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Author: Phil Wrzesinski

Phil Wrzesinski is the National Sales Manager of HABA USA toy company, a Former Top-Level, Award-Winning Retailer, a Thought-Provoking Speaker, a Prolific Author, a 10-Handicap Golfer, an Entertaining Singer/Songwriter, and a Klutz Kid who enjoys anything to do with the water (including drinking it fermented with hops and barley), anything to do with helping local independent businesses thrive, and anything that puts a smile on peoples' faces.

Everything Everywhere, Nothing is Special (Except You)

If there is one universal truth in retail it may well be this …

The hottest product on your shelf last year will be on everyone else’s shelf this year.

Every year in my two-and-a-half decades as a buyer I would watch another vendor cross over to the dark side and start selling their goods in the big-box discounters and Toys R Us. Proud brands that had grown and flourished in the independent specialty channel were cashing in with the big boys, who would undercut our prices and ruin a fine brand.

This happened Every. Single. Year. And the reaction was always the same. A lot of crying, complaining and gnashing of teeth on the part of the indies while we scrambled to find suitable replacements.

I never took part in the gnashing. Maybe it was because I had seen it happen enough times to come to expect it. Maybe it was because I grew up in the industry before that delineation between mass and specialty product channels even existed.

Page 1 of the original Business Plan for Toy House, circa 1949

My grandfather had two utility bills at our building on Mechanic Street. He got that second bill so that he would have “proof” of a second address separate from the retail operations. He did that for one reason only—to set up a “distributorship” so that he could buy certain toys he wasn’t able to buy directly from the manufacturer. Back then you could only buy certain lines through distributors, so he became a distributor just to get products. He didn’t care who else was selling the product. If it was a good product, he wanted it in his store.

He knew he could sell it.

In the 80’s and 90’s that mindset changed. Indie retailers shied away from products sold in the mass-markets and created what we called the “specialty” market. Some of that was to protect profit margins. Some of that was because we bought for different reasons than the mass-market.

In my industry the mass-market bought toys for quick turn-around—toys that had name recognition, shelf-appeal, and were backed by advertising. We bought toys for play value—toys that spurred the imagination and creativity in a child.

Once the specialty market built up a brand into a recognizable name with enough money to advertise, the mass-market would swoop in and snatch them away, sending us off again in search of the next great “specialty” line.

Today, however, the lines are once again blurred. In the toy industry especially, with Toys R Us out of the picture this holiday season, all kinds of retailers are popping up with all kinds of toys. There is no differentiation between “specialty” and “mass” in terms of products or distribution. Nor will there be for the foreseeable future.

Everything is now sold everywhere. Nothing is “special” anymore.

The only thing “special” about the specialty stores is You. How you run your store, the people you hire, the relationships you build with your customers, the involvement you have with your community, the events you host, the teaching you do—that is the Special part.

I tell you this to remind you that pop-up stores are about to start popping—not just in toys, but in all categories. Some of them will have products you sell. Don’t fret about that. Here is one other universal truth in retail …

No pop-up store will ever be able to sell products as well as you can. 

Their staff doesn’t have the training. Their leadership doesn’t have the passion. Their business doesn’t have the connections. When you play up the parts that truly make you Special, you cannot be beat. (Hint: it isn’t the product that makes you special anymore.)

The best way to protect yourself from pop-up stores and the loss of specialty brands is to double-down on your training right now. Download the Free Resources on Customer Service. (There are several good ones in there.) Go over this stuff with your team. Role Play the scenarios and look at how you interact with new customers. Talk about how to be better at curating a selection. Learn the benefits of your new products and better ways to close the sale. Practice using new phrases to eliminate the deal killer phrases we all use.

The products come and go. The relationships build your business and make you truly Special.

-Phil Wrzesinski
www.PhilsForum.com

PS Some of you are going to have stellar years without any extra training. Don’t get lulled into a false trap. Every boat rises with the tide. Consumer spending is up. The economy is relatively strong.  But if you’re watching the news, you know a lot of shuffling is going on in retail. The stores with the strongest relationships with their customers will find the greatest success in the long run. Consider that another universal truth. Make you store truly Special this holiday season. The gains will last well into next year.

PPS Heck, simply teach your staff to do what my grandfather listed as the number three part of his Sales Plan—“Listen to customer until customer is clearly understood. Do not interrupt.”—and you’ll be doing more than most retailers out there.

