Recession-proof Your Business
No matter where specialty retailers operate-mall, airport, theme park, resort, lifestyle center or anywhere else with a cart, kiosk or temporary inline program-the smartest operators take a fresh approach going into each holiday, adjusting their selling strategies as necessary. Two key questions retailers are asking themselves this year: “How is the consumer feeling as the holidays approach?” and “In light of the consumer’s current mindset, what strategies can I use to position myself for most sales possible this winter?”
Specialty Retail Report spoke with a number of industry leaders who suggested concrete, actionable steps retailers can use to end up with the healthiest balance sheet at the end of the year.
Strategy #1: Create value for your customers.
“In the current economic climate, today’s shoppers are seeking value in their purchases,” says Jerry Jones, district specialty retail manager for CBL & Associates Properties, speaking from the company’s Winston-Salem, NC office.¬† “Specialty retailers should offer incentives and discounts for customers to prompt purchases. Ideas that we’ve seen work well include frequent-buyer programs, special sale-of-the-day or sale-of-the-week programs, two-for-one specials, sales specials geared to holidays, scratch-and-win-a-percentage-off cards, buy-in-bulk-and-save programs, merchandise add-on programs and bounce-back coupons that offer discounts on future purchases.” He notes that especially during the holidays, when each customer is buying for multiple gift recipients, a small discount on a complementary item might be all it takes to land a bigger sale.
Retailers who sell high-end goods can create value by emphasizing features such as quality and craftsmanship over a big brand name during these days of waning brand-loyalty, says Pam Danziger, author of Shopping:¬†Why We Love It and How Retailers Can Create the Ultimate Customer Experience (Kaplan, $27). She suggests luxury-goods sellers “need to dig deeper” than just promoting a visible brand name and instead “communicate to their customers the superior workmanship, distinctive style, top-line materials and long-lasting value that their products bring.”
Price points aside, another way to create value is by offering services such as personalization. “There’s no doubt that product personalization creates value in the shopper’s mind,” says Deborah Kravitz, partner at Sherman Oaks, CA-based Provenzano Resources, a consultancy that develops, launches and manages specialty leasing programs. “With few exceptions, if a specialty retailer can quickly and inexpensively personalize their products, they can land additional sales.”
Even the right signage can boost perceived value, she adds. “A remote-control-toy retailer can replace a sign that says ‘Hours of Fun!’ with one that says ‘Hours of Family Fun!’ Even though the ‘family’ reference is a small addition, it refocuses the customer’s attention on the new value proposition: This product will give you hours of quality family time together. These days, with customers evaluating each purchase with more scrutiny, the more that retailers can shift their product from being thought of as a frivolous impulse purchase to something that helps a customer achieve a valued personal goal, the better their chance of landing the sale.”
Strategy #2: Kick your visual merchandising into overdrive.
If shoppers can’t tell what you’re selling until they’re a few feet from your cart or kiosk, you’ve got a visual merchandising problem that needs addressing. Shoppers-especially holiday shoppers-just won’t spend their mental energies trying to figure out what you sell. It’s up to you to make it crystal clear.
To evaluate your current display, “Approach your location from a distance in the normal flow of foot traffic,” advises display expert Cindy Kern, partner in Kern Consulting of Littleton, MA. “Does your presentation communicate your product message clearly in the first few seconds? Take a look at your signage.¬†Is the name of the business easy to read? Do you have large graphics or photos that explain your product and identify your customer?¬†Signage is probably the best way to ‘speak’ to your customer before they’re within range of your customer service person.”
Retailers who need to tweak their display should consider how shoppers process information as they create their new look, Kern says. “Make certain you’re communicating with both right- and left-brain thinkers-you may just double your customer base. Right-brain thinkers are those who rely on an intuitive and emotional response to draw them toward products that meet their needs and desires. To get their attention you want to use photos and images, especially those of the human face.”
On the other hand, “Left brain thinkers rely on logic and information,” she says. “To draw the left brain type, make your business name and logo prominent. Label product categories with head signs. Use strong, brief wording on signs to explain your products and services.”
