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The Five Drivers of Traffic – Price

I posted that JC Penney was struggling because it was losing in all five of the main drivers of traffic… Price, Product, Convenience, Trust and Delight.  Let’s look at each one of them separately.


There are two pricing schemes that can work to own Price as a driver of traffic – Sales & Discounts and Everyday Low Pricing.

Sales & Discounts is when you constantly have some type of sale or coupon or promotion going on. The tricky part of this is actually making your sales and discounts be worth something. Before the Internet, the simple perception of a sale or discount was enough to draw traffic. But today’s smartphone-savvy shoppers will call you out if all you do is jack up your prices and then offer a discount off that inflated and unrealistic price.

The other downside to Sales & Discounts is that you have to constantly be ramping up the hype machine in your advertising and marketing. Or you have to be sending out coupons and mailers enticing people to stop in.

Everyday Low Pricing is quite different. Instead of the gimmicks, sales and coupons, you simply lower your prices below everyone else and keep them there. It is certainly more trustworthy. It is also easier for customers to check to see if you truly are low price. The hype is gone, but if you do have the best prices, you will get the traffic and sales.

The Internet makes this driver quite difficult for most independents to compete. Pretty much almost everything you sell can be found online, and most often for less.  Unless you only sell items that are strictly protected with Minimum Ad Price (MAP) policies, it is almost impossible to own this driver.

Also remember that you will be competing directly with major chains like Wal-Mart and Target who have three distinct advantages over you.

  • Lower overhead through amazing operating efficiencies
  • Bullying power to get better prices and rebates from vendors
  • Billions of dollars in advertising

Of all the drivers, this one is the least favorable for indie retailers and I wouldn’t recommend it as a strategy.

You still have to have prices that are attractive, however. Price may only be one of five factors that drives traffic, but it is still one of the biggest factors in driving actual purchases.

Check out this free download – Pricing for Profit – that will show you how to make your prices attractive in a price-sensitive retail climate.

-Phil Wrzesinski

PS If you do have a price advantage, you have two choices. Shout it to the world, or raise your prices and start pocketing the difference. My dad always said we should never be below our competitors’ prices. No one thinks of us as low price, so if we’re below them, we’re just leaving money on the table.

Why JC Penney’s is Struggling

We all know about JC Penney’s decision last year to change their pricing strategy from one of Coupons, Discounts and Sales to one of Everyday Low Prices.  Ron Johnson, the CEO they hired away from Apple, warned everyone it would take some time for the transformation to take hold.

Unfortunately, the train wreck seems to be getting worse as JCP just announced a plummet of 32% in sales! I know that is a number none of us indie’s could probably withstand. Many in the world of retail are wondering if JCP will be able to withstand it.

But before everyone rushes off to blame the pricing strategy and see this as an indictment of the Everyday Low Prices scheme as being unable to work in today’s retail market, there were some other forces at work.

At the end of the day there are five primary drivers of traffic into retail stores.

  • Price
  • Product
  • Convenience
  • Trust
  • Delight

No, they do not all have equal weight. And for every customer, different factors play out in different categories. But you have to be winning in the minds of customers in at least one of those categories if you want to see traffic.

JCP was losing in all five.

Price – Their Everyday Low Prices scheme might have worked… if they had done it. They really didn’t. Their prices seemed to be changing almost as rapidly as they had before, and in ways far more confusing despite the millions they spent in advertising. No one really knew if their prices were low or not.

Product – Some say their offerings were getting worse, not better. Even if their product stayed the same, no one was going to JCP for high-quality goods or exclusive-can’t-find-anything-like-it-anywhere-else merchandise. They had given up that ground years ago.

Convenience – If JCP had any leg to stand on, this could have been it. But they did nothing to beef up or significantly increase the convenience factor. In my own experience, their checkout lines got longer (even with fewer sales – now that’s a real trick).

Trust – this is supposed to be the hallmark of the Everyday Low Prices scheme. You can trust us because we aren’t jacking you around with yo-yo pricing. Except they didn’t do that. They still yo-yo’d their prices. They made things more confusing and less trustworthy. They didn’t re-train their staff to develop trust either. They spent money on advertising their new scheme but doesn’t look like they spent a dime on training the staff.

Delight – Once again, very little done here, before, during or after. When was the last time you were actually delighted in a JCP store? Yeah, I thought so.

The cool thing is that we can all learn a lesson from this. Pick one of those five and own it. Own it with every ounce of your existence. Own it in your category so strongly that when that topic is mentioned, everyone immediately thinks of you.

