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Different Eyes See Products Differently (And That’s Okay)

I got a new laptop. While I was preparing to transfer files from the old laptop, I figured now was a good time to purge. I went through all the document files one by one, deleted all the duplicates, consolidated all the pictures, and opened up files I haven’t seen in over 10 years.

One of them was a staff meeting idea. The concept was to flash certain words on a screen and have everyone write down their own definition of the word. Some of the words would be applicable to our situation like “service”. Others could be words that have dual meanings to begin with like “experience” (noun or verb?). The point of the exercise was two-fold. First, we would see how different people interpret words differently. Second, I would see how the members of my team interpret important words like service.

We all come from different backgrounds with different life experiences, so we see and interpret things in our own unique way.

Never was that more apparent than at Toy Fair last week.

My retail customers came in looking at our brand new offerings. For everything I showed I had some retailers who loved it, some who hated it, and some who just said, “Meh.” Not everyone who loved it, loved it for the same reasons. Nor did those who hated it, hate it for the same reasons. In fact, I had one retailer give me a reason for loving an item and another gave me the exact same reason for hating an item.

Just because the first customer who sees your new offerings hates them doesn’t mean they are bad.

Just because the first customer who sees your new offerings loves them doesn’t mean they will do well.

I missed one of the biggest fads of the last two decades in the toy industry. It was Webkins. I loved the toy. Loved it so much that when it was first introduced, I bought the display and the TV monitor to show the video of how it worked. Got it in August. By December 1st I had only sold 2 of 144 pieces. That night I clearanced them all at 50% off.

Do you know when the craze hit? December 2nd. The first customer of the day walked in and asked, “Do you have any Webkins?”

She bought six. By the end of day on December 4th we were sold out. I never reordered and never looked back.

Some of the negative feedback we got in the booth was really good. It was constructive criticism of things we can (and will) change. Some of the positive feedback was location-specific to the person and store giving us the feedback. Knowing the difference and knowing how to decipher the feedback you get goes a long way.

“You are not a hundred dollar bill. Not everyone is going to like you.” -Meg Cabot

We all see the world differently. When you look through the other person’s eyes, however, you see things in a whole new light.

-Phil Wrzesinski
www.PhilsForum.com

PS Normally I like to give you something concrete to do in these posts—an action step or two. This post does not. But it does set up the next couple posts where I’ll try to show you what happens when you look through someone else’s eyes. It will transform your marketing & advertising, your customer service, your staff training, and even your merchandising. Stay tuned.

Merchandising Rules Never Really Change

I was unloading boxes of toys and trying to organize them on the shelves in our booth at Toy Fair. This is a new role for me. I’ve only ever seen these trade shows after everything is set up. I’ve never had to navigate the aisles filled with shipping crates, pallets of product, and forklift and lift drivers beeping everywhere.

I was pulling out all the toys and trying to visualize how they would look best on the shelf. Seconds later I had drifted back to my Toy House days with a cart full of new products, trying to figure out where to show them off best.

Lea, my boss, came over about the time I was on my fourth or fifth box. “I was wondering why you hadn’t been asking me questions. You were a retailer. You did this all the time.”

All. The. Time.

The rules for merchandising a trade show booth aren’t really any different than the rules for merchandising your store.

  • Give the stuff you really want to push a special place.
  • Make the eye move. Add verticality to table displays.
  • Put the stuff they need to see at eye level.
  • Put the stuff they already know and ask for by name in the “dead zone” (if you have one).
  • Group products by what makes most sense for how your customers shop.
  • Have a “splash” item or two.
  • If you use a lower shelf, put big items down low that are easier to see or make sure the aisle is wide enough for people to back up to see.

We had seven of us setting up the booth yesterday following all these rules and then some. The booth is done and ready for the sales reps who will visit us today and the retailers we’ll start seeing tomorrow.

One of my favorite things about trade shows was the merchandising ideas I would get from the different booths. And not only for that vendor’s products. We would see display ideas we would then re-purpose for own products.

Great merchandising is all around you. The rules are basically the same, the design is the key. Get your inspiration from wherever you can. (To learn more about Merchandising, download the free eBook Merchandising Made Easy.)

-Phil Wrzesinski
www.PhilsForum.com

PS It also helps to have someone on your team with that special flair for making displays pop. We have an orange box filled with all kinds of display goodies and props to dress up our displays. When Lea opened up that box and put her magic touch on everything our booth jumped to a whole new level.

(Repost) What to Do with the First Quarter Blues

(Note: this is a repost from March 2, 2018)

I went for a walk/jog down the Falling Waters Trail a couple days ago. It was sunny and in the mid-50’s. My dog, Samantha, and I enjoyed getting out of the house. There is something about those early spring days when you get that sense of renewal, that rebirth of energy. Of course, today, I stare out at five inches of snow courtesy of our bipolar vortex. Just when you think you’ve turned the corner on winter, Mother Nature smothers you with another blanket of white. So much for that rebirth of energy.

It’s easy to get the blues.

Image result for cabin fever clip artEspecially if you’re a fourth-quarter retailer. January feels like a relief from the exhausting marathon of Christmas. But by February, when the bills have all been paid and it doesn’t seem like any new cash is coming in, it gets to be a drag.

