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Two Specialty Retail Truths

If you’ve been a specialty retailer for several years you know these two things will happen every year. Every. Single. Year.

  1. A vendor who used to be exclusively sold only in specialty stores will start selling to a big box category killer (like Home Depot, Office Depot, Barnes & Noble, Toys R Us) or a major discounter (like Target, K-Mart or Wal-Mart.)
  2. A product you sell will be advertised nationally and sold somewhere (online, in a discount club store or flash site) below cost.

Write these down, my friends. They will happen. So far, they have happened every single year this century and will happen every single year for the foreseeable future.

Now you know. Now there is no reason to go postal when it happens. You saw it coming.

Yeah, it gets emotional. We indie retailer are a passionate bunch and hurts when we get betrayed. But the smart retailers are not only expecting it, they are dealing with it in a cold-hearted, calculating manner deciding whether to cut and run or ride out the storm based on sales and profits, not emotions and surprise.


Cut and run when the vendor sells out completely and gives all their product and support to the big guys.

Cut and run when the product gets turned into a commodity sold everywhere, while you are trying to be the cutting edge leader in your field.

Cut and run when the traffic it brings in because of its popularity no longer justifies the lost margins.

Cut and run when you have another company offering you the same items but with better terms.


Ride it out when the product still sells at the price you set.

Ride it out when it is just a small sample, and you’re carrying the whole shooting match. You’ll get referrals and eventually the big box will move on. Cherry-picked lines don’t often last long in the chains.

Ride it out when your model is built on selling the most popular items, but with better service and experience than your competitors.

Vendors make decisions based on numbers. You should, too. Especially since you saw it coming.

-Phil Wrzesinski

PS Sure, sometimes it hurts your bottom line. Sometimes it helps. You can focus on the negative, which is usually out of your control, or focus on what you can do. I find that the latter usually helps keep me fired up and moving forward.

Moms, Mobile Phones, and the Transactional Customer

I have been bombarded with companies selling me on the merits and benefits of Mobile Marketing. The main focus is sending out texts with coupons and deals to people in the vicinity. Some of these companies are offering me packages less than $20/week. Others want me to commit to thousands a month. They have the statistics that show they will bring me gold.

“Lies, damned lies, and statistics.” -Mark Twain

Kids Today magazine just had an article this month with even more statistics on mobile that I found quite enlightening and worth exploring deeper.

Here is the first statistic from the article:

“According to the latest data from comStore, overall mobile purchasing accounted for 11% of e-commerce spending in 2013.”

E-commerce spending, depending on your source, is anywhere from 3% to 10% of all retail purchases, so mobile purchasing is anywhere from 0.3% to 1.1% of all retail purchases. Before you drop a load of your advertising budget on mobile, keep that in mind. Shopping on their phone is an incredibly small percentage of all retail sales.

But what about coupons they get on their phones and then bring into the store?

Here is the second statistic:

“Nine out of ten moms take notice of advertisements on their smartphones. One-quarter clicked to get a coupon after receiving a mobile ad and 15% of moms clicked on the ad to go to the website.”

In other words, almost all of the moms saw the ads, but 75% of the moms did not take the bait, 85% of the moms were not enticed to go to the website. Now, don’t get me wrong. Twenty-five percent is still a pretty good click-thru rate. But remember who is clicking – the Transactional Customer – the mom who believes she is the expert on the product and knows more about it than you do. These moms are loyal to one thing only – the deal. They have no loyalty to your store and only buy from you when you have a sale.

But aren’t all moms all about the price?

Here is the third statistic:

“More than half the moms, 53%, say coupons are appealing in a mobile ad; while 23% want a deal that is located nearby.”

Once again proof that roughly half the population in any category, including the technologically savvy new moms, is interested in the deal (Transactional Customers) and the other half is more interested in the trust factors (Relational Customers).

When you plot out your strategy, decide which customer you want to attract and proceed accordingly. While your competitors go after that 53%, remember that there is a lot of business to be done with the 47% who don’t find coupons on their phones appealing.