The cooler thing is that you probably noticed that it wouldn’t be all that hard to own two or three of those criteria. Do that and you won’t suffer the same fate as JCP.

-Phil Wrzesinski

PS We’ll talk about all five and how to own them in upcoming posts. Stay tuned.

Are You Open To Buy?

I’ve written about Open-to-Buy programs for Independent Retailers and how difficult they are to manage.

For those of you who have also struggled with the OTB’s and want a simpler, more intuitive way to manage inventory and cash, here is a plan you can follow…

First, understand that the ultimate goal is to have the right products at the right time at the right price. There are three simple rules that apply no matter what…

  1. Don’t out-buy your terms. If you get Net 30 (30 days to pay the bill), try not to buy more than 30 days worth of products.
  2. Don’t buy anything you don’t want. Padding an order just to reach a new discount level rarely works. You usually end up marking down those extra items that you were never fully convinced of carrying and lose any discount in the process.
  3. With the exception of December Dating (for businesses that do most of their sales during the holidays), smaller orders done more frequently is always better than one or two really big orders per year, regardless of the specials.

Post those rules at the top of any OTB plan you decide to use. With those rules in mind, here is my plan…


Rank Your Vendors

The first thing you need to do is rank your vendors. Split them into three tiers.

  • Tier #1 – your top-selling vendors that help define your store, have the most of your ‘must-have’ products, sell through the fastest.
  • Tier #2 – your second level of vendors who have great products that you love to carry and sell, who are profitable and have generous terms, and who have a few of your ‘must haves’.
  • Tier #3 – all of the other vendors who are left including seasonal customers.

By knowing this information, you have a better idea of which vendors deserve more of your attention so that you do not spend your limited resources in the wrong places.

Break it Into Quarters

The next thing you should do is break up your buying schedule into the four quarters. Plot them out on a calendar. You can use the standard calendar quarters (Jan-March, April-June, etc) or break it up whichever way makes sense for your business. Some summer-based businesses consider June-August to be their “4th quarter”.  Label each quarter with what is most important for that quarter. For instance, you might label 1st quarter “Prepping for Easter”, 2nd quarter might be “Outdoor and Summer”, 3rd quarter might be “New Releases” and 4th quarter could be “Christmas!!!”

Just by labeling each quarter you get a clearer picture in your mind of where you need to focus your dollars. The mental aspect of this simple activity will alone make a huge difference.

Schedule Your Vendors Each Quarter

Here is the meat. After you have done the first two steps, take your tiered vendor list and write into the first month of each quarter all of your Tier #1 vendors. Write Tier #2 vendors into the second month. Write Tier #3 vendors into the the third month.

You’re almost done.

Now look at each quarter a little more closely. If there is a Tier #2 vendor that is more important to that quarter, move it to the first month. But be sure to move a Tier #1 vendor to the second month to compensate. Do the same with any Tier #3 vendors, especially the seasonal vendors.

Now you have a comprehensive buying schedule to follow for your year that will help you manage your inventory and cash flow a whole lot better.  Each month simply look at your list of vendors and write your orders accordingly – being sure to follow the rules at the top.

Adjust, Adjust, Adjust

Sure, you will have to adjust regularly. You might get to a new quarter and find you don’t need to order a line, or you might run out before the quarter is up. All OTB’s require constant juggling and tweaking. Just remember that for each time you add a vendor onto that month’s buying list, you should move a different vendor out to compensate. By having a list, you are now making those choices consciously.

Sure, sometimes you cannot buy within the terms, or sometimes you need to over-buy just to make sure you have enough product for the busy season because you know the company will run out. Those issues will usually be offset by the line that moves so fast you find yourself writing eight to ten orders per year.

Sure, sometimes your cash will be tight. you might spend it all up in that first month of the quarter. But at least you spent it on the most important lines for your business.

If you follow the guidelines as much as possible, you will see the payoff in the long run.


If you are placing at least four orders per year for all of your vendors, your Turn Ratio will likely outpace your industry (most hard-goods retailers like clothing, toys, hardware, furniture, etc expect about a 2.5 to 3.5 turn ratio – perishable goods like florists and grocery have much higher terms and much different OTB’s – and  four orders per vendor per year typically yields a 3.6 turn ratio or higher). 

This will increase your cash flow, while also keeping your store well-stocked.

Remember, Cash is King (and you are the adviser!)

-Phil Wrzesinski

PS For more on how to manage your inventory better including an understanding of how to calculate Turn Ratios and Gross Margin Return on Inventory, download my free eBook Inventory Management.