The Benefits of Teaching Benefits

He drove from Windsor, Ontario to Jackson, MI on a Friday night. “We have a Graco car seat and were told you are the closest store to have the matching stroller. Do you happen to have it in stock?”

“Yes, we have two different versions in that fabric. Which did you want?”

“Two versions?? Hold on.”

(On phone…) “Honey, they have two different strollers …”

After hanging up, we started taking about the features they wanted in the stroller. Light weight? They both had that. Easy fold? Check and check. Big wheels for walking outside? Yes and yes. Compact fold?

“What are you driving?”

“A Honda Civic, why?”

We took both strollers out to the parking lot, folded them, and then tried putting them into his trunk. They both fit, but one only went in if you had it upside down, put the front wheels in first, turned it 90 degrees, rotated it another 45 degrees and pushed really hard. The other slid in easily.

Feature: It has a compact fold
Benefit: So that you can fit it into your tiny trunk with room to spare for groceries and other stuff.

  • Feature = What it does
  • Benefit = How that helps you

It does this … So that you …

Feature: This blog offers tips, techniques, and ideas for every aspect of running a retail business …
Benefit: So that you have the tools necessary to run a successful business and have fun at your job …

Feature: Subscribing to this blog gets you an email of every new post as it is posted …
Benefit(s):

  • So that you know before your competitors what to do to gain an advantage.
  • So that you get something thought-provoking, inspiring, and helpful sent directly to you, without having to dig to find it.
  • So that you have something in your inbox that you look forward to reading to offset all those emails you dread.
  • So that you have a diversion when you just need to get away from everything else.
  • So that you get reminders of the things you already know but may have forgotten.

The Feature doesn’t sell the product. The Benefit does.

The best game you can play with your staff (new and old) is to grab a random product off the shelf, identify one of its Features, and then list as many Benefits as you can for how that feature can make someone’s life better.

There are lots of ways, places, and times to practice finding the Benefits.

  • Do it when a new product comes in so that everyone knows how to sell that product.
  • Do it during a staff meeting. Make a game out of it.
  • Do it in your daily five-minute huddle.
  • Do it during a slow moment on the sales floor.
  • Do it during training for new staff.
  • Do it randomly and on the spot.

Do it so often that finding the Benefits—how the product makes someone’s life better—becomes second nature with your staff. When it becomes a mindset for them, you’ll see the sales of your more valuable items start to rise.

-Phil Wrzesinski
www.PhilsForum.com

PS One other Benefit from playing this Benefits Game is that it helps you become better at identifying the products you’ll be able to sell better (ones with more benefits) and the dogs you need to clear out of your inventory (ones with fewer benefits). 

PPS One other Benefit from playing this Benefits Game is that it helps you be better at selling the lesser-known brands you carry to compete with the mass-market brands customers ask for by name.

What’s In Your Training Packet?

There used to be a locally-owned office supply store in downtown Jackson. I bought a lot of stuff from them over the years. They had a storefront but most of their business was done by phone from their catalog. I’d call in an order today and it would be delivered to the store tomorrow. I loved going in their store even though the selection in stock was only a tiny fraction of their available merchandise.

One thing they always had in stock was three-ring binders. I bought several of them every fall to put together my Team Member Handbooks for the new hires. I spent the better part of a day prepping these books for my new employees (until I finally learned how to delegate this task).

Here is what went into this binder …

THE WRITTEN HANDBOOK

The written handbook was the basis of the binder and consisted of five sections:

  1. Policies
  2. Store Procedures
  3. Layaway
  4. Evaluation Process
  5. Addendum

Policies included all of the policies of employment including dress code, terms of employment, employment status (full-time, part-time, etc), vacation and holiday pay, sick leave, tornado warnings, and anything else related to them being an employee.

Store Procedures included all of our major services like free gift-wrapping, delivery, assembly, UPS shipping, etc. It gave explanations of how to offer and perform these services, including guidelines for each one.

Layaway was such a large and detailed service that it garnered its own chapter in the book.

Evaluation Process talked about the criteria by which an employee would be evaluated. (Note: this one should be screened by an attorney familiar with HR laws.)

Addendum was a color copy of the major forms we used with detailed instruction how to fill them out. I also included our delivery map and delivery service guidelines here.

You’ll notice there wasn’t a section for Cash Register. The instruction book that came with our cash registers was thicker than the 1-inch binders I used for the Team Member Handbook and would have been too costly (and pointless) to reproduce for the Handbook so we left it out and kept it as a separate book.

