Retail Business “Killers”

Today I want to point you to an article called “The Top Five ‘Killers’ of Retail Businesses” from the Retail Owners’ Institute.  You have to keep in mind that the ROI is a group focused on the financial aspects of retailing.  Consequently their “Top 5″ don’t include things like marketing, salesmanship, customer service or any number of other things that would appear on my list.  In fact, the article begins with this rather remarkable statement”  Hint: (Declining Sales’ is NOT One of them!)

Again, these guys are in the business of counting retail beans so their list focuses on the financial.  With that disclaimer, here are their “Top 5”:

5.  Out of Control Growth

4.  Out-of-Control Expenses

3.  Failing to Manage Gross Margins

2.  Out-of-Control Inventory

1.  Being Out of Cash

Like I said, from the bean-counter’s perspective there isn’t much to argue with here.  There’s no doubt that if you run out of cash, you’re most likely out of business.  Read the original article to see ROI’s comments on each business killer for some good insights.

It’s a good article but, in my humble opinion, it misses some very important elements of a successful retail business.  Even the most devout bean-counter should be willing to admit that until you bring the beans in through the front door, the rest is just academic.

I Love Capitalism

gatlinburgI don’t want to go off on a political rant but I love capitalism. With the debate about government take-overs of this and that and whether we’re rushing headlong into a socialist state, I can’t help but worry that capitalism is in danger.

My wife and I just came back from a short vacation.  We attended a wedding in Atlanta and visited our son and daughter-in-law in Huntsville, AL.  In between, we spent a few days in the Great Smokey Mountains. If you want to see capitalism and entrepreneurship at their best I recommend a visit to the Smokeys, particularly to the town of Gatlinburg where small, local business reigns supreme.

There are some national chains in this small Tennessee town but the majority of businesses are of the locally-owned variety, including motels, restaurants, gift shops, mini golf, and other tourist-related businesses.  Just a few miles outside town is an arts and crafts community made up exclusively of independent business men and women who enjoy the life style of producing their own products and selling them directly to the consumer.

There is no question that this has been a tough summer for most businesses, particularly in the tourist related industries, but the independent business people in the Gatlinburg area seem to be holding their own and some are doing quite nicely.

The thing is that while I was supposed to be on vacation, I couldn’t help but look at so many small businesses and appreciate the value of capitalism.  It’s what’s made our country great.  People who are willing to invest their own time and money in a business, knowing that they might succeed or fail demonstrate the same  pioneer spirit that brought people to this country in the first place.  It’s what made them move away from the east coast and eventually go all the way to the Pacific ocean.  You and I can’t let that spirit be crushed by self-serving politicians or by the big box chains.

Not only do we have to support organizations like the 3/50 project , our local chambers of commerce, and other local business organizations, we have to get involved in other things as well.  When small-business-damaging laws are being considered at the national and local level, we have to speak out.

Being an entrepreneur is a noble profession.  Profit is not a four letter word. We should be proud of our role as the engine of commerce in this country.  We should offer our customers the best service we possibly can and not be afraid to ask them for a fair price.

In the next few days I’ll be introducing you to a couple of people I met on the trip whose stories I hope you find as interesting as I did.

A City That Gets It.

This post first appeared on September 7, 2007.  Since I’m sitting here in Huntsville once again, it seemed like a good time for a rerun.  I hope you enjoy it.  FYI, the Marriott Courtyard in Huntsville does offer free wifi.

Huntsville, AL

Huntsville_wifi
I’m posting this from the Big Spring Park in Huntsville, AL, where they actually offer free wireless internet service.  Wi-Fi at our hotel costs $10 per day, but you can sit in the park, enjoy the beautiful weather, AND check your email for free.

As we’ve been discussing, the Internet is everywhere, but wi-fi in the park is a great idea.  Instead of being tethered to an ethernet cable or a phone line, in a hotel room with too little work space and not enough light, in Huntsville you can enjoy the fresh air and the scenery while you check your email.

Jogging in the park isn’t my cup of tea (or glass of sweet tea here in the South) but blogging in the park is something I could get use to.

I imagine the presence of NASA in Huntsville, and the high tech industry that supports the space program might have something to do with having the Internet in the park, but I predict that the day isn’t far off when every city will have it.

Meanwhile, your intrepid blogger will continue working hard for you, even on vacation.

Blogging_in_the_park

Are There Limits to Buying Locally?

