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Small Business Academy Homework Part 2

I am taking a class to work on my business. It is a class for startups, primarily, but the exercises will not only help me with my business as a speaker, writer, and business coach, they will help me help you become a better business.

My instructor, Frances Schagen, has granted me permission to do all my homework worksheets live here on this blog. You can read the first worksheet here. Time for Part 2.

DISCOVERY DANCE – WHO?

The previous step was about me, what I wanted to do and why I wanted to do it. This next exercise is for me to think more about who I want to work with. I have three questions to answer …

  • What problem are you solving?
  • What are the characteristics of the people you most want to work with? What is it about them that makes them a fit for your solution?
  • List 20 people who have those characteristics and who you think might need your solution.
Don’t adjust your monitor. This is Alpine Soccer – a real thing!

What problem are you solving?

Giving tools other than the markdown gun to retailers and small businesses to help them create successful businesses that can compete on a field slanted against them.

What are the characteristics of the people you most want to work with? What is it about them that makes them a fit for your solution?

Business Owners and Managers of small, independent businesses who:

  • Can make their own decisions
  • Want to learn new and better ways to run their businesses
  • Believe in continuing education
  • Are open to trying new things
  • Care about their customers
  • Care about their community
  • Want a push in the right direction
  • Want to learn new skills

Notice that these characteristics align with my Core Values of Having Fun, Helping Others, and Education. Your answer should align with your Core Values, too.

Notice also that I did not limit myself to just retailers. I go back and forth on this part of the answer. Although my background is in retail and some of my presentations are strongly retailer-focused, the characteristics listed above are not just limited to retailers. Nor are all my programs and teachings just limited to retailers.

My book Hiring and the Potter’s Wheel: Turning Your Staff Into a Work of Art works with any business that must hire people. I have a couple Fortune 500 companies that use this book and its teachings. I have a couple international companies doing the same.

There is something to be said for narrowing your focus so tightly that you become the known expert in a narrow field. There is also something to be said for keeping the net more broadly focused not on any single type of business or individual, but on the characteristics. I love that part of this question. If you own a non-retail business and have the characteristics listed above, I am sure I can help you.

There are still a couple problems with my original answer of “Business Owners and Managers of small, independent businesses.” Most of those people cannot afford my services on an individual basis and I prefer to work with large groups of these people at once.

Therefore, to truly reach them in the ways I can help most, I have a secondary customer that is in many ways my primary customer. I have to go through the gatekeeper.

My true customers are typically Trade and Business Organization Leaders who, along with the mindset above, also:

  • Plan learning events for their members
  • Hire people from outside their echo chambers to give fresh perspective, new insights, and sharper tools to their members

Those organization leaders are the gatekeepers to the first group because A) they have the money to plan learning events, and B) they can corral a number of businesses into a group setting.

Therefore, to reach my preferred customers, I have to find these gatekeepers who share these characteristics and reach them.

This is an important understanding and distinction. I write this blog and create the content on my website for you, the small business owner. I have to find another avenue to convince the gatekeepers to hire me. This blog isn’t for them, nor will it ever get me hired by them*.

When you understand your customers at this level, it changes the way you look at how and where to find them.

List 20 people who have those characteristics and who you think might need your solution.

I think Frances wants me to list specific people or businesses here. I’m going to take a slightly different approach in my answer.

I think the following businesses need my solution …

  • Independent Retailers & Restaurants
  • Locally Owned Franchise Retailers & Restaurants
  • Service-based businesses such as insurance agencies and beauty salons
  • Anyone involved in Sales

who belong to …

  • Downtown Development Authority districts
  • Chambers of Commerce
  • Shop Local Organizations
  • Industry Buying Groups
  • Industry Trade Associations
  • Main Street Programs
  • Merchant Cooperatives

and/or attend …

  • Industry Workshops
  • Educational Conferences
  • Local Seminars

I also think the following people need my solution because it can help strengthen their members, which strengthens their organization …

  • DDA Directors
  • Chamber of Commerce Directors
  • Main Street Program Directors
  • Shop Local Directors
  • Economic Development Directors
  • Trade Association Educational Committee Directors

One of the first questions I always ask when I meet this last group of people is,

“Do you offer or have you considered offering any training programs for your members?”

