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Category: Independent Toy Stores

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.

-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

The 3/50 Project – Are You On Board?

Cinda Baxter had a good idea. A really good idea. An idea that sprouted wings only seconds after she hit “publish” on her blog.

Pick 3 local retailers you would really miss if they closed. Spend $50 in those stores this month. Repeat.

It’s The 3/50 Project and it all started with a blog post on March 30th, 2009. Now, less than a full year later, The 3/50 Project is an international juggernaut with over 17,000 independent retailers registered at her website, over 53,000 fans on Facebook, and a boatload of resources you can download for FREE to help promote your fellow independents.

Cinda came to Jackson last Wednesday night to talk about the project and how it can help promote local Jackson businesses. She gave us the history behind the idea and a laundry list of great ways to bring this positive message to our community.

Ideas like this cross promotion between retail stores and restaurants…

Spend $50 in any/all of these select retail stores this month, get a $10 gift certificate to any of the following restaurants for next month (and vice versa)


Ideas like this window display…

Write on this card 3 locally owned businesses you would miss if they closed. Sign your name at the bottom. We’ll post your card in the window with all the other cards and you’ll be entered to win one of three $50 gift certificates.

(Think of the impact such a display would cause – the reinforcement to the person who wrote the card of supporting those businesses, plus an easy way to cross promote your customers’ favorite businesses to other customers.)

Ideas like this way to create evangelists for your store…

Attach five $5 gift certificates to a 3/50 Project flier with your customer’s name on the back and give to her with instructions for her to pass 4 of those gift certificates on to her friends. Tell her that for every gift certificate that comes back she’ll get entered in a drawing to win a monthly prize.

(Do you think that would get some new business in your store? Of course it would!)

And many more ideas.

It was a fabulous presentation. Unfortunately only about 15 Jackson business owners were in the paltry audience to hear such a message. But then again, 15 is a start. And we have to start somewhere.

Do you think you could round up 15 local businesses to start some sort of cross promotion in your town? Do you think you could benefit from a campaign that encourages people to think about their favorite local stores? Are you one of the favorites? Will you be in the top 3 on someone’s list? (If not, we need to talk. I might be able to help you.)

Do yourself a favor and go to The 3/50 Project. Read all about it. Sign up. Download the freebies. Promote yourself and your local retailers. To steal a phrase from my fellow blogger Jay H. Heyman, it’s a good idea, it’s a really good idea.

-Phil

PS I got to meet Cinda Baxter after the presentation. We had a wonderful conversation sharing ideas. What incredible energy and passion she has for local retailers. I’m a fan. I’ve added her blog to my must-read list. You should too!

What to Change, What to Keep the Same

Johnny’s Toys, a fixture of the Cincinnati toy market for decades is dropping out of the toy business. Their flagship store in Covington, KY, just across the river from Cinci is converting the sales floor into more space for birthday parties and events that they host in the back of their store, an area called Otterville. They’re keeping their electric train business, but cutting out the toys and baby products.

I had a chance to visit Johnny’s a few years ago. Johnny’s has been one of few remaining giant independents like us carrying a wide variety of toys, hobby & baby products. In the electric train world Johnny’s is legendary. While we have a nice train display, ours is only one fourth the size of theirs. A full 24×8 feet of trains, track, bridges, crossings, landscape and wide-eyed children.

It was awesome!

I just wish the rest of the store had been as exciting.

Talking to a sales rep, together we lamented their getting out of toys. But then he added, “Phil, you’ve been far more proactive in your business, staying current on products, marketing, etc. I’m not really surprised they’re doing this.”

Proactive? Staying Current? Aren’t those minimums for running a business? I mean, we’re not talking advanced retail. Shouldn’t every business be staying current? Unfortunately, it is too easy to fall into the trap of believing that what worked before will work again.

The real skill in retailing is figuring out what to keep the same and what to change. Isn’t that the real skill in all business?

What do you hold fast, what do you let go? What do you never change, what do you constantly change? Where do you stay old-fashioned, where do you modernize? Principle questions being asked by businesses of all shapes and sizes all across the world.

I have an answer to those questions and I think the answer applies to every type of business.

What do you keep the same? Your Core Values! The principles that guided you when you began your business. The traits that define you and your business. David Freeman calls this your Character Diamond. It is the three to five traits that consistently identify you and guide every decision you make. Because these traits are inherent in both you and your business, they never change. In fact, they should be the rock upon which everything else is built.

What do you change? Everything else!

The key is to know what are your Core Values, to know your Character Diamond. Once you identify these traits, change becomes easy. Just ask yourself if the change you are looking to make is consistent with your Character. If yes, make the change. And make changes, you should.

You need to be current on products and trends, changing to meet the needs of your customer base. You need to know marketing and accounting principles and the changes happening in those worlds so that you perform at your best in both categories. You need to be on top of the best hiring and training practices so that your staff regularly exceeds your customers’ changing expectations. Yes, you need to change everything else. But you already know that.