PPS For a list of Turn Ratios by industry go to this article on Rick Segel’s blog.

Is This the Right Price?

I just published my third book.

Welcome to the Club, Daddy is a book for expectant fathers based on the class I have been teaching twice a month at our local hospital for the last ten years. It is a funny, yet practical guide for new dads that helps them learn how to change a diaper, deal with a crying baby, understand what their wives are going through and how to support them, and addresses the top concerns most new dads are feeling.

The book is a hardcover that sells for $17.99.

My wife asked me why $17.99. Why not $19.99 or $14.99 or even $9.99?  Good question…

I chose $17.99 for a number of reasons based on my Pricing for Profit eBook.


When the perceived worth of an object meets the actual price, the item has value. This book, based on its size and being a hardcover, fits in the $12.99 to $19.99 price range. Most other books this size fall into that price range.  Fiction tends to range a little lower, business books a little higher. The better known the author, the higher yet.  Self-help falls somewhere in the middle.

So just on size/style alone, we can narrow down the price to the $14.99 to $17.99 range.

Two factors raise the perceived worth of this book. First, it will primarily be bought by women for their husbands/sons. They perceive a greater need for this information which raises the perceived worth.  Second, this will primarily be bought as a gift, which also increases the perceived worth. We will spend a little more on a gift for others than we will on ourselves.

5-10-20 RULE

People also make calculations based on the actual bill they have to pull out of their wallet.  Believe it or not, but $14.99 and $17.99 are both basically the same price to a customer. Both are a “twenty dollar item”. Since there is little distinction between the two, take the highest number that fits into the Value Equation.


Numbers themselves have stigma and perception. We generally do not like the numbers 0, 3, or 6.  Zero is lonely. Three conjures up unlucky thirteen. Six six six is the sign of the devil. Prices like $13.99 and $16.99 just don’t look as attractive as $14.99 and $17.99 for subconscious reasons.  Numbers like 5 and 7 are okay. Thanks to Las Vegas, sevens are considered lucky.

So to recap…

  • The Value Equation says the price range is $12.99 to $19.99.
  • Being a Self-Help book narrows that to $14.99 to $17.99.
  • Being a gift in a category with high perceived worth suggests the upper limit.
  • The 5-10-20 Rule says that there is little perceived difference between the lower and upper prices so it also suggests the upper limit.
  • The BOGG Rule says that sevens are okay numbers, definitely better than fives or sixes.

Therefore, the suggested retail price is $17.99.

See how that works?

-Phil Wrzesinski

PS For more on rules that govern pricing to help you pick the most attractive price for the items you sell, download the free eBook Pricing for Profit.

PPS Those who have read Welcome to the Club, Daddy all agree – that price is way too low for the amount of information given.

PPPS If you would like to sell this book in your store, contact me for wholesale prices. Margins are great, terms are generous, and this book is not sold on Amazon.

Convenience Trumps Price

I’ve been telling you all this for years. Price is not the only thing. Convenience trumps price both in the store and more importantly online, too!

Here’s the proof.

Quoting the article…

Continuum’s 2012 Service Design Report looked at data from more than 1,000 consumers across the country and uncovered the top reasons they choose whether to shop in-stores or online.

The top reasons respondents say they shop in stores are:
• For convenience (40%);
• They don’t trust the quality online (22%);
• They don’t want to pay for shipping/returns (17 %);
• For better prices (17%); and
• For personal interaction (4%).

The top reasons respondents say they shop online are:
• For convenience (43%);
• It is easier to find what they are looking for (29%);
• For better prices (25%); and
• To avoid interaction with employees (3%).

(Doing a tiny little happy dance.)

-Phil Wrzesinski

PS That begs the question… How do you become more convenient? Come to Austin, TX January 29-30 and I’ll show you.

Top Viewed Blog Posts 2012

Everyone loves Top Ten Lists.

Here is my list of my Top Ten Most Viewed Blog Posts from 2012

1. Two Thing You Can Correct Right Now – Two simple things you can do that won’t cost you an arm and a leg, but will make the next year better than the previous year.

2. Lessons From MLK Quotes – Five of my favorite quotes from Martin Luther King, Jr. and how they apply to independent retailers.

3. Two Days to Take Your Customer Service to Shareworthy Levels – Announcing a class I am teaching alongside Tim Miles at Wizard Academy on January 29-30. (You really should go!)