Listing 20 people can be challenging. For your benefit, I thought about my business at Toy House and came up with this list:

  • Parents
  • Grandparents
  • Children
  • Aunts & Uncles
  • Teachers
  • Home Schoolers
  • Hobbyists
  • Gamers
  • Librarians
  • Interior Decorators
  • Coaches
  • Athletes
  • Event Organizers
  • Daycare Workers
  • Therapists
  • Pediatricians
  • Dentists
  • Anyone with a waiting room with kids
  • Musicians
  • Entertainers

I’m sure with enough thought you can come up with a list like this for your business.

Here are my takeaways from this exercise for you.

If you can clearly identify the problem you are trying to solve and clearly identify the characteristics of the person with this problem you would most like to work with, you’ll understand more clearly the advertising and marketing you need to do to get more of the customers you want (and less of the ones you don’t want).

(Having read ahead in the course work, I think Frances will take this info to send us in a slightly different and more fascinating direction than that. Sit tight. I’ll explain it when we get there.)

Thanks, Frances!

-Phil Wrzesinski
www.PhilsForum.com

PS *This blog actually can get me hired by “them,” but it involves YOU. When you tell your DDA/Chamber/Shop Local/Trade Association person about wanting opportunities to learn more and having educational programming available to you, then they are more likely to hire me to do that. Tell your organization directors about me. Send them to this page.

Why, Why, Why, Why, Why – A Simple 3×5 Question We All Need to Answer

You know me. I like to learn. When a friend of mine offered me the chance to sign up for her new six-week online tutorial for launching a new business, I jumped at the chance.

Frances Schagen has helped over a thousand businesses get started. That’s an impressive number. You might remember her name because I quote her at the beginning of the Free eBook Reading Your Financial Statements.

“What gets measured gets done.” -Frances Schagen

Frances was instrumental in proofing and helping me get the math and concepts right in that eBook and also a bigger financial statements book I wrote for the toy industry. She is a smart lady and I’m lucky to get to learn from her.

You can join Frances’ club, too!

Her new project is “Six Stages to Building Your Effortless Business.” Earlier today she had an online chat with those of us in the current class. She also gave us homework.

With her permission, I am going to do my homework throughout the class live on this blog. 

Not only will you get to see how I am building my business, you’ll get ideas that will help you with your own business.

THE OWNER’S STORY

The first stage is The Owner’s Story. The first worksheet and homework for me to do is the 3×5 Whys Project. I have three questions I need to answer. For each question, however, I need to answer five “whys.” The purpose of this sheet is to really dig deep to uncover my story, why I want to start this business, why I want to go into this field, and what I hope to accomplish. Here are my answers:

Why are you starting a business? Why have you chosen this way to make your living?

Why #1 – I have chosen this way to make a living because of my Core Values of Having Fun, Helping Others, and Education. I find writing and speaking to be incredibly fun, helpful and educational.

Why #2 – I am starting a business because I like being my own boss, calling my own shots, being responsible and accountable for my own mistakes, and choosing my own schedule. As a single parent, it gives me flexibility to be the parent I want to be, too.

Why #3 – I have chosen this way to make a living because I like travel and meeting new people.

Why #4 – I am starting a business because I need to make money. I have one child in college and another starting college next year. I have living expenses and not enough retirement money saved up.

Why #5 – I have chosen this way to make a living because I see a decent income potential. While I don’t ever expect to be one of those high-profile speakers who gets tens of thousands of dollars every time he steps on stage, if I can find two or three opportunities to speak or lead a workshop each month I can make a decent living. I also believe I can do this type of job long past the typical retirement age, which not only gives me more income potential, but also keeps me active and fulfills my own needs for a long time.

