Summer 2009

A New Economy, A New Shopper: A New Set of Gift Shop Retailing Rules By Naomi Grossman

As a gift shop retailer, you are no stranger to the vagaries of the economy and their impact on your customers’ shopping habits. Experts believe that this recession has all the hallmarks of an economic shift that might need a recalibration of the ways in which you conduct business.

But with change comes great opportunity—if you are prepared. This requires understanding how to adjust to shoppers’ revised outlooks. It will require more attention to your price points, a deeper connection with your customers, a new look at your store’s design and new marketing efforts.

These efforts will pay off in a big way. Your store will be a leaner, more effective and more efficiently run business that will not only weather the current economic downturn but will also emerge with the potential for success.

What’s changed

The first change in how customers are shopping now is the most obvious: They are spending less money. “Consumers will spend $10 or $15 instead of $100,” says George Whalin, president and CEO of Retail Management Consultants, a consulting firm based in Carlsbad, CA. Paco Underhill, founder, CEO and president of retail consulting firm of New York-based Envirosell and author of one of the seminal books on retail, Why We Buy: The Science of Shopping, notes that everyone is holding their wallets more closely.

Conspicuous consumption is now in bad taste. “It’s become almost cool to save,” says Shilpa Bharne Rosenberry, a senior consultant at New York-based market research firm, WSL Strategic Retail. “It’s become distasteful to over-consume.”

Whalin says that shoppers are also “trading down” to less expensive items. Customers, he says, who have in the past looked for gifts and other items in upscale stores such as Neiman Marcus or Tiffany’s are either choosing to shop at a lower priced store, buying lower priced merchandise at the upscale store, looking for a bargain online or simply not making the purchase at all.    

The third big change in shopping trends is the decrease in impulse buying. “There is less impulse buying today than any other time in recent history,” says Whalin. In the past, he adds, a shopper may have gone into a store for a gift, saw something she liked for herself and purchased two or more additional items. That is happening far less often today resulting in fewer sales for retailers.

“The big culture shift is underway. The longer shoppers learn to say ‘No’ the easier it is, and the longer it will take to return to the consumption of the early years of the millennium,” says Wendy Liebman, CEO of WSL Strategic Retail in a release.

Despite these shifts, Rosenberry adds that smart retailers can find new ways to encourage shoppers to open their wallets and new markets in which to leverage their business.

Winning the shopping war

Gift shops might have a fight on their hands but there is no reason they can’t prevail. The upcoming holiday season presents the perfect opportunity for you to adapt to the new shopping realities, retool your sales and marketing strategies and convince both new and returning customers to spend. Here are five points to keep in mind:

Price points matter. So your customers are spending less. But as a gift store retailer, you have never competed on price—nor can you afford to. What’s a good compromise? Emphasize little treats—lower-priced gift options so shoppers can trade down and not walk out, Rosenberry says. Yes, your customers are spending less but they are still spending something, especially if it’s a gift. It is also important to emphasize value. Studies show that your customers might be willing to spend a little extra if they perceive the item as something that has value or will last longer than the cheaper-priced equivalent. “Obviously price is key in this economy but retailers need to understand that there is a whole new set of values,” Rosenberry says.

Connect with customers—both new and old. Be more sensitive than ever to the market you are serving. For instance, if your store is in a Spanish-speaking neighborhood, Underhill recommends stocking up on Spanish language magazines. “The degree to which retailers connect with their customers can make all the difference,” says Underhill. This also means that gift store owners need to recognize that their employees are a critical part of what Underhill terms their “selling engine” and they need to get their employees physically out on the floor “hip to hip” with their customers. Every customer and every potential sale matters these days. Kathy Grannis, spokesperson for the National Retail Federation notes that an emotional connection with the shopper could often tip the balance. She recommends loyalty promotions in which select shoppers get an invitation for a special sale or an email campaign with discounts for returning customers.

Change your store’s design—and get your customers to buy. A gift store’s design is what Underhill terms “in-store marketing.” It is what could make all the difference in persuading precious customers to open their wallets—especially now. Underhill recommends that a store’s layout be reconfigured to ensure that employees can get out from behind the counter and on the floor quickly to connect with or help customers. Signage should not be immediately in the front where shoppers are less likely to notice them. Signs should also not be too long—no more than a 15-second read—but they can be educational, which frequently can get customers to justify paying a bit more, a crucial difference. Grannis likes discounted items in the front of the store, and she likes similarly priced items grouped together so that customers can quickly make their price decision. She recommends having a few pieces of value upfront as well so customers don’t feel like retailers are only throwing the cheaper items at them. Whalin has another piece of advice for retailers: Use store design to truly differentiate your place of business, something that is more essential than ever as retailing becomes increasingly competitive. He likes wild colors, lots of props and things your customers wouldn’t expect to see. “Get people to go wow!” he says.

Reconsider your merchandise. The bane of a gift shop retailer’s existence is maintaining inventory wisely and in this economy that has become even more crucial. “In this environment with declining sales, a gift store cannot stock the same breath of merchandise,” says Whalin. “It’s not economically possible.” Whalin recommends stores run with 20 percent less inventory by more effectively choosing what to buy. “We recommend retailers spend more time with customers in the store finding out what customers like,” he says. “Customers will tell you what you want to know if you just ask them.” When purchasing, keep in mind what type of items shoppers are more likely to buy now. Rosenberry notes that the new Do-It-Yourself economy means there is more of an interest in gourmet cooking ingredients and hair and nail products. Similarly, more home-based activities mean that shoppers are more interested in things like picnic baskets, board games and crafts. Grannis likes the idea of gift baskets, which incorporate many gifts into one package and make customers feel like there is more value there.

Give customers a reason to come into your store. Buying something is what you want your customer to do in your store but in this economy you need to give shoppers another reason to cross the threshold. Whalin likes special events such as a signing by a local artist or a holiday party that will interest customers. One of his clients has an annual Millard Fillmore birthday event where milk is five cents. “It’s innovative and it grabs people’s attention,” he says. Needless to say, Whalin tells retailers not to follow their instincts and curtail their marketing efforts. “That’s the one place you don’t want to cut back on,” he says. Retailers also need to pay attention to the new “values mindset,” notes Rosenberry. A WSL survey indicated that 35 percent of women shoppers chose stores and brands that sponsor causes they support. Gift shops can sponsor programs with their local community and shoppers will be even more inclined to support the business, she adds. “Value is not just in price but in doing good,” she says.

With a little ingenuity and some work, a bad economy can be overcome and a gift shop can be transformed into a feasible, fun and even profitable enterprise.

Naomi Grossman

Naomi Grossman runs her own writing and Web content consulting firm. She can be reached at naomigrossman@hotmail.com.