25 retail basics that builds the foundation of success

#thinkdifferent

Good retailers execute these fundamentals well. There is of course always an exception to each ‘rule’, but they are not as common as you think. It is tempting to dismiss something as theory because one disagrees with it, but for every person who denies the validity of these fundamentals there are hundreds of successful retailers who simply just get on with doing it.

PEOPLE

1.      Staff are critical to your success:

o   Teach them to serve well

o   Use them to sell actively

o   Reward them effectively

o   Control your expenses with good rosters and productive staff, not stingy pay scales

2.      Use your own time to add value and manage – not only to serve behind the counter. (Take regular mini-breaks if you can’t take proper leave. Your customers will love you for it.)

PRODUCT

3.      Focus your core product range so that you:

o   Become an expert

}o   Develop bargaining power with suppliers

o   Become known as the ‘go to place’ for… something

4.      Stocktake annually at least (even a rolling stocktake) – no exception

5.      Buy your stock to a Budget (OTB)

PRICE

6.      Consolidate price points (avoid price point proliferation) for each sub-category: Best, Value, Average, Good, Premium

7.      Never discount unless a product falls below the benchmark stockturn rate

8.      There are over 20 different types of price reductions you can negotiate with your suppliers – fight hard for your business

PROMOTION

9.      Doing the same old will get the same old results – be brave, be different

10.   If it works, don’t change because you are tired of it

11.   Use your suppliers and work with their calendars and resources for marketing activities

12.   Community engagement should be at the core of your activities – and the sales will follow

PRESENTATION

13.   Good displays sell silently: visual merchandising matters

14.   Be smart with product/category locations

o   Be consistent for customer convenience – but don’t be afraid to experiment

o   Convenience products in convenient locations

o   Destination products in destination locations

o   Promotional and high-margin products for the dance-floor

15.   Even the dirtiest, poorest, most ignorant customer does not love a dirty store – they will leave as soon as there is an alternative

16.   Your fitout should be SUBSTANTIALLY be refreshed every SEVEN years. And NOTHING should be allowed to be older than TEN years.

PLACE

17.   Allocate product space proportional to their Gross Margin contribution as far as practicable.

18.   Reduce non-selling space to <15% of GLA (sub-let if you can or innovate a new use)

19.   Target a benchmark floor space productivity (in shopping centres, for example aim for more than $8000/sqm based on annual sales)

GENERAL

20.   Systematise everything to minimise errors and risk. From opening and closing hours though to how you cash up.

21.   Pay your bills on time then you can demand the same respect.

22.   Communicate when you have issues – ask for assistance from anybody and everybody and NEVER stop learning. (There is a big difference between TWENTY years’ experience and ONE years’ experience twenty times over.)

23.   Don’t worry about the competition – do your own thing and do it well

24.   Make sure your system (POS/Database) is 100% current and that you can make accurate, meaningful decisions about your agency.

25.   Measure all the metrics that matter and make decisions accordingly

Of course there are a few more and we look forward to hearing from readers what they may want to add to the list. But in summary, there is a final, over-arching rule that applies.

MOST RETAILERS ALREADY KNOW WHAT NEEDS TO BE DONE.

But for reasons that escape me entirely, too few actually do it.

Dennis can be reached on dennis@ganador.com.au with any questions on any of these topics.

Ganador Blog is about #thinkdifferent. We cover topic of business- and personal development aimed at entrepreneurial marketers. (c)Applies. Posts authored by Dr Dennis Price.

15 Things retailers can learn from market operators

I am not a huge fan of markets – not any more than the average Joe at least. I don’t pretend to have more knowledge about markets than the next bloke. But I do understand retail and I really understand consumer behaviour. But more importantly, I have enough common sense judge good and bad business practices when I see it.

This post is not a critique on market stall operators because many of them are hobbyists ands should probably not be judged against professional standards. (Although having said that, even an amateur photographer will try to take the best photo they can and not hide behind their amateur status.)


Observation # 1

A customer is looking at the shoes that (for some reason) were laid out flat on the grass. The operator made a sales pitch, but the customer did not engage, but did not walk away either. After a moment the operator says: “I am going step away and I will be at the back if you need me.” He then proceeds to step away – all of 2 meters (it is a stall after all).

The insight

Very smart. People like to buy, but don’t like feeling ‘sold to’. By SAYING what they were going to do and THEN doing it, they do more than simply give the customer space. They actually communicate a level of psychological consistency – the sub text being that I am as good as my word.

Observation # 2

Some operators do and some don’t wear your own product.

The insight

You are your own best advertisement. A big, fat dude can’t credibly sell diet products. If you sell art then you must look the part. Wear your own product.

Observation # 3

There was an operator that built some jewellery that contained plants – sort of a ‘garden in a necklace’ – like a ship in a bottle, but on a miniature scale.

The insight

In a sea of junk, something different and innovative always stands out.

Observation # 4

One clothing stall had a sign that communicated: “Fashion at market prices.”

The insight

It may seem redundant because both the fashion and the market aspects were obvious. But telling a customer what to expect when that is exactly what they expect is never redundant.

Observation # 5

The candle retailer had a nifty tactic to help customers smell more candles. She offered them coffee beans to chew – which apparently clears the nose sufficiently to allow customers to keep smelling when the variety of aromas could become overwhelming.

The insight

Knowing your product and understanding what the customer is actually buying (not just the look of the candle) is important and finding practical things to make that easier for the customer is hugely valuable.

Observation # 6

One stall had a price point sign that read: “Price’s as marked”

The insight

I know you are not a professional, but really? You can’t spell ‘prices’? I googled the phrase "price's as marked" in quotation marks. Can you guess how many results I found? Exactly 4. I did not realise it was possible to search for something that gave so few results. If the billion people on the internet can get it right, sure you can.