Why have you chosen this field? Why are you doing this work?

Why #1 – I have chosen writing a blog and books, and doing workshops and presentations for small business owners because it is the topic I know best and have the most personal experience.

Why #2 – I have chosen this field because I know how little true help there is out there for indie retailers. I have belonged to several retail owner groups over the years and have heard the questions. We all bring some expertise to the arena, but running a retail business requires you to wear so many different hats that it is impossible to know everything. Too much of our learning as business owners is done on the fly, often the hard way through trial & error and learning from our mistakes.

Why #3 – I am doing this work because I believe I have a talent in both the writing and the presenting. I have been told several times that my super power is the ability to break down seemingly complex ideas into understandable thoughts.

Why #4 – I am doing this work because it satisfies me. I take more pride in hearing how something I said or wrote made a difference for your business than I do in just hearing, “Nice job,” or “You did good out there.” My favorite testimonial to date came from a guy at SuperZoo a few years ago who said, “You’ve saved my business AND my marriage!”

Why #5 – I have chosen this field because I have been on the other side of the equation, asking the questions small business owners ask, searching for the resources and answers. I know a lot of the answers from making the mistakes and learning from them. I also know where to go to find more answers because I have done those searches. I want to be that resource for others.

What global problem do you want to solve? (however you define that) What change do you want to make?

Why #1 – I want to help small businesses, primarily indie retailers and entrepreneurs, to find their success.

Why #2 – I recognize that the field is slanted toward big businesses with deep pockets and strong lobbies, but I believe there are plenty of ways for small businesses to compete and thrive. The tools are available, but sometimes we need people to show us how to use those tools. I want to be that person.

Why #3 – I want to encourage shopping local. I have seen enough studies to know a strong local retail presence will further strengthen the local economy. But I also believe local businesses need to be better than they have been if they want to keep the local dollars in town.

Why #4 – I believe small business owners care more than large corporate CEO’s. CEO’s focus solely on the shareholder. Small business owners don’t have shareholders, so they care more deeply about their employees, their customers, their community, and even the environment. If I can help small business owners develop, grow, and find success, I can bring caring back to this world.

Why #5 – I believe in generosity. When we give more of ourselves, we encourage others to give. Whether they pay it forward or pay it back. I want to live in a world where generosity is the default, not an outlier. It starts with me. That’s why I have this blog and the Free Resources page. That’s why I answer every question emailed to me.

 

Whew! That was a little harder than I thought. Coming up with five answers to each of those questions was not as easy as I originally thought. But I can see the importance of this exercise. In our online chat today, Frances helped us try to clarify what we want to do and why we want to do it. Some of those answers above have helped me realize what I really want to do.

I would encourage you to answer these same questions for you and your business. Often we get into business because of one reason, but once we get there and have to juggle all the day-to-day problems and wear the many hats, we forget why we’re here in the first place. That’s when business is no longer fun and you’re merely in the game for survival. As you can see from the above answers, I don’t want that for you.

-Phil Wrzesinski
www.PhilsForum.com

PS You can still get in on this class if you want. We only just started today. The real meat begins next week. Contact Frances if you want to play along.

PPS Now you also know a little more about what drives me to do what I do. The ultimate goal for me would be to have two or three paid events each month where I am presenting or leading a workshop, leaving the rest of my time to write and mentor other business owners. If you know of any organizations such as your Chamber of Commerce, DDA, Main Street, Shop Local, or trade association looking for a professional speaker, please let me know. I’d love to do a live event in your town or at your next event.

Reviews: Good, Bad, Necessary Evil?

I remember the first presentation I saw about the power of online reviews. The speaker instructed us how to use our smartphones to take quick testimonials right on the sales floor whenever we had a happy customers. I looked at my notes from the presentation and read …

“Get them to post their reviews before they even checkout. That’s when they are happiest.”