This rather lengthy post originally appeared on February 24, 2009

A regular reader and former coworker emailed me over the weekend with an interesting question about buying locally.  He asked, “At what point is price an issue?” He cited a couple of recent instances where he paid more to buy something locally rather than buying it online.  The price difference wasn’t enough to be a problem, but is there a point where price trumps doing business with a neighbor? It’s not unlike the question, “Can you be a little bit pregnant?”

The question raises still more questions!

Aren’t some mail order businesses run by independent business people? In the past I have written good things about Heather Gorringe and her “Wiggly Wigglers” online gardening business. (A Small Business Owner Who Knows How to Use Social Media. A Big Award for Wiggly Wigglers) You can’t lump her into the same category as Amazon.com.  I’d buy from Wigglers if I were into gardening (and if she weren’t in England, making shipping very expensive.)  It’s a global mom-and-pop operation, something that would have been impossible just a few years ago.

What does “local” mean? Here in Saint Louis, at least until last year, Anheuser-Busch was a local business.  Was I supporting local business by buying Budweiser?  Yes I was.  But what about local micro-breweries?  Wouldn’t drinking a beer from Schlafley (a local micro) be more in line with a Buy Local philosophy?  And what about Guinness which is unique and only brewed in Ireland?

Then there’s the issue of determining what’s local and what’s not.  McDonald’s is a national chain, but the individual stores are locally owned. Then again, all of their raw materials come from McDonald corporate.   On the other hand, there are some similar operations, like White Castle, where the company owns all the stores.  How many people know that?  How do you know which is which?  Given the addictive taste of a White Castle burger, and their low cost, does it really matter if I eat there?  Like Mickey D’s, they bring the stuff in from out of town.

Does buy local trump buy American? Chances are that you’ll be more likely to find American-made items at your local hardware store rather than at Lowes or Home Depot.  But, what if you don’t?  What if the chain has an American-made drill and everything at the local True Value is made in China?  Which is the better choice?

What about unique items? Again, the local merchant is more likely to have the really unique items, but not always.  Books are a good example.  Sometimes the only place to find an off-beat book is at Amazon.com.  Let’s say that the local book store (if you can find one) doesn’t have the book, but can order it for you.  It will cost $50.00 and take two weeks.  Amazon can get you the same book in two days and it will cost you $40.00 (including shipping and handling).  And you need the book for an important project that’s due in a week.

This one is pretty easy.  You have to go with Amazon because of the deadline.  But what if there is no deadline.  What if you just want to read the book?  Is it worth ten more dollars and twelve more days to support the local business?  Nobody said this was going to be easy.

Buying locally takes some effort.  But it’s worth it.  You wouldn’t be reading this if you didn’t have a vested interest.  If you want your friends and neighbors to do with business with you, you have to do business with them.  It’s as simple as that.  That’s the short-term answer.

Long term, if you want to have a neighborhood hardware store to answer your questions, and to have the part for your twenty-year-old lawn mower in stock, then you’d better do your part in keeping them around.

A lot is being written and said about economic stimulus.  I’m not an economist, but I do think that stimulating the national, and even the world, economy starts with stimulating the local economy.  We all know that small business is responsible for the lion’s share of jobs in the United States.  A sign of a healthy economy is a lot of “help wanted” signs in the windows of our local stores and restaurants.  We can make that happen.

I just realized that I’ve written quite a bit, 698 words and counting, and haven’t answered the question, “At what point is price an issue?” First, I think you have to look at value rather than price.  And value includes the services and potential services that the local business offers.  What looks like a better price may not be.  In the case of on-line purchases, have you considered shipping and handling?  What about the hassle of receiving the merchandise (for example, taking off work to be home when the package is delivered) and the possible hassle of returning something that isn’t right?  Can you trust the vendor to deliver the product as ordered?  All of these come at a price.

If you’re comparing a local store versus a chain, are you comparing apples to apples.  The big guys often have products that are built to their spec, which may not be your spec.  An items that’s ten percent cheaper but wears out twice as fast as a similar one isn’t much of a bargain, is it?

If an item requires assembly or technical knowledge to operate, who’s going to help you out if you have problems, the “helpful hardware man” or the guy in the blue smock who just started to work yesterday?

To wrap this up, you have to make up your own mind what you value and what you don’t.  Everything has a price.  You get what you pay for.  (Insert your own cliche here.)

