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Two Forks in the Road for Sears

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

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

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

Walmart ad in Vogue Magazine

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

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

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

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

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

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

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

This recipe put them on top of the world.

COMPETITION

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

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

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

CORE VALUES

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

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

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

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

MAIL-ORDER BUSINESS

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

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

Then along came Amazon.

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

Kinda …

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

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

The lesson in all of this is simple.

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

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

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

-Phil Wrzesinski
www.PhilsForum.com

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

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

Change Your Viewpoint to See Your Business Better

I was sitting in a conference center in Louisville, Kentucky for a presentation by Rick Segel in May 2009.

Rick asked the crowd, “Raise your hand if your product selection sucks, if you just don’t have the goods people want.” No hands went up.

Rick then said, “Raise your hand if your store has lousy customer service, if you’re treating customers poorly.” Again, no hands went up.

One more time Rick said, “Raise your hands if you are gouging the heck out of your customers with your prices.”

Since two surveys I had done showed customers already believed that about us, I raised my hand. “Ooh, me! I do!” Rick tossed me a free copy of one of his books and said thanks for being honest.

The point Rick was trying to make was …

Every business thinks they have Great Selection, Great Service, and Great Prices.

Most of us are wrong. We have either wrongly convinced ourselves of our greatness or justified away our flaws. We think, “If only more people would come through the door they would see how great we are.”

The truth is …

If you were truly Great, more people would come through your door.

Our problem is one of perception. We see the business through our own perception, from inside the bottle. Our customers have a completely different frame of reference. We compare ourselves to our mass market competitors and say, “See? We are soooo much better than them.”

Our customers compare us to every store they’ve ever visited and say with a sigh, “I wish [your store] was more like [my favorite store].”

If you want to find your blind spots, you have to look at things differently. You have to look at your business from your customers’ perspectives.

PRODUCT SELECTION

To improve your product selection, create a “No List”. This is a list of all the items customers come in asking for that you have to say, “No, I’m sorry we don’t. Can I show you an alternative?” (By the way, that or “Can I suggest a store that would have that item.” are the only two acceptable answers when you don’t have a certain product.)

If a customer walks through your doors or calls you on the phone asking for a certain product it is because the customer perceives you to be the kind of store that would carry that product. If you’re constantly saying no and not showing the alternatives you would rather carry, you’re flying directly in the face of customer perception. If there are one or two products on that No List every week, you need to look into either carrying those products or the next best alternative to those products. Otherwise your product selection will not be considered “Great” in your customers’ eyes.

CUSTOMER SERVICE

What percentage of your business is repeat business? Make an educated guess. Your repeat business is a direct reflection of your Customer Service. If your Customer Service is Great, meaning you’ve met her every expectation, she will be back.

What percentage of your business is referral business, people who have never been in your store but came in because a friend told them (or better yet, dragged them in)? This is a direct reflection of how often you did more than a customer expected.

“Surprise is the foundation of delight. If you expected something to happen and it happened, there is no delight.” -Roy H. Williams

If all you do is meet expectations (Great Customer Service), you’ll get some repeat business. To get referral business, however, you have to raise the bar even higher. If you aren’t getting a lot of repeat and referral business, then you don’t have Great Customer Service in your customers’ eyes.

One last thing to consider … If your store isn’t the store everyone points to in town for having the best customer service, your service isn’t good enough, yet. (And if it is, then the bullseye is on your back so you better be doing something to keep raising the bar.)

PRICE

This is one area where you’ll have a hard time changing perception. When we did our surveys we were regularly considered “Over-Priced” and “Expensive” compared to Walmart, Toys R Us, Meijer, and Target. All four of those stores talk about low prices and saving money in every ad they run. There is a built-in perceptual bias that all indie stores are more expensive than their mass competitors. The interesting part of the survey for me was that we also owned the word “Value.” That’s when I knew my prices were okay. Yes we were Expensive because we carried more expensive items. But the customers saw the Value in those items.

Remember, too, that not everyone shops on Price. Make your prices competitive and sharp, but more importantly, hone up on the Product Selection and Customer Service elements, and people will see the value you offer.

Every store thinks they have Great Selection, Great Service, and Great Prices. Most stores are wrong. You can’t measure whether you have Great Selection, Great Service or Great Prices from any of your spreadsheets. You can’t see it from behind your cashwrap. You have to look at it from the customers’ eyes. That’s the only point of view that counts.

-Phil Wrzesinski
www.PhilsForum.com

PS You can win over some of the perceptual bias on Pricing. The blueprint is in the Free eBook Pricing for Profit. Most stores who have followed this pricing have reported back how customers perceive their pricing to be much more competitive. All of the stores who have followed this pricing have reported back increases in profit margin because of it. What do you have to lose?

PPS Even if you think your Customer Service is Great, ask yourself …

  • What would happen if your staff was better at building relationships with your customers?
  • What would happen if your staff was able to close more sales?
  • What would happen if your staff was able to increase the average sale?
  • What would happen if your staff learned to work together better as a team?

How would that change things for you?