I also remember around the same time reading about Yelp and the problems with reviews there. Yelp was accused of suppressing good reviews and only showing an equal mix of both good and bad reviews. Yelp’s argument was that most good reviews were false anyway and that the people reading the reviews needed to see both the good and the bad.

I had never even looked at Yelp because I thought it was only for restaurants and west coast businesses. I immediately checked out our listing. To my surprise (and delight), there were no negative reviews posted, mainly because we didn’t have any negative reviews.

Then I got the extortion letter from Yelp. If I signed up for advertising with them I could control (somewhat) my negative reviews. I remember thinking three things at that time.

First, I didn’t have any negative reviews to control on Yelp.

Second, I didn’t see the return on investment for running ads on Yelp, partly because I didn’t and still don’t see much return on investment for any brick & mortar running online ads, and partly because I didn’t see Yelp as a big deal for indie retail.

Third, anyone that was already looking me up or finding me on Yelp was either going to visit me because I was an indie toy store or not visit me because I was an indie toy store. The reviews were a minor part of the decision process. More importantly, anyone who didn’t know me, then found me on Yelp, and was debating whether to visit was basing their decision on every single interaction they had ever had with an indie toy store.

The reviews were just the reinforcement of their already-established bias.

That’s the reality of how we read reviews. We first have an established bias based on our own beliefs and previous experiences. We look at reviews to reinforce those beliefs. We’ll justify away negative reviews for places we expect to love, and discount the reviewer’s opinion when it is at odds with what we expect.

In the back of our mind, we’ll also wonder how many of these reviews—good and bad—are simply made up.

About the only time we’ll heed the reviews is when they are heavily slanted to the negative. When everyone is saying something bad, we’ll decide the business is an outlier and shun them.

(Note: I talked about how to deal with negative reviews here.)

Does this mean you should ignore reviews for your business? Absolutely not! You should always be checking your reviews. If they slant negative then you have a problem you need to address with how you run your business. Even one bad review might be enough to warrant a change in policy to make the experience better for your customers.

If they slant positive, great! Keep up the good work!

Only if you don’t have any reviews (because you’re a new business or have only recently claimed your online profile) should you actually go after getting them. If you’re running your business correctly, the good reviews will take care of themselves.

Because of confirmation bias, though, you don’t have to lose sleep over your reviews. Just keep an eye on them from time to time and make sure you run your business so well that the positive organic reviews outweigh the negative ones.

At the end of the day the most important “review” is the one-to-one where your current customers talk about you to their friends.

-Phil Wrzesinski
www.PhilsForum.com

PS Of all the reviews online, pay most attention to your Google reviews. These are the ones that most people will see because A) Google is the top search engine. B) Google Maps is the top Map App.

PPS If you are a restaurant, reviews are much more critical than if you’re a retailer. How you respond to each review goes a long way to how people will view your restaurant. Read this about negative reviews.

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.

Lessons From Sears – Retail is Always Changing

“Phil, you know this store is going to put you out of business, right?”

My grandfather heard that first in 1962 when Shoppers Fair, a discount department store chain, opened in Jackson. We heard it when Westwood Mall opened in the 1970’s with a Circus World store (eventually becoming a KB Toys). We heard it in the 1980’s when Meijer opened their second store on the east end of town and Kmart opened a new store on the west end of town. We heard it in 1990 when Target came to town. We heard it in 1993 when Toys R Us opened.

Shoppers Fair Jackson, MI 1962

Shoppers Fair closed in 1974. KB Toys is gone. Kmart left when we did. Toys R Us left only a year after us. Montgomery Ward left Westwood Mall a couple decades ago. Younker’s is leaving Westwood Mall as I type.

Retail changes.

Jackson used to have a Woolworth store, a Field’s department store, a Jacobson’s department store, and an A&P grocery store—all defunct retailers now.

