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Self-Employed or Working for the Landlord?

When Toys R Us closed their Times Square store at the end of 2015—the one with the giant T-Rex and the three-story Ferris wheel—the biggest reason given was the landlords raising the rent from $12 million a year to over $52 million a year.

Image result for toys r us times squareYeah, that would be a hard expense for any retailer to cover, let alone one that was already struggling.

While the financial model is certainly different for big-box stores than it is for indie retailers, one thing that is universally true is that there is only so much profit margin you can spend on rent and expect to run a successful business.

For the typical indie toy retailer, occupancy costs (rent/mortgage and common area fees) need to be around 10-12% of gross sales for the store to be able to safely cover those costs. In fact, for a lot of businesses where keystone pricing is the norm, that number tends to hold true.

For Toys R Us, that would mean doing $100-$120 million in sales at the Times Square location. I can see that as a realistic number. But to pay $52 million, they would need to do half-a-billion in sales, over $24,000/sq ft. Even Apple couldn’t do that much in that space.

The 10-12% occupancy cost is a benchmark I use when talking to retailers about locations. Yes, you might pay a little more for a better location, but you should expect a little more in traffic and better clientele. Yes you can find locations cheaper, but you might have to pay a little more in advertising to draw traffic to your store.

But occupancy cost is only half of the equation. Here is one other number I want you to look at.

How much are you paying yourself?

Take your salary (you are paying yourself a salary, right?) and your net profit for the year. Add those two numbers together. Who made more, you or your landlord?

If you made more than your landlord (or even the same), pat yourself on the back. You are self-employed and running a smart business (as long as you’re paying yourself something, and not just reinvesting every dollar back into the business.)

If your landlord made more than you, something needs to change. You aren’t working for yourself. You’re working for him. Better for you to close shop, buy the building, and rent it to some other poor sap willing to pay you to keep their hobby afloat.

I know that sounds harsh, but it is a reality of business. If you aren’t making as much as your landlord, something needs to change. You need to sell more. You need to increase margins. You need to find a cheaper location. Something.

Or you can just accept that your business is simply a hobby and treat it as such.

I want you to make money. That’s the only reason I bring this up.

-Phil Wrzesinski
www.PhilsForum.com

PS Before you go lambasting me because your numbers don’t match, I fully understand that your industry may be completely different. If you belong to a trade organization, see if they have done any benchmark surveys to give you an accurate picture for your industry. Before you waste your breath on all the reasons why you aren’t making as much as the landlord (the only valid one being you are still in start-up phase), this isn’t about me. It is about you. I want you to be successfully self-employed. The landlords are already making too much. You should, too.

PPS I’ll put my thoughts why you should pay yourself a salary and whether it is better to own or rent in future posts.

Ask Your Customers What They Want

The one “service” my biggest competitor had that I didn’t was a Birthday Club. I wanted one for my customers. I already knew one thing I would do differently. That was the big Birthday Bell you got to ring when you came in to celebrate your birthday. What you probably don’t know was that I actually wanted a bigger bell than the 32-pound brass bell we ended up getting.

Phil holding the Birthday Bell

I wanted to run a hole through the ceiling and put a little steeple on top of the store with bronze church bell inside. That way, when you rang the bell, not only would everyone in the store know you were celebrating your birthday, so would everyone outside the store.

Unfortunately that would be a potential violation of the noise ordinance, so we went with the indoor bell.

The two parts of the Birthday Club I wasn’t sure about were the offer and the age limit. So I asked my fans on Facebook.

I first asked what people got from other birthday clubs for kids. Most birthday clubs offered a small coupon good on a larger purchase with a limited time frame to redeem. The general sentiment was that $2 and $3 coupons, especially when they came with strings attached such as a limited window to redeem and a minimum purchase, were of little interest to the child and often not enough to even garner a visit to the store. That was useful information. I knew I had to go big or go home.

With this knowledge, I sent out a postcard that was a $10 gift certificate—no strings attached. Well, okay, we had one string attached. It could only be used by the birthday person. Period. How that person used it was up to the individual. The postcard never expired. The postcard didn’t have to be used with anything else. There was no minimum purchase (although you didn’t get change back if the purchase was less than $10).

A lot of people gave us the postcard and 59 cents for their birthday purchase ($9.99 plus 60 cents for MI sales tax).

A lot of people spent way more.

Our average ticket for the birthday postcard was just under $30, which meant we made a profit (albeit a small one) on those transactions. More importantly, the postcards drove traffic. Over the last couple years we averaged over 300 postcards a month. That’s over 10 per day. Imagine ten happy customers ringing a bell and having fun spending their free money. Not only did it create excitement in the store and drive traffic, it drove word-of-mouth advertising. Everyone took pictures and video of their kids ringing the birthday bell that they posted on social media. On top of that, it created lifelong memories. I have had several customers come up to me since we closed saying that was the one thing they miss the most!

I had one more question to ask … “How long should the Birthday Club last?” Some stores aged you out at 10 years old, some at 12 years old. I wondered what my customers thought.

When I asked that question of my fans on Facebook one mom answered, “40?”