Observation # 7

One stall holder was selling (handmade) dog leashes. But no dog in sight anywhere.

The insight

In an open air market like that dogs are permitted and there are a few around. Most dogs that are taken into these environments are relatively trained not to attack other dogs on sight, but even so that would be a relatively minor hassle.

The alternative is I walk past your stall and I see a table with colourful ropes on it.

Observation # 8

Some stallholders have EFTPOS tap-and-go while others still rely on theold-fashioned bumbag.

The insight

Do you really need to give a customer a reason not to buy?

Observation # 9

No sample jerky at the jerky stand.

The insight

Good luck with selling that.

Observation # 10

I observed the quietest stalls were the ones where the owners were sitting down on a char at the back of the gazebo.

The insight

Is this the cause or effect? I would hazard a guess that customers are thinking if you are not very interested in your product there is no reason for them to be.

Observation # 11

Customer approaches the table and touches product (a plush toy). The owner announces from the behind the laden table “That one is $15 “

The insight

The first thing surely isn’t what it is going to cost but what you are going to get? If the operator said “they smell really good too” the customer would probably have lifted the product towards their face to smell. Picking up the product is already one step closer than simply touching it.

Observation # 12

While selling some organic bathroom/beauty product – owner announces that he is really 167 years old. The customer laughed.

The insight

Rule #1 of getting a customer to buy is to get them to relax. Humour is an effective tool in doing so – if you can pull it off.

Observation # 13

The pickle stand showed their certificates form the Sydney show

The insight

The credibility that comes from an ‘official endorsement’ should not be underestimated.

Observation # 14

I observed one owner juggling sticks to entertain himself while waiting for customers to his herbs and spices stand.

The insight

It wasn’t entertainment aimed at the customers. It had no relevance to his product. He clearly showed his disengagement in a way that is possibly worse than the operator sitting down at the back of the stand because customers would not want to interrupt someone who is ‘doing something’.

Observation # 15

AT the stand selling clocks, not a single one had the correct time, neither have they been set to 10 past 10 as is the custom to display the ‘happy face’.

The insight

If not showing your product in a positive light (by wearing it or demonstrating it) is a crime, then showing it to prospective customers in a ’broken’ state is even worse.

The most important point about all of the above is that NONE OF THESE would cost money and can easily be applied by any operator. These little things can often make the difference between a good and great business.

BONUS OBSERVATION

None of the stall holders actively and prominently directed customers and/or passerby to their website and not one tried to collect a name for a subscription list. There were a few websites listed on labels but nothing significant. I would consider that to be a major missed opportunity.


 

 

Nobody likes needy people, so...

...think before you sign up for ‘Buy Local’

Buy local or shop local campaigns abound. The NSW state government even has a special page on their site to tell you how to do it. (If that is not a sign that that you should be concerned, then I don’t know what is.)

Last week I wrote that customer service won’t sugar-coat a poor, inappropriate or unwanted offer.

By the same reasoning, a ‘buy local’ campaign cannot save a decrepit retail precinct by a misguided appeal to the community to ‘shop local’.

Every struggling town and every decrepit retail strip has such a campaign, or has tried one or wants one. These campaigns are often instigated by a number of stakeholders who rarely recognise their flawed motives which make for poor execution.

How does one reconcile ‘begging’ customers to ‘do the right thing’ with sound marketing? Is there even an example where begging has been a successful way of growing a business? (It may help you survive, but hardly prosper.)

The mind boggles at the condition of the local high street generally and the trader’s stores specifically. The lack of investment in infrastructure and (more often than not) crappy service and over-priced merchandise is obvious to all but the campaigners.

Often a local council sees fit to waste taxpayers’ money in a misguided attempt to save the economy and to protect their rate base. If the Reserve Bank (or even a Government) can’t save an economy, why do the local councillors think they have special powers? It probably happens because it makes them FEEL better and gives them something to TALK about come election time; but neither talk nor feelings will change anything.

Whatever the motivation and however deep the pockets, it is almost always a bad idea to launch such a ‘buy local’ campaign - at least the way these programs normally get launched.

Consider this campaign in Gladstone. All the ingredients are there: Awareness. Advertising. Customer Service. Etc. In addition, they may even throw in the shopping bags and a funky street map. (I am looking YOU St Kilda Village.) What do you think are the chances of making it being a success?

IMAGE: www.gladstoneobserver.com

 

I am guessing slim to none, because the most important ingredient is missing: What are the local traders doing to make it worth THE CUSTOMER’S while?

Of course raising awareness of the offer is important. I even promote an APP that will do that for you. (And good onya for trying Gladstone.)

But that alone is not sufficient. In fact, the more successful the campaign to attract people to a poor offer, the quicker the demise.

People don’t buy elsewhere because it is more expensive to buy locally. Whilst no one wants to be ripped off, you don’t have to be the cheapest. Only ONE product in every single category will classify as the cheapest. Few of the things in the world that you or I buy will be classified the cheapest.

I don’t buy because it is local, I buy local because you have what I want.

Making things worthwhile for me – the local shopper – is about making me feel special. I am the customer; it IS all about me, so make it about me.

  • Love me… (Yip, serve me as if you actually love me; because whilst there will always some commercial prostitution, most customers want the real thing.) Love is the killer app, as Tim writes in his book.
  • Make yourself interesting and different – which makes me feel special for interacting with you…
  • Make your shop a nice place to spend some time – which makes feel special…
  • Make me feel part of the community – because that is special…
  • I think you get the idea… It is not (only) about service and it is not about ‘guilting’ me into buying from you. Don’t beg for my patronage. No-one likes needy people.

‘Buy Local’ campaigns can be done and should be done, but the fundamentals have to be there first. And these fundamentals are really just a collective commitment and concerted effort to practise great retail. Now, about that APP….

Dennis

Ganador helps organisations systematise success.