Do you know your Character Diamond? Join me on Wednesday, May 20th at Jackson Coffee Company for the Midtown Morning Breakfast and I’ll help you identify the Core Values that are the foundation of your path to greatness. We’ll get started at 7:30am with a free continental breakfast and some of the most valuable information you’ll learn all year.

And as a bonus, I’ll show you how to use your Character Diamond to attract new customers and new business in ways you never imagined.

It will take a little over an hour of your time, but I promise it will be worth every minute.

-Phil

PS The May 20th event is actually Part 2 of my How Ads Work presentation. I’m doing Part 1 on Wed., April 15th same time same place. Hopefully you’ll join me for both.

Wal-Mart Got it Right

In this dismal economy Wal-Mart keeps racking up sales gains. Many people are quick to point to the slumping economy as the reason Wal-Mart is doing well. Lost your income? Shop at Wal-Mart.

But there’s more to it.

In 2007 the economy was already starting to slide, yet Wal-Mart didn’t fare so well. In 2007 Wal-Mart rolled out their “high fashion – low prices” campaign. In an effort to compete with Target’s “cheap chic”, Wal-Mart tried to upscale their offerings. The result? Abject failure. No traction whatsoever.

Why did something that worked so well for Target fail so miserably for Wal-Mart? Core values.

Target’s core values from day one have been to offer a step-up from the K-Mart/Wal-Mart fare. They have cultivated the image through store design, product selection and advertising. They have built their reputation and core customers on this premise.

At the same time, Wal-Mart’s core values have been to offer really, really cheap stuff. They have cultivated that image and their core customers over many years. Their core customers shop at Wal-Mart for one reason – really, really cheap stuff, not high fashion. So when Wal-Mart deviated from their core values, they alienated their core customers. And at the same time they were unable to shift customers loyal to Target.

But in 2008 they got it right. Wal-Mart went back to their core values and focused on what they do best – really, really cheap stuff. Yes, the economy helped. No, it wasn’t the only reason. How do we know? Because some other stores also did well in this economy, and not by offering really, really cheap stuff.

Independent stores have fared far better in this economy than their chain and department store counterparts. And the best performing independent stores did it by being true to their core values. They didn’t go after the low price market. They offered great customer service, or expert product knowledge, or high-quality merchandise, or all of the above. They made sure that their core customers’ expectations were met or exceeded. They didn’t leave their core for a grab at someone else’s pie. They stayed true to who they were.

Do you know what are your core values? Do you know who are your core customers and why they shop with you? The best stores know this and are constantly working to make sure every part of their business aligns with these values.

Our values are Fun, Helpfulness, Education, and Nostalgia. It isn’t about the products as much as whether those products are consistent with our values. It isn’t about the services, but whether those services are consistent with our values.

When you know who you are, the business model gets easier. When you stay true to your core, you create loyalty. And in this economy, when loyalty is most fragile, you need to hold onto as many customers as you can.

Everyone knows the old adage that it is cheaper to keep a customer than find a customer. Now, more than ever, that statement is showing itself to be true. Keep your core customers by sticking to your core values. Finally, a lesson from Wal-Mart we can all put into practice.

-Phil

Why You Love (Or Hate) Black Friday

Are you Relational or Transactional? Chances are, you’re probably both. You just don’t know it. And whether you’re more Relational or more Transactional tells you everything you need to know why you either love Black Friday or were part of the Buy Nothing Day crowd.

Let me explain.

A Transactional Customer (TC) is someone who has done all of the research, knows exactly what she wants, and now is on the hunt to find the best price on that item. And once the best price is found, the TC makes the purchases.

The driving force behind a TC is the fear of paying too much. The TC sees all the research and price-shopping as part of the transaction, and each transaction is a single event, a conquest to beat the system. Transactional Customers love to brag about the deals they found and are great at word-of-mouth. But TC’s are loyal only to the price, not to any particular store or brand.

Black Friday was made for Transactional Customers. The newspaper flyers are the research. The early bird deals are the attraction. Finding the right item at the right price and getting it before anyone else is the conquest. And making it to five or more stores by 9am is the Mount Everest of Transactional Customer shopping.

The Relational Customer (RC) is a different breed. Unlike the TC, who believes she is the expert on the product, and only needs to find the best deal, the RC knows she is not the expert. In fact, the driving force behind the RC is finding that expert that she can trust, the one that will help her make the smart purchase, because an RC’s biggest fear is buying the wrong item.

Relational Customers don’t tend to brag as much (they don’t want to show their lack of knowledge), but their loyalty to a store or particular brand is especially strong. Once an RC finds that expert, all other stores disappear. If you’re second on an RC’s list, you’re just first loser – there is no second. The Relational Customer sees each transaction as one in a long line of transactions – a relationship between herself and the store.