I didn’t need any more answers (although I got several that echoed her sentiment). I knew right then and there our Birthday Club would have no age limit. Sure, some of the parents and grandparents used their postcards to buy gifts for the little ones. Some, however, bought stuff for themselves. One young lady celebrated her 96th birthday by ringing the bell and buying two new decks of cards.

Without asking my customers, I might have structured the Birthday Club quite differently and it wouldn’t have been the successful program it was.

Toy House Birthday Bell

Find out what your customers want. Give them that and a little more.

We only had the Birthday Club and the Birthday Bell in the last decade of our operations, but it quickly became the highlight and focal point of a visit to Toy House. The bell was engraved and now rests in the capable hands of Ella Sharp Museum where they pull it out for special displays of Jackson’s history.

-Phil Wrzesinski
www.PhilsForum.com

PS The Birthday Club worked on a variety of different levels. The ringing of the larger-than-life, 32-pound brass bell was about creating memories and spreading the word through social media posts. Rarely a day went by that we weren’t tagged in a photo or video somewhere. The $10 gift certificate was an act of generosity that outshone our competitors and positioned us as being more customer-centric than they were with all the strings attached. The no expiration on the postcard allowed customers flexibility for using it whenever it worked best for them. One family saved them all up and made a family trip in for everyone to spend their cards on one special day. One family was always traveling around their daughter’s birthday so they appreciated not having to “use-it-or-lose-it.” Another family held it for their son to celebrate his December birthday in July. Any time you can delight your customers, you should.

PPS If Goodyear had asked its dealers (its customers), I’m sure they could have helped create an even better system that would surprise and delight the end-users more than the frustrations they caused yesterday.

How to Find Out Your Business Reputation

Some of you read them. Some of you don’t. I often get asked why each blog post has a Postscript (PS) or two. Postscripts are also called “afterthoughts.” In the case of my blog, I use them to reinforce different points made in the post, without clunking up the writing. I also use them to clarify and/or sum up something I’ve said. Often the PS is an action step or an application of the idea posed by the post. Sometimes it is a humorous anecdote or story from my past experiences.

Sometimes the PS hints at the next post. That was the case yesterday.

According to Roy H. Williams, aka The Wizard of Ads, your brand is “every single interaction someone has with your business, plus how they feel about it.”

In other words, your brand is not your slogan, your color scheme, or your logo. It is the way people feel about your business. It is your reputation.

In 2005 I wanted to know what people thought and felt about Toy House. Before I could create a stronger brand, I had to know from where I was starting. To do that, I needed to do a survey. Here is what I did.

LOCAL COLLEGE STATISTICS CLASS

Image result for phone surveyI contacted a professor at Spring Arbor University who taught statistics. Fortunately I already knew him. We had met at a networking event (one more reason why you should attend those events).

I told him what I wanted to do. I had a survey. I had the questions. I just needed someone to figure out the sample size, do the calling, and compile the results. It would be a live exercise for his statistics students. I agreed that I would write a letter of recommendation for all the students who participated, and that I would host a pizza party for the students when they had the results.

The professor thought it would be a fun exercise, and put it into his lesson plan at the appropriate time.

The students did the math and figured out we would need a sample size of 400 Jackson County residents to accurately measure the entire county within an acceptable margin of error. They also devised a random way to find those 400 people using the phone book. Each of the twenty students was then tasked with getting twenty survey results back within a two-week window.

QUESTION #1

The script I gave the students came from Roy. In a class I took, he showed me how to get an accurate assessment of where Toy House stood in the minds of Jackson County residents. It also showed how I compared to other stores selling toys in the area.

When someone answered the phone, the student would say …

“Hello, my name is (____). I am a Spring Arbor University student. My statistics class is doing a survey on toy shopping habits in Jackson County. Can I ask you a couple questions?”

If they said yes, the first question was this …

“Please name all the stores you can think of that sell toys in Jackson.”

The students had a worksheet with all the possible places listed and a few blanks for some out-of-the-box thinkers. As the person named stores, the student would number them in the order they were named. After the person stopped, the student would say, “You named (list of all stores they named). Can you think of any others?” This went on until the person said they could not think of any others.

The beauty of this question is that it helps you see how much awareness people have of your existence. You also see how you compare to everyone else in your town. It was eye-opening to see what percentage of Jackson County shoppers knew we existed. The results looked like this.

  1. Toys R Us 84.1%
  2. Meijer 82.3%
  3. Walmart 69.5%
  4. Toy House 64.8%
  5. Kmart 59.1%
  6. Target 45.2%

Thirty-five percent of the population could not think of us when asked to name a store that sold toys in Jackson. That was a shocker. (So was the fact the 16% couldn’t name the iconic national brand of Toys R Us and over half the population didn’t think of Target as a place to buy toys.)

QUESTION #2

Once the first question was answered, the student would then say, “For the second part, I am going to read you a few words. From the list of stores you just gave me, I want you to tell me the first of those stores that comes to mind with each word. There is no right or wrong answer. Just blurt out the first store you think of.”