Don't do the December Discount Dance

Many retailers use discounting as a substitute for marketing. Discounting is a race to the bottom – and inevitable unprofitability.

Discounting is only appropriate for in the following two scenarios:

  •   strategic retail promotions (e.g. introducing new products)
  •  too fix buying mistakes (bought too much or wrong products) and it is not moving

Q: How do you know when a product is not moving?

A: When the stockturn (or sell-through rate) is below the benchmark for that category – and only then. (Never rely on instinct, use your POS.)

Beware the tipping point. Frequent discounting will lead you to a point where customers perceive you to be a discount store. Unless this is your strategy, make sure you manage discounts prudently.

First impressions count in your retail store

Your store entrance is important in achieving two main objectives:

  1. Should be inviting (attract customers)
  2. Must not present a barrier to a prospective customer

This is achieved by:

Making it convenient:

  • Ensuring no steps are placed at the entrance
  • Sufficient width for easy passage– especially in high-traffic areas
  • Easy access for pregnant/handicapped persons or those with trolleys where appropriate (no merchandise/fixtures to clutter entrance)

Making it attractive:

  • Good lighting (bright/ visible signage and or shopfront)
  • Changing entry statements at least monthly to remain interesting and noticeable
  • Use attractive and attention-getting colours in windows, displays and signage

Ask your staff/family/friends to pretend to be customers and to make notes of anything that may inconvenience the customers. They should also use trolleys and prams to test the flow and remedy any issues accordingly.

 

Is your business a Canary, a Duck, a Horse or a Human?

What is the most important metric in retail? And the answer is NOT that ‘it depends’.

Whilst I like GMROI as being most useful and revealing, it has one drawback in that there aren’t many benchmarks available to be used. Its ugly sister metric, stockturn, is simpler but still extremely useful – AND importantly it goes to the heart of retailing. (Breaking bulk to tailor product/quantity to the needs of the consumer.)

Understanding the stockturn of a product/category is extremely useful, yet so few small retailers actually do the homework necessary to have access to this metric. (Services and hospitality would have equivalent metrics that go by different labels, but the same principle applies.)

Your stockturn will reveal that:

(1) Your inventory levels are wrong, or that

(2) Your sales rate is wrong.

But there is one feature or principle of stockturn that even very experienced retailers don’t know and don’t appreciate. The ideal/optimum stockturn for a category is (for practical purposes and in most cases) fixed. That is the optimum stockturn for any given category is a given.

With metrics like sales or profit, there is never a case of ‘having too much’. But with stockturn there is an optimum range. Consider these examples.

The stockturn for a daily newspaper is 365 times per annum. Any more than that would indicate inefficient double handling and any less would mean you probably overstock.

Fashion has a stockturn of 4 times per year – for the obvious reason that the purchase cycle is driven by the seasons. The Christmas Tree Farm sells its stock once a year.

The same applies for every category or product. This rate is determined by (a) the retailers’ business models and (b) by how consumers purchase certain products.

Good planning and good systems will allow efficient retailers to make mid-season corrections on their stock and instead of turning their stock once per season, they may be able to do a mid-season clearance of the duds and stock up on the best sellers. They may turn their stock 1.5 x per season, resulting in a turn of 6x per annum. Inefficient retailers (like Department Stores) who also sell fashion traditionally achieve stockturns of less than 4x per season in their fashion category.

The vast majority of (specialty) fashion retailers will sit in that 3.5 – 6.5 range. But there are ‘fast fashion’ retailers who have a different business model. For instance, Zara is vertically integrated and goes from runway to store in a few weeks. They achieve stockturns of 17x per annum (my estimate.) But then, they are not really in the Fashion business, they are in the disposable clothing business.

What people don’t appreciate is that there is an optimum level for this metric. Just like your heartbeat can’t be in the 1-25 bpm range, nor can it sustain 200+bpm. To work best it needs to be in the 65-75 range.

That is just for a human being. Canaries’ hearts flutter at 1000 bpm, a duck at 190 and a horse at 38. (Yes, there is an apparent mass/ rate inversion – just like the boutique and the department store.)

Heartbeats and Mass - Like stockturn.PNG

 

Which brings us to the title of this post: Do you sell canaries, ducks or horses? And of course, whether your canary’s heart beats like a canary or is acting like a duck or a horse?

You should know the rate of turn and you must compare it to the benchmark:

Again, since the relationship between your sales and your inventory is (relatively) fixed, the amount of stock determines the level of sales you can achieve. (READ THAT AGAIN.)

How to interpret and use stockturn metric:

If the canary is a canary = just right

Assume you sell a product that has an optimum stockturn of 8 – and your average inventory is valued at $200K at retail. The BEST you can hope for is $$1.6m in sales. No matter how much marketing you do, or how much you improve your service, your sales destiny is determined by the amount of stock you carry.

The worst thing you can do if you are turning your stock in the optimum range, is to discount your stock. Your rate of turn will spike slightly but won’t go up over an extended period (the whole year) because discounting will bring tomorrow’s sales forward to today – and on average the turn will stay the same. In fact the net effect is you will make less GP over the term because your discount is the margin you give away.

You should evaluate whether $1.6m is sufficient turnover for your business. None of the traditional, retail tactics like sales/service/display etc is going to change the business fundamentally. The only way to grow a business that is already tuned for an optimal stockturn, is to make strategic structural changes that will increase your market share. E.g. buying out a competitor or implementing strategies that are directly aimed at taking business from someone else

If the canary acts like a horse = too slow

If you are over-stocked, with a sub-optimum stockturn, you should discount the product to recycle the cash into new product that will sell. That is, if people aren’t buying canaries, then you should sell ducks. Or horses. But remember that different products/categories are different yet again.

A low stockturn indicates that you have made a mistake: you bought too much or you bought stuff that doesn’t sell. Discounting is only an appropriate tactic to rectify these mistakes – and should not be used in any other way.