As a business person you might want to do unto others as you would have them do unto you.  But what about your customers?  How do we get them on the “buy local” bandwagon?  It’s all about education.  Show them why your product is worth more than your big box or out-of-town competitors.  Use in-store signage, advertising, your web site, and your presence on social media (you are on social media, aren’t you?) to tell them why it’s in their best interest to buy from you.  Because, when all is said and done, people do what’s in their best interest, not yours.

I’d especially welcome comments on this important topic.

Small Business Influencing the Influencers

marketing beercastTo paraphrase the late Jim McKay, we’re always “spanning the globe” to bring you tips for your small business.  I recently stumbled onto a blog and podcast called the “Marketing Beercast”.  Since the title contains two of my favorite things, I decided to give the podcast a listen.  In episode 39, the topic is influencing the people who influence your customers.  This idea comes from a dental office, of all places, but with a little imagination  it can certainly be adopted to any business.

Here’s how it works.  Many times a patient is accompanied by a spouse, a friend, or someone who has to cool their heels in the waiting room while the patient is having work done, sometimes for a fairly long time.  Rather than let them waste an hour or two reading old magazines, the dentist in question offers the “waiter” a prepaid $50.oo debit card with the suggestion that they go and have lunch or do some shopping.

Think about the consequences of this gesture.  First it makes both the patient and their “waiter” happy.  The patient doesn’t have to be concerned about the time their loved one has to spend waiting.  Obviously it makes the waiting party even happier.  Second, the “waiter” becomes a walking billboard for the dentist.  When he or she pays for their lunch, or their purchase, you know they won’t be able to resist telling the person they deal with where they got the gift card.  “Dr. So-and-so gave me fifty bucks to buy lunch while my wife’s getting her teeth fixed.  Isn’t that great?”  In fact, they’ll probably tell everyone they know, making them ambassadors for the dental office.  There’s no telling how much referral business they’ll generate.

Of course, the patient and the “waiter” will become loyal customers.  It’s a win/win.

Think about situations in your own business where this idea could be useful.  The amount of the gift card can vary with the type of business.  As the podcast suggests, maybe it’s just a $10.00 gift card to Toys R Us to get dad and the little ones out of the way while you do business with mom.  The possibilities are endless.

Check out this Beercast episode.  It’s less than fifteen minutes long.  While you’re at it, check out some of the other episodes, too.

Rethinking Your Small Business in a Tight Economy

Happy Monday!

To begin the week I thought I’d share some insight from the world of kitchen and bath design. In the August issue of Kitchen and Bath Design News, Jerry Johnson offers some thoughts on expanding your product offering. [Note: The link is to the “columns” page on K&BD’s web site. As of this morning the site was still featuring July columns. Jerry’s column should be up there soon.]

He tells of meeting a customer who had just purchased a new kitchen from his company.  He asked her, “Can you tell me why you decided to buy your kitchen from us?”  She responded that a few months earlier she had been shopping for some small items and that Jerry’s showroom was the only one out of four that she visited that would take the time to help her.  She decided then and there that this was the company that would get her remodeling business.

There’s no doubt that customers today are taking much longer to make a positive buying decision, and they are visiting more companies to see what they offer and how they work.  The dollars are not as easy to get.

That annoying small-ticket customer, you know the one who takes up your valuable time for a few dollars profit, could be your next big sale.  Or she could refer her friend(s) to you for their large purchases.   Rather than spurn those small transactions, maybe you should cultivate them.  Get the word out that you’re the store that’s willing to go the extra mile to provide parts, accessories, and complimentary items.  Become the place to shop for anything related to your core business.

Quoting from Johnson’s article again,

If you’re just going to be the cheapest bid, well, good luck.  You will never outbid the lowest bidder.

And, why would you want to anyway?  Making a few low-profit sales now, establishing your business as the one who cares enough about the customer to give world-class service on a $10.00 sale, will make you the go-to place for high dollar, high margin business later on.  Doesn’t that make more sense than passing on the little sales and having to compete on price for the big ones?

I’m just sayin’…………

Winning on the Uphills

We haven’t heard from Seth Godin in a while but here’s something I can relate to.  He writes,

“I used to dread the uphill parts of my ride. On a recumbent bike, they’re particularly difficult. So I’d slog through, barely surviving, looking forward to the superspeedy downhill parts.”

No argument here.  Uphill is work.  Downhill is easy.  But as Seth points out, you never get bettere going downhill.  That’s just gravity at work.  In fact, I suppose that as I lose weight I’ll actually lose downhill speed.  Bummer!

The way to get better is to focus on the uphills; the hard part.  That’s where you pick up time.  That’s where you get stronger.  That’s where the real improvement comes.