The list of words I had the students read included positive words like Affordable, Caring, Clean, Friendly, Fun, Helpful, Knowledgeable, Quality, Value, and Welcoming.

The list also included negative words like Arrogant, Cluttered, Confusing, Dark, Deceptive, Dirty, Expensive, High Pressure, Indifferent, Over-Priced, Pushy, and Rude.

The list also included one word that upon reflection could be considered either positive or negative—Cheap.

The deal here is that whoever is mentioned the most for that particular word owns that word in the minds of shoppers. That is your reputation, good or bad.

  • We owned the words Caring, Clean, Friendly, Fun, Helpful, Knowledgeable, Quality, Value and Welcoming from the positive list, and Expensive and Over-Priced from the negative list.
  • Walmart owned the words Affordable, Deceptive, Indifferent, Rude, and Cheap.
  • Kmart owned Dark and Dirty.
  • Toys R Us owned Cluttered, Confusing, High-Pressure, and Pushy.
  • Target and Meijer didn’t own a single word on the list.

(Note: in that first survey, no one owned Arrogant. We were in a virtual tie with both Walmart and Toys R Us for that word.)

The one thing I didn’t include in my list of words was all of our Core Values, but mainly because I didn’t know them in 2005 like I did in 2007. We did a second survey in 2007 adding Education and Nostalgia to the list and owned those words hands-down. The only other changes in 2007 were that Walmart tied us for Value, and we took over Arrogant.

RESULTS

There were several takeaways from these results. The first was the lack of awareness for our giant, colorful store that had been in business for 56 years in the heart of downtown Jackson. More people mentioned Walmart, yet they had only been open a couple months when this survey was done. When we did the survey again in 2007, our name recognition jumped from 64.8% to 76.0%, whereas Walmart’s only went from 69.5% to 76.5%. We were still fourth overall, but had closed the gap significantly. (TRU and Meijer held steady.)

I was okay with owning the negative words Over-Priced and Expensive. That’s a common belief of indie retailers and I expected it. I was especially okay because we also owned Value. Value and Expensive are not exclusive. Value and Over-Priced don’t go together, but for every person that thought of us as Over-Priced, there was someone else who saw the Value in our offerings. I was okay with owning Arrogant in the 2007 survey, too, since I also owned nine of the ten positive attributes.

Most importantly, we owned the things we wanted to be know for. We owned our Core Values of Helpful, Fun, Education, and Nostalgia. We owned the things we were already advertising such as Friendly, Knowledgeable, and Quality. We owned the one word that made my mom the happiest—Clean! So we knew we were on the right track with our advertising, but more importantly we were on the right track with our actions.

Advertising cannot change your reputation. It can only enhance it. Actions speak louder than words.

Now you have the blueprint for doing your own survey to find out where you stand compared to your competition. If you don’t like your results. First change your actions.

-Phil Wrzesinski
www.PhilsForum.com

PS The interesting question about doing a survey today is whether to do it online or by phone or both. Back in 2005 and 2007 most people still had landlines. Today, if you only do a phone survey with numbers generated randomly from a phone book (assuming those still exist), you’re missing out on a huge segment of the population. That will be the challenge for your statistics class to figure out. It might cost you a little more than pizza, but it will be totally worth it.

PPS One other benefit from the survey was that I had a classroom of 20 college students who now knew about our store and saw the reputation we had. That alone was worth the pizzas and a quick letter thanking them for running the survey.

“Customer Service” is Dead

I make a living teaching businesses how to raise the bar on their Customer Service. It is one of my favorite presentations that always gets rave reviews. In fact, I have several presentations built around the concept of how and why to offer better Customer Service.

Yesterday I got an email from a toy store manager who was struggling to get her new team to connect their Customer Service Training with actually serving the customers. She was looking for ideas to help them understand and deliver the concept of Great Customer Service. It was then I realized something profound …

“Customer Service” is dead.

Not the action, just the phrase. It means nothing. It has no basis for today’s workers. It is vapid and useless and needs to go on Lake Superior State University’s list of banished words (might I also suggest adding “omnichannel?”)

The phrase is meaningless because so few retail outlets actually offer anything remotely resembling what it used to mean. Think about today’s young adults. Where are they shopping in brick & mortar? Big-box discounters like Walmart and Target? Check. Discount and close-out rack stores like TJ Maxx, Marshall’s, and Home Goods? Check. Cheapie stores like Dollar General and Five Below? Check. Under-manned and under-trained department stores like Macy’s, Sears, JC Penney’s and Kohl’s? Check.

When you tell your staff to focus on offering great Customer Service, they have no point of reference to understand what you mean. Most of them have never been in a Nordstrom’s at the peak of their game. Most of them have never been in an indie store like yours that spends the time and energy you do on training your team. They have heard the phrase, but cannot connect it to anything meaningful in their experiences.

Image result for problem solvingMy response to that toy store manager was to quit training on Customer Service. Drop that word from the vocabulary and instead focus on something for which they have a frame of reference like “Problem Solving” or “Surprise and Delight.”

Problem Solving is something we all have to do in our lives, something we all have experience with doing, something to which we all can relate. Instead of telling your staff to offer better Customer Service, teach them to be better at figuring out what problem a customer has come in to solve.