One downside is that you would be busier. You’d have to write more orders (increasing your turn ratio and your cashflow). You’d have to look into hiring more people to handle the increased traffic. You might even have to consider a new location to expand your business. If you’re okay with those hassles, contact me to run The Ultimate Selling Workshop with your team.

Is it the Best Place to Spend Your Money?

“It’s only $400. What have you got to lose?”

If you’ve ever run a small business you’ve heard that question before, usually spoken by an advertising sales rep trying to sell you on some new marketing fad, or maybe an add-on to a package you’ve already bought. You fall for it, too. I know I did, several times.

You fall for it like I did for one of three reasons:

  • You didn’t have a marketing plan
  • You didn’t have a goal, or expected outcome you knew you wanted from your marketing plan
  • You didn’t do the ROI and truly answer that question
Close up of a pen and blank check

What have you got to lose? For starters, the $400 check you just wrote. Secondly, the chance to spend that $400 more wisely. The better question to ask is …

“Is this the best place to spend that money?”

When you have a plan, you have a better idea of where you want to spend your money, how that money will be used, what you hope to accomplish, and how you’ll measure the results. You’ll also have a budget that you’re checking regularly so that you’ll know if you even have that $400 to spend in the first place. When I started budgeting, I had set amounts to spend in certain places where I knew I would get the best bang for my buck. I also had some flexible money for opportunity buys.

When you have a goal or expected outcome, you have another measuring tool. When I finally got smart about my budget, the question I would always ask before spending that flex fund was, “Would this money be better spent on this new thing or just added to the money I’ve allocated elsewhere?”

The ROI is the hardest question to answer. One truth about marketing, advertising and even sales training is that there isn’t a simple plug-and-chug equation that says if you spend X your results will be Y. Anyone who tells you otherwise has a good ROI—for him, not necessarily you. At best you have generalizations based on previous experiences, trial-and-error, and hope. Yet being able to figure out the ROI, even in the most general sense, is the only way to really know what you have to lose.

DOING THE MATH

I’m going to do a math problem to give you an idea of how to calculate ROI. To do it, I will be using some basic assumptions. You can adjust your numbers accordingly.

  • Traffic = 200 people/day
  • Conversion rate = 20% (40 people/day)
  • Average Ticket = $50
  • Sales for 30 selling days = $60,000 (40 people x $50 x 30 days)
  • Profit Margin = 50% ($30,000 on that $60,000 in sales)

If we do the math backwards, it might look like this: I need to do $60,800 in sales just to break even on the $400 I’m going to spend. Realistically, though, to make it worthwhile, I’d like to make back at least an extra $400, so I need to do $61,600 to get any kind of return worthwhile. Therefore, at $50/per ticket, I now need an extra 32 paying customers over the 30 days. Since my conversion rate is only 20%, however, I need to attract an extra 160 customers over the month just to break even. So the real question becomes, “Will this $400 attract an extra 5-6 people a day or more (3%)?” Considering one of the most highly measured advertising models—direct mail—has only a 1-2% expected return, that might be asking a lot of any marketing effort, especially something new and untested.

Remember, too, that the effects of this advertising will likely end with the season. If it isn’t already in your budget, being able to do the math like this can save you from losing a lot.

You can play around with this basic formula to find out all kinds of cool things. For instance, if your Profit Margin was 52% instead of 50%, you’d have an extra $1,200 in your pocket. (To find out how to increase your profit margin through a better pricing strategy, download the FREE eBook Pricing for Profit.)

What if you raised your conversion rate from 20% to 22%? (By the way, that’s converting 4 out of the 160 people that didn’t convert before.) Now, instead of 40 people a day, you have 44 paying customers. Over 30 days that equals $66,000 in sales, or an extra $3,000 in profit.

What if you also raised the average ticket just 2% to $51? Now you have 44 people x $51 x 30 days = $67,320 in sales, or $3,660 in extra profit.

Wait. Did I just show you the ROI for The Ultimate Selling Workshop? Maybe I should add in a few other benefits.

Unlike most advertising that ends when the season ends, Sales Training keeps creating results long after the season ends. Your staff will learn new skills that they will use the rest of their lives. You’ll see your culture change for the better as your staff focuses more on relationship-building, not only with your customers, but with each other. They’ll also be more intrinsically motivated because you’ll be offering them Mastery and Purpose, two of the three elements (along with Autonomy) that Daniel H. Pink, in his book DRIVE, says motivates people to do their best.

Better Sales Training also leads to happier, more satisfied customers which leads to more Repeat business as your happy customers want to come back more often and Referral business as those happy customers tell all their friends about you. Yes, you can actually “buy” word-of-mouth by teaching your team to be better at selling. It is the gift that keeps on giving.

Here’s one last nugget for you to chew on …

If your customer service is substandard—and let’s face it, a lot more stores have lower levels of service than they’re willing to admit—then just increasing traffic through advertising will only help speed up your demise as more and more people will talk about you in a negative way. Shore up your Customer Service first. Teach your staff how to build relationships, how to surprise and delight, how to convert more of your traffic into paying customers, and how to make your customers happier. Then you’ll have all the money you need to attract more people through the door.

The ROI is there.