If your horse is a canary = too fast

You are probably under-capitalised and paying the price of ordering small quantities (with no volume discounts) and double handling. The only way to slow down your turn is to increase your stock levels.

Keep increasing it UNTIL you hit benchmark and you will see your sales rise.

In summary:

If you don’t know your stockturn, you are not practising retail. This number reveals whether you should buy more or less or different stock. It reveals when you should discount and when not. Knowing your stockturn eliminates certain strategies and opens up others as the logical options. Buying stock accounts for 70%-40% of your total expenses of running the business – it is vital to get that right.

Do you really know the stockturn of every major category in your store?

 

GOOD NEWS: You don’t have to sell in retail

In a fast moving retail environment like (say) a newsagency, you don’t have to sell. At least not the way most text books and some gurus tell you.

There are two conditions:

1. Make sure the store is laid out to optimise the opportunities to buy.

2. Make sure your visual merchandising tells the right story.

Then you can help the customer buy:

3. Simply have a conversation with the customer; a conversation that shows you are generally interested in what they want and help them get what they want.

Of course this means that you can’t stand behind the counter if you really, authentically and effectively want to engage with the customer.

Once you are in this position (you have achieved 1-3 above) then you may able to focus on learning some of the techniques that will help you have more productive conversations with customers. It takes skill to lower barriers and appeal to their emotions, and this skill can be learned.

One thing is for sure: it is NEVER about hard sell.

If you do this right, you may not get the sale today. But if you do it right you will get sales more often than most, more often than before; and worst case, you will get it next time.

 

Alley coffee.jpg

Retailers who chase this, will drift nowhere

The curse of retail drift, and how to avoid it

A common mistake seen in all sizes and in all categories of retail from fashion to shoe stores, from fast food to pharmacy is ‘drift’.

You see it in many products and brands, not only in retail. When Hyundai launched here, they were positioned as low-cost entry level motor car. Over time they add features and the price creeps up. This is called ‘image drift’; as the brand seeks to become more prestigious.

The executives always find a (rational) reason why that must be so.

But of course another executive suite argues (perfectly rationally) that this gap presents a good business opportunity and very soon there is a new entry-level, low cost brand. (Hello Kia.)

The process repeats itself again and again. (Hello Ssangyong and then Great Wall ad infinitum.)

Image drift is the love child of feature creep, and the step child of ‘retail (proposition) drift’.

 

Repositioning a Strategic Context.PNG
  • The Fish & Chips shop adds chicken burgers and then hamburgers and then coffee.
  • The Pharmacy adds beauty products, then shoes, then home wares and finally pet food.
  • The Ladies Shoe Store adds Men’s shoes, then kids’ shoes and then athletic shoes and then school shoes and then bags and then belts.

These are all examples of the BLUE ARROW options in the diagram above. They chase the volume; seduced by the marginal sale. They convince themselves they are chasing an increase in basket size with no clear understanding of what it does to their offer and to their brand and to customer perceptions of their proposition.

Do you go to the Fish & Chips shop to buy hamburgers? Of course not. When the Fish & Chips shop does start selling hamburgers, it is Corner Café – an entirely different proposition.

Does a woman looking for those really special shoes (insert favourite band here) really want to wrestle through the aisles cluttered with kids and trolleys?

Too few retailers go for the RED ARROW option – because they would be going uphill. Only a rare few even hold their position.

The reason why great retailers are great is that they achieve consistency. Lowes is a great retailer for that very reason. And no wonder they are more than a 110 years old. Good brands like Sportsgirl, Reject Shop (please get rid of that annoying auto play video) and Country Road have owned their proposition for as long as I have known them. (The Reject Shop resisting the temptation to go online shows to me that they understand their business model and proposition well.)

This does not mean you cannot re-position or adapt, but changes and additions ONLY work when they fit the original proposition.

McDonalds introduced fresh options to their menu and added (real) coffee. McDonalds is about fast family food and the menu is modernised to reflect the tastes of their market, so that works.

Similarly there are newsagents who added gifts. If you are selling cards, the same customer is happy to buy a gift for the same person on the same occasion at the same place.

But if Dominos starts selling hamburgers, you can be sure to start selling your shares, because savvy consumers will perceive that as a cynical attempt to capture an additional sale.

In the long run, chasing that shiny, seductive incremental dollar at a lower margin is a counter-productive chimera that will destroy your business. It kills your brand; the goose that lays the golden eggs. (E.g. Toyota could not become Lexus, they had to create a new brand instead.)

Two strategies that you could consider instead are:

  1. A service company should ‘productise’, and product companies should create services. For instance, BMW did it with BMW on demand. Patagonia’s Common Threads Partnership is an example of how Patagonia facilitates (offers the service) the recycling of their own clothes. This is completely counter-intuitive, but it is exactly the right thing to do.
  2. Strengthen your proposition by purifying it and focussing it. If you sell Fish & Chips, sell fish and chips that would make Jamie Oliver proud. That is, add some organic fish cake or gluten free batter or whatever. Become a Fish & Chips shop worth visiting because the service and the offer together provide a unique and special experience. (I am not suggesting the shop becomes ‘swanky’ – just different and interesting and worth visiting.)
"Would you tell me, please, which way I ought to go from here?"
"That depends a good deal on where you want to get to," said the Cat.
"I don’t much care where--" said Alice.
"Then it doesn’t matter which way you go," said the Cat.
(From Alice's Adventures in Wonderland) 

Adding lollies on every counter is lazy retailing and a sure sign of a retailer drifting down the road to nowhere.

Have fun

Dennis

Read this: warts and all about Fifty Shades of Failure: A Personal Confession.

Ganador: Learning & Development for the 21st century retailer dealing with the 21st century consumer.

