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.
CONVENIENCE
Convenience is a tricky subject because there are many different ways to define convenience.
You could be considered convenient if it is quick and easy to get in and out of your store. Heck, we have a whole category of stores like that called, conveniently Convenience Stores. Smaller stores located on intersections with front door parking, a handful of commodity products, and rarely ever a line at the register. You can charge a lot more for a product when you have this kind of convenience.
You could be considered convenient if you have such a wide selection of product that it truly is one-stop-shopping. This is the road Wal-Mart and Target Supercenters are taking. Add in the groceries and you can get everything you want under one roof. How convenient!
You could be considered convenient if you offer services that make your customer’s job so much easier. Free giftwrapping is such a service. We get many customers the day of the birthday party or baby shower who stop in on their way. They get the gift, get it wrapped, buy a card and off they go to the party. Repair services, installation services, delivery and assembly services are matters of convenience to a customer.
The first and last of those three examples are fairly easy for indie retailers to own.
We can certainly be quick stops for customers who don’t want the hassle of parking in a huge lot, walking half a mile to the front door, navigating a 200,000 square foot store to find a $20 gift, only to now have to wait in line behind someone juggling three kids and two shopping carts in a line staffed by a minimum-wage, poorly-trained, gum-chewing clerk.
We can offer services that make life easier on our customers like those mentioned above.
But I will also argue that we can, in some ways, also own that middle example. Do you have everything to “complete” a sale? For instance, if someone buys a model, do you also sell them the glue and paint and a display case to show off the finished product? If someone buys a pair of shoes do you also have the socks, stockings, inserts, shoe polish, shoe-trees, suede brushes, and waterproofing to complete the sale?
Whatever you sell, you can become the “convenient” store in your customer’s mind if she is able to buy everything she needs to complete that purchase. If she has to go to another store to finish the purchase, you lose that driver.
Convenience comes in many forms. Although you may not be the one-stop-shop that a Wal-Mart Supercenter is, you can (and should) still own convenience in many other ways.
-Phil Wrzesinski
www.PhilsForum.com
PS Completing the Sale is a major component of my staff training. I want my staff thinking about that with every customer. It isn’t so much about selling a product as it is about fulfilling a need or solving a problem. When you start thinking like that you will see two things happen. First, your average sales will increase. Second, your customers will be happier. Yes, your customers will spend more and be happier at the same time!
Author: Phil Wrzesinski
A Worthy Goal
My dear friend Dr. Rick Wilson, DMD posted an incredibly simple thought that many of us forget.
To steal his line… Are we in the business to “get new customers” or “meet someone new and make a difference for them?”
One helps the short-term and costs a lot, one helps the long-term and costs a little. Choose wisely, grasshopper.
-Phil Wrzesinski
www.PhilsForum.com
PS Yes, I read a lot of stuff outside of my industry. You should, too. There are some amazing lessons when you go looking for them.
The Five Drivers of Traffic – Product
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.
PRODUCT
Products are the stars. Without them, you don’t have a business. You have to have products that people want. Products typically fall into three categories:
- Commodities – the products everyone wants and most stores carry. Products designed for the masses (and usually sold at the masses).
- Niche – the products that are different, maybe with special features, that appeal to only a small but loyal segment of the market.
- Custom – the unique, one-of-a-kind products such as hand-crafted artwork, customer-customized products, and items so different you wouldn’t expect to sell more than one.
To own the traffic driver of Product, you have to own at least one of those three categories.
Commodities
This is probably the toughest for an independent to own, because the mass market wants this category big time. They believe this is their category so much that they try to commoditize products that might otherwise seem niche.
The other problem with this category is that price drives more of the purchasing decisions for commodities. The mass advertises the price constantly, which sets the perceived worth in the customer’s mind.
But if you own the Commodities (at the right price), you can draw the masses.
Niche
This used to be the domain of the independent toy store. Our model was easy. Carry the stuff Toys R Us and Wal-Mart didn’t carry and you can compete easily with the mass. The profit margin was better on these toys, and there was plenty of product available that wasn’t in the big boxes.