It might be someone needing a birthday present, or someone changing their wardrobe, or someone just killing time. Because of all the churches downtown we often had families in nice clothes show up on a Saturday afternoon just to kill time between the wedding and the reception.

It might be someone working on a project, or someone trying to replace an heirloom, or someone who saved up their money for a big purchase. In a toy store we often got kids with allowance or baby-sitting money burning a hole in their pocket.

Whatever the problem, your team’s true goal is to figure it out and help the customer solve it. We had a dad in the store one Saturday morning with the kids. He was filling time. We showed him all the demos and displays so that he could be the hero taking his kids around the store to play. We often had customers on their way to a birthday party that started ten minutes ago. Our staff would take the item before they checked out, leave the price tag at the register, and start wrapping it just to save time (and with a nice helium balloon on top, it was the hit package at the party.)

Surprise and Delight is another frame of reference to which we can all relate. We’ve all had that moment when something really cool and unexpected happened. Work with your staff to identify those moments when you can surprise and delight customers. Maybe it is something you give out of generosity. Maybe it is saying, “Yes!” to some crazy request. Maybe it is identifying what the customer truly desires and offering not only that but a little more. Maybe it is doing something totally unexpected. On several occasions, including a few Christmas Eves, I made after-work deliveries of large, bulky toys and baby products to customers who couldn’t be home during our normal delivery hours, or who needed the items right away.

When you get your staff laser-focused on Problem Solving or finding new ways to Surprise and Delight, they can relate better and understand their role better. At the end of the day, they are raising the bar on Customer Service, whether they know it or not. You just aren’t using that phrase.

-Phil Wrzesinski
www.PhilsForum.com

PS Reinforce this concept with your staff by always having them regale the tales of when they solved a problem or delighted a customer. I always started my staff meetings with Smile Stories (our tagline and my focus with my team was, “We’re here to make you smile.”) These were the moments when the staff truly made a customer happy. Not only did it reinforce our purpose, it started our meetings off on a positive, feel-good high, which made the meeting far more productive than the typical here-is-what-you-did-wrong-last-week berating that poor managers use to start their meetings.

PPS Since closing Toy House, I have abdicated the throne of being the “Largest Independent Toy Store in America.” There are some amazing contenders for that throne. One of them is The Toy Store with locations in Lawrence and Topeka, Kansas. It was one of their managers, always seeking better ways to train her staff, who reached out to me with the question above. I have full confidence her team will be solving problems and delighting customers at every turn by the time they reach the fourth quarter. If you want to see a magical toy store, check them out if you’re ever near their towns.

Reaching the People Who “Think” They Know You

I’ve been out at YMCA Storer Camps the last couple days teaching sailing again. This time, instead of teaching the kids, I’m just working with the staff to make sure everyone is on the same page for teaching the kids. While walking to the waterfront, one of the new instructors asked me where I sail when I’m not at camp.

“Nowhere,” I replied

They called me Admiral Graybeard!

I have sailed other places in the past. I sailed for the University of Michigan Sailing Club. I sailed on the Great Lakes with a different, larger boat that the camp used to own. I’ve even sailed in races hosted by the San Diego Yacht Club (no, not The America’s Cup) a long time ago. But for now, my only chance to sail is out on Stoney Lake in camp boats.

Sailing is not my true heart’s desire. Teaching is.

At the camp I have taught Archery, Riflery (bb guns and pellet guns), Canoeing, Kayaking, Sailing, Swimming, Horseback Riding, Snorkeling, Wilderness Survival, Ropes Course Climbing, Rock Climbing, Backpacking, Biking, Team Building, Cross-Country Skiing, and Nature. Out in California I taught Earth Sciences, Astronomy, Geology, and Ecology. At Toy House I taught Car Seat Installations, How to Buy Toys, How to Buy Baby Products, How to Sell, and How to Work With Children of Special Needs. At Henry Ford Allegiance Health I teach new and expectant fathers how to be better dads. On the speaking circuit, I teach Marketing & Advertising, Customer Service, Hiring & Training, Inventory Management, Retail Math, Team Building, and Management Skills.

“Whenever you are asked if you can do a job, tell ’em, ‘Certainly I can!’ Then get busy and find out how to do it.” -Theodore Roosevelt

(Forgive me if it sounds like boasting. I’ve just said, “Certainly I can!” several times.)  What I’m really trying to do is find new and better ways to Help You (one of my Core Values) so that I can convince you that I can help you even more. Therefore, I teach.

Teaching is not only a love, it is a means to an end. If I can teach you one thing, hopefully you’ll trust me enough to want me to teach you other things. That’s one way I generate new business.

Last weekend I taught a group of toy store owners looking to capitalize on the disenfranchised Toys R Us shoppers that there are two reasons those people didn’t shop with independent specialty toy stores like theirs.

  • They don’t know you
  • They “think” they know you

That first group is fairly easy to reach. Any extra marketing or advertising you do will find them because they will be looking. That second group will be a lot harder. They have opinions about you (usually wrong) that won’t be swayed by a fancy radio or TV ad.