The purpose of all this information was to make sure everything was spelled out not just for the employee’s sake, but for our sake as well. It helped make sure we treated everyone fairly and equally within the guidelines of the law.

I am a huge fan of having such a handbook for your employees. It helps clear up confusion and solve disputes—as long as you follow what is written in your handbook. I had an attendee in one presentation tell me his attorney friend makes a living suing businesses because of their handbooks. Those lawsuits are almost always when a company doesn’t follow its own rules. I advised this guy to hire his attorney friend to review his handbook. That would ensure the handbook was crafted within the laws and that his buddy could never be the one to sue him.

I’ll give you the same advice …

Have a lawyer familiar with HR Laws review your Handbook before you publish it.

 

THE BROCHURES

We had seven different brochures that we handed to customers over the years. With each new hire I made sure there was a copy of all of the current brochures in the back pocket of the binder. As I sat down with new hires the first day, I would show them each brochure and tell them since customers were reading these it was important that they knew what each brochure said.

(Here is a link to three of those brochures from the Toy House website.)

 

THE eBOOKS

In the back pocket, along with the Brochures, I printed out three eBooks that customers could also download for free from our website titled:

These fully explained our philosophy on toys, including why we sold what we sold. These documents, more than anything else, helped teach our staff how to find the best solutions for our customers time and time again.

If you have a different philosophy than your competitors for why you sell what you sell, you need to have a vehicle for sharing that with your customers. It might turn some people off, but for everyone else it creates a higher level of trust and loyalty. Just make sure your new hires know this philosophy right away, too.

I also included an article I wrote about why I believe in Santa. I wanted my new hires to better understand me and our store’s official position on the jolly old elf.

 

THE PAPERWORK

The front pocket contained the paperwork including:

  • IRS W-4 Form
  • Schedule
  • Parking Lot Map with assigned parking spot
  • A key to the employee entry door
  • Employee Training Checklist
  • Employee Handbook Reading Slip

The first four are fairly self-explanatory.

The Training Checklist was a worksheet with all of the areas of necessary training the seasonal employee needed to complete. Each section had a blank line in front of it. As one of my regulars taught the new person a skill, the veteran would initial the line next to that skill. That way, if the new person didn’t have a skill down to my satisfaction, I could go back to the employee who trained him or her to see how to improve the training. (Page 3 of this pdf is a copy of an older version of that Training Checklist)

The Employee Handbook Reading Slip was a half-page piece of paper with the following paragraph …

I acknowledge that I have read the Toy House Team Member Handbook and understand its provisions.  I understand and acknowledge that my employment at Toy House, Inc. is indefinite and for no specified length of time.  I understand and acknowledge that my employment can be terminated at-will by myself or by Toy House, Inc. for any or no reason, with or without previous notice. 

I know that this handbook is not a contract of employment and that its provisions are subject to change.  I will ask questions about any issues or areas I do not understand.

Name___________________ Signature____________________________ Date_____________

 

I paid my employees an extra hour of pay for reading their Team Member Handbook and signing this piece of paper. Yes, I quizzed them on its contents. I even played a little game. In each section of the Written Handbook I hid little symbols like this ⊗. If they found all of them and included the section and page numbers on the signed piece of paper, I gave them an extra half-hour of pay. (Hey, it was a toy store. Of course we played games. And this game ensured that, if nothing else, they looked at every page in the book!)

Anyone in education knows that people have different preferred styles of learning. Some learn better by reading. Some learn better by seeing. Some learn better by doing. I made sure my new hires got all three.

The Holiday Season is your time to shine. Make sure your new hires are up to that task. Give them the tools they need. Your Training Packet is an important tool in that toolbox.

-Phil Wrzesinski
www.PhilsForum.com

PS If you would like a word doc copy of the first two sections of my written handbook, shoot me an email. As I said before, however, before you use it for yourself (with modifications, of course) please have an attorney look it over. Times change. Different states have different rules. Different cities have different rules, too. Most importantly, don’t publish any rules you don’t intend to follow.

Ten Mistakes, One FREE eBook

I actually did job interviews in a Halloween costume once. Okay, more than once. Several times, in fact, because the end of October was when I needed to start the hiring process. I’ve often wondered what an interviewee was thinking, sitting across the desk from a bird watcher, a king, Zeus, or Sorcerer Mickey.

Yes, we celebrated Halloween in costume!

When I was on my game I would have my seasonal help interviewed, background-checked, hired, and on the schedule by Election Day. That gave me two to three weeks of training before the Thanksgiving Weekend ratcheted everything up a notch.