Toys R Us and Target changed that game as they kept buying more and more of the niche products. Now the Internet is trying to take over this category. The Internet is built for the niche market. One website can reach all 500 potential customers for a niche product much more easily than trying to get that product into stores in the 500 markets where those people live.
There are still plenty of niche products out there not carried in the big boxes, but the list of products not sold online gets smaller every year. If you can find niche products that are also MAP protected (see the discussion on Price), then you can still own the Product driver.
Own this category if you want to attract customers who are less price-focused and more solution-oriented.
Custom
This is still a wide-open category. The big boxes don’t want it. Not a high enough turn-ratio. The Internet is struggling with this category because it is hard to attract people to check out product they don’t know they want, and in most cases they prefer to see and touch first before falling in love with it. Individual artists can be successful online, but mainly because they have built a tribe of followers. The independent retailers are also wary because it takes a lot of commitment and cash to get into the world of custom, one-of-a-kind offerings. Do it poorly and you’ll go broke.
To own this category, you need a savvy buyer who can guess the wants and desires of the customers before they walk through the door, and can hunt down those products and fill your store with them. If you have a buyer like that, keep her. They are a rare breed.
The fun part of owning a store full of custom products is that the mix is always changing, the delight factor is high, and your most loyal customers will come back often just to see what is new. If you can own this category, you can earn a lot of word-of-mouth, too.
If you want to own Product as a driver of traffic, choose one of those three categories and own it lock, stock and barrel. They each draw a different type of crowd and require a different type of advertising.
Then again, there is some wisdom in not worrying about owning any of the categories of Product but just dabbling in all three.
- Carry some Commodities to draw the masses.
- Carry some Niche for the people wanting something different (and to make some profit.)
- Carry some Custom to keep the store ever changing and unique.
If you can afford the lower profits on the commodities and the lower turn ratios on the customs, you can have a fun mix that has something for everyone. Focus on owning one of the other major drivers of traffic.
-Phil Wrzesinski
www.PhilsForum.com
PS Some of you might wonder why I spent the first 90% of this post telling you how to own a category, and then end it with a paragraph about why not to own any of them. I do so because I want you to consciously make that choice. I want you to decide what you want to be, and be it by choice, not happenstance. Knowledge is Power (France is Bacon).
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.
PRICE
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
www.PhilsForum.com
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
www.PhilsForum.com
PS We’ll talk about all five and how to own them in upcoming posts. Stay tuned.
Two Types of Customers (and Other Generalities)
(Warning: there are enough bullets in this post for the Zombie Apocalypse. You may want to save it in your favorites just in case…)
I sat through a webinar today on advertising. The hosts (whose names shall be withheld to protect the ignorant innocent) said there are three types of customers:
- Frequent (loyal)
- Infrequent (fickle)
- New (not yet a customer)
Now I like There-are lists as much as the next person. My current favorite is…
There are three types of people in this world. Those who are good at math and those who aren’t.
Those of you who know me, however, know I believe there are only two types of customers:
- Transactional
- Relational.
But this webinar did get me thinking… You could also say there are only these two types of customers:
- Those who shop with you
- Those who do not shop with you
And you can break that second group down into three subgroups:
- Those who do not shop with you because they know you
- Those who do not shop with you because they think they know you (but don’t)
- Those who do not shop with you because they don’t know you
And while we’re on this list kick, your customers come from three primary sources:
- Repeat Traffic
- Referral Traffic
- Advertising-driven Traffic
What percentage of each do you think is in your store today?
That last one – Advertising-Driven Traffic – is really only aimed at two people – Those who think they know you and those who don’t know you. What can you tell those people that will change their minds? Go write that ad.
-Phil Wrzesinski
www.PhilsForum.com
PS Repeat and Referral business come from Shareworthy Customer Service. If they aren’t the bulk of your business right now, forget about advertising. You got a bigger leak in your boat that needs serious fixing. Start training your staff to delight and WOW your customers. Otherwise the money you spend on advertising will only hasten your demise.