Retailers come and go. The retail landscape changes. Stores open and close.

We can look at Sears filing bankruptcy as just the natural evolution of retail. They had a good run, but now it is over.

In fact, I’ll go out on a limb right now and predict the eventual demise of Walmart. It might be fifty or one hundred years from now, but history shows us no retailer lasts forever.

The only problem with simply dismissing Sears as an eventuality is that Sears was once on top of the world, both figuratively as the largest retailer in America as recently as 1989, and literally when they opened their tower in Chicago in 1973. Their fall is far more educational to the independent retail world than Toys R Us and their debt problems caused by venture capitalists.

As a student of retail, I see two turning points for Sears starting their downward slide that incorporated the other five “lessons” I listed yesterday. One was in 1993 when they discontinued their catalog. We’ll talk about the other one tomorrow.

-Phil Wrzesinski
www.PhilsForum.com

PS There are several reasons why an independent retailer closes shop including retirement, illness, death, boredom, new opportunities, local market collapse, and competition. The big boys close for one reason and one reason only—Cash Flow. It is the decisions that lead to cash flow problems that I find most interesting.

RIP Sears

There is a group on Facebook for people who grew up in Jackson, MI. The posts are mostly, “Who remembers …?” so that former Jacksonians can reminisce about days long past. A recent post was about Toy House. A couple hundred people waxed nostalgic about visiting the original store in the 50’s and 60’s.

Several people mentioned the Catalog Sale, something my grandfather started early on.

The Catalog Sale was a two-weekend sale, once in October, once in November, where people brought in their catalogs and we matched the catalog price on any toy we had in stock. Our goal was to keep the sales in town.

The Sears Catalog

The most common catalog was the Sears Christmas Wishbook.

We ended the Catalog Sale in the early 1980’s when it turned out our prices were usually sharper than the catalogs at that time. The event was no longer a draw. By 1993 even Sears had stopped producing their catalog.

Times change. Retail shifts. Today Sears has filed bankruptcy.

Sears was Amazon before Amazon with their mail-order catalog business that allowed you to buy almost anything you could imagine from the comfort of your own home.

Sears was Walmart before Walmart when they dominated the retail landscape in the 1940’s and 50’s by offering a wide variety of merchandise at low prices. By 1969 Sears was the largest retailer in America with a larger market share of categories like home appliances than any retailer has ever had since. Four years later they completed construction on the tallest building in the world.

Sears also was a pioneer in retail, with legendary sales training, teaching their sales staff how to upsell and not sell from their own pocketbook. They were taught how to sell on features and benefits. They had their own credit card (which eventually became the Discover Card). They had their own insurance agency (which became AllState). 

Today they filed bankruptcy.

The easy blame is going to be Amazon and Walmart. Amazon out-Searsed Sears in the mail-order business. Walmart out-Searsed Sears in the commodity goods business.

Yet when was the last time you truly thought of Sears as a convenience-based place to buy goods? They dropped their catalog back in 1992, two years before Amazon launched.

And with well-known economy brands like Kenmore, Craftsman, and Diehard, tons of cash, and superior vendor relationships, Sears was well-positioned to destroy Walmart in the race to the bottom. Yet they dropped faster than a greased baton at the blind relays. 

So what happened?

The answer is quite simple. Sears got away from their competitive advantages and Core Values. Convenience and Commodity Brands were only two of them. The one I believe they truly missed was their sales training.

When was the last time you were blown away by the customer service at Sears?

Toys R Us got away from their Core Values in 1992 when Walmart surpassed them in total toy sales. Sears did the same thing over the years as they gave up the advantages that brought them to the table.

There are several (contradictory?) lessons in all of this.

  • Retail is always changing.
  • New competitors will try to beat you at your own game.
  • Stick to what you do best.
  • Don’t give up your advantages.
  • Adapt or die.
  • Stay true to your Values.

We’ll explore these concepts over the next few days and try to learn from their mistakes.

