Randy H. Eller
Eller Enterprises, LLC
Dynamic Experiences Group, LLC
Q: I have heard that many consumers are clamping down and only buying essentials. I don’t stock many “essentials.” What should I do? Should I be changing my inventory mix now? To what?
Bob Negen of WhizBang! Training
Co-author of Marketing Your Retail Store in the Internet Age
As an independent gift shop retailer, your essentials are your best sellers and they are the reason shoppers come to your store. Do not run out of your best sellers. People know that if they go into seven different stores, they are going to see the same things. Have a strategic plan for what you are going to sell. One thing that ties into this is assortment planning; the process of looking at historical information and what you and the experts believe are the trends.
Doug Fleener of Dynamic Experiences Group LLC
Author, The Profitable Retailer: 56 Surprisingly Simple and Effective Lessons to Boost Your Sales and Profits
We see retailers right now who are successful in today’s economy and one of their key traits is their ability to adapt to what’s taking place in the market. They adapt to their customers changing around them, and are not necessarily adapting to the industry. I recently talked to a gift shop owner whose sales are up 26% year to date. She told me that one of the big changes she has seen is that her gift sales are down, but the number of customers buying things for themselves, is up. So, she has adapted her inventory to what’s selling and who’s buying. People want to buy little things for themselves because they can’t afford a big purchase. They can buy “essentials” at CVS or Target, but they’ll come to a gift store to treat themselves.
Randy H. Eller of Eller Enterprises, LLC
Two things that sell well in this type of an environment are products that make people laugh and products that have a spiritual feel to them. When people are anxious about what’s going on in the world, many of them will turn to spirituality to help give them the strength to get through it. And, the best way to get people to take their mind off troubles and open up their pocketbooks, is to make them laugh. Sell more humorous cards, T-shirts, gift items—anything you can, to make people smile or laugh out loud. This is also a great time to carry products that have things to do with children, grandchildren, or pets.
Q. Where should I cut spending back? Where should it be the same?
Be wise with your payroll. Don’t hurt yourself by not having enough people on the floor. If you can train your people to sell more effectively, payroll is an investment. You may have to have staggered or shorter shifts, but make sure that everybody who comes into the store is getting help.
Regardless of the economy, you should look at all of your expenses once a year. Look at your shipping costs, the price you pay for bags, your Internet service, etc. Save money in places that do not impact the customer experience.
I don’t think the important thing is to cut spending as much as it is to reevaluate it. You should not be spending less on inventory as a whole, but you can spread it out among many different products. Look for vendors that have low minimums per sku; vendors that will let you buy just a few pieces of items instead of having to buy a case pack. For example, if a minimum order for a vendor is $500 you would be better off buying 2 or 3 each of 50 different products than you would be to buy a case each of 12 products because this will help keep your store a lot fresher if you have 50 new items in your store for $500 vs. 12 new items for $500.
Q. I am not attracting enough traffic to my store. What can I do to get more people to visit my store and more often?
Some gift shop owners engage in what I call hope marketing; they open their doors every morning and hope that people come in. They hope that the economy is doing alright and they hope that customers find them. Hope is not a marketing strategy. Instead, make a list of your top 30 customers and call them on the telephone and tell them what you have coming in. Also, reactivate your old customers. Look at who was a good customer but is no longer coming in and call them. They will appreciate that you noticed that you haven’t seen them in a while. Or send them a note with a gift certificate. An e-mail would work also, but a personal phone call or card works best.
If there’s one message that I drive home it’s that you need to have a customer database and you have to use it. One of the mistakes I see retail store owners do is to not segment their mailing lists. They’ll say that they don’t advertise because they can’t afford to mail a flyer to the 3,000 customers in their database. This is where a point of sale system can be very helpful. For example, if you sell pottery, go into your database and find out who bought pottery from your store in the past three years. Plan an event around an artist who you will bring into the store and for this particular event, you [need] send out only a few hundred advertisements.
We’re living in uncertain times and people want to know that local businesses are supporting the community. If you show this through events and charitable functions, I believe that the traffic will come. This could be as simple as helping the local high school band raise money for a trip by donating 10% of your sales during a certain week as your contribution. Or get together with the other stores in your shopping center and hire a band to play in the parking lot for a few hours. Promote a certain product line and have a trunk show. Sales representatives are wonderful at these events because anything they can do to help the sales of their products in your store will result in more commission.
Q: Should I hold more frequent sales? Higher markdowns?
No. Manage your inventory correctly by putting things on sale when you realize that they aren’t moving. You store is not a museum so you should always have a clearance table. When they are sold, you will have the cash available to buy merchandise that will sell. As far as having more sales, don’t have more than two or three a year. If you have too many, you will train your customers to wait until you have a sale.
Be cautious because there is a difference between being a specialty retailer and being a discounter. You can’t be a discounter today then all of a sudden go back to being a specialty retailer. But you can be faster with your markdowns when merchandise isn’t selling quickly. Sometimes you just have to cut your loss and move things out faster so that you can constantly reinvest. But, I heard about a health food store that had a sale that was a great idea. It was an early bird special and customers had to show up in their pajamas to be let in the store. One woman was on her way and she had on a black negligee and had to stop and get gas. If you did something like that, you might get some free press out of it.
The answer is no, with the exception of merchandise that needs to be closed out. Independent gift retailers need to understand that the price war is over between them and WalMart, Target, Kohl’s, and other big retailers. The reason why people come to independent retailers is because they expect and want to see something different. I believe that as they are walking to the store, they already know that they are going to pay more. It’s not about price that brings them to your store. They are looking for a better shopping experience or for different products. The value that an independent gift shop should be giving to its customers is great service, fresher merchandise, and more knowledge of the community that you are in.
Q: I would like to stay in this for the long run. But what resources do I turn to if I can’t make any profits at all in the first two quarters of ’09?
People usually think that they just need money, but I don’t believe that that’s the case. What they need to know is where to find the information that is going to help them. The answer is not to buy more advertising, it’s finding innovative ways to drive traffic, get repeat customers, and increase your average sale. One of the most powerful ways to make this is for you and all of your employees to be expert sales people. Get out on the floor and talk to people.
You can get a lot of good ideas from other storeowners. Gift stores that are far away aren’t big competitors, so arrange a conference call with a few other storeowners and share ideas. You can also get acquainted with other storeowners over the Internet. One idea is to take your main line—let’s say it’s Vera Bradley, for example—and find others that sell her line and share your best practices. Another resource is your vendors; ask them who is successful selling their products
As a prudent businessperson, no matter what size business you have, you should already be working on your Plan B and your Plan C as if you are expecting a tough time in ’09. In other words, don’t wait until the business is already in a little trouble before you start thinking about back-up sources of capital or support. Go ahead and run your budgets for 2009—run two budgets—one to reflect what you would like to do next year and a second one with your worst-case scenario. If you do that second budget, you will pretty much identify how much of a problem you may have. Go ahead and prepare for that worst-case scenario, but not by actually borrowing more money or taking on more bank debt. Talk to your bank and perhaps other bankers in the area and let them know that you are not there because you are in trouble, but because you want to learn what would be required if you had to come to them for help.