If you’re a jeweler or florist, you get Valentine’s Day. If you’re a toy retailer or candy shop you get Easter. But that isn’t a lot to carry you through the First Quarter Blues.

Here is a list of different things you can do during the quiet times to combat the blues.

  • Paint the store. A fresh coat of paint brightens the mood and lifts the morale of the staff.
  • Re-do all your signs. Print new ones, change wording, make them more fun and in alignment with your Core Values.
  • Work on new selling techniques. Hold trainings, do role playing, practice new techniques.
  • Make displays for out-of-your-category gifts. For instance, January-March are big baby shower months (no one wants to hold them in November/December because of the holidays). Put together an endcap of great “baby shower” gifts – even if you don’t sell baby products! A hardware store could do a display of “build your nursery the right way”. You could also do “gifts for the mom/dad-to-be.” Get creative. The same is true for weddings. The bridal shows are January-February. Bridal showers are March-June. Put together “bridal/wedding gifts” like board games if you’re a toy store (the family that plays together, stays together), or tool kits. I got a drill as a wedding gift from a thoughtful friend.
  • Get creative with your social media. Post often about a wide variety of things (not all related to selling your products). Have a contest among your staff. Make them all admins. Allow them two posts a day. See who can get more comments and shares in a week. Pay the winner $20. Do it for five weeks. It will be the best $100 bucks you spend on social media this year because you’ll see what kind of posts move the needle.
  • Have a contest of some kind. Maybe a raffle for charity. Maybe a “taste-test” where you put two competing products side by side. (I can see this for tools, for toys, for shoes, for cleaning products, for foods, for strollers …) Maybe a competition. We did a five-week March Games Madness where we pitted four games against each other for four consecutive Friday nights. The game voted the best each week made it to the final four. The fifth week we crowned the champion.
  • Spend more time networking. Send everyone on your team to different networking events.
  • Rearrange the floor layout. Stand at the front door and look around. See what catches your eye. Redesign the store so that your customers can see farther into your store. And make sure something cool and compelling is in those sight lines.
  • Clean and fix everything. Everything.
  • Make your bathroom cool. When George Whalin wrote Retail Superstars: Inside the 25 Best independent Stores in America, he mentioned the really cool bathrooms for 14 of the 25 stores.
  • Make a list of your top 50 or 100 customers with phone numbers. Assign them to your staff to call each person and personally thank them for shopping in your store. No sales pitch. Just a simple, “I want to thank you for being a customer last year. We truly appreciate your business. Have a great day!”
  • Make a goodie-bag for those same top 50 or 100 and personally deliver them. Free. No questions asked. (Thank you Brandy & Eric for this idea!)

The customers will be back soon enough. You have new products rolling in. Take this time to plant the seeds for future sales by refreshing the store, training the staff, and getting creative with your marketing.

That’s how you beat the First Quarter Blues.

-Phil Wrzesinski
www.PhilsForum.com

PS I would love to hear your suggestions for additions to this list. I know there are some really good ideas out there. Help me share them with the world.

Stay in Season or Drive Them to Amazon

I was in Target two days ago. They have a huge selection of swimsuits front and center. Tonight and tomorrow we’re going to get 3-5 inches of snow. Sunday is going to be 12 degrees Fahrenheit with a minus 5 windchill.

Unless you’re going to Florida, no one in Michigan is thinking about swimsuits. Heck, with the holidays only a couple weeks behind us, most of us don’t even want to imagine trying on a swimsuit right now.

Earlier this week my son went to Target also. He was looking for earmuffs. No luck. Plenty of swimsuits, but only a small section of hats and no earmuffs at all.

He spent the next two-and-a-half hours driving around town looking for a pair of earmuffs.

He found a $2 pair at CitiTrends, but the quality matched the price. He walked two malls, visited several stores, including three big-box stores, and came home empty-handed with cold ears. And he’s a Generation Z!!

Only after exhausting all the brick & mortar stores he could think of in town did he go online to Amazon to order.

That’s the point. When you drop this season’s goods to make way for next season’s goods, you lose a lot of in-season sales.

When do many people shop for a swimsuit? Three times:

  • When they are planning a trip somewhere warm
  • When they try on their swimsuit for the first time and it doesn’t fit.
  • When their swimsuit is ruined because of a spill, a tear, or a split seam.

Two of those are smack dab in the middle of the season, not months before.

When do most people shop for mittens, gloves, and earmuffs?

  • In the fall for Christmas gifts
  • When the first cold snap hits
  • When you’ve lost or destroyed your current pair

Those last two groups want desperately to find a pair in a brick & mortar store. Yet, many of those stores let them down.

Most of my competitors were already sold out of their sleds by this point in the year. With 3-5″ snow predicted for tomorrow, I would be making a killing selling sleds today, and another killing replacing everyone’s old sleds that break tomorrow. All because my competitors aren’t staying in season.

You can put the spring stuff out if you want. Just don’t put away the winter stuff—unless you want to drive your customer base to Amazon.

There are far more people still buying in-season than trying to get a jump on shopping for the next season.

Just sayin’ …

-Phil Wrzesinski
www.PhilsForum.com

PS I had that problem two summers ago when I was teaching sailing. I wore a swimsuit every single day. I had two to get me through the season. One died on me in the middle of the summer and the other got snagged on some rigging. It was July and I could only find one store that still had swimsuits in stock. They all had winter coats, though, and probably plenty of earmuffs. In July!