-Phil Wrzesinski
www.PhilsForum.com

PS It is never a good day when a legacy retailer such as Sears files bankruptcy. If we don’t learn from their mistakes, though, then we’re likely to make the same ones ourselves. As I’ve always said, Retail is not Rocket Science. Rocket Science is actually math for which you can solve all the variables. Retail has variables and equations that never fully resolve. The lessons, though, are fascinating.

The Fallacy of Foot Traffic

I was at Great Lakes Crossing Outlet Mall in Auburn Hills, MI the other day. It is one of the few malls I truly enjoy, partly because it has an aquarium (I have an oceanography degree), a LEGOLand (I used to sell toys for a living), and a Bass Pro Shop (I used to lead wilderness trips and still love to go camping). With Haggar, Levi, and Bose stores, and tons of seating in the walkways in front of the ladies clothing stores it is definitely a man-friendly mall.

The place was hopping. Whoever said malls are dead hasn’t been to this mall. The main aisles were jammed with people on a lazy Sunday afternoon in late August. It wasn’t a back-to-school crowd. It was just people out shopping and having a good time.

The food court was especially crowded. The line at Starbucks snaked all the way around their kiosk. Almost every restaurant in that food court had a line four or five people deep.

The key phrase there is “almost.”

Two restaurants in particular had no lines at all. As I sat eating my pizza, I watched both restaurants with interest. Three young girls approached one restaurant, stared at the menu, and walked away. A mom with a kid in a stroller stopped at the other restaurant and ordered her meal. In the time it took me to eat my pizza, that was the only paying customer at either of those two restaurants.

All the other restaurants had lines of people.

It wasn’t like these restaurants were serving fried crickets on a stick or something else not on the American palate. In a busy mall they weren’t getting the benefit of any of that foot traffic. Somehow, either through previous reputation, the signage in their restaurants, their pricing, their selection, or their attitude, they were idle—even with plenty of customers all around them.

All the foot traffic in the world won’t help you if there is a flaw somewhere in the business. It might hide the flaw for a little bit, but until you find and fix that flaw, you’ll never grow.

The reverse is also true. If you have a fabulous business, your location may hold you back a little, but not nearly as much as you think.

Schlenker’s Sandwich Shop
1104 E. Ganson St.
Jackson, MI 49201

One of my favorite burger joints has been in the same location since 1927. The road was a dirt road back then and the location is still well off the beaten path. The only foot traffic they get is the traffic they generate themselves. The restaurant is just a counter with limited seating. Yet the business is still going and growing after 91 years.

Just last week new owners took over. Yes it was a viable enough business to sell (something very few restaurants can say). The big change the new owners are planning? They are thinking about adding a drive-thru to handle all the takeout traffic.

My point is that too often we think, “If only I had a better location with more traffic …” or “If only I could find that silver bullet in my advertising that would draw more traffic …”

Neither of those thoughts is the true path to success. I predict those restaurants at Great Lakes Crossing will be replaced by next summer. They had all the traffic they could stand but weren’t able to convert it into customers.

I also predict that when Schlenker’s builds their drive-thru it will be filled with cars every day without them having to spend a dime on advertising.

If you have ever heard yourself saying, “If only we had more foot traffic …” the better question to ask is …

“What do I need to do to make my business better so that people want to come here?”

You are a destination store. When you act like one, you’ll draw all the traffic you need without any silver bullets or malls to do it for you.

-Phil Wrzesinski
www.PhilsForum.com

PS Even with a steady, solid, faithful customer base and a burger that was rated the seventh best in the entire state of Michigan, the other change the new owners of Schlenker’s are making is to switch suppliers to a higher grade and quality of the ground sirloin that makes their burgers so good. They have all the traffic they can handle, yet even they are answering that one question above. Are you?

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.

Self-Employed or Working for the Landlord?