-Phil Wrzesinski

PS Don’t think of me as anti-technology. Smartphones are here to stay. You need a website and it needs to be optimized for mobile. You need social media as one part of your relationship-building portfolio with your customer base – and many moms are using their smartphones as their primary tool for social media. You also need to be smart about where and how you spend your money. Your most loyal customers are not loyal because of your coupons, they are loyal because they trust you. Before you buy a mobile marketing plan, make sure you’ve put enough effort into building that trust and that the mobile plan reinforces that trust, not undermines it.

Tired of Saying No?

Everyone wants a discount. Everyone wants a deal. They bombard you daily. Can you match this price? Can you give us this break?

You’re tired of saying no. Me, too.

What if instead you started saying Yes?

Yes, I can do that. Yes, I can offer that. Yes, I can do something.

What would it take to say yes? Higher prices and margins? Support from your vendors? Lower expenses? Guts?

There are certain aspects of retail that lend themselves perfectly to saying yes. Food service is one. If you sell food, whether a sit-down restaurant in a fancy part of downtown or an ice cream stand on the boardwalk, you should set your prices high enough that you can say yes all day long to whatever gets asked.

Don’t advertise that you say Yes. Just do it. Say Yes out of the generosity of your heart. You’ll feel better (Yes always feels better than No). Your customers will feel better. They’ll start telling everyone else about your generosity. New customers will flock to see you because of that generosity.

When you say Yes more than you say No you’ll get more customers. Period.

Those of you selling non-consumable goods are tuning out. Stay with me. There is something you can do, too.

Generosity is contagious. You will be surprised what you can give when you start looking to give. Can you give free delivery? Free giftwrapping? Free extended warranty? Free balloons with your logo on it? Free assembly? Free tune-ups? Free shoe laces? Free yard stick? Free gift with purchase? Free information? Free instructions? Free tips? All of that should be built into your business from day one.

When someone asks for something, rather than tell them No, tell them what you can do. Say Yes. It feels better.

(Once again, though, don’t advertise it. Just do it. Give, give, give, and let your customers advertise your generosity for you.)

-Phil Wrzesinski

PS Yeah, you might be thinking that you can’t raise your prices enough to cover any generosity. I’m telling you that you can. The formula is in my first Freebie, the one that launched Phil’s Forum Publishing LLC, and it is still as relevant and effective today as it was the day I wrote it. If you aren’t using my Pricing for Profit tips, you’re leaving money on the table and not giving yourself enough room to say Yes.

PPS Notice I did not say “match prices”. You don’t have to match prices to give generously. There are other valuable services you can offer. In fact, you don’t have to give away anything. But if your current strategy isn’t working or you are feeling beat up by the requests, this is another way to go. If you’re in food service, this is one of the best ways to go.

Can You Really Buy Loyalty?

How many of those loyalty scan cards do you have on your keychain? Your grocery store? Your pharmacy? Your office supply store?

Are you going in regularly with those coupons they mail you? Does it make a difference where you shop and how much you buy? For some customers, yes it does. The Transactional Customer loves those cards and takes full advantage of them. But not everyone does.

According to one survey, only about 65% of Americans actually use those loyalty program cards and coupons.

I question how many of those people would still be “loyal” to that store without the program. I know that the two cards I use are at places where I would shop anyway, whether I had the card or not. One of them, I actually hate shopping there. I only go because they have a product I can’t get anywhere else, not because of any loyalty card.

More importantly, the top reasons people say they would switch their “loyalty” to another store is because of indifferent sales help and the other store being perceived as more fun. Price and loyalty programs are far down the list.

So how much “loyalty” are you really buying? First consider that 35% of the population doesn’t care about loyalty programs. Then consider what percentage of those people using your program are actually spending more at your store than they might otherwise just because of the program. Is it more than what the program costs? I saw one program that promised if I gave away 10% discounts in my loyalty program I would see a 5% increase in sales. Not my kind of math. Then consider how quickly customers might leave your store, loyalty program and all, because of perceived indifference by your staff.

Would you really like to buy some loyalty? Spend your money on training a kick-ass staff. Spend your money making your store a more fun place to shop. Spend your money on delighting the 35% (or more) who could care less about discount cards and coupons.

That’s a loyalty program worth having.

-Phil Wrzesinski

PS And it won’t be a burden on anyone’s keychain.