-Phil Wrzesinski
www.PhilsForum.com

PS If your business is going to do $60,000 or more this December, The Ultimate Selling Workshop is a really good deal for you. In fact, the higher your traffic count, the better the investment becomes. I’ve shown you how this pays for itself and then some with just a modest growth of 2-2.5% in conversions and average ticket. Now do that math over the whole year to see the true benefit.

PPS Yes, you can download the FREE eBooks on Selling that I’ve posted and you can read my blogs to do this yourself. You’ll save the $2,000 you would have spent on me. You’ll instead spend it on time and energy planning your own trainings and extrapolating all those idea to your industry. Or you can hire me and not only will I do all that work for you, there is something about bringing in an outside expert that gets your staff fired up even more. They might love you, but they’ve heard you speak before. I know when I brought in new people to my meetings the staff perked up and listened even better. The introductory price ends at midnight September 30th. Let’s make this your best December ever and kick start 2019 all at once.

Price is the Default – Change Your Settings

Do you feel beat up over price? Does the business news turn your stomach into knots as you read about department stores like Younker’s going out of business and Sears and Macy’s doing another round of closures? Does it make you cringe every time you hear that Dollar General has opened a new store? Do you want to curl up in the fetal position every time Amazon has a Prime Day?

The retail economists look at all that news and keep coming to the same conclusion …

Price drives all retail.

They are missing the true picture. Price is not the driver.

In the absence of everything else, Price is the Default.

At 3:01am EDST Apple opened up pre-orders of their new lineup of iPhones they introduced two days earlier. These phones cost more than the computer I use to write this blog. Yet the early adopters were up and ordering their new phones at full retail prices.

Apple gets what so many retailer do not. There are tons of customers out there willing to shop for some reason other than price. The reason they don’t is that too many stores have given up on giving them something else.

I just read a report that department stores, long mired in a slump, are spending more on television ads this coming fall. It also talked about their other strategies to turn their ships around that included supply chain and inventory management improvements.

Nowhere in the article did it say anything about investing in employees and employee training. Nowhere were the words (albeit overused) Customer Service, Customer Experience, or Sales Training. Nowhere was there a discussion of spending more to surprise and delight customers. The article went on to say that modest growth based on the already growing consumer spending in the US was about the best they could hope for.

Do you know why the traditional department stores are struggling? They have cut their staff and their training back so far that they are just over-priced versions of their competitors. Target, TJ Maxx, Marshall’s, and other stores like them now have pretty much all the same stuff with the exact same levels of non-existent service as the traditional department stores, but at lower prices.

According to the same article about their TV spending, the only department store mentioned that has a chance of truly thriving is Nordstrom’s. Yeah, the only store still focused on customer service.

There was a survey done by National Retailer Federation during the Great Recession. When asked what would drive people’s decisions where to shop, 41% said “deals and discounts” and another 12% said “everyday low pricing.” That only adds up to 53% of the population. Another 47%—almost half—said something other than price would drive them during a time where money was tight.

Today’s economy isn’t that tight. Although price has become default for more and more customers—mainly because of the lack of service out there—there are still well over 40% of the population that would choose a store for reasons other than price … if they were given that option.

That’s why I am pushing The Ultimate Selling Workshop so hard this fall. You could spend the $2,000 on advertising and maybe drive in a few more shoppers this season, especially if your prices are sharp enough. Or you could up the game of your sales staff, increase average tickets, increase loyalty (without just giving bounceback coupons or discounts), increase word-of-mouth advertising, increase repeat business, and increase referral business not only this season, but going forward into 2019.

Your holiday ads end with the holidays but Sales Training is the gift that keeps on giving.

Millennials are more open to shopping local than any generation before them. They also shop completely differently than any generation before them. Reaching them through advertising and marketing is only half the problem. You also have to know how to sell to them. You’ll learn how in The Ultimate Selling Workshop.

Don’t be a Default retailer. Change your settings to Surprise and Delight. There are a lot of customers who would choose you if given the chance. Call or email me today.

-Phil Wrzesinski
www.PhilsForum.com

PS Last year over 100 million people went to Toys R Us even though Walmart had consistently lower prices and Amazon had a much larger selection. Those 100 million customers went for some other reason. If they can draw that kind of business by offering a better “experience,” you have the opportunity to draw some amazing crowds, considering I am sure you can offer an even better experience than any chain store out there. (By the way, just for clarification, Toys R Us went under because of heavy debt load caused by their greedy venture capitalist owners borrowing money for themselves against the company. They were profitable, but not profitable enough to pay the massive interest on their debt.)

PPS If you aren’t convinced yet of the Value of The Ultimate Selling Workshop, next week we’ll do the math.

Having Fun, Helping Others, Eating Lunch

For the past three weeks I have been making several drives from my home in Jackson to the Oakland County area for lunch. For those of you not in Michigan, Oakland County is one of the three counties (including Wayne and Macomb) that makes up the Greater Detroit Metropolitan area. Oakland County is the northernmost of the three and includes several cities, villages, townships, and lakes.

Oakland County is home to twenty-one Main Street programs in the various cities, villages, and townships, and also home to one of the largest county-wide Main Street support programs. It was Main Street Oakland County (MSOC) that hired me to make these drives each week to do a “Lunch-and-Learn” series of workshops. The workshops are four-week-long tracks on one of three topics: Selling & Customer Service, Marketing & Advertising, or Retail Math.

