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Archive for November, 2008

Big Steep Discounts For Holiday Retail Sales Nothing New

I am so tired of the words “crisis”, “fear,” “downward spiral,” “worsening economic news,” etc., that I’ve become numb to whatever words follow. One word that gets used over and over again that really gets my goat, as if it were something fresh and newsworthy is the word “discount.”

Every dire prediction for holiday 2008 has to talk about retailers having to “discount.”

Extra!

Extra! Discounts!

This is not news and hasn’t been news for a long time. Take a look below from the past five years:

From the Boston Globe, November 23, 2008, “Consumers will look for bargain-basement prices to help meet austere budgets, while retailers from Wal-Mart Stores Inc to Saks Inc learn if they have the right products at the right prices.

From the Chicago Tribune, October 29, 2007, “According to a new study by BDO Seidman, LLP, one of the nation’s leading accounting and consulting organizations, almost three-quarters (73%) of chief marketing officers at leading U.S. retailers believe discounting and promotions will be more plentiful this holiday season compared to 2006 due to the current credit crunch.

From CNN, December 11, 2007, “In some instances, consumers say they’re simply turned off by poor customer service or not enough discounting.

From Bloomberg, November 25, 2006, “Holiday discounts this year seem to be locked in a range between 20 to 60 percent.”

From the New York Times, November 28, 2005, “The disparity, analysts said, could indicate a tough season ahead for clothing retailers like Gap and Aéropostale and even deeper discounts for shoppers as the chains scramble to build momentum in the crucial approach to Christmas.

From The Associated Press December 2004, “Retailers are expected to increase discounting before Christmas after a late-buying binge failed to materialize during the weekend, fueling worries that industry profits could be hurt in the fourth quarter”

From CNNMoney, November 28, 2003, “ Despite signs of a pickup in the economy and an improving labor market, consumers don’t appear to be feeling the Yuletide cheer.  The Conference Board in a survey Monday said U.S. households on average are expected to spend $455 on gifts this year, down 5 percent from 2002.  “The 5 percent drop is shocking,” said Delos Smith, economist with the Conference Board, a New York-based business research group. “It indicates that perhaps the consumer tax rebate stimulus that benefited retailers during the back-to-school season has petered out.”  Analysts say it’s the discounters such as Wal-Mart and Target that are expected to ring in the bulk of holiday sales, while department stores will offer the most aggressive promotions.”

Does all of this sound too familiar?  It should – its an easy story to tell every year at this time of the year. That won’t stop any number of news sources from touting retailers “aggressive discounts needed to lure customers this holiday season” and how they aren’t working.  Look for those stories this Thursday, Friday, Saturday, Sunday and Monday. 

I’ll continue my thoughts on discounting in my next post about why people discount. Stay tuned!

Discounting, Short Selling and Going Bankrupt Is No Mystery

If you’ve read my book, You Can Compete: Double Sales Without Discounting, you know I used to sell western wear during the 80’s in Los Angeles.  Both the employees and managers were on a fairly generous commission program.  When I was just starting, one employee, let’s call him Grant would always take his customer over to a section of the store that was out of earshot from the rest of us.

Next thing we knew, he’d be ringing up a very big sale, tending to all the details personally. The customer was incredibly loyal and came back again and again – many times bringing his friends. No one else could wait on them – it had to be Grant. It led this guy to become manager. Subsequently his store had the highest sales in the chain – even after they added another fifty stores.

Cowboy Bob

Cowboy Bob

We also had to do polygraphs back then as a way of “deterring theft.” That’s another post. 

Anyways, one of the questions was, “Have you given any unauthorized discounts to anyone?” It always made me nervous – even though I hadn’t. As the manager of a store that competed with Grant for customers and having heard the stories of him giving up to 30% off and more, one time I asked the polygraph guy how Grant did on it.  “They know he’s dirty but it’s none of my business.”

I felt the company was being sabotaged, so I naively went to one of the owners and told him how the rules have to be the same for everyone.  His reply? “High volume covers a wealth of sins Bob.”  In other words, as long as they were making money, how it was accomplished was immaterial.

But the average business only makes 3 to 5 cents on the dollar profit.  So when Grant would give $100 off, the rest of the chain had to offset it with $2000 in sales.  That was a recipe for disaster.  It could have been an easy fix, just stop doing it.