 

How to build a successful retail system

What does footy, meat pies and the Dick Smith story teach us about retail success?

An increase in sales revenue hides a multitude of sins. If profits increase, executive bonuses increase. In our American-influenced business culture we obsess about results and outputs. (Every proposal I write list the key deliverables.)

There is a mucho overtone to our gleeful acclamation: ‘Look at the score board!’

INPUT >> PROCESS >> OUTPUT is the archetypal structure of a system and holds true for the system of retail. (See diagram for a Retail System in this post.)

The most common OUTPUTS businesses seek are revenues and the distant cousin, profit. This is the Holy Grail that is pursued by executives and that is hardwired into the culture of most organisations. We live by the mantra of ‘garbage in is garbage out’. It is commonly said and commonly believed. But it is not even close to being a truth – and in fact is a counter-productive approach.

Most struggling retailers that I have worked with directly has in poor access to data. Their technology does not provide information that allows you to run an effective business. They don’t have a scoreboard and I am a great believer in getting the metrics right and measuring the right things. This is crucial to successful business, but focussing on the profits/sales etc will not fix your business.

Metrics are almost invariably historic. They reflect outputs achieved. You can no more alter your sales by focusing on sales than you can improve the taste of a meat pie by focussing on the meat pie. What is done is done.

Strategically astute managers understand that the system is NOT a matter of Garbage In Garbage Out. Instead, you should be changing the Inputs or changing the Processes. This is the ONLY WAY to alter the outputs. (Focus on SELLING not on REVENUE.)

Garbage in, garbage out assumes there is no ‘transformation process’. There is. At least there is an opportunity to transform the input:

Sewerage in, drinking water out.

Discarded clothes in, charitable revenues out.

Starting off with the right INPUTS will make things easier, but if you inherited a ‘difficult’ suite of resources, it is always possible to turn it around. The middle (process) stage is when all the WORK happens. Maybe that is what scares people?

If you identify the critical inputs (see diagram) and the core processes and focus your attention on fixing those, the results will happen.

Consider the Dick Smith turnaround story: a business bought (effectively) for less than $100m is turned around within a year to be re-floated at $600m.

I have no inside knowledge and cannot judge the people. Maybe the retail team at Anchorage Capital really are geniuses and the Woolworths executives failed miserably. But the comment by an ex-employee indicates that the in the short time available to them, the turnaround was not focussed on the core processes, but rather on addressing the symptoms (outputs). If this is true, then it is exactly what I am advocating against.

Play the game, not the scoreboard. If the scoreboard reflects a poor result, dig deep to determine how you can play the game differently. If you are playing your scoreboard (and protecting your lead) the opponents invariably run away with the game.

Dennis

Ganador: Coaching Winning Retail Teams all the way to the Finals.

 

Social Media risks to bite your arse

Social Media is now pervasive – it is safe to say. But how prepared are you for the inevitable shit that will happen when things go wrong? To paraphrase Elizabeth Barrett Browning: How could it happen? Let me count the ways…

  1. If customer tweets about the poor service, and they say LMFAO, should it be addressed? Removed?
  2. Is the abovementioned any different if they spell it out as Laughing My F*cking Ass Off?
  3. Is WFT offensive if it is offered instead of WTF?
  4. Can you fire an employee who checked in at a venue via Foursquare, when they were meant to be somewhere else?
  5. If a manager happens to see someone’s Linked In profile (but they were not invited as a connection) and there is an inconsistency with their resume, can you do anything about that?
  6. If someone insults a colleague via their personal FB profile, does that constitute harassment?
  7. If customer ‘friends’ an employee (are they allowed?) and during subsequent communications the employee infects the customers computer system with a virus, are you covered?
  8. Email signatures can have disclaimers, but tweets and updates and check-ins don’t, so how do you ‘disclaim’ something in such a way that it will hold up in court?
  9. If an employee owns a twitter account and is followed by customers and that person resigns; who owns the list of followers? (The database?)
  10. How long are you meant to keep a list of tweets in archive? Can you archive it?
  11. An employee sends a link via a tweet that connects to pornographic content via direct message as opposed to a public tweet. Is that different?
  12. Are there certain twitter followers who are not allowed to be followed?
  13. Given the prevalence of ‘bots’ on twitter (fake, robot accounts) – should you and can you verify all your followers of an official account?
  14. If one employee posts a picture of another – or even a selfie – is there a potential breach of privacy? Or if someone or something ‘confidential’ happens to be in the background of said selfie, can you be sued?
  15. Is there a difference between a tweet that is scheduled for after hours release but written in business hours?
  16. If a customer (ratepayer) lodges a complaint via Facebook, is that a considered a formal complaint even if it was not directed at someone specifically?
  17. If a customer lodges an offensive picture or comment and other customers are offended by it, are you liable?
  18. Are you allowed to delete a post just because you find the language offensive?
  19. Is having a policy sufficient defence in releasing the employers’ obligations?
  20. How much training is enough given that there are new networks all the time?
  21. Are employees obligated to declare their activity on all social networks?

There is more where that came from, but I am sure you get the idea.

What are you going to do next?

BYO - Solutions for struggling retailers

Times are tough and I thought it might be useful to share with readers here at Inside Retailing the conceptual framework Ganador uses to assess and advise struggling retailers. If you have the requisite knowledge, creativity, objectivity, time and other resources, there is no reason why you can’t self-diagnose and fix your own business.

 

Systems Thinking -RetailNumbers.PNG

This is not a checklist; it is structured approach to solving the retail puzzle. I personally have limited use for checklists and tend to work each case as if it is my first. If there is a specific topic or area you are interested in, just ask and if I have one, I will give it to you, or give you the pointers to assist. Alternatively search on the website and you may find a more insights on specific topics that could be useful. (No charge and you don’t have to subscribe to anything.)

