Author: Phil Wrzesinski

September 14, 2010

New Statistics on Market Share

I just got back from presenting at the Michigan Downtown Conference in Bay City, MI. Robert Gibbs offered some new statistics on the breakdown of Retail Market Share worth passing along.

In 1955 the Central Business Districts of our cities had 90% of the Retail Market Share. Today the CBD’s have 2%.

The breakdown looks like this:

Power Retail Centers (think Wal-Mart plazas) 37%
Regional Shopping Centers (malls) 31%
Internet 9%
Living Centers (the new outdoor mall type places) 7%
Downtown CBD’s 2%

(I am guessing that the other 14% is in small strip malls and stand-alones that are spread out along the highways, rural areas and non-commercial districts of this fine country.)

That is a major shift in shopping habits. His solution for downtowns to reverse this trend is for downtowns to attract more chain retailers. The chains then become anchors that attract shoppers and raise the tide for all the shops. Unfortunately, that is not a reality for most small cities.

Especially after he told us the 50-50-50 rule for attracting chain stores. You have to have two of these three factors:

50,000 people in the trade area (or more)
$50,000 average income (or higher)
50,000 cars driving by daily (or more)

How does your community stack up? I am guessing that 95% of the cities in the US were eliminated immediately.

My solution is far simpler and works whether you’re in a bustling metropolis or quaint little town.

To gain back market share you need to be better than you were in marketing, better than you were in over-the-top incredible customer service, and better than you were in turning your customers into evangelists. Do that and the people will come. You don’t need a national chain store to draw you a crowd. Start your own crowd – a crowd of people who love you.

-Phil

September 10, 2010

How Much Market Share Should You Have?

I showed you how to calculate your Market Share. Hopefully you did that. It’s a real eye-opener when you see how much (or little) of your market you actually own.

Your first thought was to wish it was higher. But how high is realistic? It depends on a few factors, some of which you have no control.

The Factors
Competition is your biggest factor. How many other stores are in your industry? How well do they do their job? How much crossover of product is there? How well do you do your job? How much marketing do they do? How much marketing do you do?

In my market of roughly 160,000 people we have a Toys R Us (plus the new pop-up TRU Express store), Wal-Mart, Target, 2 K-Marts, and 2 Meijer’s. At Christmas time we also have to deal with the toy departments at Sears, Kohl’s and JC Penney. That’s a lot of competition for a shrinking piece of pie.

Fortunately for us, while they all spend enormous amounts on advertising, almost all of it goes towards the Transactional Customer. And most of our product selection cannot be found in their stores. Customer Service? Ours is much better (or at least it better be:-).

Not a Level Playing Field
But as an independent store most of us have an uphill battle in the market share game.

First, only about 9% of the population (heard this multiple times but still looking for source for this stat) are pre-positioned to shop at an independent retail store.

Second, most independents are far below the big chains in name recognition. Not surprising considering the huge ad dollars these chains can spend.

Third, independent stores are perceived as having higher prices and lower selections. Whether true or not, this perception is the reality in the public’s mind.

Therefore, a typical independent store is likely to have only 4-6% share of the market. If you are above that, you’re doing things right. If you are above 10% then you are really on the right track because you have convinced people not predetermined to shop local to still shop with you. And if you are over 15%, you rock!

Roy H. Williams likes to point out that 30% is the gold standard for any one business in any one market. If you have 30% of the market, you own that market. Just don’t expect to grow much more. Even Wal-Mart only has 10% of the retail market, and is lucky to top 20% in any category. Sure, some Wal-Marts have that mythical 30% in certain markets, but mainly because they are the only game in town.

Where to Go From Here
But as an independent retailer, if you have 15%, it will take some nifty circumstances to grow much higher. And the higher you go, the tougher the battle. Once you have reached a high point in your market in one category, the only way to grow is add a new category.

That is what I am doing right now – researching new categories for my store. Although we will still go after higher market share in the current categories, our market potential is shrinking. So adding new categories gives me the best opportunity to grow our business.

And how will I pick which categories to enter? You guessed it – by calculating the Market Potential and seeing if 5% of that market is worth my time and resources. I am currently evaluating Teacher Supplies, Crafts, Juvenile Furniture and others to see which has the most potential, the fewest competitors, the best opportunity to jump in and take a piece of the pie.

Without knowing how to calculate Market Potential, this exercise is futile. But armed with that knowledge, I know we’ll pick the best way to be successful.

Make sense?

-Phil

September 8, 2010

Is it Interesting? Cool? Useful?

You should ask that question about every product you sell.

If it isn’t at least one of those, preferably two or three, then why do you have it? I’m pretty sure that unless someone thinks a product is interesting, cool and useful, you aren’t going to sell a whole lot of them.