It wasn’t a surprise to me when Howard & Phil’s Western Wear went bankrupt a couple years after I departed.  What was a surprise was what they attributed it to.

We are seeing the same “the ends justify the means” thinking with short sellers on Wall Street. Who could imagine people would profit from destroying our financial institutions?  But it’s happening. 

And someone is getting their cut because “high volume covers a wealth of sins.”  GM, Citibank, Ford, who would ever have thought they would trade at 10% of stock price a year ago? No one.  Forget how inefficient the big 3 car companies have been, they are being sabotaged.

Today’s New York Times notes Citibank was sabotaged from within as well. “Citigroup insiders say the bank’s risk managers never investigated deeply enough. Because of longstanding ties that clouded their judgment, the very people charged with overseeing deal makers eager to increase short-term earnings — and executives’ multimillion-dollar bonuses — failed to rein them in, these insiders say.”

While the company’s behind-the-scene intrigue is interesting, what we really need is full disclosure on who is doing large trades, short selling, driving the price of oil to astronomical levels in one quarter, then driving the price of stocks down to fresh lows the next.  It would seem if someone wanted to harm America, it would wreck Wall Street. 

I picked up Barron’s last week and read their open letter to the president that said in part, “Short-sellers of stocks appear to have been manipulating the CDS market to drive down stocks. This must be stopped immediately, and is easy to do.”

Is it all just people looking for opportunity? And if so, is there a greater need? I think so. Don’t get me wrong, I believe in capitalism but we’re being yanked here folks. 

If you have a practice of looking the other way when it comes to salespeople discounting, here’s my advice: High volume didn’t cover a wealth of sins in the 80’s and it doesn’t in 2008.

October Record Decline For Retail Sales – Dining With Disaster

In the New York Times article today, the reporter notes sales were down 4.1% compared to October 2007.  Retail analyst Eric Beder said, “Unless it’s something super-compelling or really necessary, they’re not going to the mall.”

I’ve been to malls in Los Angeles, Seattle, Albany, Richmond as well as the streets of New York and Cancun during October and beg to differ Mr. Beder.  The malls I have been to are full; shoppers are out there.

What’s not out there is anything that could lift our spirits to want to buy.  More signs screaming discount in colors appropriate for going-out-of-business than pre-holiday. More glum employees worried more about their jobs than the person standing in front of them. More restaurant specials dumbing down their offerings.  More talking heads on plasma TVs making a living out of making us fearful of the next shoe to drop.

Is this how to beat a recession?  I don’t think so.  The problem is that people are scared.  We have to find a way for them to get over the fright, not add to it.

You have got to begin by having a compelling vision of what you offer versus the other guy.  You can say personalized service all you want, but the proof as they say, is on the sales floor.

Look, even if traffic is down in your location by let’s say 20%, that still means you still have 80%. You need to reinforce the positives.

I can’t tell you how many times during a downturn I’ve heard business owners proudly telling customers how slow it is.  Why not just put up a sign now, “Going out of business!”  We don’t want to hear more bad news!

And while I’m at it, this would be a perfect time to pull the plug on all those stupid plasma TVs retailers and restaurants have plastered their locations with.  “Feeling bad? We have even more reasons on our plasma screens!” 

Dining With Disaster

Dining With Disaster

When I was in the coffeehouse business we had a guy wanting to put a plasma TV in justifying, “People want to know.” We maintained they didn’t, they wanted as Howard Shultz with Starbucks had said early on, “a third place away from home and work people could be comfortable in.” 

Then came 9/11 – thank goodness we didn’t have plasmas.  People came to the coffeehouse to talk, share and connect, not be frightened further in 20-minute cycles. 

It is up to you, the retailer to lift our spirits. Americans don’t need much encouragement; we just need less Red Bull and more Prozac from everyone. 

Things are playing out and we’ll get out alive to be sure, but all you can control right now, in this minute, is the customer who just walked in.  It’s your four walls – nothing else matters.

Marketing Lessons From Prop 8 Defeat

Last week’s defeat of California’s Prop 8 is a classic case of not knowing your market. Yes the ads were heartgrabbing where the woman is unable to get to the alter of her wedding. But in the end, the proposition lost.  The campaign seems to have focused their hindsight to the black vote having been particularly skewed against them. Now we are seeing endless peaceful protests.  I am writing this to look at the marketing that needed to be done, not to state a case.