There is one tool I now possess that I wish I had back then. It is a Free eBook I posted back in August called “Ten Mistakes that Sideline the Sale.”

While not the complete list of all the Customer Service issues I had to deal with in training, it is a powerful list of ten things you can easily correct, and that any employee of any experience can easily understand.

It would have been a mandatory part of the training packet I gave each new employee. It would have been a mandatory part of the post-training discussion to make sure they had read and understood everything clearly.

It is impossible to cover every issue, but these ten are so common and so simple to correct, that it would be a crime for any retailer to be losing business by making these mistakes. Before you download the eBook, let me tell you two things …

  • There is nothing in this eBook you don’t already know
  • Your staff are making these mistakes daily

Heck, I would find myself making these mistakes every now and then—especially #6 and #10—cringing every time it happened.

This is such a valuable training tool because it covers mistakes we make greeting customers, selling to customers, and ringing them up at the end—all the key things your new staff will be asked to do. It shows you what not to do, why you shouldn’t do it, and what you should do instead, all in four pages.

I shouldn’t be giving this away for FREE.

I should be charging you for this download because of how much it will improve your Customer Service overnight. Download it now before I change my mind. Download it, save it, print it, incorporate it into your training manual, and share it with your fellow retailer friends.

It will be the easiest staff training you do this fall.

Your team will be super heroes for your customers (and you won’t have to wear a costume to do it!)

-Phil Wrzesinski
www.PhilsForum.com

PS You won’t even be asked to give your email to download this Free eBook. That’s how much I want you to succeed. (But if you want to subscribe to the blog and didn’t do it with the annoying little pop-up box, you can find the subscribe box here.)

PPS Yes, there is a Live Presentation of these Ten Mistakes. It is full of stories and experiences not in the eBook (including a bonus eleventh mistake you can also easily correct) that will drive home the points in a fun and entertaining way. It’s not too late to book me to teach this to your staff this fall. (I’ll even wear my super hero cape if you ask.)

PPPS Number Three is one of the most aggravating for me personally. Don’t tell me what I missed. Tell me what is going on right now.

Who Challenges and Inspires You?

Every morning I check the email on my phone and see several familiar faces. There is always an email from Jackson Coffee Company, always something from Land’s End, Duluth Trading, Kohl’s, and DSW. Being a mostly Relational Shopper, these transactional discounts they offer Every. Single. Day. are somewhat of an annoyance.

I don’t unsubscribe, though. One of these days I’ll need to go to their stores. Since they are so regular with their discounts, I’m not going to ever pay full price again. Ever. (Yeah, there’s a lesson in there, but that’s for another day.)

I also get emails with links to stories from the New York Times, Chain Store Age, Retail Dive, and Total Retail Report.

Once a week I find out all the news in the toy industry by getting an email from The Bloom Report.

Most days I hear from retail speaker Bob Negen and Whizbang Training.

I also subscribe to different blogs. I start every single day learning from Seth Godin. Sunday nights I hear from Bob Phibbs, aka The Retail Doctor. Every Monday I read Roy H. William’s Monday Morning Memo. It is my favorite part of Mondays. Most weekdays I get posts from Josh Bernoff.

Josh writes about non-fiction writing, books, press releases, and the such. He also writes about analyzing data and drawing conclusions. His blog is called without bullshit and is quite instructive. In fact, because of Josh I play a game every day with the other articles I read. I put on my analyst’s hat and think …

“What would I say if The New York Times called me up for a quote on this article?”

I tell you this not to brag or sound important, to look like I am informed, or to give you my credentials above and beyond just running a high-level independent retail store. (I am sure I suffer from Dunning-Kruger Effect to some degree somewhere—I believe we all do. And every now and then I suffer from its opposite—Impostor Syndrome where I feel the need to prove to you I actually do know something about retail, besides what I learned working retail for thirty six years of my life.)

I tell you this so you will know my influences. You will know where I find inspiration and ideas and new tools I can share with you for your retail toolbox. I want you to have more to offer your customers than just the transactional customer discount emails I get Every. Single. Day. from retailers where I would likely pay full price otherwise.

Seth Godin challenges me to create something of value to others. Roy H. Williams challenges me to look at human behavior differently and understand what motivates us to do what we do. Josh Bernoff challenges me to write with purpose, clarity, and insight.

They all challenge and inspire me to be better at what I do (so that you can be better at what you do.)

Now you know where I get my inspiration. Who challenges and inspires you?