PPS My son said he would have gladly shopped local but couldn’t think of a single local store to try. As it is, we forgot one store—a regional sporting goods store—until just after he had checked out online. The second point of this post is that his generation is supposed to default to shopping online. Don’t believe that for a second. They only shop online because you make them.

Self-Diagnosis Tool #4 – Inventory Management

I used to like math. It lost me when it added the timber industry into the equation (logs and natural logs and all that calculus stuff). I got jaded because I could never figure out how to derive those trees into the answer the professor wanted.

I found, however, all that algebra I had to learn to get to calculus has actually been quite useful.

Today we’re going to put it to use to diagnose how well you are Managing your Inventory. Fortunately it is simple algebra, stuff your POS system might already do for you, and stuff you can easily program into an Excel spreadsheet once and not have to do it all the time.

Stick with me, because the numbers are fascinating.

First, here is the list of numbers we’re going to calculate:

  • Profit Margin
  • Turn Ratio
  • Gross Margin Return on Inventory (GMROI)
  • Accounts-Payable-to-Inventory Ratio
  • Current Ratio
  • Cash-to-Current Ratio

Here are the numbers we need to find from our reports to calculate the above numbers.

  • Gross Sales – This can be found on your year-end Profit & Loss Statement (also called an Income Statement)
  • Cost of Goods Sold (COGS) – This can be found on your year-end Profit & Loss Statement
  • Total Current Assets – This can be found on your year-end Balance Sheet
  • Total Current Liabilities – This can be found on your year-end Balance Sheet
  • Cash on Hand – This can be found on your year-end Balance Sheet
  • Accounts Payable – The money you owe to your vendors. This can be found on your year-end Balance Sheet
  • Current Inventory at Cost – This can be found on your year-end Balance Sheet
  • Average Inventory at Cost – You will likely have to calculate this unless your POS system has a report that will give you this number. Take your Current Inventory from each monthly Balance Sheet, add those twelve numbers together and divide by twelve.

Go get those numbers. I’ll wait.

PROFIT MARGIN

Profit Margin is your profit as a percentage of the retail price. The formula looks like this:

Profit Margin = (Gross Sales—COGS)/Gross Sales

Do this math and your results will likely be between 45% and 55%. That is a typical range for an indie retailer.

Obviously the higher the number, the better. If you are at or above the higher end of this range, good for you! There might be some room to push that margin a little higher, but for the most part, that area of your business is in good shape.

If your number is at the lower end of that range—and your rent/mortgage costs for your building are at 10% or higher of your Gross Sales—then we need to seriously look at how to raise that Profit Margin. Otherwise you won’t have enough money to properly pay for things like Payroll and Marketing.

I developed a simple, intuitive, easy way for any retailer to be able to raise their prices in the right way—one that doesn’t kill sales, but actually maximizes them. Most stores who adopt this pricing strategy see both increased Profit Margin and increased unit sales at the same time. Download the FREE Pricing for Profit eBook and see where and how to raise those margins.

TURN RATIO

Turn Ratio is simply a number that tells you how often you turn over your entire inventory in a calendar year. To do this calculation, you only need two numbers. The formula looks like this:

Turn Ratio = COGS/Average Inventory at Cost

The range for this number varies quite widely from 2.0 to 8.0. If you are a seasonal business such as a toy store, a garden center, or a gift shop in a summer tourist town, your number is often quite lower (2.0 to 5.0). If you are a store without a true season such as a pet store or baby goods store, your number will likely be higher (3.5 to 6.0). If you are a commodities store (i.e. grocery) your number will be much higher (5.0 to 8.0).

This is a tricky number to use by itself for diagnosing your business health. For instance, just being at the high end doesn’t necessarily mean you’re doing well. You might be losing potential sales because your inventory is too light. One misplaced order or one vendor who is out-of-stock could cripple your next month’s sales. Being at the lower end of your range isn’t necessarily bad, either, if you are able to get favorable terms from your vendors.

Often we’ll look at this number in conjunction with another number. For instance, if your Profit Margin is low, you can offset that by turning over your inventory faster (make it up with volume).

GROSS MARGIN RETURN ON INVENTORY

One number often used in conjunction with Turn Ratio is GMROI. GMROI tells you how much money you made for each dollar you invested in inventory. The formula is:

GMROI = (Gross Sales x Profit Margin)/Average Inventory at Cost

A typical indie retailer is likely going to have a GMROI between 200% and 400% meaning for every dollar you invested in inventory, you made $2 to $4 in return.

One reason we look at this in conjunction with Turn Ratio is because of Profit Margin. If your Profit Margin is really high, that lowers your Turn Ratio, but increases your GMROI. So if GMROI and Profit Margin are healthy, we know your Inventory is probably okay, even if your Turn Ratio is a little low. But if GMROI and Turn Ratio are both low, something needs to change.

