Let’s face the truth. Forecasting for your busy season is the single hardest decision you make if you are an independent retailer. As much as we all would like our purchasing to be just right, every year we seem to buy either too much or too little.

Since you’re likely to err on one side or the other, you ought to look at those options more closely and base your strategy on which option will work better for you. (For this post we will look at Christmas, but you can extrapolate that to spring and summer-based businesses just as easily.)

BUYING TOO MUCH

Buying too much for December means you have more products but less cash in January.

The Upside: You had plenty of inventory to maximize your holiday sales. Your shelves are still stocked. You don’t look like you’re going out of business. You’re better prepared to capture the post-holiday-have-to-use-my-gift-card crowd and delight them with your merchandise. You’re better prepared to increase average ticket and items per transaction because you have more product to up-sell and add-on.

The Downside: Your cash is sitting on the shelves tied up in the products you couldn’t move. You’re less capable of taking advantage of any post-season deals or early buys. You can potentially get behind on your bills and dig a hole that is really hard to get out of during the slower months of the year, which puts you into a downward cash flow spiral for the rest of the next year.

When to Choose This Strategy: When your cash flow is already strong, you should lean towards over-buying. The potential for maximizing sales (and profits) during your busiest season should be your main focus for this strategy. (A 10% increase in December sales is far more beneficial than a 10% increase in January.) If you have a strong birthday gift business or a strong gift card business, there is a lot to be said for having plenty of products in stock in January, too.

BUYING TOO LITTLE

Buying too little is fraught with peril. But if the cash flow isn’t there, then buyer beware.

The Upside: Cash. Maybe not the maximum cash you hoped to get from holiday sales, but at least there is cash in the bank instead of bills to be paid. Good cash flow will keep you in business far longer than strong profits (see Amazon). One method for improving cash flow is tightening up the inventory. If you can manage expenses to match lower sales, you can maximize your cash. Then you can use that cash to take advantage of any post-holiday deals or early buys to restock your store (potentially with new and fresh merchandise).

The Downside: You miss out on some holiday sales. Your store looks barren post-holiday. People wonder if you’re going out of business. Perception can be damning. If you’re spending most of the holiday season saying, “No, we don’t have that,” you are training customers to go elsewhere. If your store looks empty on January 2nd, you might lose some customers then, too.

When to Choose This Strategy: When your cash flow is extremely tight. The downsides here can be crippling, but so can a lack of cash. If your cash situation is not good, employ this strategy to get to a better place. Then focus on controlling expenses and inventory to improve that cash flow for next year. If you choose this strategy year after year, you could be doing long-term damage to your brand, setting yourself up as the store that doesn’t have it.

A LITTLE OF BOTH

As much as we would like to always buy it just right, that rarely happens. Unforeseen circumstances cause us to miss the mark most every year. If you’re still not sure which way to lean, here are ways to do both…

Too Much: Buy too much of the “Must-Haves” – the items people ask for by name that sell all year long. Buy too much of the best post-season sellers. Identify which items you do best with after the holidays. Look at price-points and categories. You need products for those gift-card holders.

Too Little: Buy too little of seasonal products. Better to run out than be stuck. Yeah you might lose a sale or two, but better to have cash and not product on stuff you know you won’t sell in January. Buy too little of the marginal categories. No one is eating buckets full of caviar every day. But they are buying bread and milk and eggs (French Toast?) all year long. Buy too little of the big-ticket items. Big Splash items are great for Christmas, but rarely sell as well outside of the season. If you need to trim the budget, that’s a good place to start.

You’re going to miss the mark on your buying. That’s the only given. Which direction you err, however, is up to you. Choose wisely.

-Phil Wrzesinski
www.PhilsForum.com

PS Yes, I use a lot of tools for forecasting including previous sales history, industry trends, data from peers, suggestions from reps, gut feel, etc. Unfortunately, every market is hyper-local and only you will truly know what will be hot in your market. Make your best guess and do as Roy H. Williams says… “Pull the trigger and ride the bullet.” 

PPS Get off the weatherman’s back. Chances are you are wrong with your forecasts as often as he or she is. But just like the weatherman, keep updating and adjusting every time you get new data.

I attended a reunion for former staff at YMCA Storer Camps last weekend. One of the events was celebrating 75 years of their horse program including 50 years of a dedicated ranch just for would-be wranglers.

Tom Brown brought out a horse named Zach. Zach was 29 years old and had been giving rides to children for 24 years.

