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Shuttered Chrysler Dealers' Lesson For Small Business

chryslerThe Chrysler bankruptcy passed with thousands of dealers closing their doors forever as of Tuesday night.  An interesting sidebar to the story was how some Chysler dealers sued to avoid being terminated. Chrysler had said in court documents, “Dealerships located in the markets at issue lack the operational, market, facility and [brand] characteristics necessary to best contribute to the ongoing dealer network under current or future ownership.”

Instead of addressing the fact they were not apparently very profitable businesses and prioritizing what they needed to do to survive, they chose to waste a month of time suing to stay with a company about to close all of its plants for a minimum of three months.  Be careful what you wish for.  What if they had remained open with sagging demand and old products?

A few years ago a southern California deli called me in for a consultation. Sales were slipping, they’d invested thousands in a renovation and the owners were worried. After we got a cup of coffee and sat down in one of the booths the owner took a sip and started to speak. I figured he would be asking where to look first or a spreadsheet would be bought out to show details of the sales collapse. He began, “We’ve contacted our attorney with a cease and desist order for a similar concept stealing our ‘look.’” I couldn’t believe my ears.

The owner went on at length to say how they were stealing his logo and concept and how he was prepared to fight them in court.  Meanwhile, I had to keep bringing him back to reality – he was losing money with this concept he wanted to protect so badly.

Like some wronged hero in an action movie, sometimes small business owners or managers get so personally vested at being wronged that they lose sight of their priorities. Many times that is because it is easier to get worked up about someone else than taking responsiblity to change.

The lesson? Keep your eyes on the big picture, don’t get caught up in the vendettas with vendors or competitors.

Retailers Financials: Collision Course To Reality

Retail sales are up. Stocks are up. So why are so many independents down? They aren’t making money.

Truth is, many never have but it took the economy to pop like a balloon to bring them back to earth.  It was a crash course in reality. But why does it persist?kf_collision

Is it that the owners are enamored with being “the boss?”

Does their wife have an endowment she is supported by, so their business hasn’t really had to make a profit?

Do they have a husband who has another job and this has been a hobby?

Do they like to buy pretty things regardless of whether they sell?

Maybe they own the building so rent is cheap. But the reality is you have to pay attention to your business fundamentals before it is too late.

You’re either taking out a profit or you’re putting in money.  Period.  When you continue to pump money in with no letup, you have to ask if this is a viable business or not.  Many owners discover they’re subsidizing their customers by not pricing correctly, being over-bought or staffing so their friends have jobs.

I heard a speaker last week say you could double sales by just asking more people to buy.  If you believe that or you think saying, “I refuse to participate in the recession” will result in more sales, I think you’re delusional.

Much like after 9/11, we are in a different environment than many of us have ever faced.  We can’t hide from the truth – business is work.

A marriage is work. Raising kids is work. We see what happens when people don’t take care of those things.

When you’re in denial about your business, the financial results can be devastating.  When it closes, everyone sees what the owners should have seen.

Some business owners I read about in the papers and online seem OK with hoping for better days, not working on them.  But isn’t that fairly naive, almost child-like? For them I’d suggest now is the time to take off the bib and put on the apron.

Put another way, if you’re happy being in denial and driving blind in the car, you are on a collision course with reality.

If you want to know what you can do about it, get a copy of Phibbs book, You Can Compete: Double Sales Without Discounting. It is the backbone of scores of businesses’ training programs because it teaches his methods for making a business successful. Download more free tips at his website. Follow him on Twitter at http://www.twitter.com/theretaildoctor.com

Popeye's Chicken Runs Out Of Chicken, Guts

popeyes2Another amazing tale of idiot behavior from a business appeared yesterday in Rochester, NY and across the country.  You can read all about it in the Democrat and Chronicle.  The franchisees of Popeye’s chicken ran out of chicken.

You can watch a local TV report of it on YouTube here. Get past the racial nature of all the clips’ comments which are numerous and disgusting.  As retailers or small business owners you should recognize damage when you see it.

Just last week we saw Amazonfail where “someone” mysteriously removed gay and health titles from Amazon.com.  Then Domino’s in Conover, NC with the employees boasting on camera how they put food up or wiped it on various parts of their body and then served it.

Now comes the spectacle of franchisees not buying enough chicken to support a major ad campaign of their core product.  It would be like Starbucks saying, “sorry out of coffee.”

I mean, how stupid do you have to be to not go out and buy more chicken from your distributor, Costco, or even several grocery stores to save the day?  Pretty stupid if you are a customer.