We rolled this out to three different communities. Two of the communities chose Marketing & Advertising, one chose Selling & Customer Service. All three are reporting back with incredibly positive feedback. Other communities are already bugging MSOC to be included in the next round.

The fun part for me is that I like driving and I love doing these presentations, mostly because I know the difference one or two good tips or techniques can make for a small business.

The fun part for the attendees is that they get a free lunch (or breakfast) and four 45-minute presentations jammed with eye-opening ideas, out-of-the-box thinking, and surprisingly simple techniques to improve their businesses.

The fun part for you is that there is still time to plan a Lunch-and-Learn in your neck of the woods (as long as you are within two hours driving time from Jackson which would include Grand Rapids, Kalamazoo, Fort Wayne, Toledo, Detroit, Flint, and Lansing areas).

Here are the three tracks with class titles and descriptions.

Option A: Marketing & Advertising

  • Week #1 Boosting Your Brand to Attract the Right Business – A quick lesson in branding to show you how a well-crafted brand makes a huge difference in attracting the right types of customers and business. You’ll learn how to uncover the true value in your brand and make your brand stand out in the crowd
  • Week #2 Marketing Your Business on a Shoestring Budget – Seven different ways you can get the word out about your business and draw traffic in without spending a fortune. You’ll learn how to leverage your talents and time to attract more customers to your business right away.
  • Week #3 Making Your Ads More Effective – We hate ads, not because there are too many, but because most ads suck. This presentation will show you the six principles that make the difference between your ad being remembered and acted upon or being simply ignored. You’ll learn techniques even the most highly paid professionals sometimes get wrong, and how you can apply them to your own advertising efforts
  • Week #4 Generating Word-of-Mouth Advertising – We all know Word-of-Mouth advertising is far more effective than traditional advertising, but do you know what it takes to actually get your customers to talk about you? This presentation shows you four proven ways you can generate word-of-mouth advertising. You’ll walk away with tips and techniques that get people talking the very next day.

Option B: Selling and Customer Service

  • Week #1 Selling in a Showrooming World – Online shopping is here to stay. So is the concept of Showrooming, where a customer uses your store to touch and feel the product before ordering it online cheaper. This presentation shows you the two types of customers, how to recognize them, and the very different ways you sell to them. Learn this and you’ll close far more sales than ever before.
  • Week #2 Raising the Bar on Customer Service – Every store thinks they offer Great Customer Service, but every customer can regale several stories where the customer service fell far short. This presentation gives you a different perspective on customer service and shows you how to up your game so that Great Customer Service is only the minimum. You’ll learn how to surprise and delight customers at every turn.
  • Week #3 Building the Perfect Salesperson – Finding the right salesperson is the key for any organization. But how do you identify the perfect fit? This presentation will change the way you look at interviewing and hiring and even training. When you’re done you’ll have a better understanding of how the best companies find the best employees time and time again.
  • Week #4 Training and Motivating Your Team to Perform Their Best – The carrot and stick might be good for a donkey, but it won’t get the best out of your team. This presentation will show you what really motivates people to do their best work and how to get the kind of creativity from your team that sets you apart. You’ll also learn how to turn staff meetings and training times into something your staff looks forward to attending.

Option C: Retail Math

  • Week #1 Reading Your Financial Statements – Your accountant will be glad you attended. This presentation will show you in layman’s terms how to read the two most common financial statements – the Profit & Loss and the Balance Sheet. You’ll learn how they are calculated, what they show, and an intuitive way to use them to check the financial health of your company. It isn’t as scary as it sounds.
  • Week #2 Inventory Management – Cash is King. In retail, the biggest use of your cash is your inventory. This presentation will show you simple and smart ways to manage your inventory levels better including how Open-to-Buy programs work and easy ways to increase cash flow. You’ll learn how to turn slow moving merchandise into cash and make your inventory work for you.
  • Week #3 Pricing for Profit – Most businesses leave thousands of dollars on the table because they don’t understand the principles behind how to properly price their products or services. This presentation shows you how you can raise prices and increase unit sales by harnessing the power of perception. Learn these techniques and you’ll start making more money the very first day.
  • Week #4 Unlocking the Hidden Cash in Your Business – There is more to retail than just buying and selling product. This presentation will show you some different ways to measure your business and some simple ways to make a little extra cash that might just be the difference you need to pay yourself a bonus this year.

If you just read those and said, “Dang, I could use this!” pass this post along to your DDA Director, your Chamber of Commerce, your Main Street Director, your Economic Development Director, your Shop Local director, and tell them, “Dang, we could use this!”

(Heck, you don’t even need one of those organizations. Just get a few other small businesses together and give me a call.)

Then contact me. We’ll go over what it would cost, creative ways to finance it, how to get the food and venues, and what dates to schedule this fall to have some fun helping small businesses grow and thrive, all while having lunch.

Sound yummy to you?

-Phil Wrzesinski
www.PhilsForum.com

PS Not within that two-hour drive? No worries. Instead of four lunches, we’ll do one big brunch and put all four lessons into a three-hour workshop. Call me.

