people!

Don’t forget to send me your case studies for next week’s article.

A Moment of Magic or Is It a Moment of Misery?

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I was just about finished with this week’s column when I experienced 2 classic customer service experiences that I just had to share. A colleague of mine by the name of Shep Hyken wrote a book called Moments of Magic, where he separates customer service experiences into two categories: Moments of Magic and Moments of Misery. These experiences could only be defined that way.

My kids and grandchildren came to my house for the weekend, just to visit. We had planned all of the typical outdoor activities you would do on Cape Cod with a 2 and a 4 year old. But Mother Nature had other plans and it rained and rained. So we decided on having a family bowling tournament.

I went online to check out the hours of operation for the bowling alley or “family amusement center,” as it likes to be called. The center had a very acceptable website with all of the information I needed. It gave the opening and closing times and even offered a couple of coupons. One of the coupons was an early bird special for anyone who wanted to go bowling before 12 noon on Sunday. It was for $15 per lane which represented a savings of $6. That made sense so I printed the coupon and rushed my family along so that we would be there before noon.

We got to the bowling alleys at 11:15 only to find out that the place was closed. There was a sign that said open at 12:00 noon. OK, no big deal. We were planning on bowling and then going out to lunch, so we decided to reverse the activities and have an early lunch. That is exactly what we did. Our lunch experience was memorable but I’ll address that at another time.

We got back to the bowling alley at 12:30, checked in, and got our shoes. I asked about the coupon not so much that they would honor it but just to share my disappointment and maybe receive some type of consideration. They have a large game room where you have to buy special coins to play (ala Chucky Cheese). I was hoping the person who was taking care of us would give me some tokens that I could give to my grandchildren as a little something for the confusion.

Well, I apparently got the new counter person.  He was a bright college kid, and from the shape he was in and his thick Southern accent, he was probably a baseball player playing in the famous Cape league for the summer.  (Local businesses fight to offer these kids part-time summer jobs because they are generally hard workers and besides you never know when you will be employing the next major league superstar.) Anyway, his first reaction was perfect. He said, “I’m sorry that happened to you and I’m sure we will honor that coupon.” Great–that was a Moment of Magic. He said the right thing and made me feel important because I was smart enough to check out the website and print the coupon.

That Moment of Magic turned into a Moment of Misery when the clerk went over to ask the manager about the coupon. The manager replied, loud enough for me to hear, “That promotion ended two weeks ago”.  The manager then looked at me for a brief second and gave me a look which said—”What are you trying to pull off? You cheap so and so”. I didn’t argue and said something stupid like, “I just wanted to check”. Not wanting to make a scene, I just accepted the rude and degrading service.

I felt badly for the clerk who had to relay the policy because he knew it was wrong. I will make a prediction that the clerk will be changing jobs before the summer is over. Forget about what the manager’s attitude did to me–think about what it did to the employee. No one wants to work for a jerk.

Will I stop going to this bowling alley? NO. They don’t have any other convenient competition. Will I be happy about going? NO. But I will look for other alternatives.

Here are the lessons:

1. If you are going to publish a coupon, honor it. Regardless of circumstances.
2. If you are going to change your policy, then change the website. That is the act of the amateur.
3. Think about the effects your actions will have on your employees. It is easier to attract good customers than it is to keep good employees.
4. Just because a customer asks for a discount doesn’t make them a bad person. Respect them, compliment them for trying, but don’t treat them as second class citizens.
5. It takes little fish to catch big ones. I didn’t need the discount to satisfy my request. As I mentioned, a few game coins would have gone a long way and cost him nothing. But even a simple, “I wish we could . . . ” would have calmed me down nicely.

This whole scenario could have been avoided with just an ounce of common sense. Walk in their shoes and you will see what they see. This manager has been renting shoes too long and needs to rent a pair for himself.

The Response – What Would You Do?

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WOW! Last week’s tip will change my life. Bet you didn’t expect that. I didn’t expect that either but it definitely will. For those readers who DID NOT read last week’s column, I suggest you stop reading this newsletter and go to my blog at www.ricksegel.com/blog and read it now. Otherwise this piece will not have as much meaning for you.

Now that we are all on the same page, let me explain why this experiment will change my life. I have never had so many responses to an article that I had ever written, including the Imus controversy. That on the surface is astounding but what makes it even more amazing is that my email service experienced a snafu this week and 30% of my readers didn’t even receive the article. (That has since been corrected—I hope!) Because of that I will be making the case study format a once a month occurrence.  If you have issues with universal appeal that you would like to have discussed, send them along and on the day closest to the 15^th of the month, we will do a case study. It changes my life because of the new process I must follow to make this work. It took time to compile everything but it was well worth it. Thanks for a great idea.