4. What to Do About Showrooming – We all face the problem of customers walking in with smart phones, checking out our product, asking our advice, getting our knowledge, scanning the UPC codes and buying it online. You might be surprised at my answer to this ever-growing problem.

5. This Will Be a Successful Year If… – A different, better approach to the dreaded New Year’s Resolution (Appropriate that this would make today’s list. By the way – I accomplished three out of four!)

6. Is JC Penney Making a Mistake? – They announced their new pricing policy at the beginning of last year. I had my opinions on whether it could work or not. Go see if I was right.

7. The Goldilocks Effect – I was egged on by a friend in another online group to discuss this inventory management topic about how to stock and merchandise your store to fit the needs of your customer base better. Apparently other people liked the topic, too.

8. Tell Me About a Time When… – The absolute best interview questions you should be asking!

9. Shopping Local Benefit Salt Lake City – Mostly a link to a great article about a study done in Salt Lake City. Either I have a lot of fans in Salt Lake City or people love to read more articles about the positive impact of shopping local. (You should forward the article to everyone you know in your local and county government economic development positions.)

10. Fair and Square – Another post about the JC Penney pricing fiasco. Their idea was right. Their implementation was wrong, wrong, wrong. Don’t look at their failure as a policy problem, only an implementation problem.

Definitely an interesting mix of posts, don’t you think? Covers a wide gamut from Hiring to Customer Service to Inventory Management to Shop Local to Pricing to Leadership.

Thank you to all who are following publicly, lurking quietly, or just plain stumbling onto this blog by accident. If there are topics you would like me to write about more in 2013, please let me know. I get the feeling the indie retail movement is on the cusp of some serious positive growth over the next few years.

-Phil Wrzesinski

PS One of the reasons I believe we’ll see more people Shop Local, Shop Independent is because of a sense of community that they feel at your stores. If you have not yet read the book Pendulum, you need to go get it today. “Sense of Community” will be a driving force for the next decade at least. You should be playing up that aspect of your business.

Fair and Square

My wife is frustrated (and thankfully, it is not my fault). She used to love going to JC Penney. Well, love might be a strong word for someone who finds shopping a chore. But now she finds that JCP rarely makes it on her list. And she is not alone. JC Penney just reported that same-store sales fell a whopping 26.1%!

Many are blaming their new Fair and Square pricing policy.

My wife is one of them.

She says it is neither Fair nor Square. As she pointed out to me last night, our prices are Fair and Square. They are clearly marked on every package. There are no misleading header cards on the racks. There are no surprises at the register. There are no gimmicks, exclusions, mark-it-up-to-mark-it-down contrived sales. There are no hidden fees, add-ons, hoops or loopholes. The price you see is the price you pay.

That is what JC Penney promised us when they launched this new pricing policy at the beginning of the year. The problem isn’t in the policy. The problem is they failed to deliver what they promised.

Many pundits will wrongly claim that customers want sales and deals and JCP’s failure is because they aren’t offering enough deals. I will argue that their failure is because they didn’t actually make their prices Fair and Square. Every time my wife went in, the prices were not clearly marked, some items had no price at all!  The header cards rarely matched the price on the product and even less the price at the register. The prices seemed to fluctuate faster than the stock market.

Before you listen to the pundits try to tell you that customers only want sales and discounts, understand that many retailers are quite successful offering pricing that is fair, clearly marked, and not jumping all over the place. JC Penney promised us that back in January. Empty promises lead to empty stores.

-Phil Wrzesinski

PS There is a Fair and Square pricing policy that keeps your customers happy and your margins strong enough to be profitable. Download the free eBook Pricing for Profit here.

I’m Gonna Raise Your Sales 300%!

I was at a conference where one of the speakers promised us he could raise our sales 300%!

Yeah, like me, you’re all laughing at him.  Huckster, Snake Oil Salesman, Liar Liar Pants on Fire and other derogatory terms crossed your mind.  But after further review, I think his plan was solid and would probably work.  Short term.

His plan was simple.*  Slash your prices by 50%.  Increase your advertising by 400%.  In short time your sales will be 300% greater than the same period last year.  You’ll be broke and filing bankruptcy, he was quick to note, but you’ll be happy because sales are up!

And therein lies the problem…

Ask any retailer, “How’s biz?” and they’ll either be happy because sales are up or sad because sales are down.  Folks, we’re tying our mood to the wrong numbers.  It isn’t about Sales.  It is about Profits.  Sure, increased sales make it easier to be profitable.  But they don’t guarantee it.