“Just think about all the kids Zach has carried these past 24 years, raising their self-esteem and giving them an experience they’ll never forget.”

I admit I got choked up. At that moment I looked around and realized there were close to 200 former staff members in attendance. Like Zach, we all had lifted up children, raised their self-esteem, and gave them experiences they’ll never forget.

A single counselor in a single summer has direct influence on at least 48 campers and indirect influence on another 200-300 kids. Some of the people at the reunion had worked at camp for decades.

Doing some quick math, I figure collectively, the people in that dining hall last Saturday night had influenced over half a million children, most who were better for that experience. And those children went on to make a difference in the lives of others. And so on and so on.

This kind of ripple effect is not just reserved for camp counselors and teachers and people who work with youth. Indie retailers also make difference. You make a difference because you care about what products you sell. You make a difference because you care about the experiences you offer. You make a difference in the lives of your customers. You make a difference because of your involvement in your community.

Sometimes it is worth it to stop and think about the ripple effect you have on your market. You’ve made a huge difference in the lives of many of your customers. Some of them have paid it forward by shopping more local, by referring others to local shops, and by doing more to support you and your community.

You’ve made an incredible impact on your community that reaches exponentially farther than you can imagine.

Keep up the good work. The ripple effect is amazing. Just ask George Bailey.

-Phil Wrzesinski
www.PhilsForum.com

PS It is good to take stock from time to time and remind yourself about the influence you have to change the world around you. It grows exponentially every single year. Do something worthy.

My dear friend Dr. Rick Wilson, DMD posted an incredibly simple thought that many of us forget.

To steal his line… Are we in the business to “get new customers” or “meet someone new and make a difference for them?”

One helps the short-term and costs a lot, one helps the long-term and costs a little. Choose wisely, grasshopper.

-Phil Wrzesinski
www.PhilsForum.com

PS Yes, I read a lot of stuff outside of my industry. You should, too. There are some amazing lessons when you go looking for them.

There is a blog in my blog roll that you regulars may have noticed did not have an update for the last several months – until two days ago.

Michele Miller took a break to reinvent herself – something I think all businesses need to do from time to time to make sure they are fresh and current and relevant.  Her blog – Wonder Branding – just went through a complete overhaul.  Her new look and her new direction are an expansion from just looking at the trends of marketing to women to helping all manner of Main Street businesses market themselves better to everyone.

She has teamed up with Tom Wanek (another blogger I follow who wrote one of my favorite books – Currencies That Buy Credibility) to re-launch the blog and their business.  I think you will like what you read and see.


(I would normally post a link directly in this post, but I want to encourage you to check out the blog roll on the right.  These are the blogs I read regularly.  You should, too.  Wonder Branding is the last one on the list, but certainly not the least.  Check it out.)

-Phil Wrzesinski
www.PhilsForum.com

PS  I follow these blogs for three reasons.  First, they are well-written.  I always appreciate clearly written thoughts and ideas, and hope I accomplish the same here.  Second, they have timely and useful advice that I know I can use, and you can, too.  Third, I trust them.  These writers are walking the walk and have the experience and expertise behind them to say what they say.  I don’t always agree, only because I have my own headstrong ways.  But I always read.  Who are you following that I should consider adding to this list?

This question comes up every time I give my talk about Pricing for Profit.

It always revolves around the concept of using 99 cents at the end of the price.  Marking things $19.99 instead of $20.00.  Most everyone sitting in the presentation automatically assumes that everyone knows both are virtually the same price.  People are not that easily fooled.

So next time I give this presentation I am going to ask them “What is the price of gas?”

Then I will show them this picture…

Yes, we are that easily fooled.  You thought $3.95 just like I did.

Don’t fight it.  Use it.  The smart retailers already are (and, no, JC Penney is not one of them).

-Phil Wrzesinski
www.PhilsForum.com

PS  Apparently pricing is a hot topic for retailers.  Bob Phibbs and Rick Segal, two of the top retail consultants around are also talking about price.  They both are telling you why.  I’m telling you how.

It probably seems like common sense that to be successful in retail you have to have the right products. Unfortunately common sense is all too uncommon.

With the massive glut of retail on this planet, the specialty and niche independent retailers keep hearing the message, “You have to differentiate”. “You can’t carry the same things as the big boys and compete.”

Unfortunately, too many indies go too far with this concept and end up stocking product so niche that they cannot sell it in their market. Or product that differentiates only a little, but at a much higher price giving them no advantage in product or price. Or don’t stock a category deep enough to offer the kind of choice that would attract a wide audience.