There are only three ways to affect GMROI:

  • Increase Gross Sales (without decreasing prices – you might want to revisit Self-Diagnosis Tool #3 Customer Service)
  • Increase Profit Margin (see above)
  • Decrease Average Inventory at Cost (see “Dead Weight” below)

ACCOUNTS-PAYABLE-TO-INVENTORY RATIO

(Also called “Payables-to-Inventory Ratio”)

This is an interesting number to throw into the mix because it tells you how much of your inventory is already paid for, and how much is being financed by your vendors. The formula looks like this:

AP-to-Inventory Ratio = Accounts Payable/Current Inventory

A typical indie retailer will likely have an AP-to-Inventory Ratio between 20-35%. The higher this number, the more favorable the terms you are getting from your vendors. Being at the lower end of this ratio means either you have unfavorable terms (or no terms at all—common in certain food service industries) or too much dead weight in your inventory. If your vendors are all offering Net 30 or better terms and your Ratio is low, then it is definitely dead weight in your inventory.

One interesting phenomenon this number helps point out is when terms are incredibly favorable. For instance, some of my vendors would offer me December Dating. I could stock up heavily in January and not pay until December 1st. The upside was getting my large store stocked quickly and thoroughly. The downside is that my Average Inventory at Cost would be extremely high, putting me at the lower end of the range for both Turn Ratio and GMROI. But my AP-to-Inventory Ratio would be outstanding!

(Note: if your industry does not offer terms, you need a higher Profit Margin and Turn Ratio to offset this.)

CURRENT RATIO

This number comes straight off your Balance Sheet. The Ratio shows whether you have enough Current Assets to pay off all your Current Liabilities. The formula looks like this:

Current Ratio = Current Assets/Current Liabilities

Depending on when you do this calculation, your number will vary. If you are a 4th Quarter store and you run this number on January 1st, you’ll likely have a Current Ratio in the 2.5 to 3.5 range. other times of year it might be down around 1.5.

Most banks use that 1.5 as the bellweather mark. You need to be there or higher to be considered healthy.  Anything below 1.5 is too low because even the banks realize you won’t be able to liquidate everything in a pinch.

This number by itself is only part of the Inventory Management analysis.

(Note: if your Current Ratio is too low, you can look at a couple options to make it better. First, raise your prices and sell more goods to pay off those Liabilities. Your Current Assets include your inventory at cost, not at retail. Second, look into a long-term loan to pay off some of those Current Liabilities.)

CASH-TO-CURRENT LIABILITIES RATIO

Your Current Assets include two numbers—Cash and Inventory. This Ratio is similar to the previous one, but only looks at your Cash in relation to Current Liabilities. The formula looks like this:

Cash-to-Current Liabilities Ratio = Cash/Current Liabilities

Again, this number varies widely depending on time of year. If you just finished a successful Christmas season and are loaded with cash, your Ratio might in the 70-80% range. If you ran that same number on December 1st when your Inventory and Current Liabilities were at their highest, that number could be 10-20%.

Think of those two ranges as goals to shoot for depending on the time of year and your season. (Note: if you are in an industry without a “season” you’ll likely always be closer to the 20% mark and that’s okay.)

The key to this number is to look at it in conjunction with the Current Ratio. If your Current Ratio is good but your Cash-to-Current isn’t, then you have too much inventory. If your Current Ratio is bad, but your Cash-to-Current is good, then you don’t have enough inventory.

If both are bad, we have some serious work to do.

IDENTIFY THE “DEAD WEIGHT” AND THE “MUST-HAVES”

All of that math is done to help you understand whether your inventory is in balance or not. Retail is a balancing game. If you have too much inventory, you don’t have enough cash. Without cash you cannot pay your people to sell your excessive inventory. If you have too much cash, you might not have enough inventory to make the sales you need to continue your growth and keep your customers happy.

Most inventory problems happen when you are unable to manage the two ends of the inventory spectrum—the fastest and slowest moving products.

DEAD WEIGHT

Your “dead weight” in your inventory is the stuff that isn’t moving. You’ve paid for it, but it isn’t making you any money. It just sits on the shelf and sucks the life out of you. You have to find it and turn it into cash as quickly as possible.

Think of it this way …

If you spend $60 on a product and put it on your shelf, that space on your shelf has now cost you $60. That shelf space needs to make you money. Right now, however, it is costing you. The hope is that you’ll sell the product for $120 and make $60 for that shelf space, but the longer it sits, the more you stay in the red. Once you realize that item isn’t going to sell, mark it down to $60 and get back to even. Then find something else to put in its place that will sell and make you money.

You need a system for identifying these slow movers. I used the following criteria:

  • Didn’t sell through by Christmas
  • Hasn’t sold in 3 Months
  • Damaged box
  • Old style packaging
  • Don’t like it
  • Have a better version coming

That was the stuff I needed to move out. Every year in May and June my team and I would pull all these items off the shelf, mark them half-price, and then have a HUGE sale on the third Thursday in July. Turn it into cash.

Whatever system you choose to use, make sure you have one that identifies the dead weight and turns it into cash quickly.

MUST-HAVES

The other end of the inventory spectrum is the “must-haves”, the stuff you never want to be without.

  • If customers come in asking for the product by name, it is a must-have.
  • If your store is known for selling this item, it is a must-have.
  • If you sell more than one a week, it is a must-have.
  • If the item is something you always sell and the customer needs it right now, as in they’ll drive all over town until they have it, it is a must-have.