PPS The beauty of what you’ll learn in these tracks is that the dividends are immediate. With many of the lessons you’ll see results right away. Having this information fresh in your mind leading into the busy holiday season will make a huge impact on your bottom line this year. Lets get some dates locked in now.

PPPS If you’re in Oakland County, MSOC is already working on the budget for 2019. Contact John Bry at MSOC and let him know you want in. If you want something this fall, however, check with the other organizations in your community to see if they will help you organize this.

If You Have to Ask …

I stood up on stage in front of a crowd of retailers and said, “If you have to ask how much it costs, …”

The crowd answered in unison, “You can’t afford it!”

That quote is attributed to J.P. Morgan and is so common and pervasive that if you say the first half, almost everyone can tell you the second half. So why do so many stores put out merchandise without price tags forcing customers to ask?

Michigan was the last state in the union to get rid of its pricing rules where every product that could be priced had to be priced. The Michigan Retailers Association was against this rule because it put an undue burden on large retailers having to price out every single item.

Imagine the cost of all those price tags and the staff necessary to tag all those items. Oh the outrage! (sarcasm intended)

Frankly, as a consumer, I loved that law. I hate having to walk around the store looking for a scanner to verify if the price on the shelf is correct (if there is a price on the shelf at all!) I find it annoying when items aren’t priced. Many of your customers do, too.

Putting price tags on products is not a cost issue. It is a customer service issue.

I’ve talked before about how signs increase sales because a large percentage of the population would rather read a sign than interact with a salesperson. Price tags are the lowest hanging fruit on the sign tree.

Price tags are one half of the Value Equation (Perceived Worth versus Actual Price). Without a price, a customer cannot finish that equation and make a decision to buy on her own. Many of those customers walk away without asking an associate for help.

Image result for if you have to ask how much it costs you can't afford it“If you have to ask how much it costs, you can’t afford it.” J.P. Morgan

That quote popped into my mind last weekend while I was shopping in Dillard’s. They have a nice Big & Tall section that has mostly served me well since I discovered it. Several items, however, were not priced. I couldn’t help think how often I moved on to the next item that was priced rather than look for a sales associate.

I’m not your typical male shopper. I will ask for help … if it is convenient enough. Unfortunately, more and more stores are cutting back on their sales force, leaving fewer and fewer sales associates even available to help me.

This is the downward spiral of customer service that is driving customers to the Internet. Yes, pricing your items is a Customer Service thing. If you aren’t pricing every individual item that you possibly can, you aren’t offering good customer service.

If you aren’t pricing every individual item you possibly can, you’re losing sales.

In the big box stores I can take an unmarked item to a scanner somewhere on the floor. In a smaller store I may just scan the UPC with my phone and buy it online right in front of you.

I hated when Michigan finally gave up the price tag rule. It meant worse customer service for consumers in general. It meant lower costs for all those big-box competitors that didn’t care about customer service in the first place, and it drove more people to the Internet for shopping just to avoid the lousy customer service they got from the big retailers.

Yeah, it gave me a chance to outshine the competition with superior service, but for most people it lowered their overall perception of brick & mortar shopping in general. All boats sink with the tide, too.

You might think buying all those price tags and paying staff to tag all those items costs too much. I will tell you that by not properly pricing your merchandise, it is costing you far more.

-Phil Wrzesinski
www.PhilsForum.com

PS The last thing you ever want a customer to think is, “I probably can’t afford it.” Yet since that J.P. Morgan quote is so pervasive, that is exactly the thought in their head every time they can’t find a price. I can’t make that quote or that thought go away, but I can encourage you to eliminate that thought in your store. Make your pricing crystal clear.

PPS One other benefit of pricing all your merchandise is Trust. If your stuff isn’t marked, it looks like you’re hiding something or playing games with your pricing. That undermines trust, which undermines relationships and loyalty.

“Everything Cheaper Somewhere Else”

I used to hate anonymous commenting on news articles and blog posts. It is so easy to hide behind a pseudonym and take unsubstantiated potshots at people and businesses, spread rumors, and even spread downright lies.

As a retailer, I took every negative comment and review of my business personally. Some of them hurt, especially when they weren’t true. The misunderstandings were one thing but the outright lies were the worst. They cut to the bone.

I remember one day in the infancy of online news when a fellow downtown business owner alerted me to comments posted on an online news story that attacked both my store and me personally. He warned me not to read them. I didn’t heed his warnings.

One person had taken it upon him or herself to just rip the business up one side and down the other, calling us, among other things, price-gougers who were just out to destroy the little people in town. This person claimed that he or she could find everything we sold in our store cheaper online.

I took offense to the first part. The person posting the comment had no idea what I paid myself or my staff or our profit margin or what we gave to charity or what causes we supported. I am a forgiving person, though. I will forgive them their ignorance.

The second part, however, was pretty much true. Not only could that person show you the items cheaper, I probably could, too. After all, I had Internet access. I could also show you sites and stores where just about everything we sold was more expensive than our prices. That exists, too.