-Phil Wrzesinski
www.PhilsForum.com

PS I left off a few other emails I get and read regularly because they aren’t as helpful as they used to be. You’ll tell me when this blog is no longer helpful, right?

PPS When you get the Monday Morning Memo ALWAYS click on the picture at the top of the memo. (Click on the beagle picture in this blog to go to the MMM page.) It takes you into the Rabbit Hole where you’ll find all kinds of inspiration. It also ends at the Monday Morning Radio page where you can listen to a great interview each week. This morning I heard an interview with Steven D. Goldstein, former chairman of Sears Financial, who said this …

“Scale doesn’t help if you have two different businesses that are underperforming and don’t really know what their place is in the consumer’s mind.”

Yeah, I’m going to see if he has a blog I should be adding to my list.

Reviews: Good, Bad, Necessary Evil?

I remember the first presentation I saw about the power of online reviews. The speaker instructed us how to use our smartphones to take quick testimonials right on the sales floor whenever we had a happy customers. I looked at my notes from the presentation and read …

“Get them to post their reviews before they even checkout. That’s when they are happiest.”

I also remember around the same time reading about Yelp and the problems with reviews there. Yelp was accused of suppressing good reviews and only showing an equal mix of both good and bad reviews. Yelp’s argument was that most good reviews were false anyway and that the people reading the reviews needed to see both the good and the bad.

I had never even looked at Yelp because I thought it was only for restaurants and west coast businesses. I immediately checked out our listing. To my surprise (and delight), there were no negative reviews posted, mainly because we didn’t have any negative reviews.

Then I got the extortion letter from Yelp. If I signed up for advertising with them I could control (somewhat) my negative reviews. I remember thinking three things at that time.

First, I didn’t have any negative reviews to control on Yelp.

Second, I didn’t see the return on investment for running ads on Yelp, partly because I didn’t and still don’t see much return on investment for any brick & mortar running online ads, and partly because I didn’t see Yelp as a big deal for indie retail.

Third, anyone that was already looking me up or finding me on Yelp was either going to visit me because I was an indie toy store or not visit me because I was an indie toy store. The reviews were a minor part of the decision process. More importantly, anyone who didn’t know me, then found me on Yelp, and was debating whether to visit was basing their decision on every single interaction they had ever had with an indie toy store.

The reviews were just the reinforcement of their already-established bias.

That’s the reality of how we read reviews. We first have an established bias based on our own beliefs and previous experiences. We look at reviews to reinforce those beliefs. We’ll justify away negative reviews for places we expect to love, and discount the reviewer’s opinion when it is at odds with what we expect.

In the back of our mind, we’ll also wonder how many of these reviews—good and bad—are simply made up.

About the only time we’ll heed the reviews is when they are heavily slanted to the negative. When everyone is saying something bad, we’ll decide the business is an outlier and shun them.

(Note: I talked about how to deal with negative reviews here.)

Does this mean you should ignore reviews for your business? Absolutely not! You should always be checking your reviews. If they slant negative then you have a problem you need to address with how you run your business. Even one bad review might be enough to warrant a change in policy to make the experience better for your customers.

If they slant positive, great! Keep up the good work!

Only if you don’t have any reviews (because you’re a new business or have only recently claimed your online profile) should you actually go after getting them. If you’re running your business correctly, the good reviews will take care of themselves.

Because of confirmation bias, though, you don’t have to lose sleep over your reviews. Just keep an eye on them from time to time and make sure you run your business so well that the positive organic reviews outweigh the negative ones.

At the end of the day the most important “review” is the one-to-one where your current customers talk about you to their friends.

-Phil Wrzesinski
www.PhilsForum.com

PS Of all the reviews online, pay most attention to your Google reviews. These are the ones that most people will see because A) Google is the top search engine. B) Google Maps is the top Map App.

PPS If you are a restaurant, reviews are much more critical than if you’re a retailer. How you respond to each review goes a long way to how people will view your restaurant. Read this about negative reviews.

Payroll is Not Just a Line on Your Profit & Loss

My dad was a journalist. Got his degree from University of Michigan in 1965 and started writing for the Jackson Citizen Patriot newspaper right out of college.

He worked for his future father-in-law at Toy House all through high school and college to pay for that degree and even worked part time around his journalism job to help pay for the expenses of having a new family.

There is a legendary story about how he got his start at Toy House when my grandfather gave him a 40% raise to lure him away from another job at age sixteen.