When cash flow is poor, this is where the inventory dollars need to go. Don’t worry about profit margin. Worry about keeping your core customers happy. If you are constantly saying “No, we don’t have it,” your customers will eventually stop asking.

There are several models for what percentage of your inventory should be changing to new product each year (or season). Rather than worry about percentages, let’s just put this into priorities. When you are looking to place orders, your priorities should be:

  1. Must-Haves
  2. New Products
  3. Everything Else

The vast majority of your customers are going to ask for two things:

  • Do you have a specific item?
  • What’s new?

Inventory Management is about making sure you have a positive answer for both of those questions.

DOS AND DON’TS

If you’ve made it this far, I’m going to leave you with some simple tips that will help you improve your cash flow.

Here is my Do List:

  • Do measure those numbers above. Together they tell a story. What gets measured and managed improves.
  • Do ask for Extended Terms from your vendors (but be sure to reward those vendors by paying those bills on time).
  • Do buy less but buy more often. Smaller orders placed more frequently will always improve cash flow. If a vendor has great terms at a trade show, see if they’ll take your huge order and split it into two or three ship dates to spread out your payments.

Here is my Don’t List:

  • Don’t buy anything you don’t want. Never pad an order with something you don’t fully believe in selling. It never works out well.
  • Don’t run out of the Must-Haves.
  • Don’t out-buy your terms. If it is Net 30, try to buy 30 days worth of product (not always possible, but incredibly effective when you do it right).

Whew! We’re at the end of this Self-Diagnosis Tool. Realistically, however, this is just the tip of the iceberg for Inventory Management. There are some more details in the FREE eBook Inventory Management for 4th Quarter Stores. (I also have one specifically for the Pet Store Industry.) I also recommend you look at Merchandising Made Easy. sometimes it is your displays that are turning good merchandise into dead weight.

-Phil Wrzesinski
www.PhilsForum.com

PS If the math is driving you crazy, find a high school kid getting all A’s in Calculus. Show him this. He’ll find the math to be incredibly easy and can set up your Excel Spreadsheet so that all you have to do is plug in the numbers.

PPS Sell off your seasonal merchandise. Don’t carry it over. Without going into all the details, you’re better off marking down your seasonal merchandise at the end of the season and turning it into cash than carrying it over into next year. The math says it is the right thing to do.

PPPS One last number I might look at is Shrinkage—the amount of inventory that disappears, unaccounted for. If you’re using a POS system, your shrinkage is the discrepancy between what your computer thinks you should have in inventory and what your physical inventory actually shows. Read those FREE eBooks on Inventory Management for more info on what causes shrinkage and how to control it.

This “Free” is Really Free!

I was looking at the Free Resources page on my website yesterday. There are nine eBooks on Marketing & Advertising, twelve on Customer Service, and five on Money. You can download any and all of them for free. No strings attached. No limits to how many or how often you can download them. No limits to how far or wide you can share them. I don’t even ask for your email address first, just credit for having written and produced them.

Yeah, pretty stupid to give it all away like that for free.

Free eBook Icon from Phil's ForumYet, if you read yesterday’s post, you would understand why I do it. Of the three questions and the fifteen answers I gave yesterday to why I am doing what I do, the last question about the problems I want to solve and the last five answers were the easiest.

Helping other businesses succeed drives everything. It is the starting and ending point. If these eBooks can make a difference, you should have them.

  • You’re more likely to download them if you don’t have to jump through a bunch of hoops.
  • You’re more likely to read them if they are short and to the point.
  • You’re more likely to share them if they are smaller files that you could even print if you wanted.

“A man who doesn’t read has no advantage over a man who can’t.” -Mark Twain

My sales staff got a copy of everything I had written about customer service at that time either through a staff training or by printing copies for their handbooks. (That included Generating Word of Mouth which is technically a Customer Service issue even though you’ll find it under Marketing & Advertising.)

My buyers all got copies of the Inventory Management and Pricing for Profit eBooks (the latter of which is the second most downloaded after Understanding Your Brand). 

While the stats counter shows how many times each gets downloaded, it doesn’t tell me how you’ve used them.

Would you do me a favor?

Drop me a comment on this post or an email and tell me which eBooks you’ve used and what, if any, difference they have made for your business. I’d like to know which ones have been most useful and which ones need to be revised, revamped, or removed for better content.

Thanks.

-Phil Wrzesinski
www.PhilsForum.com

PS The five newest eBooks are:

Those first four make up the basis of the new half-day workshop The Ultimate Selling Workshop. (They also stand alone as great Breakout Sessions!) Yes, the live event for any of these eBooks is a far cry better than the eBook, itself. You get more stories and examples. You get the whole presentation tailored to your specific industry or region. If it is a session with owners and managers, you also get tips and techniques for teaching it to your staff. If it is a session with the staff at your business, you get hands-on activities to really drive home the points. While I encourage you to hire me for a live event, please keep sharing and using this information. Together we can tilt the playing field back in your direction.

Why Signs Increase Sales

Whether you agree with them or not, I have found a lot of value in personality tests such as Myers-Briggs. They have helped me understand my own choices in life and also helped me understand why we don’t all see eye-to-eye on everything. It also helps that I had an expert on these types of tests explain to me exactly what they show and their shortcomings.

