Archive for the ‘Retail’ Category

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

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.