Four years after college my dad got another job offer, this time to move to New York and write for Newsweek. Once again my grandfather made my dad a substantial counter-offer 33% higher than the Newsweek offer to stay and work full time at Toy House.

1974 – 25th Birthday of Toy House
My dad and grandpa are in the white shirts on the left. My sister and I are in the clown costumes in the middle.

Now some might say my grandmother was behind this offer. She didn’t want to see her grandchildren (my sister and me) leave town. But my grandfather knew a good employee when he saw one. He always told me …

“You can never overpay for great help.”

Talking about Sears these last few days has struck a nerve. Along with the comments here, I’ve received emails with stories of families with long ties to Sears.

One long-time reader of this blog told me how his grandfather who worked for Sears for 33 years talked about how they changed their employee stock options program in the 1980’s. He speculates that started some of their “well-trained staff” attrition. 

Wikipedia tells of how Sears changed their hourly pay structure in 1992 that ended up cutting pay for several employees. This followed on the heels of Walmart and Kmart surpassing Sears in total retail sales in 1990 and preceded by a year the demise of their catalog. Coincidence?

Circuit City did the same thing in March 2007, cutting starting hourly pay and laying off 3,400 higher-paid employees. Less than two years later they liquidated.

In both cases the C-Suites were only looking at payroll as an expense to be cut instead of an asset to invest in.

You can treat your employees as an expense instead of an asset and get away with it. Amazon has done that for years. Even their new round of raises was offset by a cut in bonuses and other benefits (and was politically motivated to decrease the chance of Bernie Sanders getting the Stop BEZOS Bill passed).

It only works, however, if you didn’t treat your employees like assets first.

I may be biased but I think my grandfather had it right. How you treat your employees affects how they treat your customers which affects your bottom line.

Go find some people to overpay.

-Phil Wrzesinski
www.PhilsForum.com

PS I wish I could have paid my employees better. I wish I could have offered them better benefits. Since I couldn’t, I did other things to help them out like grant all their time-off requests, work with the schedule to make sure they got the hours they wanted, feed them every now and then, train them, treat them with respect, give them responsibility, pay a stipend toward their continuing education, celebrate their birthdays and achievements, and bring in a masseuse during the Christmas holidays. Even when you don’t have the budget there are things you can do to make your staff feel appreciated.

Two Forks in the Road for Sears

In 1988 Walmart opened their first Supercenter in Washington, Missouri. The Supercenter concept heralded Walmart’s entry into the highly-competitive, low-profit, huge cash flow, repeat-traffic driver grocery business.

Two years later Walmart surpassed Sears in total sales to become the largest retailer in America.

By 2004 Walmart was capturing one out of every four dollars spent on groceries and remains the biggest player in the grocery industry.

Walmart ad in Vogue Magazine

In May 2005 Walmart did something completely unexpected. They ran a full-page ad of their new fashion launch in Vogue Magazine. Yes, Walmart and Vogue. No, it wasn’t a designer pajama line to wear when you visited a Walmart. Walmart wanted to do to fashion what it had done with grocery.

There was only one problem. Fashion isn’t a commodity like groceries. One year later Walmart reported declining sales for the first time (at a time when most retailers and the economy were booming). By 2007 they scrapped their foray into fashion and went back to what they did best—sell mass-produced items at cheap prices. When the economy tanked in 2008, Walmart found itself back on top with sales growth and cash flow.

I tell you this story in our discussion of the lessons from Sears filing bankruptcy (part 1 and part 2) because it illustrates what can happen when a company tries to diversify the right way and the wrong way. Walmart’s model is built on selling cheap goods cheaper than anyone else.

Their foray into groceries made sense. Fashion, not so much. When Walmart began selling groceries it vaulted them to the top of the retail mountain. When they got away from what they did best, it caused them to falter.

Sears made the same mistake in the 1980’s and never recovered.

Sears made its living in the same style as Walmart—selling lower-priced items. One difference, however, was that Sears sold “value” more than price. The well-trained staff* would talk you out of the most and least-expensive versions of their appliances by showing you the “value” you got from buying something in-between with a lot of bells and whistles.

Sears also made its living by having stores near urban centers, but also a catalog to serve the less-represented rural areas.

This recipe put them on top of the world.

COMPETITION

While Sears had made a living selling to rural markets through their catalog, Walmart was quickly encroaching their territory with actual stores. Walmart went after the rural markets that didn’t have the retail glut of the urban locations, the same rural markets where the Sears catalog was most popular.