One thing he taught me was a new definition and understanding of the terms. For instance, I always believed Extrovert meant outgoing and Introvert meant shy. They don’t.

Extrovert and Introvert are just two different ways we energize ourselves and recharge our battery. They have nothing to do with shyness. Extroverts (like me) get our energy from interacting with others. We seek out crowds, groups, hanging with friends, because it picks us up. Introverts, on the other hand, get their energy from being alone. They can be every bit as engaging and fun-loving and outgoing as anyone else, but that exhausts their energy. They need alone-time to recharge their batteries.

Introverts aren’t shy, they are just cautious with whom they will expend their energy.

Before I learned this I would have been surprised to find out that, like the population as a whole, half of my staff identified as Introverts. This helped me understand why certain people liked solitary jobs more than others.

I also learned why signs are such an important element of your merchandising displays.

Great use of signs in a Game Dept

SIGNS INCREASE SALES

Rick Segel told a group of baby store owners once that signs increase sales by 43%. He never told us where that statistic came from or why, but he encouraged us to put up more signs on our displays.

Now, with my new understanding of Introverts, I started to see why. Introverts would rather read a sign or read the side of the box to get basic info than spend their energy interacting with a salesperson. It isn’t that they won’t interact, but they want to know as much as possible before asking their questions. They want to formulate the right question so that they don’t have to ask too many questions.

There is another group of shoppers who also prefer signs over salespeople. I belong to that group. Men.

Men communicate differently than women. Men speak vertically. Did what I say make you think higher of me or lower of me? That’s the reason why we won’t stop to ask for directions. We don’t want to admit we don’t know. That is also why we don’t actively seek out a salesperson unless we know exactly the item we want.

If we’re looking for the Makita XT269M 18V Cordless Drill, that’s one thing. But if we’re just going in to look at cordless drills, not knowing exactly which one we want, we’re not looking for a salesperson because we don’t want to be asked a question we don’t know or show off our total lack of knowledge on the subject.

Men want signs to educate us before we have to interact with someone so that we don’t look foolish or stupid.

I’m an Extroverted Man who is not afraid to admit when I don’t know something. Yet, I get this mentality fully. I can see how signs can make a difference.

With most of the men and most of the Introverts preferring signs before salespeople, now Rick’s 43% starts to make sense. Armed with that knowledge the most important elements of a good sign are:

  • Answers to the most frequently asked questions about this item
  • Benefits of owning this item
  • Price

Want to create a sign that sells? Ask you staff what are the two most common questions asked about the product and what are the two most beneficial reasons for owning the product. Put those answers on your sign and you’ll see your sales rise with the sign.

-Phil Wrzesinski
www.PhilsForum.com

PS Before you rip me about how biased, inaccurate, wrong, or even dangerous these personality tests are, understand that I am not using them to label people but to give you some insight into differing human behavior. Introvert and Extrovert are tendencies and preferences. In reality the majority of us are often a little of both with a tendency to lean one way or the other. Likewise, not all men are afraid to ask directions. These generalizations about our tendencies and preferences, however, give you an understanding how to adjust your business in a way that best suits your customers.

PPS My free eBook Merchandising Made Easy (pdf download) is on the Free Resources Page under the heading “Improve Your Money” because it is part of Inventory Management, but it fits equally well with Customer Service and your customer’s shopping experience. Think of Merchandising as a tool you have that sets you apart from your competitors. It is one of your competitive advantages over the Internet.

Building a Browsing Store

Amazon wasn’t built for browsing. Oh sure, they have a fully-functional search engine, one of the most heavily used, but most people go there only when they know or have a darn good idea what they want.

According to a study done late last year, Amazon was the top place people searched when they knew what they wanted, but other search engines such as Google were tops when people didn’t know what they wanted, when they were browsing.

Amazon wasn’t built for browsing. But the bigger question is … are you? This is one area where you can kick Amazon’s virtual ass. Are you maximizing this advantage?

The best displays tell a story.

Browsing is a visual game of Capture-the-Eye. 

When a customer walks through your door, what catches her eye? Where does she look? Do you control that or does she? Do you give her a place to look or not?

Think about your grocery store. When you walk in, what is the first thing you see? Produce! What is the most visually compelling item in a grocery store? Produce! Coincidence? I think not.

When a customer walks through your door her eye will be drawn to a focal point. Where that eye goes is dependent on three things:

  • The geometry of the store
  • The angle at which she enters
  • What you give her to see

THE PATH

Walk into your store and see where, based on the geometry and angle, your eye is naturally drawn. Do you have something compelling to see there? That is your Spotlight Spot. Put something cool, profitable, new, and visually compelling there.

Walk over to that spot and look around again. Where does the eye travel? Better yet, where do you want it (and her) to travel? Make sure all those options are easily visible from this location.

This is how you create a shopping path through your store, one visual display at a time. If you have a whimsical, boutique store layout, you can lead customers through your store one display at a time and make sure they see exactly what you want them to see.

If you have long aisles like a grocery store, the aisles themselves dictate some of your traffic. Your endcaps of each aisle become your most obvious locations for compelling visual displays.