Why JC Penney’s is Struggling

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

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

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

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

  • Price
  • Product
  • Convenience
  • Trust
  • Delight

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

JCP was losing in all five.

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

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

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

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

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

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

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

-Phil Wrzesinski

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

Get Rid of Your Dogs

What if you bought this shiny new crib for your store. It measures 62″ wide and 35″ deep. It takes up 15 square feet of your store.

What if six months after you bought it, you still hadn’t sold it?

One calculation some stores use to see how healthy their sales are is Sales per Square Foot. Take your total annual sales and divide it by square footage of selling space to find out your Sales per Square Foot.

Now you know how much business you should be doing for those 15 square feet.

But if you haven’t sold a single crib, where are you? You’re in the hole. You’re out whatever it cost to bring that crib in. You are in negative numbers.

Not only have you not made any money, you’ve lost money on that space.

And chances are, since no one wanted that crib in the last six months, just taking 10% off the price isn’t going to move it any faster.

The best move is to mark it at cost and sell it quickly. Get it out of there. Get back to zero for your 15 square feet. Then you have six more months to try something else in that space that will make you money.

Hey, we all make bad buying decisions, dogs that just won’t hunt. That’s part of the retail game. But a worse decision is not getting rid of the dogs soon enough.

Make sense?

-Phil Wrzesinski

PS If you want to know more about managing your inventory including the two formulas every retailer should know and track, download my FREE eBook on Inventory Management.

PPS Follow this link for my post on the best way to make your dogs bark.

PPPS Check with your industry to see if there are standards for what your Sales per Square Foot should be. But understand that every store is different. The bigger your store, the more of your space might be used for extra cash registers or wide aisles for shopping carts, thus lowering your numbers.

Black Friday Deals – A How To

Okay, you’re gonna venture into the murky waters of Black Friday with some doorbuster specials at your retail store. You better know what you’re getting into. Do it right and you’ll see your registers ring. Do it wrong and you just might be borrowing trouble.

Here are some tips to help you navigate the seas of this retail extravaganza.

First answer this… Why are you having Black Friday doorbusters? Is it to draw traffic? Grow market share? Move out some slow sellers? Because your shopping center makes you?

Knowing this makes all the difference in the world.

Going After Market Share
If you’re trying to grow market share and draw in new traffic, you have to have a really good deal on a whole lot of good stuff. And you need to share that info with the whole marketplace, not just your fan base. Email and Facebook won’t help you grow traffic and market share. They are only preaching to the choir. You’re going to need a flier in the newspaper or an ad on radio or TV. And that deal better be a killer deal because you’re up against a whole bunch of killer deals from a whole bunch of deep-pocketed retailers.

Still not afraid? Good.

Now you need to make sure you have enough product to keep the momentum going. Run out of your best deals in the first few minutes and the rest of the day is sunk. You need to have enough merchandise to last the first couple of hours minimum, otherwise you’ll send away far more unhappy people than happy ones – not a good marketing plan this close to Christmas.

And lastly, you have to make sure your staff is ready for the challenge. Do you have traffic flow under control? Is everybody up to speed on the deals and how to ring them up? Is everybody okay with the new hours? (especially if you’re opening up extra early) Are they trained for dealing with unhappy customers, unruly customers? It’s a given that you’ll have at least one or two.

That’s a minimum of what it will take to attempt to grow market share on Black Friday. (And there’s no guarantee it will work. The competition is pretty savvy.)

Moving Out the Dogs
Maybe all you need to do is get some slow movers off the shelf, make those dogs bark. You can give the appearance of having a Black Friday type event without all the expense and risk, just by marking down some merchandise that you were probably going to mark down anyway.

First, this is a good day to start those markdowns. The Transactional Shoppers are out in force and looking for a deal. Second, you won’t have as many unhappy customers, seeing that it was older, closeout merchandise in the first place.

Plus, you can advertise that kind of sale purely to your fan base and make them feel even more special because they knew what was happening before the general public who has to show up Friday to see what is on sale.

Doing Nothing At All
Then again, you don’t have to do much of anything to make Black Friday special. Put out a pot of coffee for those early risers. Dress up the store in your best Christmas spirit. Make sure your shelves are fully stocked & straightened. Put your happiest smiling faces on the sales floor and let them do their magic.