Interesting gets their attention.
Cool makes them pleased they looked.
Useful compels them to buy.

I’m asking you the same questions about this blog. At the bottom of each post you’ll see a place where you can check Interesting, Cool, and Useful. Please tell me what you think (check all that apply). Feedback is always appreciated.

Thanks,

-Phil

September 7, 2010

Growing Your Market Share

Toys R Us has opened an Express store in our mall.

They already have a full service store in our other mall (2 miles away). They are hoping to grow their Market Share with this pop-up store (here today, gone December 26th).

Calculating Market Potential
Do you know your Market Share? Here is an easy way to find out.

Find the total dollars spent in the US in your industry for 2009 (toys = $21.5 billion)
Divide that by the population of the US (308.5 million)
Multiply that number ($69.69) times your market’s population
Adjust that number up or down based on your market’s average household income versus the national average
Adjust that number up or down based on one pertinent demographic (for example, if you sell toys or children’s products, how does your youth population compare to the national average. If you sell boats, how does boat ownership in your area compare to the national average?)

The answer is your Market Potential – how much total business is done in your industry in your market. Divide your Gross Sales by the Market Potential and you’ll have your Market Share.

Knowing this makes a huge difference in how you go about your business.

How Many Customers Equals Growth?
If you have a relatively small market share (less than 5%), it doesn’t take a whole lot of new customers to grow your business. Just convincing 1% of the market to switch to you gives you 20% growth! Wouldn’t that knowledge change the way you advertise?

Knowing how to do this calculation also helps you see the trend in your market. Is it growing or shrinking?

In the case of toys, it is shrinking. Back in 2004 the sales per person was $75.17. In 2009 it was only $69.69. Plus, in my case, the population is shrinking, too. My market potential has dropped almost 10% in the past 6 years (not adjusted for inflation which makes it even worse) because we have a shrinking toy industry and a shrinking population base – double whammy.

So just to keep sales equal to last year I need to steal business from my competitors and grow my market share. That’s a hard task for any retailer, and part of the reason why Toys R Us is opening a second location in a small market. They are trying anything they can to grow their market share.

Market Share at What Expense?
But before you say, “Hey, what a great idea. I’m going to open a pop-up store!” you need to understand the ramifications of their actions. Yes, they will probably gain some market share. The mall in which they put the pop-up is next to a Wal-Mart, but doesn’t have any other toy retailers.

But the costs will be extensive. They will have rent and payroll at the new place on top of the rent and payroll at the main store. And the two stores are so close that a large portion of their sales in the new location will be lost sales at the main spot. In effect, the biggest market share they will steal is from themselves.

Pros and Cons of the Pop-up Model
If you are thinking about a pop-up store you have to weigh the pros and cons.
The pros:

Only paying rent for the busiest months of the year when sales are enough to pay those bills.
Getting exposure and sales in new geographic areas
Having built-in traffic (mall-generated) instead of having to advertise

The cons:

Increased rent and payroll (decreased profit?)
Increased headache of keeping inventory straight and stocked between two locations
Potential of cannibalizing your own market share
Could damage brand reputation with smaller selection, less-trained staff

Only you can weigh those options and know if it is the right decision for you. But if your market potential is shrinking, it might be the best way to grow your share of that shrinking pie. My guess is Toys R Us doesn’t care as much about expenses and profit as they do market share – a number they know all too well. That’s the number that makes headlines for them.

When you know your Market Share you are better prepared to make those decisions.

-Phil

PS In the next post I’ll tell you my plans for dealing with our shrinking Market Potential.

September 4, 2010

To Labor on Labor Day or Not

Are you open this Monday? We aren’t.

Labor Day & Memorial Day are paid holidays for my staff (along with New Year’s Day, Easter, 4th of July, Thanksgiving and Christmas).

We’re also closed Sundays of Labor & Memorial Day weekends.

Why?

For my staff. They deserve a break. I expect a lot from them and so I need to reward them from time to time. Giving them paid holidays and long weekends is one way I tell them that breaks are important and family time is a priority and that it isn’t always about chasing the almighty dollar.

Plus, in our town it just isn’t a big shopping day for anyone but the Transactional Customers looking for a Labor Day sale. And I’m not going after them.

You may have your own reasons for being open or closed this weekend. That’s fine and good by me. Just thought I’d tell you mine.

Happy Labor Day! (wanted to tell you that now, because Monday I’ll be sleeping in:-)

-Phil

September 3, 2010

Completing the Sale

Rick Segel’s last post was on how to raise your average ticket by selling more. His suggestion? Suggestions (read his post here).

Of course, rather than tell you what to do, he invites you to attend his webinar to learn how.

With all due respect to Rick, I don’t want you to attend any webinars, so let me tell you how I taught my staff to do suggestive selling. (Hint… it’s not a whole lot different than, “Want fries with that?”, but then again it is completely different.)