Let me first give you the raw data from the survey. Then I will highlight some of the comments, and lastly I will share my opinion. The following were the solutions offered:

I still can’t believe that not one person voted to move to the expensive center. That shocks me! It is important to understand the quality of the people who responded to this survey. They are mostly very successful retailers from around the world. (We did get responses from Australia, New Zealand, South Africa, and Turkey.) There were a number of educators and college professors who responded as well and even a few shopping center management people. So when something is so universal, you must take heed.

The facts are being first in a new shopping area exposes you to more risks than an independent should expose themselves to. The costs are always greater when you are the first to occupy the space. You are never really sure what other tenants are coming to the location or when they will actually open despite what the developer promises. As one mall manager wrote, “I have seen businesses lose their shirt waiting for the majors to open. Wait and if you do decide to go to the new center, be one of the last businesses to arrive. But I wouldn’t recommend any independent to go that route.” (name withheld on request)

What was equally as surprising was that 59% said not to move at all. That is the number when you total A & B together. From my perspective, developing some type of ecommerce is a requirement for every retailer today. It’s just getting too important. As Tracey from Everybody LTD, a soap and lotion store that has been in business since 1971 said, “I love my store and my customers but I make more money online without the overhead.”  Having addressed the ecommerce issue, let me share some rather compelling comments.

From The Queen Eileen, one of the top gift basket stores in America, located in Encinitas, CA. simply says, “Don’t do it!” From Fond du Lac, Wisconsin, Laura Parr, wrote, “Tell him to count his blessings and try to buy the building.” Trying to buy the building was mentioned a few times and is an excellent idea.

Daniel McNulty from Delaware wrote, “Will the loss of the quaint old store into a new modern facility help or hurt?” But the best comment of all was from a Texas retailer I worked with after she moved her small, very successful store into a larger location. Shawna Phoenix-Mathis from Simply Divas wanted to expand into a shopping center. After spending baskets of money she really never did any more business. After a long and frustrating battle she finally broke her lease and moved back to a smaller location with reasonable rents. She is doing business again, keeping more of the money that is coming in. Shawna went from Hell and back because she thought that bigger and newer was always better. She summed it up this way, “Stay put, stay put, stay put.”

All of the people who suggested moving into the older section of the life style center were in agreement with one idea. Negotiate everything. One men’s store in a shopping center was told by his landlord that his rent would double when he renewed his lease. Then he was told if he didn’t like it, he would have to leave in 30 days.  After the negotiating process was over, he had a moderate increase but the landlord made some necessary improvements to the property. But the issue is will you actually do more or less business in the shopping center?

More people felt that another less expensive location would be better. As one Australian merchant commented, “If he is a destination business, then why spend extra money for traffic you might not need?” And another retailer reminded me of words I had shared with her a few years ago. “When you move, it’s like starting a new business over again. Do you really want to do that?”

This was my response:

It sounds like you really want to move into the hot new location but you want an objective expert to tell you it’s a good move. The truth of the matter is that it might be a brilliant move but my feelings are the risks are simply too great. You could be killing a great business. You might just be upsetting the shopping patterns of your customers who might never shop your store again.

Ask yourself how much will the move cost, just the move? Then add another 30% for all the expenses you can’t imagine. Then ask what will the increase in inventory be and how much more time are you going to have to spend to make this work? Then how much more advertising will you have to do just to let people know that you have moved?

Those three items are paid out of profits, not current sales. If you are like most retailers and your net is about 5% of your total sales, then that’s how much you can afford to spend. At $800,000 in sales, you can only spend $40,000 for all of your loans and increased capital improvements (those moving expenses are NOT everyday operating expenses.)

Now the good side. How much more business will you do? There are a couple of things you said that are concerning me. You said you are behind the curve in web presence and ecommerce which means if you make this move your ecommerce initiatives will suffer. They will suffer because you will be focusing all of your time on moving the store. Closing and opening a new store is exceptionally time consuming. If ecommerce has taken a back seat when you are in an established location, what’s going to happen during a period of change? Sorry, it gets the back burner. That’s not good. Not in this day and age.

Sure, you will do more business but will you make more money? I don’t think so. All that glitters is NOT gold.

What do your customers think about the move? Did you ask them? Make sure you survey them and have 4 or 5 focus groups to ask their opinions.  (Carole Riley from Australia made a similar comment)

Two last comments. Last year I was one of the judges for the Coolest Jewelry Stores in America for In Store Magazine, the largest jewelry publication in North America. Out of the top 50 stores we had to select from, only 3 or 4 were in shopping centers. Most were free standing businesses or downtown.  Understand what I call the Big Box Concept. Big Box businesses have taught us that the two most important elements in selecting a location are Convenience and Visibility.  Make your outside sign as your best advertising vehicle. That can only happen if customers can see it from the street. Make it easy for the customer to get to you.