I would, however, advise you that there will be more benefit for you if you work through the process and build your own checklist, rather than be given something that becomes a tick-the-box exercise.

I provide a conceptual framework because retail management requires a whole-of-business approach. It is not a matter of being good at one thing and not so good at another. Like a chain, your business is only as strong as the weakest link.

STEP 1

Q: Where do you start?

A: At the END.

You must assess and evaluate what the OUTCOMES should be. The only way to do this is to collect objective evidence to analyse, identify problems and prioritise actions. So the logical starting point is to get FEEDBACK.

I have written extensively about retail metrics. Understanding stock turns, GMROI, margins etc. are the symptoms that tell you what is sick and what is healthy in your business. The remedy after all must be targeted at the right problem. Figure out what is right for your business and find a way to measure that. Every business has different metrics, but the most common ones are:

  • Stockturn (or equivalent)
  • GM% (by category)
  • GMROII
  • Average Sale (or equivalent)
  • Trading Density (Sales /sqm)
  • Sales/employee

(You may notice that total sales are mentioned specifically, and that is because total sales in and of itself is actually meaningless. If I told you I had a shop that turned over $1m, then you would have no idea whether that was good, bad or indifferent.)

STEP 2

The next step is the strategic context assessment where you consider the environment and evaluate the trends and the forces of change in your businesses and your category:

  • What is the competition doing?
  • What is possible and what is fatal?
  • Where are the opportunities?
  • And most importantly, what do customers want?

The better your questions, the better your answers. (And contrary to popular opinion, there are stu0id questions.)

STEP 3

Now that you have had (a) a critical evaluation and (b) a reality check you must decide what business you are in. (What is the vision for your store?) This is not an academic exercise. Regular readers will know that I consider most business planning a waste of time, but there are elements of a business plan that you must do as a business owner and formulating a clear and compelling vision is the first thing that is committed to the blank canvas of your future success. You MUST have a clear vision of what success looks like in order to be excited about it and in also to engage your stakeholders in that vision.

STEP 4

Your vision is now refined. It is time to formulate your retail proposition.

  • What is your story?
  • What is your offer?
  • What experience do you want your customer to have? (Evaluate exactly each and every touch point and a desired outcome and describe the ideal state.)

This may seem either unnecessary to do formally or it may seem obvious. But the vast majority of people start with the status quo and attempt to figure out a way forward. Instead, start at the end and figure out a way backward.

In essence, you are now describing your business model.

STEP 5

Only now are you ready to conduct a thorough resource assessment. The key resources are:

  • People
  • Capital
  • Stock
  • Space

Stock and space combine to tell the story; that is it articulates the retail vision or communicates the proposition.

Your vision dictates what products you must carry, and your key metrics determine how much you must carry.

Your proposition will dictate the best configuration of your store and your analysis determines how much space must proportionately be allocated to each category.

STEP 6

This step focuses on how customers find their way to the store and the in-store experience. These processes TRANSFORM your inputs into the outputs you identified earlier. This is how we capture customers and convert passers-by into browsers.

The processes to be reviewed comprise the ‘funnel’ of retail. How do you attract, interact and convert passersby into browsers and browsers into buyers?

  • Buying
  • Marketing
  • Selling & Service
  • Housekeeping – etc…

STEP 7

The final step – which is NOT on the framework - is what you must do as an owner/manager to systematise the decisions you have taken and ensure that (a) they are implemented, and (b) are constantly monitored.

You will know it is being done (or not) if you have the feedback systems in place (see Step 1) to monitor how the outputs are tracking. Literally and figuratively you go back to square one.

IN CONCLUSION

1.      Managing a successful retail business is an iterative process. It never stops. When you stop tweaking, you start failing.

2.      The elements I described above constitute the key issues you must resolve in your retail business. This post is long, but it is rich in content so it may worth printing or bookmarking to refer back to it. Space constraints mean that, for example, I can only refer superficially to ‘buying’ or ‘marketing’ as a critical process to be addressed (step 6) when either of those may represent huge challenges with many issues.

3.      It is no coincidence that in the last seven years ALL (but one) struggling retailers I have worked with lacked the basic systems to monitor their business. That is no coincidence! Having a good system is the beginning and the end, and having no system is the beginning of the end. (POS vendors can use that in their advertising J)

4.      Every retailer that I worked with but failed anyway, failed because they waited too long before they started to fix the business. More often than not they had run out of money, ideas and out of motivation to make any changes. And when you don’t change, nothing changes. NO surprise there. Start TODAY.

Hope that helps. Have fun…

Dennis

Ganador: Solutions for the retail supply chain (landlords, brands, franchisors etc) to engage their stakeholders (retailers, communities, consumers etc) effectively.

PS: For the retail nerds: If you look carefully you will see elements of systems thinking, chaos theory and the traditional retail mix framework contained in the approach outlined above.

 

Seven ways to make more money in your retail store today

1. Evaluate your top three product categories and assess whether the space they occupy is proportionate to their contribution to profit. (There are sometime practical/physical reasons why this may not be so – but consider your answer rationally, don’t merely accept historic circumstances.)

2. Take one category at a time and write down all the price points in that category. If there are more than five different price points, homogenise the price points. Customers can’t discriminate between a $3.95 pen and a $4.95 pen.

3. Pick a customer type and write down three places in your store where you think they may visit or where you want them to stop and browse. Discretely follow ten customers (of that same type – e.g. mum & bub) through your store and observe. Assess where they stop, why they stop and what they do. Consider why they don’t stop where you may have thought they should. Make changes to your configuration and adjacencies accordingly.

4. Make staff (as many as practicable) swop (or swap if you like) roles and ask them to observe and identify two or three processes that could improve the new role. Cross-training your staff may seem unnecessary, but it buys you much more flexibility and it gives you fresh eyes on stale problems.