The thing that separates the winners from the losers in professional races like the Tour de France is the ability to climb those Alpine mountains, not the ability to coast downhill.

Of course Seth applies the lesson bo business and you can too.  Anybody can handle a happy customer.  It’s the unhappy ones that are a real challenge.  And they’re the ones who make you better at what you do.

Check out Seth’s blog for his take on this and other topics.  Always a good read.

The Most Important Thing

I’m a little behind in my blog reading (and blog posting) but I ran across an excellent piece today from last month by my buddy Doug Fleener at the Retail Contrarian blog called The Most Important Thing You Do. As Doug so rightly points out, the most important thing you do as a manager is to create the best place to work.

You probably think that customers come first, and you’re right.  But without happy, no make that delighted, employees, your customer’s experience will never be first rate.

I hate to tell a story without proper attribution, but I think this originally came from Steven Covey.  A restaurant owner was asked who was more important, his best customer or his very excellent hostess.  Without hesitation, he answered “the hostess.”

“I can always find another customer, but a well-trained, customer-focused, efficient hostess is worth her weight in gold.”

To quote Doug’s post:

You might have a beautiful store with fabulous products but chances are whatever you sell I can find somewhere else.  It’s the people in your store that make the difference. It’s the people that keep your customers coming back time and again.  The reverse is true, too.  At some stores the reason the customers don’t come back is because of the people.

BTW, a Happy Beleated Birthday, Doug.

No Wonder We’re in a Recession!

An interesting thing happened to me today.  I had a flat tire on my bike.  Fortunately it went flat while I was having lunch with my wife, so we threw the bike in the back of her SUV and she dropped me off at a local bike shop.  While the mechanic fixed the flat I wandered around the store for about fifteen minutes looking at the bikes.  No one said a word to me!

These guys sell bikes that run well into four figures, some almost five.  They had my bike.  I couldn’t leave.  They could see that I could use a new ride.  In fact, they sold me the one I have now.

For the life of me, I can’t understand a specialty retailer that doesn’t try to show you something, especially when they see you kicking the tires like I was.  No wonder we’re in a recession.

C’mon people! At a time like this you can’t let any potential sale get away.  At least do a quick demo with every warm body that comes into your store.  No one should ever leave without at least a brochure.  That’s just common sense.  But I guess common sense isn’t really that common.

The Art of Listening

hearing aidI was speaking to a friend the other day.  He was very excited by his new hearing aid.  He said he can carry on a conversation now, without having to ask the other person to repeat anything.  He can hear birds singing and even crickets chirping.  He said “I can actually hear a pin drop.”  It was expensive, but well worth it.  He said he thought it was the greatest hearing aid in the whole world.

So I asked him, “What kind is it?”

He looked at his watch and said “12:30”

I know it’s a corny story, but it makes a good point.  Even with perfect hearing, we often don’t hear what the other person is saying.  We may think we do, but somewhere between the speaker’s lips and our brain, the message gets short-circuited.  “What we have here is a failure to communicate.”

As business people we have to know what our customers want.  Barring a psychic gift, the only way to do that is to listen to what they’re saying.  But sometimes you have to read between the lines.  It’s been said that people have two reasons for doing something.  One is the real reason.  The other is the one that sounds good.  Sometimes, but not always, they’re the same.

For example, a customer may tell you that you don’t have the item that they’re looking for.  They may cite some feature or other that your offering lacks.  That sounds good.  But maybe their real reason for not buying is that they can’t afford something with the quality that you offer.  They’re over their budget, but they don’t want to admit that.  They save face by putting up a smoke screen.

You may have exactly what they want, but if you don’t ask questions to get through the smoke, you’ll never make the sale.  You can’t overcome an objection that doesn’t really exist.

The same is true with your employees.  Let’s say your best person comes into your office and give you notice.  “Why?” you ask.  And he gives you a reason.  Maybe he says he needs more money.  You offer him a raise but he still says “no”.

Maybe the real reason is that his wife wants him to take a bigger part in raising the kids.  Maybe she’s missing too much work.  But rather than admit that his wife is making him quit, he uses money as a smokescreen.  Again, a few probing questions might get you to the real reason.  By offering an additional day off, or more flexible hours, you might just retain a good employee and not have to give him a raise.

Here’s the thing.  Information is vital in running any business, especially a small one.  The key to good information is good listening.  And the key to good listening is asking the right questions and paying attention to the answers.