The best way to reach that second group is through Word-of-Mouth. Do something big to get your current customers to talk to them about you.

I told the toy retailers last week that was the only way to reach them. I was wrong. 

While I was walking down the trail to the waterfront with these soon-to-be sailing instructors I realized there is a second way … Teach!

Seriously. Just like me, you have some crazy, cool knowledge you could share. You have some wisdom and understanding of the products you sell that they won’t find just surfing the Internet. You have some tips and techniques for using and maintaining those products that might be a lifesaver for those customers.

The people who “think” they know you can be enticed to attend a free training program about the products they don’t know.

That was our Shopping for Baby 101 class. Free information about how to buy certain baby products including what to look for, what questions to ask, and what criteria to use when making buying decisions. The class was never a sales pitch, just useful information.

We picked up a lot of new customers that way who only thought we were a toy store.

We also began changing the way they thought about toys. Many of those same people who bought into our teachings about baby products also bought into how to buy toys, and became lifelong customers.

What do you include in the class? Answer these questions …

  • What info do most customers either misunderstand or not know about our products?
  • What info separates the smart customers from the average customers?
  • What questions does your staff have to answer over and over and over about the products?
  • What info would be fun and shareworthy?

Have a free class. Serve refreshments. Give out vendor-donated prizes. Make it fun and informative. You’ll sway a bunch of skeptics in the process.

-Phil Wrzesinski
www.PhilsForum.com

PS Teaching is a lot like leading. Think of your lesson plan as a path. You want to guide your audience by starting with what they know and building onto their knowledge and assumptions until it is time to break those assumptions. Then lead them back to safety with new knowledge that shows them why their assumptions were false in the first place. This template works time and time again.

PPS Teaching leads to word-of-mouth, especially when you weave in a lot of stories for your audience to share.

PPPS If you didn’t see a topic up there that might work with your group, follow this link. That list above was already way too long.

Five, Ten, Fifteen Years Ago

Do you remember the start of the Great Recession back in 2008? Did you see it coming? Were you prepared in advance, ready for it?

Okay, you can stop laughing. No one saw it coming. Very few were prepared. Yet if you remember it and are reading this blog, it means you likely survived the Great Recession.

No matter how you got through those tough years, I’ll bet your business looks a lot different now than it did in 2007. I’ll bet for most of you, today’s version of your store only merely resembles the store you had fifteen, ten, or even five years ago.

Things change. We learn new stuff. We grow. We adapt.

The business model that worked in the 80’s (open your doors, stand back, and watch the traffic roll in) wouldn’t last a month in today’s retail climate.

Here is another truth …

Flag Raising circa early 1970’s

The store you’re running five years from now will only merely resemble the store you’re running today. 

The name will be the same. The Core Values will be the same. Some of the services will be the same (some will be unnecessary, some will be enhanced). Some of the fixtures will still be there (but hopefully not in the same place as today).

August 6, 2016 Flag Raising

Yesterday, at the annual business meeting of the American Specialty Toy Retailing Association (ASTRA), the past chairperson, Ann Kienzle, gave a speech. Apparently she had heard from some ASTRA members who were there twenty-six years ago at the first meeting, where less than fifty people got together to do something for the independent specialty toy retailing industry. This past weekend the attendance was measured in the thousands.

Those people noted how ASTRA looks a lot different than it did just ten or fifteen years ago. I wasn’t there to know if they said it with admiration or disdain. I only know what Ann said at the meeting.

“I’ve heard from some of the original members of ASTRA who noted that ASTRA doesn’t look anything like it did fifteen years ago. You should be proud of that. … If we looked the same today as we did fifteen years ago, you should be hugely disappointed.”

The reality for ASTRA and for you is if you look the exact same as you did fifteen years ago, you’re likely already out of business. In fact, it would be harder to stay the same than to change and grow because the atrophy (and apathy) would take you down more and more each year.

If you have been in business the last fifteen years, as Ann said, you should be proud of what you’ve done. Your business has changed and will continue to change.

I have said often that you should always be changing. Here are previous posts that tell you how or what to change …

JULY 6, 2017 – Some Things Change, Some Things Shouldn’t

AUGUST 9, 2017 – The Biggest Thing That Needs to Change

JUNE 15, 2012 – When and What to Change

SEPTEMBER 14, 2011 – A History Lesson About Change

APRIL 14, 2009 – What to Change, What to Keep the Same

I can’t tell you exactly what your store will look like in five years. Like you, I was blindsided by the housing crisis of 2008. But if your store more closely resembles your Core Values and has changed everything else that wasn’t productive or consistent with those values, it will look like my favorite store—an OPEN one!

-Phil Wrzesinski
www.PhilsForum.com

PS When you change what needs to be changed, do me a favor. Make it Over-the-Top! Go big or go home. Put the WOW Factor into it. Give people something to talk about. I’ll give you some ideas of what I’m talking about later this week.

“Everything Cheaper Somewhere Else”

I used to hate anonymous commenting on news articles and blog posts. It is so easy to hide behind a pseudonym and take unsubstantiated potshots at people and businesses, spread rumors, and even spread downright lies.