When Toys R Us closed their Times Square store at the end of 2015—the one with the giant T-Rex and the three-story Ferris wheel—the biggest reason given was the landlords raising the rent from $12 million a year to over $52 million a year.

Image result for toys r us times squareYeah, that would be a hard expense for any retailer to cover, let alone one that was already struggling.

While the financial model is certainly different for big-box stores than it is for indie retailers, one thing that is universally true is that there is only so much profit margin you can spend on rent and expect to run a successful business.

For the typical indie toy retailer, occupancy costs (rent/mortgage and common area fees) need to be around 10-12% of gross sales for the store to be able to safely cover those costs. In fact, for a lot of businesses where keystone pricing is the norm, that number tends to hold true.

For Toys R Us, that would mean doing $100-$120 million in sales at the Times Square location. I can see that as a realistic number. But to pay $52 million, they would need to do half-a-billion in sales, over $24,000/sq ft. Even Apple couldn’t do that much in that space.

The 10-12% occupancy cost is a benchmark I use when talking to retailers about locations. Yes, you might pay a little more for a better location, but you should expect a little more in traffic and better clientele. Yes you can find locations cheaper, but you might have to pay a little more in advertising to draw traffic to your store.

But occupancy cost is only half of the equation. Here is one other number I want you to look at.

How much are you paying yourself?

Take your salary (you are paying yourself a salary, right?) and your net profit for the year. Add those two numbers together. Who made more, you or your landlord?

If you made more than your landlord (or even the same), pat yourself on the back. You are self-employed and running a smart business (as long as you’re paying yourself something, and not just reinvesting every dollar back into the business.)

If your landlord made more than you, something needs to change. You aren’t working for yourself. You’re working for him. Better for you to close shop, buy the building, and rent it to some other poor sap willing to pay you to keep their hobby afloat.

I know that sounds harsh, but it is a reality of business. If you aren’t making as much as your landlord, something needs to change. You need to sell more. You need to increase margins. You need to find a cheaper location. Something.

Or you can just accept that your business is simply a hobby and treat it as such.

I want you to make money. That’s the only reason I bring this up.

-Phil Wrzesinski
www.PhilsForum.com

PS Before you go lambasting me because your numbers don’t match, I fully understand that your industry may be completely different. If you belong to a trade organization, see if they have done any benchmark surveys to give you an accurate picture for your industry. Before you waste your breath on all the reasons why you aren’t making as much as the landlord (the only valid one being you are still in start-up phase), this isn’t about me. It is about you. I want you to be successfully self-employed. The landlords are already making too much. You should, too.

PPS I’ll put my thoughts why you should pay yourself a salary and whether it is better to own or rent in future posts.

Good Idea, Poor Execution

I need new tires for my vehicle. I’ve been through this process before. It used to be easy. I had a downtown Goodyear Tire place. I went there. Supported my fellow downtown business. They always took care of me. Knew me on a first-name basis. It was only two blocks from Toy House. No worries.

They’re closed now.

Image result for goodyear assurance tripletred all-seasonSo I did what a lot of people do these days. I went online.

Let’s face it. Tires are scary. There are so many different makes and models. Each vehicle has its own requirements. Without trust between buyer and seller, it is easy to feel afraid of being ripped off. I wanted to know more about tires before I set foot in a store. I wanted to research different models, check prices (last time I got tires there was a $250 difference between the tires I got and a couple other places offering the same tire), and be prepared.

I’ve always been a fan of Goodyear, probably because of the Goodyear store downtown, probably because there used to be a Goodyear plant in Jackson that spent a lot of money at Toy House both as a company and the individuals that worked there. I found myself on the Goodyear website comparing different models the right size and style for my vehicle.

The website was good. It had side-by-side comparisons, reviews and ratings, plus all the specs like warranty, fuel-efficiency, season, comfort, etc. I narrowed it down to a couple choices and felt a whole lot smarter.