In fact, if prices weren’t fluid across different channels, Retail would look a whole lot different and be a lot less fun. Everyone would pretty much do the same thing and charge the same for it. Yawn.

Image result for valueRetail is a game, and the game can be boiled down to this … Find the Value you can give the customer that will make it worthwhile for them to pay the price you wish to charge.

At the ballpark they charge you more for a single beer than you would pay for a twelve-pack at the store. You buy it because you want to drink a beer during the game. There is enough Value in enjoying that beer while watching the game that makes you pay the price. (Don’t want to pay their outrageous prices? You can eat before you go to the ballpark. Most people can handle 3-4 hours between eating. You can also drink water for free. They have to provide it to you.)

People call them price-gougers all the time. It doesn’t stop them from raising their prices and making money. They offer you the Value of being at the game and watching the action in person.

The real question you need to ask yourself as a retailer is … What Value are you adding to the equation and will that Value be enough to get people to pay your prices?

You can add Value in several ways. You can:

  • Offer services other stores don’t have (i.e. layaway, free gift-wrapping, assembly, delivery)
  • Curate the selection to help customers get only the best solutions
  • Align your business with a social cause
  • Offer follow-up services (such as the free 30-day riding tuneup that we used to offer with every bike we sold)
  • Build relationships to the point that the customer feels as much ownership in your store as you do.

Any one of those is a way to “play” the Retail Game. Play more than a few of them and you’ll never worry about how someone can find “everything cheaper somewhere else.”

Were we the lowest priced game in town? Nope. Never tried to win that race to the bottom. But in a 2007 survey of Jackson County residents about stores that sell toys in Jackson, we were rated as having the highest “Value” ahead of Walmart, Target, Toys R Us, Kmart, and Meijer (all whom love to advertise their “lowest prices”.)

What Value are you adding to the equation?

-Phil Wrzesinski
www.PhilsForum.com

PS I have a good friend also named Phil who also ran a toy and baby store in the other Jackson (MS) who never liked MAP (Minimum Advertised Pricing) because it made everyone price their goods at the same price. He said true merchants have no problem with the undercutting of prices on the Internet because they know how to offer Value and make sales at higher margins. As much as you hate to admit it, he’s right. MAP only protects you at the margin the vendor thinks you should make, not the margin you deserve for all the value you offer.

PPS As for anonymous negative comments online, if they are an attack on your character or the character of your business, ignore them completely. Your actions speak louder than your words. Use your actions to prove that person wrong. If the comments are simply something misunderstood, you can respond for clarification, but only if you can substantiate your claims without putting down the person who made the comment. More often than not, however, it is best to ignore anonymous comments, period. I’ll talk about how to respond to Reviews in a future post.

PPPS A few of those ways to play involve the skills and training you give to your front line staff. As I pointed out before, that is probably the easiest way to add the kind of Value your competitors are not adding to their equations.

You’re Looking at Credit Cards Wrong

I was having a recent discussion with a friend about credit card usage. She uses her credit and debit cards almost exclusively. I still prefer cash. Many people think exclusive credit card usage is a young person, Millennial thing. My friend was born on the cusp between Baby Boomers and Gen X.

She isn’t the only person I know who prefers cards over cash. In fact, many smart shoppers prefer to use their cards. They have rewards cards that earn them miles or cash back. Some of my fellow business owners use their cards almost exclusively for their business and go on vacations virtually free.

Image result for credit cardsCredit card usage is the way of the world. It is the way most customers wish to pay you. And with the expansion of Apple Pay and other mobile wallets, that usage is going to continue to increase and become the preferred method of payment not just for Millennials but for all generations. (My son wants me to change banks just because my bank doesn’t yet support Apple Pay.)

Yet many small retailers (and some larger ones) are still stuck in the dark ages when it comes to accepting credit cards.

Yes, you need to accept chip cards. Yes, you need to accept mobile wallet payments. Those are necessary changes in today’s retail climate.

More importantly, you need to check your attitude about accepting credit cards.

I still see retailers who have “minimum charges” for credit cards. If you have that, you’re penny-wise and pound-foolish. You’re telling your customers those few extra cents on that transaction are more important to you than taking care of the customer and serving her the way she wants to be served. You’re telling the customer your needs are greater than hers.

When my friend sees those signs it pisses her off, makes her want to spend less, and makes her not want to come back. Would you rather she comes in once a week to spend $5 or spends zero money and tells people what a horrible store you are?

Heck, even if you allow credit cards for any amount yet you cringe when a customer pulls out her card for a $2 purchase, you need to check your attitude at the door. Swipe fees and percentages are part of the cost of doing business. Period. Unless the majority of your transactions are under $5, those fees are actually quite minimal in the grand scheme of your business. (And if your business does have a lot of $5 and under transactions, you should be making enough margin on your sales to cover those fees quite easily.)

If you want to cringe at a $2 credit card transaction, don’t cringe at the extra pennies you might pay to Visa. Cringe, instead, at the inability of your sales staff to make a larger sale. Cringe, instead, at your lack of connection with the customer that might compel them to buy more. Cringe, instead, at your failure to price things enough to cover your expenses.