There are almost as many mistakes in product selection as there are retailers. Yet, many of these mistakes can be avoided.

Product selection is no different than store location. When you scouted out the site for your business you checked:

• Lease rates
• Drive-by traffic
• Foot traffic
• Restrictions on signs, hours, and parking.

You checked out the neighborhood for:

• Demographics
• Competition

Selecting the right product, you have to take all those same factors into account.

• Where will you merchandise them? (Location)
• Can you sell them for a price that earns you a profit? (Lease rate)
• Will they draw traffic into your store? (Drive-by traffic)
• Will people ask for them by name or do they need to be shown? (Foot traffic)
• How long is the season for this product? (Hours).
• Does it fit into the concept of your store? (Neighborhood).
• Who else is selling it or something like it? (Competition)

One common mistake is to chase after anything that seems to sell quickly, regardless of whether it fits in your store. Our Kroger store sells beach chairs (in the middle of Michigan?). Another former grocer in town sold hardware – didn’t work out too well for them. Our Menard’s Hardware store sells food. Yes, you can buy ketchup & mustard to go with your grill. Like I’m really going grocery shopping at the hardware store.

Have you made that mistake, too?

We jumped on the Beanie Baby craze and rode that wave for a short time. It was a wild ride. The hardcore fanatics were getting updates from UPS on days we would get shipments. They would be at our front door before we were even unloading the boxes at the back door.

We dumped those BB’s on a table in the middle of the store and stood back while hoards of shoppers pawed through them. An hour later we took down the table and went back to our normal work.

Yeah, the short-term profit was nice. Until the company got greedy. They made a requirement that you had to buy more of their not-so-hot-moving product. At first we followed along, until seeing that half our profits were eroded away by the unnecessary merchandise we were forced to buy. Add in the greasy feelings of dealing with an unethical company and we decided enough was enough.

Funny thing… We didn’t lose a single regular customer. Those BB customers weren’t our regulars and never became loyal customers. They just bought their BB’s and ran, never to be seen again. No crossover, no add-on sales, no loyalty. No place in our business model.

Whether you have a 16,000 square foot store with the largest selection of toys in the country, or a 600 square foot store with the hottest selection of salsa on the planet, your product selection is the biggest statement your store makes to the public.

Is your product selection sending the right message to your potential customers or do your buying mistakes make the most noise? Believe me, it is a mistake we all have made.

Another mistake we make on products is in how we give it away to our customers too cheaply. Are you a For-Profit store or a Not-For-Profit store? Check out Pricing for Profits in the Freebies section of PhilsForum to learn some easy ways to sell more and make more at the same time.

The results are in. Here is how my 5 myths about Black Friday stood up to the weekend.

Myth #1 These are the best deals you’ll see.

As reported in Market Watch and the LA Times, the deals were all that drove Black Friday business in the big stores. Saturday traffic was way down across the board for these stores, which means what? More deals to come, and probably pretty soon.

Myth #2 This is the busiest day of the year.

The verdict is still out on this one, but just you wait. Not only will the last two Saturdays be the biggest days of the year, but this year they’ll be especially big. Why? People aren’t using credit cards so they’re waiting for cash to come in. People are doing more layaways, which show up in most accounting systems as sales when picked up. People are waiting for better deals. All that adds up to a huge last week. (And we’ll be ready.)

Myth #3 This is the day stores become profitable.

Nope, not this year. Too many steep discounts. Too little October/November traffic. One day, no matter how big, can’t make up for a couple of slow months that have been reported.

Myth #4 The earlier you open, the better you do.

Ask K-Mart how that’s working out for them.

Myth #5 Early hours are worth it.

Just ask the family of the trampled worker in the Long Island Wal-Mart if it was worth it. What a sad, sick story. One more reason why I would never want to open our store early.

Oh yeah, and for the record, how did we do? We opened at our regular time of 9:30am. We did not have any contrived door-buster specials, just our every day values and top-notch selection. Yeah, we offered free coffee, but we do that every year, and I doubt anyone came just for the Maxwell’s House Colombian Supreme.

And we set a record for busiest Thanksgiving Weekend ever.

While other stores – the ones that offered early hours and big deals – saw their Saturday business fall off, ours grew stronger all weekend long.

Hmmm… You think maybe there’s more to shopping than just big sales? We’ll explore that in the next post.

Happy December!

-Phil