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Archive for December, 2008

4 Ways Everything Old In Retail Is New Again

Does it feel like you’ve done everything you could to boost sales?  Everything old is new again and here are four updated for 2009.  

#1. Merchandising That Cross-Sells.  Thom Blischok, in Refrigerated & Frozen Foods Retail Magazine is quoted in an article “Tough Times Create a Revival of the Dining Room Right Now.” He says, “there is opportunity to rethink what frozen displays look like. Think like a shopper: ‘How can I get a frozen meal for four for under $15?’

That sort of concept will be a real winner in the marketplace, but it will require you to display meals differently creating frozen food displays by meal components rather than by just categories or prepared meals. You might want to have chicken breasts next to frozen vegetables, next to frozen potatoes, next to a dessert. Think about putting together simple meals inside the display cases, and especially in endcaps.

It’s the old “this goes with this,” or “if you buy this, you’re going to need that” merchandising we’ve seen in merchandising fashion, home furnishings and hardware stores for generations.  Now new categories are putting these concepts in place. 

#2. Notifying Loyal Customers Of Sales
A blog posting alerts us that Amazon’s shopping cart now will notify you if an item you’ve placed in your shopping cart or wish list becomes discounted.  This is why boutique stores used to have their salespeople keep a card file, so they could call customers for sales or other items the customer was interested in. Now the system does it automatically.

#3. Getting Merch Transferred To Your Local Store 
sitetostoreWal-Mart has a new commercial touting their site to store program where you can order online from a larger selection, Wal-Mart ships to a local store so you don’t pay shipping.  The voiceover? “I would have paid anything for that service.”  Stores with salespeople used to transfer merchandise in via inter-store transfers. Now the customer does it for themselves online. 

#4. Collaborate and Show How All Your Products Look In Home
Georg Jensen, the Danish silverware company, has remodeled its stores to evoke the warmth of home rather than museum-like sophistication. It is also showcasing other brands — such as Royal Copenhagen and Bang & Olufsen — not to sell them but to depict a lifestyle. “It’s creative retailing at a time when everyone needs to be as creative as possible,” says one trend analyst.  Helping the customer see the big picture is what department stores in particular used to be good at, now the specialty stores are reaching out to do the same thing. 

Take a look around, the magic bullets of success are re-invented from ones that have worked in retail for a long time. 

Out of Business Luxury Chocolate Shop Points Up Success Tactics

It was December of ’98 I was shopping in South Coast Plaza, singularly the highest grossing per square foot shopping center in the world.

I had come to purchase two small handmade, hand-decorated chocolate gift boxes at Trops, one of the smallest shops you can imagine. Here’s a video they posted last year of the shop.

I approached the counter, selected the items and as they were packaging them, I chatted with one of the workers. “You must really be doing well having been here so many years and with the economy so strong.”

“Actually, we’re closing at the end of the month,” came the reply. I couldn’t believe it. I asked to speak to the owner. She stepped up to talk with me.

“Yes, it’s really sad, but everyone wants only Godiva chocolate.”
“You’re kidding!” I said.
“And rents are too high.”
“Have you tried renegotiating the lease?”
“We’ve tried everything.”
“How about selling from another location?”
“No, we can’t move.”
“Did you try to sell the business?”
“No, the recipes are ours and we don’t want anyone else to have them.”

I still couldn’t believe my ears. I had just driven forty-five minutes out of my way in rush hour traffic to visit a specialty luxury niche retailer in one of the world’s premiere shopping destinations and they were telling me everyone wanted someone else!

It was really sad as their product was great but the die had been cast and they were out. If they’d stuck it out, here are some ideas I’d have offered and ones you too can use…

How to succeed:

  • People. Hire a manager who believed in their unique product.
  • Web. Develop a website with point and click ways to personally design the chocolate boxes.
  • Location. Consider moving the store’s kitchen to an industrial park where overhead would be lower.
  • Outside sales. Hire an outside salesperson to sell the store as a source for personalized holiday gifts.
  • Market. Personally call on as many secretaries as possible with brochures touting the promotional aspect of the product, then repeat the fliers on a regular basis.
  • Target. Drop off a custom chocolate box with their company’s logo and the CEO’s name on it to the top 30 prospects.
  • Research. Find companies that do custom gifts and recognition awards and leave them similar samples.
  • List. Direct mail customer list with offer of a free gift with purchase. If no list was present, start one immediately.

In short, there were hundreds of things that could have been done but weren’t. I arrived at the scene to a business owner who couldn’t see the strength of their own product or any options to make their business work. It was a business owner who didn’t have the tools to change course. 

While that was 10 years ago, don’t let that be you. We are going to hear more stores about retail businesses going bankrupt in January and probably blaming the economy.  But if you are willing to fight for your customers, there are plenty of things to do by looking in the mirror first!