I understand you are in location with parking issues but any good shopping area always has parking issues. Show me an area with congestion and I will show you an area where retailers are doing business.

My opinion is simple and blunt. You are not ready for a primetime location. The risks outweigh the rewards. It could end up killing the goose that laid the golden egg. Ask your customers’ opinions, try to buy the building, be prepared to negotiate hard on your lease, and look at other freestanding locations that have great visibility. Remember you are a specialty store. Be special and stand out from the crowd. I have visited more great businesses in secondary locations and have seen why many great retailers fail in top locations. Has anyone ever seen a major mall that didn’t have turnover of stores? They all turn over businesses and the businesses they are turning over are not all independents. They are from multiple store chains that have some pretty sharp people picking locations.

Of course I am a bit prejudiced here because I built my business in a blighted downtown. My store was 10,000 square feet and it did just over $2 million of business. We were a destination as well. I thought it was cool being the big fish in the small pond. The lower rent allowed me to advertise more and create celebrity status.

One last word of caution. Don’t let gross sales figures impress you. As the old stock brokerage commercial would say. “It’s not what you make, it’s what you keep.” I have seen stores that are debt free, paying their bills on time , and extremely profitable at $500,000 while others are struggling at $2 million. You are in business to make money, not lose it.

I want to thank the hundreds of people who responded. I wish I could have mentioned all of your names but maybe next time. We will be doing this again on June 15^th so if you have a good idea or an interesting problem, send it along and hopefully we can all work on it together.

I hoped that helped and thanks for giving me an interesting case and an idea that will change my life and the way I approach this column.

A Case Study – What Would You Do?

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This week’s column is going to take a different form than my norm. Instead of my normal rant, I decided to share an email I received from a regular reader from Canada. He was asking my advice on a business decision he had to make. The decision was about moving and expanding his store. I felt that this scenario had enough universal appeal that everyone might find it interesting.

A few ground rules: I will not reveal the reader’s identity or his industry. I can assure you that the type of retailing he does is something that we all can relate to. For writing purposes I am just going to refer to this retailer as The ABC Shop and the owner’s name is Bobby.

Here are the specifics:

The ABC Shop is a moderate to better priced specialty business. It is15 years old and has a customer data base of 7000 customers/clients. The store is 2000 square feet and is doing $800,000 or $400 per square foot annually. The store is located in an old shopping district in a 100 year old building. The building certainly has charm but also has the problems that many older buildings face. In other words, the building has never been truly upgraded or modernized. The biggest obstacle in the building is a basement that only has a dirt floor and an occasional visiting rodent. The layout is challenging but they make it work. Parking is difficult and is a source of many customer complaints. The rent is $3,600 per month or $43,200 per year.

That means that the rent is $21.60 per square foot and that represents 5% of total sales. The only advertising ABC does is in the Yellow Pages and they are very pleased with it. They have NO web presence whatsoever but they are working on it. (I have heard that one a thousand times.) Due to the growth in the area, ABC is expecting a sizable rent increase to $35 per square foot or rent of $70,000. The landlord is not planning on doing anything to the building, which obviously is a bone of contention for Bobby.

That would mean that if sales were to stay constant, the percentage of rent to sales would jump to 8%. However, in the last two years, the store has experienced 15% increases per year and last month’s sales were up 45%. They consider their store a true destination business.

Although they are making money, they really aren’t very proud of their location. So they decided to look around at other possible locations. There is a lifestyle center that has residential space, offices, and retail not too far away which is the happening place. The rents there start at $45 per square foot but they are planning a major expansion tripling the size of the facility to over 3 million square feet of retail space. The new section’s rents will start at $55 per square foot.

Let me give you a little hint here. When a developer says rent that does not mean that rent will be the total cost to occupy the location. They add on Common Area and Maintenance charges, taxes, insurance costs, and anything else they can get away with. That’s why it is advantageous to use the term “occupancy cost” as opposed to rent. Also, in a new development, the store owner is responsible for the “build out” or all the costs involved in finishing the space. In brand new space it can include walls, ceilings, and floors as well as the normal store fixturing — which just means that it could be pricey.

The new section has NOT confirmed any of the tenants yet but promises they are a mix of big and small and all names you have heard of.

