Writing the manuscript for The Retail Doctor’s Guide To Growing Your Business (being published by Wiley & Sons in mid-2010) is forcing me to examine why so many businesses are not profitable. In years past, it was OK for owners to joke about it. This year, no one is laughing.
Whenever I look at a business that is not making money I find it usually is from owners or managers thinking like a customer or employee rather than a merchant.
It starts with not pricing correctly. ”Oh, I wouldn’t pay that much for this item.” Knowing how much something costs somehow devalues its worth in their eyes. Since most owners or managers have never taken a course on pricing or examined their financials, they may mark it up less than keystone. (One guy at a recent speech sheepishly admitted he purchased an item at $10 and priced it at $15.) But in a declining economy, merch should be marked up keystone (that’s double) + a few bucks so the business is profitable. That’s what merchants do.
It continues with employee flexibility. Instead of a set schedule a manager can knock out in an hour or so, the manger lets employees give them their availability week by week and then try to plug that into a schedule. This results in hours and hours of wasted time with store coverage compromised. Merchants come up with a set schedule based on demand, then fill it based on ability to sell the merch. That allows the managers much more time to train, monitor and sell on the floor.
It shows up in marketing and promotions with endless freebies, 2-4-1s or discounts. One local gift store offered free gift wrapping on Feb. 14. The busiest day of the year for them when people would have paid anything to have someone wrap their gift, they gave it away.
How did they come to that decision? They thought how great it would feel for a customer. As a customer, imagine a florist giving away free same-day delivery on Mother’s Day, a Christmas ornament store offering 2-4-1 on ornaments December 21 or a wine store offering 25% off champagne December 31. Wouldn’t that be great? But that intent to “get” like a customer instead of “lose” like a merchant damages profits.
This problem extends into management when we don’t write people up for being late, rudeness or their inability to perform the job. Thinking like an employee cripples managers from doing their job as a merchant. We want to be “nice,” “liked,” “popular.” I had a boss one time say, “You’re only as good as your last sale.” Brutal. He was a merchant.
Understanding the different mindset of a merchant versus a customer should help you when a tough decision needs to be made, ask: “
Am I thinking like a merchant looking to profitability, or like a customer or employee looking to be nice?”
Be profitable, be a merchant.
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