Bob Phibbs, The Retail Doctor, has helped hundreds of small and medium-sized businesses in every major industry, including hospitality, manufacturing, service, restaurant and retail.  

You Can Compete

This was only one story from his book, You Can Compete: Double Sales Without Discounting. It was Phibbs first book highlighting a proven method every business in any market can improve the bottom line and compete successfully. Other books include The Retail Doctor’s Guide to Growing Your Business (Wiley) and Groupon: You Can’t Afford It.

Devil Starbucks to Angel McDonald's

The largest hit for the Seattle Post-Intelligencer last week wasn’t the economy, or Obama or Iraq no, it was that Starbucks Won’t Slug It Out In Ad Wars.  Seems McDonald’s has put up a billboard promoting its espresso within sight of Starbucks’ headquarters. Oh yes, it also has another message: “Four bucks is dumb.” 450mcdonalds11_billboard1

Another billboard, among a group of 140 in the western part of Washington, states, “Large is the new grande.”

Alan Finkelstein, a McDonald’s franchisee in the state, told the Seattle Post-Intelligencer, “The billboard placement was done because we picked high visibility locations. We really wanted to point out that ordering an espresso at McDonald’s is quick and simple. Small, medium and large. It’s easy.”

Despite McD’s jabs, its unlikely that Starbucks will respond just as it has ignored a Dunkin’ Donuts comparison campaign that shows actors choosing its coffee in blind taste tests. And I would agree, for most people, Starbucks own the words “specialty coffee.” They don’t need to say “oh yeah, well we’re better than them.”

I applaud the franchisee who thought this up. I built my business taking on two Starbucks within a block of an independent coffee roaster.  While I detail how it came to pass in my book, You Can Compete, the ads that knocked the competition (and there were about 150 of them) were the third (last) thing we concentrated on. pgc-ad-11-02

You first have to have a store that is clean, organized, displayed well and well lit. Next you have to have great employees who sell the merch, not just make, dust or fold it. Finally, you create awareness of the brand.

Martin Lindstrom says in his excellent book, Buy-ology that we need a devil if we are going to succeed as the better answer.  Think the Pepsi/Coke challenge.  He even says Coke 1 is the answer to less calories than its companion product (though featured here as the devil) Coke.

I applaud any retailer or restaurant who can creatively tweak their nose at the category leaders. It makes for much more interesting ads and creates buzz.  It isn’t the only answer to making yourself stand out, but as the last part of brand building, we’ve  proved it builds business.

Way to go Mr. Finkelstein, you got your money’s worth from this campaign!

Retailers Discounting Their Way To More Holiday Red Ink

images-2One of this blog’s readers, Paula from San Francisco sent her recent shopping experience to me.  ”Today I spilled coffee all over my top and decided to run over to the mall to see if I could find a replacement.  My goal was to find a sweater in a basic style, color, not wool (I’m allergic), that fit me , cost less than $90, and that I didn’t hate.  And I only had 45 minutes to do it.

First stop was Macy’s.  I wandered around for 10 minutes or so in the higher-end sections to no avail, before spotting a 25% off rack in the petites section.  At the nearest counter I asked where Charter Club was for regular sizes, but was told that they’d all been “moved to a store at another mall to make room for coats.” There was no followup inquiry as to what I was looking for.  Clearly they didn’t want my business.
 
So I left Macy’s, now really pressed for time, and went into the next clothing store I came to, Chico’s. In about 30 seconds a salesperson approached, asked me what I was looking for, suggested I try on a sweater I was carrying around, brought me a different size, pointed out a couple of other possibilities.  I decided I liked the sweater, and asked her if they had some plain black tops.  She pointed them out, noted that they were buy one, get one half off.  I tried on the top, picked out another one in a different color, the salesperson cut the tags off the top and the sweater, put my coffee stained ones in a bag, and I was on my way and back at the independent bookstore I work at with a couple of minutes to spare.
 
So, that’s a pretty straightforward tale of two chainstores.  But, there’s something that keeps bothering me about it.
 
The two tops I bought were priced at $32 each, and the sweater was $88, for a total of $158 .  With the buy one, get one half off promotion the tops came to $48.  The salesperson found me in their database from previous purchases, and somehow because of that I was eligible for a 50% discount on one item, which she applied to the sweater.  So my total was $92, a 42% reduction from the list price.
 
Naturally, I liked paying less.  But how can Chico’s make any money on that?  I had no problem with paying $88 for the sweater.  

42% off would be our entire margin where I work.  If you’re discounting that heavily how do you pay your employees and your rent?  I saw a list somewhere on 10 Retailers That Could Fail, and Chico’s was on them.  It made me sad to think that they could go away.”