I’m still waiting on the savvy retailer, who when asked, “How’s biz?” tells me, “Awesome! I was able to cut three points off my COGS and finally got a handle on expenses.  Profit this year is well ahead of last year.”

Then again, I think most retailers are not even calculating such numbers.  They are just waiting until the year end when the accountant tells them if they made any money or not.

I get that.  Retail accounting can be scary.  Even though I’ve written a book on the complete financial analysis of the typical toy store and have also written an easy guide to reading your financial statements (those reports Quickbooks and all other accounting software can print with just a couple clicks), I’m still constantly trying to wrap my head around our financials.

But that is far better than putting my head in the sand and ignoring those numbers.  Especially now with the 4th quarter finally under way.

Now is the time to figure out a new pricing structure that might increase your gross profit.
Now is the time to figure out which expenses are out of whack and need attention.
Now is the time to figure out what inventory isn’t moving and needs to be marked down.
Now is the time to figure out where are the holes in your training program.

-Phil Wrzesinski

*PS  Don’t try his plan.  Please don’t try his plan.  Even he didn’t want anyone to try his plan.  He was just trying to make a point (and I was, too).  If you try anything, try measuring your financials once a month.  Yeah, it’s more work on your part.  Yeah, it’s way more rewarding when you do that work right!  Waaayyy more rewarding.

Convenience Trumps Price

In case you need more proof that not every customer shops on price, a new study on Back-to-School shopping by WSL/Strategic Retail shows that only 26% of customers are chasing BTS price promotions to do their shopping.

Instead they are shopping based on Convenience.  Seventy five percent are going to stores where they believe they can get everything all at once, regardless of the price.  Sure, most of them are going to a big-box discounter, but that isn’t the issue.
The key word here is Convenience.  What are you doing to offer that to your customers?  Do you have services like online shopping with same day delivery?  Do you offer a wide selection that covers everything your customer needs?  Do you have an easy-to-get-to location? Front door parking? Delivery?  Personal shoppers?  A fast checkout?  Free gift-wrapping? (Heck gift-wrapping, period.)
Convenience comes in many forms.  The convenience stores that dot every other corner were designed to make shopping quick and easy when you only needed an item or two.  You paid more for a roll of tape or a gallon of milk, but you saved time and hassle.  
Personal shoppers used to be a sign that your store was expensive.  But what is the fine line between a helpful employee and a personal shopper?  You already have the helpful employees. (Right?)
Convenience trumps price.  That is why people will pay more for a bunch of screws at Wal-Mart than at the local hardware store – because they were already at Wal-Mart for BTS shopping.  
You have convenience built into your model in many ways.  The study shows that now is the time to play them up.
Phil Wrzesinski
PS  Not all conveniences are the same.  Be specific about how you are convenient, and more importantly, how it benefits your customers. (We offer free giftwrapping so that you are never late for the party.)

The Price is Right

A recent survey done by The NPD Group states that 85% of customers say that Price will be an extremely important or important factor in where they decide to shop in the future.

I would agree.  In fact, I am surprised it is not higher because almost every single buying decision ultimately ends up being about price.

But before you go around slashing prices, you ought to look at how price influences each purchase.

It starts with what I call the Value Equation.

Does the actual price on the product match the perceived worth of the product?  If it does, the item has Value and you buy it.  That is the decision you and I and just about everyone else makes before we decide to buy an item.  Every single time.  Sometimes that decision takes milliseconds, sometimes it takes days or even weeks.  That is how the buying process works.

You look at an item, decide how much it is worth to you, and then look at the actual price.  If that price is much higher, you are not buying.  If that price is much lower, you wonder what is wrong with it.  Maybe it does not do what you thought? Maybe it is cheaper quality than you thought?  Until you feel comfortable with the reason why it is much less expensive than you expected, you are not yet buying.

The key to successfully pricing your merchandise is to make sure the actual price matches the price the customer has in her mind.  Often you might find you are pricing things too low.

Pricing is important.  So is merchandising (it raises the perceived worth).  So is having the right products.  So is taking care of the customer.

Digging deeper into the statistics from The NPD Group, you will find that…
15% of the population did not list Price as “extremely important” or even simply “important”.
56% said Customer Service was extremely important/important.
60% said Convenience of Location was extremely important/important.
60% said Ease of Shopping was extremely important/important.

Get the price right and the do all that other stuff and the sales and profits will come.

-Phil Wrzesinski

PS To learn more about how Perception plays a role in Pricing, download my FREE eBook Pricing for Profit.  You will be surprised at how many pricing mistakes you have made that are costing you real money.