Complete the Sale
Every customer that is making a purchase has an expectation of using that item in one way or another. But most often the item is not a stand-alone item. Most often there are accessories either optional or required that make using the item much more productive and/or enjoyable.

A radio-controlled helicopter needs batteries. A model car needs paint & glue. A coloring book needs crayons. A dress shirt needs a tie. A pair of shoes needs socks. A new car needs fuzzy dice.

Yeah, that’s the low hanging fruit. But every product has something that completes it, often many options to complete it.

Teachable Moment
To get my staff to understand this concept we started with our usual show-and-tell. Everyone grabbed one new item from their department to show off to the rest of the staff at one of our meetings.

But then I challenged them. I asked them to go back into the store and find five items that they could suggest to a customer to “complete the sale”. Not surprisingly, they were all able to easily find five items. Some came back with ten.

The point made was that with every item there are plenty of suggestions of complimentary products, some of which they need, some of which they might just want. But unless you are conditioned to think that way, unless your staff is already mentally thinking in those terms, just making random suggestions is as effective as selling french fries.

-Phil

September 2, 2010

Chapter 2 The Lunch

Another excerpt from the book “Hiring and the Potter’s Wheel: Turning Your Staff Into a Work of Art”… Read previous excerpts here and here.

Chapter 2 The Lunch
“Just as our eyes need light in order to see, our minds need ideas in order to conceive.” – Napoleon Hill

Thursday arrived and Mary breezed into work. But even then, the minutes ticked off slowly as Mary anticipated her luncheon meeting. Finally, at 11:30, Mary grabbed her coat and headed out the door. It was only three blocks from her office to the deli. With the sun shining, Mary walked briskly down the street, her enthusiasm putting a bounce in each step. As Mary grabbed the door handle, she noticed Dr. Scott a half block away. Mary waited.

“Thank you so much for meeting me. I am so grateful,” Mary blurted out.

“Oh no, the pleasure is all mine,” Dr. Scott responded with a grin as they entered the deli. “Shall we sit?”

Dr. Scott led her to a table near the back where it would be quiet enough to talk. A waitress took their drink order as Mary stared at her former professor, not sure where to begin. This was a different side of him that Mary had not seen as a student. Dr. Scott motioned to the menus tucked away between the salt & pepper shakers. “Order first, then we’ll talk. If we don’t order now, we’ll get hammered by the rush.”

As Mary scanned the menu, she could see the tables beginning to fill up. They both ordered quickly, and settled in to wait for their meals.

“As I recall,” Dr. Scott started, “you were always one with an open mind. No matter how many times I challenged you to do better, you did. So it was funny you would call the day you did. I was opening my mail when the phone rang and had just received an invitation to the best human resources training program ever. It’s in the evenings, right during my HR308 class. Believe me, this program would be perfect for you. It meets twice a week at the downtown YMCA and runs for five weeks.

“I know, I know, before you protest about not having time, trust me. You’ll be able to start applying the lessons immediately. And anyway, it’s too late to worry about all that. I’ve already signed you up. Here’s the brochure.”

Dr. Scott slid a simple tri-fold brochure, black ink on white paper, over to Mary.

Mary was confused. “The ‘best human resources training program’ came on a simple black and white brochure in a class down at the Y?” Mary thought to herself. Mary took the brochure from Dr. Scott and read the front of the flyer. Now Mary was even more confused.
“Pottery?! Dr. Scott, this must be a mistake. I think you’ve given me the wrong brochure,” Mary said indignantly.

Dr. Scott pulled back the brochure, peered at it though his bifocals. “No, it’s the right one,” he replied as he slid it back across the table. “Trust me, Mary. Use that wonderfully open mind of yours. The class starts this Monday and you’re signed up. But I’ll tell you what. Go to that first class Monday night, and I’ll meet you here Tuesday for lunch. If you haven’t learned anything new, we’ll figure out something else. You have my word on it.”

Before Mary could respond, the waitress brought their food. And Mary could tell by the way Dr. Scott dug into his ham & Swiss that further discussion was out of the question.

As Mary walked back to the office, she grappled with the idea of how taking a pottery class could teach her to find, hire and train twenty great sales reps. No answers came and even the sunshine could not force its way into her furrowed brow. “Pottery?” she continued to question.