A good marketer knows the competition, they understand their own flaws and works to change perceptions. In Prop 8′s case, to just call people bigots, focus on one ethnic or racial group or write expletives on your house about certain religions misses the point.  You are not helping change the situation, but instead fomenting the idea of “them vs. us.”

From a marketing standpoint, my suggestion is that the leaders of Prop. 8 meet with the various groups who opposed them to try and understand why. The ones who voted for it were white, Jewish, Latino, LDS, Presbyterian, black – you name it.  To focus on that is to miss the opportunity.  

Unless it says “marriage” do lesbians and gays feel they won’t have equal rights?  I doubt it.  What is wanted is equal rights for people who choose to partner in front of the state. 

If the Bible is the hangup with the word, then come up with a new word that both can agree to.  Once you get into the Bible, you can’t justify your case versus someone else’s beliefs – that’s too deep ingrained into everyone’s psyche. But you also can’t write them off out of hand – they are people too.  

I doubt anyone in America really wants to take rights away.  But we have to find common ground here. 

As a retailer, once you market to the people who know you, do you try to understand why others don’t shop with you? Perhaps you should.  Maybe it is the way your store is arranged – it doesn’t seem welcoming. Maybe your employees give an off-putting air to shoppers. Maybe your product offerings are seen as lacking or inferior.  You won’t know until you try to engage them. And once you do, you might find some easy ways to address their needs that results in higher sales. 

Otherwise, you may be making assumptions about what you “think” others are thinking.

Just today, to return to Prop 8 for a moment, Bill Marriott, CEO posted his facts about Marriott corporate and him personally not supporting Prop. 8. “I am personally motivated to speak now because Marriott was built on the basic principles of respect and inclusion. My father, who founded this company along with my mother, told everyone who would listen: “Take care of your employees, and they’ll take care of your customers, who will come back again and again.” 

A great message and one that should be all of our mantras during these tough economic times.  I’ve said it in practically every speech I’ve given since 1994 – we’re more alike than different.  I don’t care if your customers are men, women, gay, straight, black, white, young, old, with kids, without – they’re all purple and their money’s green.  Unless we look past how different everyone is and find common ground, we will only continue to feel isolated from each other and lose.

Recessions Nurture Bully Bosses And Hurt Productivity

Everyone is scared of losing their job because we are all so over-leveraged on our mortgages, home equity loans, cars and credit cards.  Is now the time to tell your boss your true opinion and share your thoughts?  I say yes but I’m sure most of America will shut up and take it. In good times, you would see this as high turnover but now, the fear of being replaced keeps that in check.

“Need me to work overtime”?  No problem.  ”Take on more work because of ‘downsizing’?”  No problem.  ”Need it done Monday?”  No problem, I’ll skip my kids and work on it all weekend, and the next, and the next. It’s like we’re returning to the 50’s and 60’s when our parents were miserable and enduring long commutes and indignities for the good of the family.

Recessions can bring out the worst in the bully bosses.  Not consciously but its almost a “what can I get away with?” mentality.  It stops bosses from looking at employees as people. Instead they are a source for cost-savings.

The problem is you end up with “Emperor’s New Clothes” management.  No one wants to rock the boat. No one wants to admit it is a wrong direction.  So no one feels appreciated, empowered or connected to his or her job.

And while they may indeed hang on, we’ve seen after the job market goes through a downturn and starts to rebuild, the best jump ship quickly.

Management looks around stunned that their brightest quit.  They are left with more “yes” people and the company never turns around.

How to keep it from happening to your business?  If you are the boss, it is up to you to continually connect with your employees first as a person, and then as an employee.  That means respecting their abilities and going out of your way to encourage dialogue without shutting them down.  While a boss can do the job of two people, they can’t BE two people.  You need conflicting ideas to be able to find new ways of doing things.

My advice if you are an employee – don’t let them get away with it.  Find a way to connect to your boss as a person too.  He or she is just as worried about their job too.  Or maybe they have a sick mother or a child on drugs, just like some of your friends.  

While the quickest way to build loyalty in your employees is to humanize the way you look at them, the quickest way to disarm the bullies is to humanize them in your mind.  

Don’t make the mistake so many companies both large and small will make by letting the bullies rule – it will make you uncompetitive and a rotten place to work.

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