As a retailer, I took every negative comment and review of my business personally. Some of them hurt, especially when they weren’t true. The misunderstandings were one thing but the outright lies were the worst. They cut to the bone.

I remember one day in the infancy of online news when a fellow downtown business owner alerted me to comments posted on an online news story that attacked both my store and me personally. He warned me not to read them. I didn’t heed his warnings.

One person had taken it upon him or herself to just rip the business up one side and down the other, calling us, among other things, price-gougers who were just out to destroy the little people in town. This person claimed that he or she could find everything we sold in our store cheaper online.

I took offense to the first part. The person posting the comment had no idea what I paid myself or my staff or our profit margin or what we gave to charity or what causes we supported. I am a forgiving person, though. I will forgive them their ignorance.

The second part, however, was pretty much true. Not only could that person show you the items cheaper, I probably could, too. After all, I had Internet access. I could also show you sites and stores where just about everything we sold was more expensive than our prices. That exists, too.

In fact, if prices weren’t fluid across different channels, Retail would look a whole lot different and be a lot less fun. Everyone would pretty much do the same thing and charge the same for it. Yawn.

Image result for valueRetail is a game, and the game can be boiled down to this … Find the Value you can give the customer that will make it worthwhile for them to pay the price you wish to charge.

At the ballpark they charge you more for a single beer than you would pay for a twelve-pack at the store. You buy it because you want to drink a beer during the game. There is enough Value in enjoying that beer while watching the game that makes you pay the price. (Don’t want to pay their outrageous prices? You can eat before you go to the ballpark. Most people can handle 3-4 hours between eating. You can also drink water for free. They have to provide it to you.)

People call them price-gougers all the time. It doesn’t stop them from raising their prices and making money. They offer you the Value of being at the game and watching the action in person.

The real question you need to ask yourself as a retailer is … What Value are you adding to the equation and will that Value be enough to get people to pay your prices?

You can add Value in several ways. You can:

  • Offer services other stores don’t have (i.e. layaway, free gift-wrapping, assembly, delivery)
  • Curate the selection to help customers get only the best solutions
  • Align your business with a social cause
  • Offer follow-up services (such as the free 30-day riding tuneup that we used to offer with every bike we sold)
  • Build relationships to the point that the customer feels as much ownership in your store as you do.

Any one of those is a way to “play” the Retail Game. Play more than a few of them and you’ll never worry about how someone can find “everything cheaper somewhere else.”

Were we the lowest priced game in town? Nope. Never tried to win that race to the bottom. But in a 2007 survey of Jackson County residents about stores that sell toys in Jackson, we were rated as having the highest “Value” ahead of Walmart, Target, Toys R Us, Kmart, and Meijer (all whom love to advertise their “lowest prices”.)

What Value are you adding to the equation?

-Phil Wrzesinski
www.PhilsForum.com

PS I have a good friend also named Phil who also ran a toy and baby store in the other Jackson (MS) who never liked MAP (Minimum Advertised Pricing) because it made everyone price their goods at the same price. He said true merchants have no problem with the undercutting of prices on the Internet because they know how to offer Value and make sales at higher margins. As much as you hate to admit it, he’s right. MAP only protects you at the margin the vendor thinks you should make, not the margin you deserve for all the value you offer.

PPS As for anonymous negative comments online, if they are an attack on your character or the character of your business, ignore them completely. Your actions speak louder than your words. Use your actions to prove that person wrong. If the comments are simply something misunderstood, you can respond for clarification, but only if you can substantiate your claims without putting down the person who made the comment. More often than not, however, it is best to ignore anonymous comments, period. I’ll talk about how to respond to Reviews in a future post.

PPPS A few of those ways to play involve the skills and training you give to your front line staff. As I pointed out before, that is probably the easiest way to add the kind of Value your competitors are not adding to their equations.

KB-Toys Making a Comeback(?)

KB-Toys is coming back from the dead. The toy retailer that went bankrupt in 2009 is going to stage a comeback to try to pick up some of the business dropped by the closing of Toys R Us (TRU). According to one article, they will likely have a bunch of pop-ups this fall and more permanent locations by next year.

(picture from edplay magazine)

My expectation is that they won’t pick up as much of the toy industry as they think.

When TRU closed they were still doing billions of dollars in sales. They still had over 100 million customers. They actually showed a profit last year. Unfortunately it wasn’t enough to pay the massive debt they had acquired.

While a lot of uneducated pundits and many comments on several articles about Toys R Us closing want to blame Walmart and Amazon for their demise, those two companies had already taken their sizable bites out of TRU’s hide. People who wanted to shop purely on price or convenience were already going to Walmart and buying toys with their groceries. People who knew exactly what they wanted and didn’t want to leave the house to get it were already shopping on Amazon.

The customers still shopping at Toys R Us (over 100 million times, mind you) were going there for one of two things …

  • The Experience
  • The Selection

As an independent toy store owner who offered events, demos, and a fun, friendly environment for shopping, I can rightfully roll my eyes when someone mentions the “experience” of going to a Toys R Us. In fact, most of your independent toy stores will be able to offer a consistently better “experience” than going to TRU. But the customers going there weren’t comparing it to an indie toy store. They were comparing it to Walmart or Target.