What should this retailer do?  Their lease is up in a year and the new section is scheduled to be open in a year. I have already responded but I am going to wait to next week to share my thoughts. Write in with your ideas and I will share them with everyone.  But if you would like to vote on a strategy, just email me back the letter that corresponds to your thoughts:

1. Stay where you are. You got a good thing going.
2. Stay where you are and develop your ecommerce business
3. Move to the brand new lifestyle center that is in the process of being built.
4. Move to the older section of the lifestyle center.
5. Look for another location where the rents are less money and where it would be easier for your customers to shop.
6. Open a second location anywhere you want.
7. Any other not mentioned alternatives.

I look forward to your response. By the way, the store owner is aware of what I am doing. I don’t know to what extent this exercise is going to work. But if it does, it could be a wonderful ongoing free service for anyone who needs it and besides it could be fun for the rest of us.

Think Small – It’s Still the Basics

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Two weeks ago I received two very interesting emails from readers that I had planned to write about until Imus stole the spotlight. On the surface they seemed unrelated and almost a bit contradictory, but the more I thought about them, I realized how powerfully connected they really were. Let’s see if you agree with me.

The first one was from a store owner, Hillary Moulliet, who shared a rather unusual experience shopping experience at a big box retailer. I am going to withhold the name of the store, but trust me, you have all heard of this publicly traded company, even if you live outside the US borders.

Hillary wanted to stop at this store early because they were having a storewide 30% off from 8:00AM to 1:00PM only. She got to the store before 8 but she saw someone else walk in the store so she figured she would walk in as well. When she got into the store she realized that there was a store meeting taking place. The manager was giving the employees a real sales pep talk. He went over the sales numbers, the goals, the competition, and even expressed how important each and every sale was. Then he said something that upset her a little. He said, “If a customer comes in after 1:00 and wants the 30% off, give it to them. Don’t hassle them.” Actually, that is the right thing to say and do, but when you get up early to go to a sale, you don’t want to hear that.

There were about 15 employees and the manager at the meeting.  It sounded almost like a general talking to the troops or a football coach getting the team ready for the big game. As Hillary described it, “There were no warm fuzzies there.” But what happened next was what blew her mind. The meeting ended and all 15 employees and the manager, who had just given the motivational pep rally, walked  by her without a hello, a can I help you, or even directions to what she was looking for. She was the customer and that is what the meeting was all about. How did it get lost in the transition from the meeting to practical application?  Then Hillary wrote these words:

“Big retailers are not doing it. Big retail managers are not conveying the massive bottom-line importance of it. As a small business owner, you must make conversation and availability a priority. Train your staff (continually) on how to approach customers and work with them. Small business has got big business beat at his one, but it just needs to be done well and consistently.”

Well put Hillary! And to add my two cents–if you want to get big, you must first learn to master small. Big or small, it all comes down to one customer at a time.

Now to further prove how right-on Hillary’s comments were, let me share the story of world’s greatest retailer. My closest friend, Larry Lyons, sent me an article about the world’s greatest retailer, the retailer that does more business per foot than any other chain in the world. Go ahead, try to guess. You will never imagine.  Best Buy does $930 per square foot annually, Tiffany’s was the leader of the list with $2,666 but this retailer blows away all of the competition with a whopping  $4032 per square foot  and their average store sees over 14,000 customers a week.

The company I am talking about is Apple. They have 172 stores and they now do over one billion dollars per quarter just in their stores. Not bad for a high tech company run by geeks. Why did this happen? Why did Apple decide to open retail stores? For the exact reasons that Hillary observed. They believe that big box retailers did a terrible job of training their employees, let alone their customers on how to use their product. Steve Jobs, said “I started to get scared. If I had to depend on today’s mass merchant to sell our merchandise we are screwed.”

They simplified retailing. They trained their employees not only about their products but also how the customer could use them. They created a Genius Bar that serves advice and answers questions. They designed the store by customer interests not just products. Then they, wherever possible, built WOW stores. Their 5^th Avenue store is a huge glass cube that attracts over 50,000 shoppers a week.

You are probably saying that they have a hot product. Yes, they do but they also have plenty of competition that they have somehow outdistanced.  Go to Best Buy or Circuit City to see how many different styles and brands of digital players compete with the IPod. There are plenty. Somehow the IPod is the recognized leader and outsells all of the other devices that are even cheaper. Maybe it started with one customer who sat at the Genius Bar who told another or maybe it was because Apple made it simple to understand and didn’t confuse or distract the customer. They have eliminated clutter in a retail store.

Apple succeeded because just like Hillary, they knew there had to be a better way and didn’t accept that just because you are big you are right. So now Steve Jobs is not only right but very, very big. But as big as he gets, he takes with him that independent feeling and always puts the customer first. Maybe thinking small can make you big.  To think,  Steve Jobs only gets a salary of $1.00 a year and I am sure Hillary does much better than that. Of course his stock options are reported to be pretty good.

Have a great week.