But while great endcaps can draw customers and sell a lot of merchandise, they don’t get customers to go down your aisles. You draw a customer to each aisle by how you merchandise the first four feet of that aisle. The first four feet are what she can see from the main aisle. If it doesn’t catch her eye, she walks on by.

Once you get her to the aisle, you need something in the middle of the aisle that draws her gaze. If the shelves are all the same level all the way through, she’ll take a look, feel like she’s seen the whole aisle and walk on. You have to break the lines in the middle to get her attention.

(Note: you should try to keep the shelves the same level all the way to the visual break in the middle. If the shelves are constantly changing height every four feet then the aisle is a hot mess that won’t get people browsing, either. If they are the same level, they draw the eye down to the visual break in the middle.)

Merchandising is a game designed to encourage browsing and discovery. It is a game designed to control traffic flow and guide customers through your store. It is a way to put the products in front of your customers you want them to find.

To paraphrase Mark Twain …

Those who don’t merchandise their stores consciously have no advantage over those who can’t merchandise.

CHANGE IT UP

One question often asked about merchandising is how often to change up the displays. That answer depends on several issues. You should change your displays for any of these reasons:

  • The seasons change
  • The buying cycle changes
  • You have something newer to show off
  • You don’t have enough product to fully fill the display
  • Your product mix in your store is constantly changing

People will still come in asking for certain products or Brands. If you have a major draw, put that Brand in the back of the store to draw people in deeper. Then build visual displays to lead the customer back to the front of the store.

Build your store for browsing. Guide your customers through your merchandising to the products you want them to buy. Play the Capture-the-Eye game and you’ll capture her dollars, too.

-Phil Wrzesinski
www.PhilsForum.com

PS When you enter your store to see where your eye is drawn, also ask yourself this question … “How far into the store can I see?” The deeper the better. If you don’t have anything visual to draw the eye to your back wall, find something. The deeper people can see, the farther they are drawn in. That’s the other reason produce is always near the front of a grocery store. Not only is it visually compelling, you can look over it to see more deeply into the store.

PPS Not surprisingly, a website design is similar to the merchandising game. Each page needs to be visually compelling and lead you directly to the next action/page/display. If you have too much on the page, drawing the eyes all over, your web page is a hot mess.

 

Solving the Merchandising Equation

My dad had a super power. It was merchandising. He could take 400 square feet of product and fit it into 280 square feet of space with room left over. And it would look amazingly good! I think he would be a master at Tetris if he ever gets a handle on using a computer or video game console.

He didn’t need a plan-o-gram. It wouldn’t have worked in a store like ours anyway. The stock was always changing and always in need of rearranging. He could just look at the boxes, visualize it, and make it work.

I used to always say, “My dad is spatial.”

The Groovy Girl aisle

The challenge to our merchandising was our long aisles of shelves. We were closer to a grocery store in design than a boutique store. But unlike a grocery store where you might start at one end and snake your way up and down each aisle until your basket was full and your list complete, in our store we had to create visual pictures to draw people into each aisle.

I likened merchandising to a trying to solve a complex equation with several variables. We were trying to accomplish all of these goals at once with each aisle:

  • Organize everything by Category
  • Organize everything by Brand
  • Organize everything by size and color
  • Organize everything by price
  • Eliminate any wasted space or gaps between products
  • Make the first four feet of an aisle visually compelling and inviting
  • Make sure the bottom shelf products were visible and easy to read
  • Put the most profitable items at eye-level
  • Put some kind of visual break in the middle of the aisle to draw you into the aisle (either through color or shelf positions)

My dad could do all those things instinctively. I had to teach myself this skill through trial and error, through understanding why each of those bullet points was important so that when compromises needed to be made, I knew where to make them.

Morris Hite taught me something that always helped.

“Advertising moves people toward goods. Merchandising moves goods toward people.”

First and foremost your merchandising needs to be eye-catching.

You need to get the customer interested in wanting to see more. You need displays that “pop” and draw the eyes their way. Because of the design of our store with our long aisles, I focused on the first four feet of an aisle (the only part you can see while walking down a main aisle) and the visual break in the center. The rest fell into place after that.

Endcaps, tables, and free-standing displays are a whole different set of challenges. Along with being visually compelling and neatly organized, these need to tell a story. It takes a different set of skills and talents to make powerful displays that tell a story.

I never acquired that skill. I was more in the category of, “I’ll know it when I see it.” Fortunately I had some people on my team with a better eye than mine. I turned them loose on endcaps and free-standing displays.

Not everyone on your team will be skilled at merchandising. Some can learn. Others won’t. Cultivate the good ones, the ones with an eye for design and storytelling. Turn them loose on your store.

For everyone else, teach them to Stock, Straighten, and Dust.

  • Stock: pull all items from backstock out to the floor and make sure there is an ample amount of each on display.
  • Straighten: put items back where they belong and pull them to the front edge of the shelf
  • Dust: (yeah, this needs no explanation)

While bargain hunters (transactional customers) are willing to dig through heaping messes of products to find the best deals, your Relational Customers will lose trust if your store is a hot mess. You’ll lose sales when your customers (or even your sales staff) cannot easily find what they need.

There is an art to properly merchandising your store. There is also a science. Paco Underhill, in his book Why We Buy, outlines the science quite clearly. I read that book six times in the year I spent working on plans to completely remodel the store. It is worth reading (again).