5. Clear your counter of all ‘impulse items’, making room for the customer to set down the merchandise and to give you the opportunity to engage in conversation without being distracted with junk purchases that they will regret – and associate with your store. In a week, you can reintroduce some impulse junk and determine whether it is worthwhile.

6. Stand at the front of your store in your ‘landing zone’. Look around consciously and purposefully and assess the sightlines through the store. What are your focal points? How easy or how hard is it for your customer to navigate into the store? Does the signage help or does it merely clutter and detract from the merchandise?

7. Visit (or visually isolate) each product category – in your store or even in your counter – and really look at it. What does that category/display presentation actually ‘SAY’ about the category? By that I mean: Is there a clear focal point? Is it visually attractive and does it make a statement (tell a story) to the customer? Does it make a statement that you are really in the business of…XYZ?

These are just seven examples and you can come up with many more. Some are more important than others and there are even more important ones NOT mentioned at all.

The reminder I want to put out is that you need conscious exercises (like these) to combat retail blindness. Retail is not rocket science; it is about people and their emotions. And retailers are people too and also subject to falling into bad habits like everyone else.

Have fun

Dennis

GANADOR: KNOWS PEOPLE. KNOWS RETAIL.

 

Have you heard of the N11?

I am sure you have heard of BRIC countries. (Brazil, Russia, India and China) but it seems that forward thinkers are already talking about N11 – or the Next Eleven (known by the numeronym N-11) are the eleven countries – Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria,  Pakistan,  Philippines,  Turkey, South Korea and Vietnam. These countries were identified as possible next big things – originally by Goldman Sachs.

That may or may not be true. Simple, straight-line extrapolation and a few basic assumptions later and you have a prediction. And this selection is as good as or maybe better than another. I am actively engaged with the future (possibly more than most given my job) but there is a major risk that comes with thinking about the future.

If you don’t take care of the present, then the future won’t matter because you will never get there.

Strategy is not about navel-gazing and forever hopping onto the next big thing. Strategy without execution is a pipe dream and execution happens in the now. Business success means you have to understand and embrace the future, but not at the expense of the present.

Human nature (and consequently company politics) will be biased towards working toward the results that are just outside immediate, short-term results. Shirking responsibilities, and taking

HockeyStick Future.PNG

On the other hand, the short-termism like the excessive focus on quarterly bonuses prevalent in American companies is seen by many as a cause for concern, and they would be right if the assertions are true.

Which means that balance is the critical factor in business success; have one eye on the future and a hand on the tiller of the present - that is how you plough a straight line.

 

Everyone needs to know how to sell balloons

Do you sell the perfect product?

(Or, do you understand the meaning of balloons?)

I drove past a sign yesterday that announced ‘balloon and party shop 200m ahead’.

I am hazarding a guess here, but that is a business that will be struggling (already or very soon.)

And it is not the desperate act of nailing a hand-written poster to a random tree that gives me that idea.

I wonder if they understand what business they are in.

What is a balloon? It is really not much more than air (gas) wrapped by a piece of colourful plastic (latex). As far as products go, I cannot think of many products that are simpler or a product that is easier/better to retail.

The margins are decent

Suppliers are plentiful

There is very little labour involved – even that is often outsourced to the customer

The product does not change/date or perish easily and is not subject to fads

Whilst all of the above are good reasons to demonstrate why balloons are great retail products, the purpose of looking at balloons is that they clearly illustrate why people buy certain products

Clearly customers do not buy pieces air-filled, coloured latex.

People buy memory-making tools. People buy things that create  ambience.

I realise that reads like a wank, but it makes the point very clear: it is not what the product it is what the product does.

Think about this: not what the product is, but what it does.

People don’t buy gold when they buy a wedding ring.

People don’t buy a legal agreement when they buy a lotto ticket.

These examples are easy to understand, but people then often have difficulty to translate that for their own products.

If people don’t buy a drill bit, what are they buying?

If people don’t buy a steak burger, what are they buying?

Too many retailers think about their products in terms of margins, simplicity and risk. Balloons would make great retail sense if that is what mattered.

But what really matters is whether you understand what your market really wants to buy (e.g. ‘memory-making tools’) and whether you have the knowledge, skills and attitude to merchandise and market those products accordingly?

If you are selling steak but people are buying sizzle, you are doomed for failure.

 

Retail has changed in five ways Google advises

Google's newsletters etc are usually quite good. (and the style/format is an object lesson in design and layout.)  but this article disappoints:

Shopping Then and Now: Five Ways Retail Has Changed and How Businesses Can Adapt

In summary:

1. Shoppers know as much as salespeople

2. Retailers can deliver personal, relevant suggestions at scale

3. Mobile devices drive foot traffic to stores

4. Opinions carry more weight than ever

5. Products can jump off the screen

Not particularly insightful, don't you agree?  Which begs the question: WHY BLOG ABOUT IT?

My answer to that is; even though (or because) it is old hat, it serves to remind as to ask ourselves the question:

WHAT AM I DOING ABOUT IT? 

Over to you... 

Know this and win. Don't know this and die. (Your business, not you.)

No matter how small or how big the company you run; if you can answer the following question quickly and clearly, then you are off to the best possible start with creating a winning business. As always, the job of a question is to lead you to the answer. Once you have answered this question, consider your answer carefully and perhaps most importantly, do it honestly.

Why would a customer continue to visit my store over all else?

But there is a proviso; you are not allowed to refer to any of the following three descriptions:

1. Customer Service. Everybody promises it. You either get it or you don’t. If you don’t, then you won’t survive and if you do, it is merely sufficient to keep you in the game, not to differentiate you.

2. Price. There is always someone cheaper and the customer knows because they carry that information in their pockets.

3. Location. You may have been the only that sells xyz widget in a 20km radius in the past, but not anymore. See above.

If you can come up with a differentiating answer, then your next steps are pretty simple: figure out how you can deliver on that key promise.