GOOD IDEA

Then the website took it a step farther. I had the ability right then and there to purchase the tires online and have them installed locally. Before I clicked, however, I went to a few local tire place websites to compare prices. No one had the tire I wanted as an offering, but their pricing on the other Goodyear tires was similar to the Goodyear site. I felt a little more confident that I was getting a fair deal.

The good idea at Goodyear was to get the purchase right away. Don’t let me go to a local shop and have them sell me on some other brand. When I clicked on the purchase button, it then gave me a choice of shops in the area where I could get those tires installed. Even better! I knew most of them, but didn’t have a relationship with any of them, so I chose the place closest to my home.

Then the Goodyear site let me choose an appointment time. It had to be two days or more later. That made sense to me, since the shop might not have the tires in stock. I chose two days later at 10am, paid for my tires, and got my confirmation email.

I will be willing to bet this website drives a lot of traffic to these tire shops because of people like me shopping online.

POOR EXECUTION

This morning I arrived for my appointment. No tires. The delivery truck doesn’t arrive until the afternoon. Plus, even if the tires were there, the shop had already booked all their bays for the morning. The shop had only received the email from Goodyear about the shipment and appointment this morning.

The guy at the shop was quite apologetic. He said he has this problem with Goodyear all the time, even though he has called them several times trying to get minor changes to their program like scheduling out three days instead of two so that he was sure he would have the tires on time and be able schedule installers. They tell him, “Sorry, that’s the way we do it.”

Fortunately for this shop, and for me, I have a wide open schedule this afternoon. So does the shop. As soon as the tires land I’ll be back and they’ll be able to get me right in. But just imagine the person who had to work their whole schedule around this appointment.

Maybe you had to drop off the car before work and find someone to take you to work, then pick you up after. Maybe you had to get a babysitter because you didn’t want to take your two-year old to sit in the waiting room of a tire shop. Maybe you had a business meeting out of town in the afternoon and really wanted those new tires before making a two-hour drive. Maybe you were leaving on vacation and were waiting on another paycheck to afford the tires, scheduled the purchase as soon as possible, but now had to delay your entire vacation a day because of this fiasco?

Can you imagine any of those people being completely upset and irate? Can you imagine any of those people taking their frustrations out on a tire shop manager for something that was totally out of his control? Can you imagine any of those people writing bad reviews of the tire shop on Yelp?

VENDORS ARE PARTNERS

As a retailer, I understand the flow of products. If I had called this shop directly, placed the order, and made the appointment, only to find that morning that they didn’t have my tires, that would have been one thing. But these guys were at the mercy of Goodyear (and, by my guess, the mercy of Goodyear’s web guys not knowing how to add holidays into their calendar).

I applaud Goodyear for taking the steps to offer this service online. That’s what a good partner does—drives traffic into your stores.

I chide Goodyear, though, for not understanding the levels of frustration and complaint they also cause their retailers because they don’t listen and adjust the system to fit the retailers. I hope the tire shop makes their full margin on these tires, if nothing else but for the hassle of having to work around Goodyear’s “system.”

In fact, I’m going to ask if that’s the case so that next time I need tires, I can find a way to make sure my local stores get what they deserve.

If you have a vendor who is truly your partner, driving traffic into your store, thank them and support them!

If you have a vendor who is causing your customers to hate you because of things out of your control, send them this blog post. 

If you are a vendor, recognize that you can do just as much damage as good, especially when you don’t listen to your retailers.

-Phil Wrzesinski
www.PhilsForum.com

PS Just a cautionary tale for vendors … I have known several vendors over the years who have offered programs to try to drive traffic into stores, but either didn’t consult the retailers first, or ignored their suggestions. The programs always fell flat and often turned the retailers off from buying their products. Many of those vendors are now out of business.

PPS This goes for retailers, too. You are a partner with your customer. Before you start offering something you think is good for the customer, you might want to first ask your customer exactly what she wants. I’ll tell you a tale tomorrow about what I learned when I asked my customers questions.