Walmart also used its growing power with vendors to bully them into better pricing to undercut the competition and define the sales in terms of “price”, not “value.”

Whether through hubris or ignorance, Sears ignored this threat and instead focused on diversifying their portfolio.

CORE VALUES

Back in 1930 Sears had launched Allstate Insurance, a value-based insurance company. The success of that led Sears to get into three other industries in the 1980’s—financial planning (Dean Witter), real estate (Coldwell Banker), and credit (Discover Card). 

Like Walmart and grocery, Sears and insurance was a fit. Insurance is a product people have to buy but want to buy it affordably (value). Like Walmart and fashion, financial planning and real estate were not a good fit for Sears because they aren’t sold the same way. Sears was sinking valuable time and resources into ventures that weren’t consistent with their Core Values or their primary business model.

Sears divested themselves of those entities in the 1990’s but by then the damage was done.

Walmart and Kmart surpassed Sears in sales in 1990. Walmart had redefined the lower-priced goods market, begun the serious race to the bottom, and infiltrated the rural neighborhoods where the Sears Catalog had been the lifesaver for so many families.

MAIL-ORDER BUSINESS

In 1993 Sears discontinued the catalog. The catalog business had shifted dramatically in the 1980’s because of the fanatical growth of retail stores in America. Why order it from a catalog when you can pop into a nearby store and get it today? The glut of retail, the cost of shipping, and the 7-10 business days shipping time was enough to kill the commodity catalog shopping that was the Sears catalog.

The only catalogs making it were for specialized companies selling specialized goods not found in stores (LL Bean, Eddie Bauer, REI, Signals, Orvis, etc.).

Then along came Amazon.

In 1994 Amazon launched their site. While there were a small handful of people who recognized the power of the Internet and what it could become (my buddy, Hans, actually pitched Borders Bookstore on the idea of selling online before Amazon launched and was laughed out of the room), I’ll forgive Sears for not seeing the potential.

Kinda …

Sears already had the mail-order business infrastructure set up. Sears already had the cataloging of hundreds of thousands of items done. Sears already had enough stores around the country at that time to set up a BOPIS system that even Amazon can’t yet match. Sears was part of a joint venture with IBM called Prodigy, so it was even involved in the Internet in its infancy!

This isn’t to say that Amazon wouldn’t have eventually cleaned their clock through better data, better customer-centric focus, and better operations, but just imagine if instead of trying to diversify, Sears was instead looking at new ways to do what they already did, only better and with the full use of the newest and latest technologies?

The lesson in all of this is simple.

First, understand fully and clearly who you are and what you do.

Second, don’t let anyone else do it better than you.

Sears let Walmart and Amazon do Sears better than Sears while Sears was busy trying to be someone else. Because of their size, it is a slow, painful death, but the choices that led to the bankruptcy were made in the 1980’s and 1990’s when Sears chose the wrong forks in the road and stayed on those paths too long.

-Phil Wrzesinski
www.PhilsForum.com

PS *I don’t know when it happened, probably in the 1980’s, but at some point Sears got away from their “well-trained staff.” Whether it was a cut in money for training programs, a shift in management away from training as a whole, a cut in payroll, or simply a belief that sales-training didn’t matter (a common thought in the 1980’s when everyone was selling at a high clip), Sears lost this competitive edge it held over the competition, especially Walmart.

PPS I did this exercise a couple times with my staff, but it was a question I asked of myself several times a year. “If I was going to open a store to compete with Toy House, what would I do?” When you ask and answer this question, you find the weaknesses in your model that can be exploited. You find where your competitive advantage is thinnest. Not only does this question help you find where competition could hurt you and shore those areas up before the competition strikes, it helps you constantly explore options for doing what you do better.

Lessons From Sears – Retail is Always Changing

“Phil, you know this store is going to put you out of business, right?”

My grandfather heard that first in 1962 when Shoppers Fair, a discount department store chain, opened in Jackson. We heard it when Westwood Mall opened in the 1970’s with a Circus World store (eventually becoming a KB Toys). We heard it in the 1980’s when Meijer opened their second store on the east end of town and Kmart opened a new store on the west end of town. We heard it in 1990 when Target came to town. We heard it in 1993 when Toys R Us opened.

Shoppers Fair Jackson, MI 1962

Shoppers Fair closed in 1974. KB Toys is gone. Kmart left when we did. Toys R Us left only a year after us. Montgomery Ward left Westwood Mall a couple decades ago. Younker’s is leaving Westwood Mall as I type.