Can You Afford to Be a Snob?
This was an actual poster put up in a Borders store that was closing.
There were three bullet points in there that bothered me (well, okay, the whole thing bothered me, but that’s another story).
- We hate when a book becomes popular simply because it was turned into a movie.
- Nicholas Sparks is not a good writer… If you like him, fine, but facts are facts.
- Oprah was not the “final say” on what is awesome. We really didn’t care what was on her show or what her latest book club book was. Really.
Really?
If I was a bookstore and Oprah said a book I sold was awesome, I would be loving it! I’d buy more. Make a fancy display. Sell the heck out of ’em.
If there was a writer that everyone wanted his or her books, as far as I would be concerned, if I had no moral judgment against the actual books, I would love that! I’d buy more. Make a fancy display. Sell the heck out of ’em.
If there was book I was selling that became more popular because it was turned into a movie, I would love that! I’d buy more. Make a fancy display. Sell the heck out of ’em.
After reading this poster, I often wonder if Borders went out of business because of Amazon or because of the attitude of the staff.
When the sun shines, make hay.
-Phil Wrzesinski
PS Some of you may be ready to call me out on this since there are certain toys I won’t sell, one of them being toys that are tied to a movie. My reasoning is that most of those items aren’t toys so much as novelties. If the toy has great play value first, the movie tie-in is wonderful. I have sold a ton of LEGO related to Star Wars, Harry Potter, and now Lord of the Rings/The Hobbit. First it has to be something I would sell. Then if I get a movie tie-in, an endorsement from Oprah, or the general public falling in love with it – that’s a bonus I’m going to run with, not lament. See the difference?
Reading List (Short Version)
For some reason, I have found myself recommending the same three books over and over the past couple weeks. So before anyone else asks, here are those three books.
Why We Buy by Paco Underhill – Buy this book if you want to be better at merchandising your store. Buy this book if you want to think about merchandising and traffic patterns and aisle widths and aisle lengths and sight lines in a whole new light. Buy this book if you want to read fascinating case studies about retail successes and failures at merchandising. Buy this book if you have any plans at all to change the layout or design of your store.
Drive by Daniel H. Pink – Buy this book if you want to understand how people are motivated to do their best work. Buy this book if you want to find different ways other than money to reward your staff. Buy this book if you want to find ways to make your trainings stick better. Buy this book if you want your staff to work harder.
Pendulum by Michael R Drew and Roy H Williams – Buy this book if you think the world has changed dramatically over the past ten years. Buy this book if you want to see what the next thirty years will look like. Buy this book if you want to know why your advertising that worked in the past isn’t working today. Buy this book if you want to see how society changes every 40 years from one extreme to another and how to navigate each of these extremes.
It will be the best reading you do all year.
-Phil Wrzesinski
www.PhilsForum.com
PS I purposefully did NOT include links to any of these books.
- Print out this list (or keep it on your phone) and walk into your local bookstore (if you still have one).
- Order these books through the local store.
- While you are there, browse the business section for one more book that catches your eye.
- Buy that book, too.
- Then buy one more book, just for fun.
You are as good as you read.
Believing or Behaving?
I could probably fill up a whole page with “I Believe…” statements.
I believe… specialty independent retailers need to have better customer service than their competitors.
I believe… cash is king and sometimes more important than profits.
I believe… the store owner who quits trying to learn quits trying to grow.
I believe… what gets measured and rewarded gets improved.
I believe… we need to know and understand the financials of our business inside and out.
I believe… we need to stay true to our core values, but be willing to change everything else
I believe…
What do you believe? I challenge you to write it down. All of it. Take an hour and type up everything that comes to mind. It will be a powerful hour.
But then I’m going to ask you to do something else.
I was reading Drew McClellan’s blog (Drew’s Marketing Minute) and he said this…
“One of the sure signs of a person who is going to be successful is that they wholeheartedly behave in lifelong learning. I didn’t say believe in life long learning because I’ve found just about everyone believes in it. But few actually act upon that belief.”