Great graphics that make your display pop! are no longer just within reach of large businesses, Kern says. “With digital photography and competent copy centers everywhere, good graphics and images are no longer just for large businesses. Images can be purchased inexpensively from a number of online sources and used to create professional signage to draw customers to your business, even if you’re a small retailer who only needs one or two of a particular sign.”
Strategy #3: Motivate your sales force to sell, sell, sell!
Remember: Hire for attitude, train for skills. It’s much easier to train a person to emphasize certain product benefits and features than it is to give them the right attitude to go above and beyond for your customers and your business.
A pay-for-performance system is the number-one tool for retail business owners to motivate staff and produce the highest sales possible. Talk with other retailers to determine what the current rates are in your area for base pay and commissions, since you’ll be competing for candidates with these businesses.
Be sure to train your staff on how to upsell (sell the customer a higher-priced item) and generate add-on sales (selling complementary products together). According to Kelly O’Neil, chief strategy officer for Los Gatos, CA-based UpLevel Strategies, the biggest mistake salespeople make when it comes to upselling or add-on selling is that “they don’t give it a serious effort.” Often this is because “the salesperson is afraid of looking pushy,” so they just don’t go for the upsale.¬†
How can salespeople upsell without feeling like they’re appearing pushy? “Being assumptive is key,” O’Neil says. “Salespeople have to assume the customer naturally wants their product because it solves a problem of theirs. Salespeople who are nervous about selling can usually do better if they’re asked to focus on helping the customer solve their problem. We all want to help. Sales isn’t as much selling as it is helping people solve their problems. If you can refocus a salesperson on that perspective, their passion to help your customers will help increase their sales.”
After that mental shift, technique is important. “Begin the upsell with a brief benefit and then if possible, add something unique about what you’re selling. To avoid sounding pushy, particularly if the upsell requires an elaborate explanation, ask the customers permission to describe it before proceeding.”
It really comes down to: “If you don’t feel comfortable ‘selling’, you won’t really make an effort and sales will suffer,” O’Neil says. “On the other hand, if you believe in your products and let the customers see your passion, sales will follow.”
Strategy #4: Get a better handle on your inventory.
“Specialty retailers who don’t have a handle on their inventory-especially if they have more than one location-are at a severe disadvantage in a very competitive market,” says Liad Biton, chief technology officer at CSS Live POS, a company that specializes in point-of-sale systems for specialty retailers. “Retailers without a good inventory-tracking system are in for guaranteed chaos, especially during the holiday season.”
What’s more, retailers without a good inventory-management system are unwittingly giving their competitors a leg up. “If your competitors are using an advanced system while you’re relying on pen-and-paper or nightly faxing, you are already behind the curve. Your competitors will be able to promote products that tap into emerging trends, which will result in higher sales for them, while you’re left in a reactionary position because you don’t have a good handle on what’s selling.”
Biton points out that today’s better POS systems give retailers a host of automated features that save time and money well beyond inventory management. “Automated payroll and commissions modules, the ability to manage multiple locations, automatic reports on sales and productivity, customer buying histories-all of these are aspects of a good POS system are designed to give the retailer a selling edge.”
Strategy #5: Make a plan and work it.
“The best defense during an uncertain economic environment is a solid plan,” says Raymond Joabar, senior vice president and general manager for American Express OPEN, which offers a series of cards for small-business entrepreneurs.¬†As the season progresses, retailers should refer back to their plan and adjust their selling strategies as new information or shopper buying patterns emerge. He suggests that retailers:
- Write down their top 10 challenges and ways they can be overcome. “This list will help [retailers] address potential pitfalls long before they affect their business,” Joabar says.
- Use money wisely. “Be sure to match your financing sources and uses appropriately,” he says. “Use short-term financing options such as lines of credit, short-term loans or credit cards for short-term cash needs, and long-term or secured loans only for the purchase of long-term investments. Investing your own money in your business can help get you through rough economic times, but it’s important to minimize personal risk and maximize cash flow.”
- Budget pessimistically. “No holiday season ever goes exactly as planned,” Joabar notes, “so pad your budget with a little extra to accommodate downturns in the economy.”