The answer to this question will clarify how sound your business model is. You may be surprised to know how few people can do it with conviction and clarity.

The same applies to me and the business we founded in 2006. I am luckier than most in that I can rely on the wisdom of the crowd – and that is YOU. Since I have been writing here on Inside Retailing for the last six years – on average 50 posts a year - and I hope it has made a difference to someone somewhere in entertaining or enlightening you, and hopefully maybe effecting some change.

Now it is my turn to ask you to reciprocate. I have two simple questions that need answers (one word or one sentence only) – and I will appreciate your (anonymous) help. PLEASE CLICK HERE.

How easy or how hard it was to answer the question I posed above? Are you happy with your answer? Do you think your answer translates into a viable, sustainable business model?

Have fun

Dennis Price

GANADOR: Future-proof your business with smarter strategies, systems and skills.

PS: If the above link does not work <PLEASE CLICK THIS ONE>

PPS: We have a cute new widget on our site that allows you to leave a voicemail. Try it out.

The good news you don't have to sell in retail

In a fast moving retail environment, you don’t have to sell. At least not the way most text books and some gurus tell you.

There are two conditions:

  1. Make sure the store is laid out to optimise the opportunities to buy.
  2. Make sure your visual merchandising tells the right story.

Then you can help the customer buy:

       3. Simply have a conversation with the customer; a conversation that shows you are generally interested in what they want and help them get what they want.

Of course this means that you can’t stand behind the counter if you really, authentically and effectively want to engage with the customer.

Once you are in this position (you have achieved 1-3 above) then you may able to focus on learning some of the techniques that will help you have more productive conversations with customers. It takes skill to lower barriers and appeal to their emotions, and this skill can be learned.

One thing is for sure: it is NEVER about hard sell.

If you do this right, you may not get the sale today. But if you do it right you will get sales more often than most, more often than before; and worst case, you will get it next time.

And this means you are in the business for the long run.

NOTE

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The Third Dog

The retail supply chain is broken and I am sadly observing systemic failure in the retail supply chain,. The symptoms are as follows:

  1. Landlords may tell retailers that their stock is not what the market wants and the customers are simply responding to the fact that they can get what they really want somewhere else. They argue that the customer service levels are not good enough and that the presentation is not up to standard.
  2. Franchisors will berate Franchisees for not adhering to the Operations Manual and for failure to engage the customer in the right way; not serve the hot dog the way it was meant be served or that the form wasn’t completed on time. It’s a constant challenge to get people to buy into the ‘system’.
  3. Retailers (in shopping centres) on the other hand always blame centre management for lack of traffic and too much competition in their category.
  4. Franchisees always think their franchise is a little bit different and deserves to be the exception in a dozen little ways.

Who is right and who is wrong? The short answer is they are all wrong – about each other – and this is the cause of the systemic failures in the supply chain.

We often have to spend a great deal of time on facilitating discussions to help each party understand the other’s point of view.

  1. We have to help the landlord understand that the reason why the retailer is not engaging with centre management is that they rightfully don’t have respect for centre management. Just like customers punish the retailer with non-attendance when the retailer does not have what they want, similarly if centre management is not adding value to the retailers’ lives, they cannot expect any engagement from the retailer.
  2. We have to make sure the retailer understands the landlord is not a financial institution and that they cannot use them subsidise cashflow shortfalls. They must understand that the centre teams can drag customers to the centre but not into their store.
  3. We have to make sure the franchisee understands the Franchisor cannot guarantee success and that the ‘system’ is missing one important ingredient and that is the franchisees commitment and hard work. And of course that territories are not as different as they’d like to believe.
  4. We have to make sure the franchisor understands the franchisee will not buy into the consistency message if the Franchisor treats different franchisees differently because that undermines their own demand for consistency. (If you demand consistency, you have to live it yourself.)

While two dogs are fighting for a bone, a third runs away with it’; so the old saying goes. And it is true here too.

Whilst there is a tussle for power and control between landlord and retailer, between franchisor and franchisee, the customer (the third dog) runs away with it.

None of the business entities in the retail supply chain have much power anymore. And whatever power you exert over another party is tenuous and will fade anyway. The consumer is empowered. They have a little device in their pocket called a Smartphone, and that means they can any information and increasingly any product from anywhere in the world at any time they please.

A collaborative supply chain is a strong supply chain.

But, I am not optimistic:

  • How many Shopping Centre Landlords have an actual, active and successful Retailer Engagement Strategy?
  • How many Manufacturers have collaborative, transparent Trade Marketing Strategy that goes beyond mere promotion and equips and empowers their retail network?
  • How many Franchisors invest in the development of their network beyond the minimum compliance at the ‘system’ level?

Have fun.

Dennis Price

ganador.com.au: architects of high-performance retail environments.

The retail landing zone

The landing zone (or ‘decompression zone’) is that area immediately inside the entrance of the store. Its size may vary from several square meters in department stores, to something much smaller (almost non-existent) for some specialty stores.

Once you have grabbed customers’ attention and they decide to enter the store, they must undergo a physical and psychological transformation. Watch carefully and you will see how they slow down, fold away the umbrella, pat their pockets, settle the child, adapt to the lighting etc.

People need physical room to ‘decompress’ and this area should not be cluttered.

It feels counter-intuitive to leave some of your (potentially) must productive space empty but one should view it as an investment in space required for customers to mentally and psychologically transition from passerby to browser. This transition is necessary in most stores before you can convert browsers into buyers.

If you are going to break the landing zone rule, then break it properly (create something with WOW) in order to ‘punch’ the customer between the eyes, but do it infrequently in order to retain the ‘surprise’ element.

© 2014 Ganador Management Solutions (Pty) Ltd PO Box 243 Kiama, NSW, 2533 Australia Tel: (+61)2-4237 7168