The day after Thanksgiving has always been a strong shopping day, and it wasn’t the discounts that always drove the traffic. Only in the last couple decades have we seen this day become the who-can-open-earlier-and-sell-it-cheaper event that it is. You don’t have to join that fray to be successful.

In fact, if you take the hands-off approach, make sure you staff your store stronger in the afternoon and evening, and be ready for another big rush Saturday. There are a lot of customers choosing not to fight the long lines Friday. To them, no deal is worth the hassles of long lines, unhappy people and early mornings. They’ll be out in force later and don’t want to deal with those been-up-since-three-don’t-bother-me sales people.

This Black Friday, whatever you decide to do, do it consciously and do it right!

Happy Thanksgiving!


It Just Isn’t Fair!

There’s an uproar in the toy world and I want to give you my take on it – be sure to read the whole article.

One of my major vendors, a long time player in the specialty toy industry, just gave a whole bunch of exclusives to Toys R Us. Many independent toy stores are understandably upset. Not only does it cut into our margins, it makes us no longer look like the experts – one of the factors we use to compete against the big box stores.

Someone asked my opinion on it. I figure I’d share it with you, too. It’s pretty simple.

S**t happens…

Yeah, it was the specialty stores that helped build this brand in the US. So what? Yeah, it was a major difference between us and our big box competitors. So what? Yeah, it was a huge customer draw for us. So what?

If I had a dollar for every toy that used to be exclusively sold in specialty stores that eventually found its way onto the shelves at TRU, Wal-Mart or Target, I’d be retired by now.

Unhappy Customers Equals Unhappy Store?
No, it’s not fun when a customer comes in wondering why the “school” you’re selling is almost twice as much as the “school” at TRU. She doesn’t care that their school is smaller and doesn’t have all the accessories. She also doesn’t understand why you can’t get all the other stuff she saw at the other store. And she really doesn’t care that some of the price difference is because of their buying power – heck, that’s reason enough for some customers to go running from your store immediately.

All she knows is that she has a problem and you’re not being part of the solution.

But like I said before, this happens all the time. And there are pretty much only two reactions I can have.

  1. Be pissed and angry and let everyone see how unhappy I am with my lot in business (life).
  2. Accept it as part of doing business as an independent retailer and put a smile on my face while trying to show the customer what I do have and what I can do.

Of course you are going to choose #2. That’s what the smart retailers do.

Not Their Fault
It isn’t the vendor’s fault. The vendor needs to make money. Selling to the big chains is one method of doing that. And you don’t know what is driving their actions. Maybe the indie stores haven’t supported them enough. Maybe there is pressure from a silent partner or parent company. Maybe there is enough demand that going big is a necessity.

Whatever the reason, it happens all the time in the toy and baby industries, and I would guess it happens in your industry, too. It just isn’t worth getting your panties in a bind.

Take the High Road
You can choose to drop that vendor. Just don’t think it will show them any lessons. If anything it will embolden them that they made the right choice going mass.

You can choose to evaluate the vendor financially. Are they still drawing customers and making you money? Then keep ’em. If not, drop ’em.

You can choose to tell your customers what a horrible company they are in doing that to you. You might win some sympathy, but you might also come across as sour grapes. Remember that it is about the customer and her problems, not you and yours.

The better approach is to see if what you have will fit her needs. Focus on solving her problem with what you have, not what you don’t. Focus on what you can do, not what you can’t.

Bottom Line
In the end you have to take care of your own bottom line. That means first and foremost taking care of the customer, making sure she has a positive and rewarding experience in your store and that you do whatever you can to solve her issues and make her happy. No matter what a vendor does, there is no excuse for a poor attitude from you.

It also means evaluating your vendors from a strictly financial sense. Is their product still drawing customers and making you money? Good. Don’t let your emotions get in the way of a proper evaluation of a potential profit center.

At some point a vendor’s actions will not be in your best interest. Rarely do those actions cause major damage to your business. Your reactions to their actions are usually the culprit. So take control of your actions now, and reap the benefits later.


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.


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:-)


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?