You never heard a young kid pleading, “Please, take me to Walmart, puhleeeeezzzze!”

The Selection crowd was going to Toys R Us to browse the aisles. Amazon, as incredible as it is, isn’t built for browsing. Oh sure, you can search stuff on Amazon. As of last September Amazon was closing in on Google as the primary place people go to search for products. But Amazon searching is not the same as browsing. You still need a starting point.

If you want to walk aisles, touch and feel products, and get inspired, you have to go to a brick & mortar store to do that. Outside of a handful of my friends in the independent, specialty toy industry, no one had a larger selection of toys to browse than TRU. Customers went there because it was a better selection and an easier browse than the cramped, too narrow, too tall, too messy aisles of a typical Walmart or Target store.

When KB-Toys opens their pop-ups this fall they won’t have either The Experience or The Selection to truly catch the ball dropped by TRU. Sure, they will make sales. The pop-up model has been proven to be effective to an extent. Whether it will be enough to jump back into the toy market full fledged, however, time will tell. My guess is it won’t be enough and KB will become a perennial pop-up along the lines of Halloween USA. (At least that is what I would advise them to do if they were to ask me.)

The lesson here for specialty retailers like you is to recognize the different types of customers and why they shop at the different competitors you face.

Walmart is all about price and convenience. The cheaper the better. Amazon is for when you know (roughly) what you want, and you don’t want to go out to get it. Your category killers (JoAnn’s, Michael’s Toys R Us, Cabela’s, Barnes & Noble, PetSmart, et al) are more about Experience and Selection. Of the three, the one who most closely shares your customers is the category killer. Your growth is dependent on how many of those customers you can peel away. You already know you can beat them on Experience. Tomorrow we’ll talk about how you can beat them on Selection, too.

-Phil Wrzesinski
www.PhilsForum.com

PS The toy industry, with the closing of Toys R Us, offers a lot of opportunity for different stores to pick up the slack. There will be a lot of disenfranchised customers. Most everyone in the channel from the big box stores to Amazon to the indie stores stand to gain from their disappearance. The biggest winners will be those who have the most compelling message to the former TRU customers. Knowing why they were still choosing TRU over Walmart and Amazon gives you the heads up on what to say to get them to notice you.

Yes I Have Heard About Toys R Us

I was tagged seventeen times on Facebook last week about Toys R Us pending liquidation, wondering if I had seen the news.

Friends, I write a blog about retail. I do workshops for retailers. I am a presenter at the upcoming American Specialty Toy Retailing Association (ASTRA). I subscribe to three news digests specifically about retail. I subscribe to two national news digests. I belong to two retail groups on Facebook and one on LinkedIn.

I appreciate you checking with me to see if I have heard the new. Thanks. I have heard the news.

With that said, I do appreciate the links to articles. Most of the articles reiterate the same info. Barring a last-second deal, TRU is likely to go into Chapter 7 Bankruptcy, which means liquidation of all assets.

What I have found interesting has been the comments after each article. Most of the people commenting have no clue what happened to Toys R Us. Most of them get it dead wrong, blaming Amazon for their demise.

Here is what really happened …

The decline of Toys R Us started in 1992 when Walmart surpassed them in total toy sales. TRU took the wrong road and tried to beat Walmart at Walmart’s game—lower prices. TRU lost big time. So did the entire toy industry because “toys” were now considered a commodity instead of the tool they truly are.

While TRU was floundering, big money venture capitalists came in and bought the chain, primarily because of their real estate value. The second misstep happened here. In simplistic terms, the VC’s leveraged TRU and saddled them with so much debt that they didn’t have the capital to change with the tide as other big chains were going online, updating infrastructure, investing in better technology, etc.

At the same time, the toy industry went into decline. Parents were buying more electronics and spending less on traditional toys. While TRU was able to get into electronics, they also were getting into a lower profit margin item with more big competitors, which also didn’t help their bottom line.

Shortly after that the economy tanked. While the economy has recovered, not all segments have recovered the same.

Amazon was more the straw on the camel’s back than the cause. The decision to play Walmart’s game was the real cause. It gave away TRU’s one true advantage over Walmart, Target, Dollar General, and even Amazon—being the trusted resource for the quality toys that encourage imagination and creativity in children, true tools that required careful thought and selection. Once that was lost, TRU was in trouble.

Losing capital because of the debt was the second factor because the one playing card left for TRU was to be the destination store parents wanted to take their children. But without cash, they cut back on staffing,they cut back on updating their store and creating an experience. TRU was nothing more than a big-box discounter without the groceries, hardware, and home accessories.

One article asked the question where the TRU shoppers were going to go once TRU was gone. The comments on that one made me laugh out loud. Several said that the people had already chosen, since TRU was in bankruptcy and closing. Friends, TRU did $11 billion dollars in sales last year. That’s billion with a “B”! The average ticket in toys is around $40, in electronics it is much higher, but even at $100/transaction, that’s 110 million customers! That’s a lot of traffic. They weren’t doing everything wrong. They just didn’t have the cash to do everything right.

