Tuesday, October 6, 2009

Retailer Help

posted by Mary Gerlach

In each issue of Giftware News, Baby & Kids’ sister publication, Mike Russo, president of the Gift Association of America, answers reader questions and offers retailing advice. His advice crosses categories and much of can be applied to any specialty retailer. Here’s a look at a few questions from last month’s column.

Help! As the holiday season approaches, we are getting more and more concerned. We do not want a repeat of last year where we had to cut our prices so drastically. Can you give us some ideas for protecting our bottom line?
In my seminar, “Christmas Merchandising: Science or Chance,” I discuss a variety of key issues for ensuring a strong holiday selling season. The first point I address is early setup. I have always been an advocate for having the holiday merchandise customer-ready by October 1. This year, I have noticed many big-box stores as well as some independent retailers offering holiday items throughout the summer. One retailer was just handing out candy canes to plant the seeds about the holidays. Others actually had a portion of the holiday shop set and ready to go. I am not sure if they were offering leftovers from last year or merchandise purchased for early arrival. The key point is that they saw the need to expose the merchandise early.

Another area to address is the reserve stock. All holiday-themed merchandise should be out on the selling floor. This is the time to “stack it high and watch it fly.” I have seen too many instances where inventory was left in the stock room and sales were lost. During busy periods, no one has time to replenish the shelves. Then the merchandise is forgotten until the maximum traffic opportunities have passed. This leads to markdowns that could have been avoided.
Promotions are always going to be with us, but I do not think they have to be the type that put you in the red. Your assortment plans should include regularly priced merchandise as well as a strong presentation of items that were purchased for promotion. If you see items or categories underperforming, mark them down immediately. Do not hang on to slow movers in the hope that they will sell once the peak traffic period has begun.

You should be paying particular attention to your initial markup. Even if you purchased merchandise at promotional prices, you should set your initial retail prices using the regular cost and not the discounted cost you negotiated with your vendor. It is also important to establish the actual retail price to your customer before you offer it for promotion. This keeps you within the law when showing the regular price versus the sale price. If you never offered the items at the regular price you are stating, you cannot say that you did. Also, the customer will be able to appreciate the savings if there is a true comparison. I suggest having regularly priced items on the selling floor for at least two weeks prior to offering the discounted price. Setting up your shop early will give you plenty of time for establishing credible pricing practices.

Help! We are surrounded by competition. How do we survive when we cannot lower our prices as much as our competition?
This problem is as old as retail itself. In my opinion, the solution lies in your assortment planning and your image. If your image is to reflect a promotional shop, every item must be offered at a sale or promotional price. However, if you are not seeking to be known as a promotional retailer, the solution lies in your assortment plan. Your assortment plan should include basic merchandise (merchandise your customer expects to find in your shop and purchases regularly), promotional merchandise (special purchases, slow-selling inventory that has been marked down, end-of-season specials, etc.), volume-producing items (items that sell in quantity — day in, day out) and a category I call reach items. These reach items are items that are slightly above your regular price line and style. You must always be challenging your customer to try new things. Reach items are items that test the customers’ willingness to purchase items that are a higher caliber than normally found in the store. I suggest reserving approximately 15 percent of your open-to-buy for this category. You never know how much your customer is willing to spend unless you dangle the carrot in front of him or her, and you will not know how open your customers are to new concepts and ideas unless you test them.

Once you are comfortable with your assortment plan and pricing strategy, you need to focus on areas where you treat your customers differently than your competition. You must give your customer a reason for returning and/or spreading your good name to friends and family. The issue is not always price. Convenience and top-quality customer service is more important than saving a few pennies here or there.

The next project I would address is shopping your competition to find out what they are not doing and offering that particular service if possible. For example, a few years ago, some big-box stores decided to eliminate layaway from their customer offerings. The independent retailers who picked up on this mistake did very well because they were able to attract customers who preferred to pay cash and used the layaway service to accomplish their goals. Guess what? The big-box stores who tossed out the layaway program are reinstating it. The big-box stores violated the number-one rule in retailing; that rule states, “Listen to the customer.”

You should not fear your competition. Instead, let your competition be your teacher. You can learn as much about what to do as what not to do if you pay close attention. A good rule to follow is this: If it doesn’t make sense (like tossing out a successful layaway program), think twice or three times before you do it. Surveying your customers is another way to keep in tune with their wants and needs. When in doubt, it is always good to ask.

Help! I find the seminars offered by some of the markets to be useless. Either there is a high-powered celebrity talking about concepts and classifications that are over my head (and my customers’ pocketbooks) or the presentations are more of the same old thing we have heard for years. How can we get the markets to offer more meaningful programs?
It is a known fact that some celebrities attract crowds, and the various marts want to attract as many buyers to their particular shows as they possibly can. If bringing a celebrity to the market fills that need, I find nothing wrong in this strategy. However, if the presentation is not geared properly toward the audience, it is nothing more than a self-serving exercise. The celebrity may want to push a book or a product line that is beyond the scope of what the audience needs or wants. The presenter should address issues apropos to the audience’s needs, especially at a specific trade event.

Although I am not familiar with the various shows you attend, I can comment on your frustration with hearing “the same old thing.” In my opinion, this may tie to budget issues. Everyone is tightening their belts, and market centers are no different. Speaker fees range from one extreme to another. In some instances, quantity rather than quality may be the issue. However, I cannot offer a definite statement concerning the quality of any speaker because I do not know the criteria used at every market. My experience does allow me to say that budget can be an issue.

I suggest that you contact the merchandise center or centers that you frequent and share your concerns. In addition to your concerns, I suggest that you offer some topics for consideration. If you know other buyers who share your frustrations, ask them to write as well. The markets want buyers to attend the shows, so they should pay close attention to the requests made, providing they are articulated appropriately and sensible in their demands. If we have learned anything from this economy, it is that we must listen to the customer and be ready
to adapt to changing times and customer need.

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