Better yet, don’t cringe at all. Celebrate that customer and her purchase. Make her feel as special as the customer who spent $200. Be happy she came in. Be happier that she spent money. Be happiest that you have the chance to build a long-term relationship with her. That is the winning attitude.

You are going to have credit card fees. That is an expected expense in today’s business climate. Your job as a merchant is to make enough money to cover your expenses. Whether you do it through better profit margins or cutting other expenses, your attitude towards those expenses shapes the attitude you have toward your customers.

When you limit how your customers can pay you or simply take an attitude when they pay you in a way that is least convenient for you, you’re taking a business-centric approach. When you have no limits and no worries, you’re taking a customer-centric approach. One leads to smaller average transactions and fewer transactions. One doesn’t. You know the difference.

-Phil Wrzesinski
www.PhilsForum.com

PS The same can be said about whether or not to accept American Express. Yes, you need to accept it … with a smile on your face. You need to be happy when a customer pulls out her Amex instead of her debit card. You need to celebrate the customer, not worry about the fees. You do that by adjusting your margins and expenses to cover it. (As for Bitcoin and other cybercurrencies, because of their volatile nature, you can draw the line there without angering customers. Those of you who do accept cybercurrencies, however, are going to find that you attract a whole new level of clientele that could possibly be quite good for your business.)

PPS Here is the best thing you will read about how to increase your margins enough to cover those credit card expenses.

Two Lessons From Selling a House

I’m typing this while surrounded by boxes, some full, some waiting to be filled. I’ve told you many times I’m not the most organized guy. I fear that most of the contents of my home office are just going to get dumped into whatever open containers are left, to be sorted (if at all) at some later date.

Yes, my house sold. It took seventeen months from listing to closing.

It took seventeen months, a dozen gallons of paint, a new stove, two dozen borrowed items for staging, fifteen open houses, four prices changes (the last one upward), and three written descriptions of the house before the sale happened.

I want to talk about those last two.

For the first year, we started with the house listed at $249,900, hoping to get $230,000 plus. We listed in late July 2016 so we missed the window for the families who wanted to move over the summer and be in the new place before school started. Although we had some traffic early on, most people complained about the old, dated kitchen.

Our old, dated kitchen

To their credit, the kitchen was old. And dated. And included four different types of wood (light maple pergo floors, dark cherry cabinets, dark oak trim around a tile counter, and medium oak trim around the light fixtures, oh and wood paneling—yuck!) But it was also functional and efficient and filled with good, usable storage.

No offers.

We lowered the price to $245,000 and then to $239,900 hoping to refresh the listing (by the way, the comparable values put it in the $250,000 range.) The rest of the first year was all the same. Plenty of traffic. Everyone had the same comments. Loved the location. Loved the spacious rooms. But the kitchen was dated. A few commented that the price was too high because of the kitchen.

No offers.

At the end of the first year I took it off the market for a month. I painted the remaining rooms that had yet to be painted, re-staged it, and put it back on the market at $259,900.

I also rewrote the listing to include the following paragraph …

The kitchen is dated—but completely functional—and will serve you well until you decide to build the kitchen of your dreams and turn this house into the home you’ve always wanted.

The higher price meant fewer lookers, but one thing changed dramatically. Not one person mentioned the kitchen as being an issue. Surprisingly, no one mentioned the price either.

Those two changes led us to the buyer we needed—someone who would see the house for the incredible value that it is, and not be scared away that the kitchen has to be redone.

Through our new price and new description we eliminated all the traffic that was pointless, and only brought the traffic that would be interested in a house like ours.

NEW PRICE

As I have been teaching for years, price is a perception game. In housing, that game has changed dramatically thanks to the Internet. Almost every house hunter goes online first. One of the first filters you use is price. You put a minimum and maximum price into the filters and your search appears. With a price of $249,900, we were at the top end of the $250,000 filter. People who put $250,000 as their top filter are not looking to buy a $249,900 house that needs a $20,000 kitchen. We needed to get out of that search mode.

Going to $259,900 put us into searches for people who put $300,000 as their upper limit. Now our $259,900 price looked like a value. Even with $30K worth of work, the buyer will have a $300,000 house for less than $300,000.

Yes, the perception of this new mode of search is that every house that pulls up in a search of houses between $200,000 and $250,000 has a maximum value of $250,000 because they put “$250,000 maximum value” in their search. Every house that pulls up between $250,000 and $300,000 is likewise a $300,000 home.

By changing our price, we changed the perceived worth of our house. Instead of being an expensive house that needed a lot of work, it went to being a value-priced house that needed a little bit of work.

NEW DESCRIPTION

My agent was good with my new description—even the part about the kitchen being dated. I heard from other people in real estate that you should never say anything negative about a house in the description. I respectfully disagree. By admitting the downside, I earned the trust that the other statements would have a better degree of accuracy.

Most of us know that keywords like “cozy” means “cramped” and “charming” means “hasn’t-been-updated-in-years.” Yet, by admitting the kitchen was dated, not only did it make the other statements feel more truthful, it eliminated any house hunters who didn’t want to remodel a kitchen.

Our traffic was down, but we got a buyer and closed the sale.

The lessons are two-fold.