You can blame their demise on three things.

  • Allowing their largest competitor to name the terms
  • Not updating the infrastructure and staying on the cutting edge
  • Not having the cash to transform the store into one that can compete in the new retail landscape

Your lesson in all of this is simple.

  • Define the retail game not by what your competitors do, but by what you do.
  • Stay current and up with the times.
  • Keep some money in reserve.

More importantly, do the one thing you can do better than all the big guys out there. Take better care of your customers than they expect and make a visit to your store an exhilarating experience.

-Phil Wrzesinski
www.PhilsForum.com

PS Where do I think that $11 billion is going to go? Some of it will go to Amazon, Target, Walmart, etc. Some of it will go to Best Buy and Apple Stores. But there is a big part of TRU’s base that still believed in the shopping experience. Face it, a large in-store selection and the fun of being in that kind of store was the one card they had left. Amazon cannot duplicate that. Neither can the other big guys. Heck, even Barnes & Noble struggled with it. The independent toy stores in towns with closing TRU’s better be on the ball. If they can demonstrate their ability to give shoppers a great experience while touting their well-curated selection and convenient, friendly services, there is a lot of money left on the table.

Other Uses for Market Share Knowledge

The first time I was truly introduced to the idea of calculating my market share was from Roy H. William’s second book Secret Formulas of the Wizard of Ads. It was 2003 and I was trying to learn all I could about marketing and advertising. My math was rudimentary. I didn’t adjust for local economy or youth population. Simply raw numbers. I came up with our market share at about 12%.

At first I was a little disappointed. Roy teaches that the gold standard for any business is 30% market share. That’s a big number. Despite its dominance, even Walmart only has 25% of the grocery market. The optimist in me, however, said 12% was a good starting point and now I had a goal to shoot for. I had just read an article (which 14 years later I cannot find—go figure) that said only 9% of the general public was inclined to shop at local indie stores in the first place. I was already 3 points above that number.

I never did reach 30%, but I did have some other revelations about my Market Share number.

Image result for upward trend free clipartFirst, after going back and adjusting my market size for economy and youth population, our 12% was really closer to 16%. It stayed in that neighborhood until a Walmart Supercenter opened in 2005. We dropped into the 14-15% neighborhood and stayed there until Amazon became a serious player in the toy industry around 2010-2011. We stayed around 12.5% for the next several years until we closed. Even though you can beat a big guy head-to-head, the more big guys in town, the more businesses taking a piece out of the same pie.

Second, that original 12% number got me thinking. A full eighty-eight percent of the market were NOT currently shopping with me. That’s almost 9 out of 10 people. When you look at it that way, it changes your perspective on a lot of things.

In terms of marketing and advertising I realized I didn’t need to reach the entire market to grow my business. If I could just convince 1 more person out of 20 people to shop with me I would have growth beyond my wildest dreams. I really only needed to convince about 2 more people out of 100 to shop with me to have double digit growth. If you only are trying to sway two people out of a hundred you might say something totally different than if you’re trying to sway fifty out of a hundred. With two you can say something direct and personal to a small audience that gets right to the heart of the matter. Trying to reach fifty, you say something generic and non-offensive hoping other forces will come into play to swing them to your side.

In terms of product selection I realized I didn’t have to be all things to all people. I could pick and choose the products I wanted based on my beliefs in the products and how they benefited my customers. Not only does that help with the buying decisions, it helped us stay true to our core values in terms of what we sold and why.

Speaking of Core Values, we didn’t have to be someone we were not.

Meg Cabot said it best when she said, “You’re not a hundred dollar bill. Not everyone is going to like you.” We didn’t have to be liked by everyone. Sixteen percent is a pretty low approval rating. Yet it was higher than any other single store in our market.

Knowledge is power (France is bacon). Knowing your market share might be the piece of knowledge that finally liberates the way you think about your place in the market and the risks you can now safely take with your business.

-Phil Wrzesinski
www.PhilsForum.com

PS Let me first admit that 16% is actually pretty high for an indie retailer. Many of you might do the math and find yourself in the 3-5% range, especially if you have other indie retailers fighting for the 9% that skews shop local. But before I pat myself on the back, you should know that in the early 1980’s we were at that mythical 30% gold standard and then some. Of course that was before Jackson got Walmart, Target, Toys R Us, Sam’s Club, a second Meijer, a new KMart, and a whole slew of other big chains in town (without a population growth to match), and well before Al Gore invented the Internet. We were the large store that was here first. That’s what gave us much of our edge. But even if you do find yourself in the 3-5% range, if the market is big enough, you can do a lot of business with only 3-5% of your market. Plus, when you only have to convince 1 more person out of 100 to get 33% growth, advertising becomes a whole lot more fun.

PPS It used to upset me that about half my friends were not regular shoppers at my store. My parents saw about that same percentage from their friends. Then it dawned on me … Fifty percent of my friends versus twelve percent of the general population. I was ahead of the game. I slept much better that night.