Last but certainly not least, another smart tip for landing the most sales is to develop a positive, productive working relationship with your leasing representative.
“Leasing reps and property managers can be fantastic sources of information and support for specialty retailers, especially those new to the industry” says Kravitz of Provenzano Resources. “They have lots of big-picture information about national retail trends as well as very detailed info on local shopper demographics, which retailers can use to get a better handle on their customers’ wants and needs.”
Plus, she adds, “leasing folks have access to sales data from previous holiday seasons that can help retailers set realistic benchmarks going into the season and analyze their performance at key junctures along the way.
These leasing pros can be a huge help to retailers on so many levels that it’s really short-sighted not to ask for their input and support¬†so you can make the most sales possible.”
Cut Your Costs, Increase Your Profits
Here are two more ways you can save money and pocket more profit.
Pay bills strategically
Lots of experts are fond of saying, “Pay no bill before its time,” but there’s a big caveat to that. If vendors will give you a payoff for paying early, go for it if the numbers work in your favor. Even small discounts over time can really add up.
That said, if there’s no benefit to paying early, don’t. But watch those due dates. A late-pay fee will put a dent in your profit margin that you just don’t need.
Be a better buyer
Make the most of your buying dollars by asking suppliers about the discounts and deals they offer at various times. Even if you don’t qualify now, or if a supplier offers a seasonal discount later in the year, you want to build these buying incentives into your purchasing strategy. Most suppliers also run periodic sales on certain products or lines during the year. Being poised to taking advantage of all of the available incentives can save you money and raise your margins. Here are a few typical incentives.
Manufacturers and wholesalers typically offer a variety of discounts, including volume discounts, seasonal discounts, cash discounts and advance-order discounts. They can be in the form of a percentage off or free shipping or other savings. Some suppliers give volume discounts and allow split shipments (e.g., sending half of the order now and the other half later) in return for your commitment to buy.
Make it a point to ask about discounts several times during the year, so that you can plan your buying to take advantage of these deals as much as possible. You may not be able to get a volume discount on your first order, but as your business grows, some discounts may kick in. Some retailers keep a separate “buying calendar” for recording seasonal discount dates, etc. so they can stay on top of deals coming down the road.
Trade show discounts
The vast majority of manufacturers and wholesalers also offer discounts on orders at trade shows, often in advance of product availability. Note that discounts usually apply only to orders placed during the show, not two weeks later. By carefully planning your show budget, you can save from 5 to 20 percent on new orders. (Reorders of the same product may not be discounted.)
With so many trade shows and marts across the country, chances are you can find an event close enough to home that won’t require airfare. In any case, thanks to trade-show discounts, a well-planned buying trip near or far can pay for itself.
Reducing shipping costs
Many suppliers have certain shipping carriers they use by default. Using the vendor’s preferred shipping company and method (overnight, express, ground) can save you a lot of money. Consistently ask your vendors about the options they offer for decreasing the shipping expenses. For example, receiving a shipment a day or two later can sometimes mean major savings for you. It pays to be as flexible as you can in order to get the best deal. And don’t forget, COD-shipping fees are a direct hit to your bottom line. Avoid them paying in advance, or by getting credit terms as soon as you can.
Credit terms are the lifeblood of any business that wants to succeed in the long run. By getting credit terms from your suppliers, you keep your money working longer for you, rather than going into suppliers’ pockets right away. The first step is to ask for credit terms. The supplier will tell you their rules and requirements-complete financial information on you and your business, and good credit references. (If they have an application form, ask them to fax it to you.) The second step is actually a process: establish good credit history with the supplier by paying your product invoices in full and on time over a set period of time. Once you have a good history with your suppliers, they’ll review your account to make a decision.
One caution: once you have terms, don’t let that 30-day window tempt you into overbuying. Before your next order, pay close attention to which products are selling well and buy only what you can reasonably expect to sell. (You should be doing this routinely anyway.) Rosy, inflated sales estimates that translate to overbuying will likely mean overdue invoices later when sales fail to materialize. And that means messing up your good credit history, losing your credit terms and decreasing your profits.