First, price has a huge impact on the perception of an item. Sometimes a higher price is actually better than a lower price. You have to look at your prices through the eyes of a customer and see what she sees and reads into your prices. Do that and you can find the sweet spot that gets you the most bang for your buck.

Second—and this is something Roy H. Williams has been drilling into my head this entire century—you have to choose who to lose. Through our description and pricing we eliminated a lot of potential buyers, mainly because we knew they weren’t going to be the right buyers. Just having traffic to your website doesn’t make it good traffic. Just having traffic through your door doesn’t make it good traffic. You want to specifically attract your kind of buyers. You do that with your message. Our new message brought us the buyer we needed and got the house sold.

Time to go fill up those boxes.

-Phil Wrzesinski
www.PhilsForum.com

PS Before you ask, we got $230,000. We got where we wanted, but only after attracting the right people. The housing market hasn’t changed much in our area. We didn’t get any offers with the old description and old price during the peak selling season of April to July. We got our first offer during the off-season and only after the new price and new description. (Speaking of off-season, I am currently staring at a snowstorm out my front window that has closed one of the major highways through town. This is Michigan. When they close the highway here, it’s a real storm. Fun for my son because school was closed, but not so fun for packing and moving.)

PPS I apologize for the sporadic posts the last few weeks. It will probably continue into next week as well while we make the move. Stay tuned, though. I have some fun thoughts for how we can make 2018 amazing. You might want to tell your other retailer friends to sign up for the blog here.

The Value Equation

As customers, we are often quick to ask the question, “How much does it cost?” That’s what we want to know. Get to the bottom line. Why? Why do we go so quick to the price? The answer – The Value Equation.

The Value Equation is this … Does the Perceived Worth of an item equal its Actual Price?

We beg for the price because we are always at least subconsciously calculating Perceived Worth on everything we see. We’ve been doing it our whole adult lives. We do it shopping for groceries. We do it shopping for tools. We do it shopping for clothes. As we walk the store we attach a Perceived Worth to everything we see. (If we don’t want it, the PW is zero. If we might want it, we attached a price to it and check to see if we are right.) 

When the Perceived Worth equals the Actual Price, we put the item in our cart.

The surprise is often in finding our Perceived Worth is far higher than the Actual Price. The first question we usually ask when that happens is, “What’s wrong with it?” or, “Is this marked down?” Sometimes we think to ourselves, “Wow, it must not be as good as I thought it would be.” Before we buy the product, we have to answer those questions satisfactorily.

That’s why it is easy to under-price yourself to bankruptcy (or at least leave serious dollars on the table.)

The other problem is when your Perceived Worth is much lower than the Actual Price. You either totally dismiss the product as being “out of my range” or you wonder what you missed in your evaluation of the product.

Take, for example, the SPOTLIGHT ON MARKETING & ADVERTISING class I am offering. I have to find that sweet spot of a price that fits what you believe a class like this should be worth.

I start by taking cues from what other similar programs charge. For instance, Bob Negen’s Whizbang Training two-day Retail Success Summit this summer is currently $997.  My buddy Tim Miles just announced a one-day workshop with Roy H. Williams, himself, for $1250. (By the way, I highly recommend both programs, and, no, I don’t get any kickbacks from these links.)

My workshop is $250* for a half-day —similar to Bob’s price for two days. Some of you will look at the price and see that it is about what you’d expect to pay for other, similar types of training. Some of you will look at the price and ask, “Where’s the value? What do I get in return?”

So I also look at the benefits you will get from the program. For instance, in this four-hour program you get:

  • Eight ways to market your business with little or no money at all
  • How to get free publicity from the media
  • How to craft a message that gets noticed, remembered, and acted upon – three things that are incredibly hard to accomplish in today’s fractured, over-saturated media world
  • How best to use the media of your choice (and tips on how to choose the best media for your business)
  • Four ways to generate more Word-of-Mouth advertising than you ever thought possible
  • One year of advertising support including help with your message, your campaign, your media buys, or wherever you have questions or need advice.
  • Half-rate discounted tuition for any future programs I offer through Jackson Retail Success Academy™.

Some of you will still balk at the price. That’s okay. I know I won’t convince everyone.

Some of you will think that seems like a pretty fair trade for $250 and four hours of your time.  You’ll sign up now for the class on Tuesday, June 20th.

Others will wonder why the price is so low for all that you get. Most of you in that frame of mind have either been to one of my programs before or live in a city where prices for stuff like this are just a bit higher than they are in Jackson. Remember, Helping Others is one of my Core Values.

-Phil Wrzesinski
www.PhilsForum.com

*PS If your business or you personally have taken one of my workshops through the Jackson Retail Success Academy™, you qualify for the Half-Price Alumni rate of $125.

PPS Why the half-price tuition for JRSA™ alumni? I believe strongly in continuing education. Now that I make my living speaking and writing, I am reading more blogs and books on speaking and writing, and I am attending workshops to learn all I can in those fields. I want to encourage anyone who takes one of my workshops to come back for refreshers or other programs, or maybe send a staff member to learn more. Plus, you’re always looking for a better deal. You know these classes are worth it at almost any price. Half-price just makes you feel good.