Retail changes.

Jackson used to have a Woolworth store, a Field’s department store, a Jacobson’s department store, and an A&P grocery store—all defunct retailers now.

Retailers come and go. The retail landscape changes. Stores open and close.

We can look at Sears filing bankruptcy as just the natural evolution of retail. They had a good run, but now it is over.

In fact, I’ll go out on a limb right now and predict the eventual demise of Walmart. It might be fifty or one hundred years from now, but history shows us no retailer lasts forever.

The only problem with simply dismissing Sears as an eventuality is that Sears was once on top of the world, both figuratively as the largest retailer in America as recently as 1989, and literally when they opened their tower in Chicago in 1973. Their fall is far more educational to the independent retail world than Toys R Us and their debt problems caused by venture capitalists.

As a student of retail, I see two turning points for Sears starting their downward slide that incorporated the other five “lessons” I listed yesterday. One was in 1993 when they discontinued their catalog. We’ll talk about the other one tomorrow.

-Phil Wrzesinski
www.PhilsForum.com

PS There are several reasons why an independent retailer closes shop including retirement, illness, death, boredom, new opportunities, local market collapse, and competition. The big boys close for one reason and one reason only—Cash Flow. It is the decisions that lead to cash flow problems that I find most interesting.

RIP Sears

There is a group on Facebook for people who grew up in Jackson, MI. The posts are mostly, “Who remembers …?” so that former Jacksonians can reminisce about days long past. A recent post was about Toy House. A couple hundred people waxed nostalgic about visiting the original store in the 50’s and 60’s.

Several people mentioned the Catalog Sale, something my grandfather started early on.

The Catalog Sale was a two-weekend sale, once in October, once in November, where people brought in their catalogs and we matched the catalog price on any toy we had in stock. Our goal was to keep the sales in town.

The Sears Catalog

The most common catalog was the Sears Christmas Wishbook.

We ended the Catalog Sale in the early 1980’s when it turned out our prices were usually sharper than the catalogs at that time. The event was no longer a draw. By 1993 even Sears had stopped producing their catalog.

Times change. Retail shifts. Today Sears has filed bankruptcy.

Sears was Amazon before Amazon with their mail-order catalog business that allowed you to buy almost anything you could imagine from the comfort of your own home.

Sears was Walmart before Walmart when they dominated the retail landscape in the 1940’s and 50’s by offering a wide variety of merchandise at low prices. By 1969 Sears was the largest retailer in America with a larger market share of categories like home appliances than any retailer has ever had since. Four years later they completed construction on the tallest building in the world.

Sears also was a pioneer in retail, with legendary sales training, teaching their sales staff how to upsell and not sell from their own pocketbook. They were taught how to sell on features and benefits. They had their own credit card (which eventually became the Discover Card). They had their own insurance agency (which became AllState). 

Today they filed bankruptcy.

The easy blame is going to be Amazon and Walmart. Amazon out-Searsed Sears in the mail-order business. Walmart out-Searsed Sears in the commodity goods business.

Yet when was the last time you truly thought of Sears as a convenience-based place to buy goods? They dropped their catalog back in 1992, two years before Amazon launched.

And with well-known economy brands like Kenmore, Craftsman, and Diehard, tons of cash, and superior vendor relationships, Sears was well-positioned to destroy Walmart in the race to the bottom. Yet they dropped faster than a greased baton at the blind relays. 

So what happened?

The answer is quite simple. Sears got away from their competitive advantages and Core Values. Convenience and Commodity Brands were only two of them. The one I believe they truly missed was their sales training.

When was the last time you were blown away by the customer service at Sears?

Toys R Us got away from their Core Values in 1992 when Walmart surpassed them in total toy sales. Sears did the same thing over the years as they gave up the advantages that brought them to the table.

There are several (contradictory?) lessons in all of this.

  • Retail is always changing.
  • New competitors will try to beat you at your own game.
  • Stick to what you do best.
  • Don’t give up your advantages.
  • Adapt or die.
  • Stay true to your Values.

We’ll explore these concepts over the next few days and try to learn from their mistakes.

-Phil Wrzesinski
www.PhilsForum.com

PS It is never a good day when a legacy retailer such as Sears files bankruptcy. If we don’t learn from their mistakes, though, then we’re likely to make the same ones ourselves. As I’ve always said, Retail is not Rocket Science. Rocket Science is actually math for which you can solve all the variables. Retail has variables and equations that never fully resolve. The lessons, though, are fascinating.