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Field of Dreams

“If you build it, he will come.” -Shoeless Joe Jackson, Field of Dreams

Great movie. Bad advice for business.

Yet too many independents start out that way, thinking all they have to do is build a wonderful little shop and people will climb all over themselves to get in and give them money.

Roy H. Williams said, “If making a profit were easy, everyone would be doing it.” But not everyone is making a profit. Those who aren’t making a profit are closing their doors. And the first complaint out of their mouth is that they didn’t get enough traffic, followed quickly by the blame…

  • The downtown doesn’t have enough parking.
  • The Buy Local campaign didn’t advertise me enough.
  • The city didn’t support me.
  • The newspaper wouldn’t write a story about our opening.
  • There just aren’t enough people in the area.
  • No one knew about me because of the sign ordinance.
  • Unemployment is too high.
  • People are too cheap.

You know somebody who has made one of these statements. Heck, you probably have thought one or two of them.

Yet there are businesses thriving in hard-hit downtowns, thriving in high unemployment locales, thriving in spite of a lack of support from government, the newspaper, or a Buy Local campaign, thriving without coupons, discounts or cheap products.

You Have To Market Yourself
One of the biggest things they are doing differently is Marketing. Just building a store is not enough. We are over-retailed as it is. The most successful businesses are making a conscious choice to actively and creatively market themselves to the public. They are creating marketing messages, marketing plans, and mapping out new and unique ways to attract customers.

You Can Afford It
And it doesn’t cost as much as you think. There are many ways to advertise your business spending primarily time, not money. You can learn seven of them by downloading my FREE eBook Main Street Marketing on a Shoestring Budget.

And if you have the money to spend, before you drop a dime get to know how the different advertising mediums work with two more FREE eBooks – How Ads Work Part 1 and How Ads Work Part 2.

The movie is wonderful. But it is just a movie. In real life the quote is:

If you Market it, they will come.

-Phil

Don’t Alienate Your Fans

At the Michigan Downtown Conference two speakers talked about sign ordinances. The first was Sheila Bashiri, City Planner from the city of Birmingham, MI, a well-to-do suburb of Detroit nestled in amongst the other wealthy suburbs.

Because Of or In Spite Of?
Birmingham has the most strict sign ordinance in Michigan, so strict that some of the slides Sheila showed us of attractive signage wouldn’t even be allowed in her city. Yet many retailers want to be part of that bustling downtown. And Sheila claimed that her sign ordinance was a main reason for their success.

I guess the dense population of millionaires is only a secondary cause of the businesses thriving there.

The next speaker, Robert Gibbs, mentioned how much he liked the Birmingham sign ordinance and how all communities should adopt it for their business districts. In a private conversation afterwards, he went so far as to tell me that all existing businesses in those districts should be given 5 years to change their signs or move out.

Does he really believe Frankenmuth should tell Bronner’s and their two million visitors a year to take down the billboards or get the f*** out? Or that Ann Arbor should give Zingerman’s a remove the ugly trailer and all that neon outside the Roadhouse or else ultimatum? Hugely successful, yet eccentric retailers are what give our cities their character.

Businesses do not thrive because of sign ordinances. They thrive in spite of them because the city has the population base to support them and the stores are taking care of that population. Period. End of story. Sure, a well-crafted sign ordinance can give a city a uniform characteristic and look, but that does not draw traffic or grow business. The stores draw the traffic because of who they are and what they do. And signs are what help you find those stores.

It is no wonder that most downtowns are struggling. There is a huge disconnect between the city leaders/planners and the businesses that pay their taxes. Both of these speakers advocated not having businesses in the discussion for things like sign ordinances. Both believed that only city leaders should make decisions on what they want their business district to be.

A Business Lesson
That would be the same as you not listening to your customers. You wouldn’t do that would you? Of course not! You will value some customers’ opinions more than others. But if you aren’t listening to your best customers, they won’t be your best customers for long.

Don’t make the mistake others are making. Listen to your best customers. Include them in your plans. Not only will you make better plans because of it, you’ll empower those same customers to become evangelists for your business. By giving them a say in the matter, they will be your strongest advocates, and give you incredible word-of-mouth exposure.

Not everyone has an unlimited supply of millionaires. Take care of those who are taking care of you. That’s a lesson for retailers and for cities.

-Phil

How Long is Your Shoestring?

The term “Shoestring Budget” dates back far enough that no one really knows who or how it got started. Some say it’s because shoestrings are so low to the ground and your budget is really low. Some say it’s because shoestrings are so cheap that they’re all you can afford. Some say it’s because broken shoelaces were used to tie together all your other belongings, meager that they were. One theory I liked was in reference to shoestring gamblers, gamblers without a lot of money who played low stakes games.

Regardless of it’s origin, most independent retailers have a Shoestring Budget when it comes to your marketing. And most of your marketing is a gamble, spending X hoping to get Y in return.

On Monday I did a presentation at the Michigan Downtown Conference called Main Street Marketing on a Shoestring Budget.

The notes for that presentation are now downloadable in the Freebies section of www.PhilsForum.com.

Those of you who want to learn the truth behind Word-of-Mouth Advertising, how to use Social Media properly, or would like a way to turn all those requests for donations into actual business for your store will download this document.

Those of you who want to learn an easy way to turn your customers into fans, a simple way to draw traffic at only $2.50 per new customer (guaranteed), or want to learn how to meet people that can make a difference in your business will download this document.

Those of you who want to learn two techniques that will strengthen all the businesses on your Main Street at once will download this document.

The rest of you can continue to gamble with your shoestrings. But I’m betting that a lot of you are going to download this document and pass it along to your friends (strongly encouraged).

Did I tell you it’s FREE?

-Phil

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

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

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

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.

  1. Find the total dollars spent in the US in your industry for 2009 (toys = $21.5 billion)
  2. Divide that by the population of the US (308.5 million)
  3. Multiply that number ($69.69) times your market’s population
  4. Adjust that number up or down based on your market’s average household income versus the national average
  5. 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.

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

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

How Will You Measure Success?

It dawned on me that I’ve never asked you the most important question of all.

How will you measure success?

Whenever I work one-on-one with another retailer, that is usually one of the first questions. If I don’t know what measuring stick you’re using to decide if you are successful, I can’t help lead you there.

Will it be profit? Will it be increased sales? Will it be increased customer counts? Will it be larger transactions? Will it be positive cash flow?

Are you preparing your business for future stability, short-term gains, or to sell it to someone else?

All of those are realistic goals, but the path to each is not necessarily the same. Knowing the answer helps you point your ship in the right direction. The only wrong answer is, “I don’t know.”

How will you measure success? Write it down. Post it where you can see it. Put it in your planner, on your calendar, anywhere you look daily. Then start doing what you need to do to get there.

-Phil