Thanks for writing Paula!  Two points come to mind. #1 service can drive sales more than promotions. #2 well meaning employees will discount at the drop of a hat.

Paula’s experience showed the difference between these two stores.  Macy’s knew why the sweaters weren’t there, Chico’s helped her find more than one item but Paula’s surprise discount was used improperly to lower sales rather than boost them. 

We are going to see a lot of red ink in the next few months from major retailers whose CFO said to their CMO, “We’re in a recession now.  We’ve got to do something to bring them in – anything.”  But sales without profits can be worse than no sales. And crew members not trained to maximize profits can hurt as much or more than the discounts.

An article in today’s Wall Street Journal talked about Neiman Marcus, “Gross margin fell to 37.3% from 41.1% due to markdowns, as the company continues to pare inventory. Neiman said it sees higher markdowns putting pressure on margins in its fiscal second quarter.”

My next post will be on why employees discount. Stay tuned!

A and E's We Mean Business- Glorified Janitors For Outback Catering

By far my most popular posts have been my reviews of A & E’s show We Mean Business.  This week I saw their “makeover” for Outback Catering in Van Nuys, California. We learn owner Doug Noland has owned the business for 20 years. Events are roughly 30% of what they were when he started.We see he has collected a lot of props used during his events and, like many small business owners, just stored them in his offices.

Bill Ransic’s team including HGTV’s designer Peter Gurski and Katie Linendoll set the goals:
1) Bill is going to observe an event and “teach Doug how to sell.”
2) Bill is going to get Doug’s daughter involved in the business.
3) Peter is going to:
     a)Put a sign out front
     b) Make the front of the building stand out
     c) Organize the office
     d) Replace the old carpet
4) Katie, of course is going to add lots of sponsor Dell’s gadgets

Bill Ransic

We see Bill goad Doug to shout, “I’m willing to fight for success” like a couple frat boys. Then Peter announces they have a dumpster and a truck – everything out to the walls.  Peter says, “You need to throw out your past.” We see Doug scowl and worry about his memorabilia that is being treated like soiled linens. Why?

Because Doug is told,  ”Your junk filled office is turning people away.”  OK, let’s just stop here. I’ve used plenty of caterers over the years, I even worked for one during my college years but that’s another story. Never have I gone to their offices, they have always come to my house. 

We next hear Peter announcing that Doug is “throwing out some weird attitude at me.” He tells the daughter she has to convince her father to change because, “I’m done.”  We then see him like a petulant boy drive off, the daughter try to tell her father what should be thrown out and then, ta-da, Peter returns.

anow-annoyed

Katie Linendoll, annoyed

Katie starts rattling off how all the computers and phones are so outdated with an implied “stupid- don’t you get it?”  She tells them she is really annoyed because they dared to not look at her with rapt attention because she is, we are to believe, the only one who is “serious about saving this business.”  As she outlines the changes, we see Doug getting more concerned.  He says, “I’m really nervous about learning new software.” Totally understandable for a guy in his fifties but that is never addressed.

We see Bill show up at one of Doug’s events and proceed to see Doug pass out cards and say he needs to sell like this at his office. Not sure what that meant but Bill added nothing to Doug’s sales abilities.

The reveal of course is a shock, white and pink gingham now adorn the front of the building. From the beginning I doubted how much drive-by traffic a caterer in an industrial complex in the heart of the San Fernando Valley was losing but OK.

Doug Nolan, Owner

Doug Nolan, Owner

In the followup clip, we see Doug say the changes were  ”All great,” while wiping his brow. During the update he says the best part of the We Mean Business visit was “cleaning everything up.”  

My take on this episode? This was all focused as if this were a retailer where people were coming to you. The real job of a caterer is pitching the client in their home, upselling and adding on once they see the location. While DOS is an antiquated platform to run business, how does a whole new system really help him make money? Again, never addressed.    Here are four of my recommendations:

  1. Look at your food costs and pricing.  Are you making enough on the events? Probably not charging enough.  A cursory Google check found local competitors charging anywhere from $3 to $7 more per plate.  
  2. Invest in better paper goods.  Cheap foam plates and bargain basement utensils do not look like a caterer but a buddy who’s helping you out. They don’t have to be logo’d, just present a better image.
  3. At your event, have a card people could fill out for a coming event with their name, email and event date for you to follow-up with.  That proactively builds sales instead of passively giving out your card
  4. Film your events and post on YouTube. That way you can show what you do, include customer testimonials and attract new business.

Again, this show purports to change businesses.  What it usually does is act like janitors, smug know-it-alls and interior designers.  The tough work is left wanting.

You want to have your business cleaned and painted? Call these guys.  You want to change your business? Look at your fundamentals and visit my site.

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