Here are more testimonials for the book…

“What a wonderful book! I will certainly be recommending it to a few people. I like the analogy used with the pottery class in the story to develop a step-by-step best practice for finding, interviewing, hiring and training new employees. The story really made for a quick, relaxing read but with a remarkable number of “take-aways” to apply back on the job. It is, frankly, one of the better business books I have read (and I have read quite a number!) because in a short time you walk away with tips to use immediately.” – Gina Abudi, MBA – Partner/VP Strategic Solutions

“Phil, Your book was excellent. I really liked the digestible size. That’s perfect for managers who don’t have the patience to trudge through a lengthy dissertation. They could basically read it during a lunch break. The story was very engaging and fun. It kept my attention throughout. I loved the short chapters and the quotes, they really spoke to me. One of my favorites was “Pleasure in the job puts perfection in the work.” That is so true, and I wish more managers understood that. There’s so much focus on quality and checklists and process to get things right, but if you gave someone something they’d be excited to do, then they’ll do the best they can. Thanks for creating and sharing your own work of art. This will be an excellent resource.” -Rex Williams – Grootship

Buy your copy of the book here and transform your staff into the masterpiece you want them to be.

-Phil

August 30, 2010

Your Actions Tell Us Who You Are

A friend and colleague of mine had an experience using Groupon, a company that sells discounted coupons online to your store, that went horribly wrong. Bob Phibbs, the Retail Doctor, did a Case Study on his blog. (Go ahead and read it… I’ll wait)

In a nutshell, Kim made an incredible offer that sold in far greater quantities than anyone expected and will end up costing her tons more money than she will recoup in new business.

It is a cautionary tale about discounting that Bob Phibbs so eloquently points out. There are so many lessons that could be learned from this, but I want to bring up something that stuck out like a sore thumb, especially in light of all the comments made by Groupon supporters (plants?) putting all of the blame on Kim.

Yes, Kim made mistakes, but the company did nothing to help her.

Two Mistakes
Kim’s first mistake was to make such a big offer with so little restrictions. But the people at Groupon allowed it to happen. They had the power to say, “Hey Kim, you might want to re-think this.” But they didn’t. They knew they would sell a lot of coupons and make a lot of money with the offer Kim was making.

The second problem happened when the coupon sales took off. Kim noticed the problem, asked Groupon to halt sales and they refused. They told her it was her mistake and she had to live with the consequences. Of course they didn’t want to halt sales. They were making a mint.

Your Actions Give You Away
Look at the signals Groupon sent through their actions to Kim, and subsequently everyone who knows Kim.

First signal… By not helping Kim write up a proper offer, they said that the almighty dollar was far more important to them than the success of the client.

Second signal… By not halting the process in the middle when it was known by all parties that something was wrong, they said that the profit from this one transaction was worth more than any repeat business could generate. They certainly weren’t going to get repeat business from Kim after treating her that way.

More importantly, you can pretty much infer from this encounter that they already know their model is not good for their clients and don’t expect repeat business, so they are willing to do whatever possible to maximize their own return on what they believe is their one and only shot with you.

Bad News Travels Fast
Between Bob’s blog and Kim’s telling everyone she knows about this experience, Groupon is getting a lot of negative publicity and people are seeing from their actions what Groupon truly believes. Their actions speak loudly of their credibility (or lack thereof).

Do you ever have customers who don’t shop with you “the right way”? Do you ever have customers that make mistakes? Do you ever have customers that want to make changes half way through? Do you help them get it right or do you let them fail just so that you can keep the sale?

How you treat your customers when things go wrong speaks loudly to them and their friends of who you are and what you believe. Groupon showed it’s true colors. What are yours?

-Phil

August 29, 2010

Credibility Shown

Tom Wanek wrote a book, Currencies That Buy Credibility.

The new CEO of Step2 Company – Jack Vresics – is an embodiment of that book.

Last Thursday I was in Streetsboro, OH for a meeting of Step2 Center dealers – the retailers who sell the vast majority of the Step2 line. Step2 is the largest manufacturer of toys still being made in the USA. But they’ve had a shakeup the past year replacing the CEO, the CFO, and the Director of Marketing.

I was looking forward to meeting the new CEO, but at Wednesday night’s informal gathering we were told that he wouldn’t be at our annual gathering because he had to drive his daughter up to Ann Arbor to move her in for her first year at the University of Michigan. Understandable excuse. I have every intention of being there to help my boys on their first day at away at college, too.

But right before we broke for lunch Thursday a new face entered the room – Jack Vresics was in the building! He drove 3 hours back from Ann Arbor after moving his daughter in just to spend 90 minutes with us before driving back another 3 hours to be with his daughter again.

You have heard that actions speak louder than words. That one action spoke volumes of how important we dealers are to Step2.

He paid the currency (driving an extra 6 hours) to earn credibility, and he earned it big time in my book. He showed me what he was willing to do to make sure I knew how important my business was to him.

What actions are you willing to do, what price are you willing to pay to show your customers how important they are to you?

Read Tom’s book (no, I am not affiliated in any way – just a fan of the book) and you can learn some simple ways to earn that credibility.

-Phil