I ran into this on a small scale at the mega-grocery store Pavilions in Newport Beach, California.  I’d ordered a pastrami on rye at the deli.  The order taker came back to me, “Sorry, we’re out of rye bread.  You want it on sourdough?”  “Um, can’t you just walk over and get some rye from the bread aisle?” “Sorry sir, we’re not allowed to do that.”  Who eats pastrami on sourdough? I walked out and never came back.

Were Popeye’s franchisees’ thinking, “We’re not going to be making any money on this so we’ll just run out?” Was this was an “accident?” Restaurants know their numbers.  The deal was $4.99, not free.

Some franchisees complained in the press of people “trying to make multiple orders when it clearly said, ‘one per customer.’” Customers hate exceptions – people driving home on a Friday night, tired and looking to feed their family would OF COURSE want to buy more than one.

Did Popeye’s CMO Dick Lynch not have a clue as to how this could play out? I doubt it. They wanted buzz and a “killer promotion” and got it while angering people along the way. Not just anyone but their loyal customers.

The right thing to do would have been for the owner to have been personally handing out rainchecks for another day.  That would have taken guts and saved the sale and the relationship with loyal customers, rather than those franchisees who took the easy way out by taping a sign across the drive-thru speaker and closing early, some in mid-afternoon.

It reminds me of the old days at Sears when they advertised a washer for $99.  The salesmen on the floor called it the golden stake.  It was to lure customers in but if you sold it you were gone.  I believe the words then were, “bait and switch.”

With Popeye’s you just got “bait.”

If you want to create a promotion, you have to plan for what happens when it fails – like we’ve all had with boxes and boxes of widgets to giveaway clogging the back room – and what happens if it is a runaway.

Clearly, something went wrong with Popeye’s promotion and now it is all over the Internet with friends telling friends, “can you believe Popeye’s chicken ran out of chicken?”  Just like I just did to all of you.

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!

Lehman and A.I.G. Forgot Smith Barney – You Have To Earn It

There Are Lessons For Mom & Pop Businesses In Wall Street’s Tumult

It’s no mystery how Lehman, Behr Stearns, Fannie Mae, Freddie Mac and now A.I.G. have ended up – referencing the old Smith Barney commercial – they didn’t earn it.  Through manipulation and company executives’ hubris, those failed firms are now wrecking havoc on the world economy.  But make no mistake this didn’t come out of left field – many people could see what was happening beginning in 2005.

Anyone else feel like we’re watching reruns of Enron’s Smartest Guys In The Room? This time they aren’t just jacking California but the world. 

We’ll get through it, even if your grandchildren’s grandchildren will have to pay the cost.  The Federal government sees the cascading effect of letting a disorderly breakup of these major financial players continue and have stepped in.

If somebody had told economists a year and a half ago what was about to befall Wall Street and then asked them to predict the economic impact, they almost certainly would have forecast a steeper downturn, with many more layoffs, than has occurred. Lehman could have taken steps to correct their problems months ago – they went out and consciously purchased more of the toxic junk they were already holding thinking they wouldn’t get burned. 

The U.S. economy has now punished those who chose to bury their heads in the sand.

The lesson for mom & pop businesses is two-fold.  First, Wall St. is not Main Street.  We couldn’t leverage ourselves into such a predicament.  Or could we?  (See my post about Poka Dott last week.)

The lifeblood of the U.S. is the 22 million businesses with five or fewer employees.  Commonly referred to as “mom & pop” businesses, together they produce more than $1 trillion in annual revenues. 

Second, we as business owners have got to make a profit.  The days of taking out a home equity loan to support a failed business model should be done.  The days of starting a business because your husband/wife “needs something to do” are done.  So too are the days of hiring your friends because you are comfortable with them.  If you can’t fire them, you shouldn’t be hiring them.  You have to make a profit.

The lessons are clear for independent businesses – don’t assume things will magically turn around.  Sure the government swooped in and saved these giants but there’s nobody going to save you but you.

Do you have a mission to make people’s lives better by using your products or services rather than just a way to make a living?

Then get out there and compete!  Walk your neighborhood and introduce yourself.  Call your best customers.  Don’t just sit there and stew about your 401K or mortgage or get into mindless chatter about lipstick, Britney’s comeback or how awful the hurricane was.  You don’t have the luxury of a negative thought right now.

The ones to lead America now are you, the small business owners, the ones who don’t play games with other people’s money, who show up and work the long hours and who make a profit. 

We need you to do better than ever. You have to earn it. 

Don’t forget, you can always bring my positive sales tools to your next meeting, just come over and take a look at some of my clips.

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