A great example of the difference between the TC and the RC happens in the arena of auto repair. If you always take your car to the same mechanic, even if it means waiting an extra day or two, you are probably a Relational Customer. You’ve found the expert you can trust. But if you call around just to find the best price on an oil change and take your car to a service station you’ve never visited before just to save $5, you’re probably a Transactional Customer.

Wait, you cry! Do i have to be one or the other? Can’t someone be both? Aren’t there people who get all major repairs done by the same mechanic who also drive around looking for the best price on an oil change? Yes! You can be both.

In fact, we are all both TC and RC depending on the item in question.

Studies also show that not only are people both Transactional and Relational, every category of product is also split quite evenly between TC’s and RC’s.

The big theory (and myth) of the Internet is that it is all about price. Students from MIT once did a study to prove this theory. They studied the buying patterns of people who shopped for videos and DVD’s through DirectLink – a website that helps you locate items available for purchase online. You type in the item, and DirectLink pulls up all the places that item can be purchased online and lists them from cheapest to most expensive. The students theorized that if you were not the cheapest price, you wouldn’t get the sale, that 99% of customers would probably click on the first link.

To their surprise 51% of the customers they tracked did NOT buy from the cheapest website. Instead they spent about $3 more per item buying it from someone other than the first site listed. Why did they spend more? Because they didn’t trust the websites offering the lowest prices. The vast majority of those higher price purchases were done at websites like Amazon.com, WalMart.com and other recognizable names. Final Score? Price 49%, Trust 51%.

Here’s another example as told by Roy H. Williams, aka Wizard of Ads. Roy was speaking to a roomful of marketing directors for grocery stores. When Roy asked how many believed that price was the major driving force behind their sales, 290 of the 300 people raised their hands. Roy then asked how many offered loyalty cards, discounts for people who swiped or scanned a special card at the checkout. About half the room raised their hands. When asked how well it worked one person stood up and explained that 43% of his customers used such a card, higher than the national average for such programs. Did each customer get asked if they had or wanted such a card? Yes, the cashiers were well-trained to ask everyone. Yet, 57% of the people in that store basically said “No thanks, I’ll pay more.” When Roy asked again how many thought price was the driving force behind their sales, a lot fewer hands were raised. Final Score? Price 43%, Trust (or convenience) 57%.

Yes, everyone of you is both Transactional and Relational. Yes, every category has both Transactional and Relational customers. You’re probably trying to figure out right now in what categories you are RC and TC. Me? I’m mostly RC. The mere thought of getting up early to fight crowds, wait in lines, and have no chance of finding a clerk to answer my questions is downright frightening. Then again, I would never want to get in the media’s way of hyping up Black Friday into the shopping day it has become. What’s good for the goose is good for the gander.

If you’re still puzzled, here’s a quick quiz to help you figure it out.

Do you drive all over town to save 3 cents on a gallon of gas or always stop at the same convenient station on the way home? Do you top off the tank every time you see the price drop, or do you fill up only when you’re empty? Do you grocery shop at five different stores based on what’s on sale, or shop at only one store because you know the layout? Do you decide to do without something because the only store in town that has it is one you wouldn’t be caught dead entering? Do you continue to shop for a better deal even after you’ve made your purchase? Do you believe you know more than the sales staff or do they know more than you?

The fun thing is that there is no right or wrong way to be. You just are what you are. And it’s interesting when we understand why we do what we do.

And now you have a better understanding why you were out early Friday morning (or why you thought all those people were crazy).

And now you also know that while some stores only play the Price game, we’re going after that 50% plus who want an Expert to Trust. Yes, we’ll win some and lose some in the Transactional Customer game (our prices are more competitive than some people think), but you can guarantee that we’ll always be here to answer your questions, help you make great choices, and share the joy you have watching your children grow. That’s the RC in us, and part of the reason why we had such a big Black Friday that continued all weekend long.

The other stores went after TC customers. Once their sales ended, so did their traffic. The TC’s were off to look for more great deals. The RC’s, on the other hand, avoided the Friday early morning crowds and filled the stores Friday afternoon, Saturday & Sunday. Unfortunately, their presence wasn’t recorded in any of the major media stories because they typically don’t shop the big box chain stores and discounters where those numbers are gathered. But ask your neighborhood retailers, your local independents, how they fared. According to Michigan Retailers Association, more than half reported better than expected sales.

The other factor driving this is that there isn’t that one “must have” toy driving Christmas sales this year. No Tickle Me Elmo or Cabbage Patch Doll causing a retail frenzy. So without a “hot” product, the advantage goes to the stores that know their products best, the stores that cater to the RC’s.

As Paul Harvey would say, “Now you know the rest of the story.”

Good day!

-Phil