I have some strong beliefs. But does my behavior match those beliefs? Can I prove it?
Can you prove it?
Write down underneath, next to, or over the top of each of your belief statements the behavior you are actually doing that proves your belief.
I believe specialty independent retailers need to have better customer service than their competitors.
I attend and teach customer service trainings, constantly look for new ways to train my staff on customer service, read books on the topic and explore new ideas and thoughts.
I believe cash is king and sometimes more important than profits.
I get rid of slow-moving merchandise regularly.
I believe the store owner who quits trying to learn quits trying to grow.
I attend workshops, read books and blogs, and teach (to teach something, you have to learn it deeply first)
I believe what gets measured and rewarded gets improved.
I praise regularly and am implementing new rewards programs in other aspects of the business.
I believe we need to know and understand the financials of our business inside and out.
I run reports at least monthly. I wrote a book on financials for the toy industry. I look at that book frequently.
I believe we need to stay true to our core values, but be willing to change everything else.
I have my core values posted on my wall and use them as a guide for everything we do, including changes for the better.
How does your behavior stack up to your beliefs?
-Phil Wrzesinski
www.PhilsForum.com
PS You don’t have to agree with my beliefs. You are more than entitled to your own. Just live up to them. If your behavior doesn’t match your belief, maybe it isn’t something you actually believe in???
Are You Playing Your Best Card?
All through the 80’s, 90’s and even the early 00’s specialty independent retailers had the misfortune of competing with the big box stores like Home Depot, Toys R Us, Michael’s, etc. These Category Killers and the discounters like Wal-Mart, Target and K-Mart forced a dramatic shift in the marketplace.
No longer could we afford to carry much of the product that these guys carried. They used their size to bully vendors into better pricing, and used their centralized administrative functions to keep overhead down so that they could work on lower margins and sell that stuff much cheaper than we could.
We could still compete, though, because there was enough product those big boxes didn’t carry. And they never could match our knowledge. Yes, in many industries we went from being big stores like them to smaller boutiques and smaller stores. But there was still plenty to be done by playing the differentiation card.
Today we are facing another dramatic shift in the marketplace. The Internet.
The Internet has taken away the differentiation card. Almost everything you sell can now be found and purchased online. Usually at a lower price than what you are offering. And with a convenience that you cannot touch – being able to shop at midnight in your pajamas in the comfort of your home with all of the information, product data, specs, and reviews just a mouse click away.
That’s a pretty big card.
Sure there are some hold-outs. There are some wonderful companies like Trek Bikes and Stihl Yard Equipment that are supporting the independents fully 100%. But those are now the exceptions, not the rule.
The old model of product differentiation is dead. It isn’t coming back any time soon.
The new reality is that we have fewer and fewer cards left in our deck to play. We still have the desire of the customer being able to touch and feel the product before she buys. We have the immediate, take-it-with-you convenience that Amazon is trying to copy with their same-day delivery model (that I believe will bankrupt them, but that’s a discussion for another day).
And we still have Customer Delight.
That’s the best card in our deck. That’s the one card that will be difficult for our competitors to be able to take away. We have the ability to make a connection with her that resonates deep in her heart and makes her want to come back and bring her friends, too.
Instead of going blue in the face complaining about Amazon, Gilt, Zullily or any other online seller… Instead of complaining about which vendor is now selling the mass… Instead of complaining about the government and how its actions or inactions are hurting you… spend your energies bending over backwards to delight your customers. Spend your time anticipating her needs, meeting those needs, then exceeding them beyond her wildest dreams. Win her heart, you win the hand. The one that reaches for her wallet.
-Phil Wrzesinski
www.PhilsForum.com
PS To win her heart, you have to surprise and delight her. To surprise and delight her, you have to know what she is expecting and then exceed that. The easiest way to do this is to quit thinking like a retailer and think like a customer. What do you want when you shop? How do you want to be treated? What do you expect when you enter a store to make a purchase? That is the bar. Now go over it!