By the way, normally I start a topic by discussing the “why.” Today I started with the “what.” Tomorrow I’ll tell you why those first four feet and the visual break in the center are so critical. Stay tuned.

-Phil Wrzesinski
www.PhilsForum.com

PS I hate stores that are a hot mess. I won’t go in them. My mom is the same way. She gets physically ill in messy stores and won’t go back no matter how good the deal. But we both love stores where the merchandising style could be called “whimsy.” Surprise and delight us. You’ll win. (By the way, we aren’t alone. There are many shoppers exactly like us.)

PPS Yes, there is a FREE eBook on the Free Resources page called Merchandising Made Easy. You should check it out.

By Brand or By Category?

In the early stages of my running the baby department at Toy House one of our staple companies for car seats and strollers was Graco. They had several nice car seat and stroller combos in great fabrics. I even had a customer drive from Canada one night because we were the closest store to have the Graco stroller in the fabric pattern his wife desired.

Graco also had playpens and highchairs they sold in the matching patterns. My Graco sales rep would beg and plead with me to display the entire collection together. “You’d sell more if you did,” he would tell me.

He was right, too. If I displayed all his items together as a collection, I would sell more … of his stuff.

Customers would then have a matching set of car seat, stroller, highchair, and playpen (not that the car seat or stroller would ever be in the same vicinity of the highchair or playpen).

This does beg the question, however …

Do you merchandise by Brand or by Category? 

MERCHANDISING BY BRAND

Pros: When you merchandise by Brand you are making a statement. “We carry this brand.” Department stores do this a lot. You can find the Levi or Docker section in most clothing stores. This style of merchandising makes it easier for customers who shop by Brand, who come in looking for a specific company’s offerings. It also makes it easier for customers to know what brands you carry and, by relation, what kind of store you are.

Also, you can often get point-of-purchase material from the Brand to help decorate your branded sections. Vendors love branded sections because, like Graco, they know when you create a branded section you will sell more of their Brand.

Cons: One problem is how often a Brand will have products that fit into several categories. Creating a branded section makes it harder for customers to compare similar products from different brands. It also makes it harder for your staff to easily show off two or three solutions to the customer’s problems. The curation process becomes complicated.

The other problem is if you have a branded section you are likely taking those branded items out of your category-merchandised sections, making it harder for category-shopping customers to find those items.

When to use: 

  • When the Brand is strong enough to drive its own traffic to your store
  • When the Brand is willing to give you point-of-purchase materials and help you build the section
  • When the Brand is willing to give you special deals such as exclusive products, better margins, freight or dating programs, etc.
  • When the Brand fits into your Core Values as a store
  • When there is a dominant Brand in your store or in a category
  • When customers come in asking specifically for the Brand, not the product

MERCHANDISING BY CATEGORY

Pros: Merchandising by category helps shoppers compare brands more easily. It helps your staff curate the selection more easily. It helps you find solutions for your customers more easily. It is far more customer-centric than branded sections. But …

Cons: It is less visually appealing. It takes more work on your end to make the displays attractive and keep them organized and neat. You potentially lose out on special discounts and deals from the vendors. You and your customers have to look harder if you are searching specifically for one Brand. You don’t get to take advantage of the power of the Brand.

When to use: While this style may be more customer-centric in terms of finding specific solutions to specific problems, and your store is hyper-focused on solving customers’ problems, it isn’t always the best method. Use it only:

  • When there isn’t a dominant Brand in that category
  • When you have several different Brands in that category
  • When customers regularly compare Brands in that category
  • When customers come in asking for the product, not the Brand

CASE BY CASE

The best approach is to find some combination of the two. You have to look at each Brand and Category separately and decide which style will help you sell the most product and solve the most problems. For instance, we found our Preschool Department sold best and was easiest for customers to navigate when we divided it by age and development, but Duplo —a LEGO product for preschoolers—sold better when it was in the LEGO-branded section on the other side of the store.

You can even do a branded section within a Category. It gives you the benefit of both worlds by making the Brand stand out in your customer’s mind and giving your customer the chance to more easily compare Brands.

The key is to do your merchandising consciously with thought and design, taking into consideration how your customers prefer to shop those Brands and Categories. Remember first and foremost it is all about the customer.

Build your merchandising around what suits your customer’s needs best.

Then add in one more element—Surprise and Delight. Add fun little things into every display that catch the customer’s eye and makes her smile. It might be a funny sign. It might be an out-of-place-but-totally-fits product. It might be a quote. It doesn’t have to be big or obvious. In fact, the more obscure, the more someone who sees it will be delighted.

At the end of the day your job is to affect your customer’s feelings and mood. A happy mood is a buying mood.

“If shopping doesn’t make you happy, then you’re in the wrong shop.” -Mimosa Rose

-Phil Wrzesinski
www.PhilsForum.com

PS The Brands spend billions of dollars in advertising to get people interested in them. When you carry a brand doing this, there is value in your store being recognized as a source for this Brand. Customers often called us the “LEGO store” or the “Thomas store” because of our LEGO and Thomas the Tank Engine branded sections.

PPS One other element that will take your merchandising to the next level is signage. It is such a big deal it gets its own post. We’ll talk about what goes into a quality sign tomorrow.