Retail — Love It or Leave It

A Proactive Approach for a Tough Economy

– Don Capman, President, J.D. Associates

Well, it’s gloom and doom time again in the media. As usual, dire predictions are being made about this year’s holiday retail sales going to “hell in a handbag.” Don’t you get tired of hearing the same old thing every year from the same old media where we, as retailers, spend a fortune advertising in their publications or on their air time? What’s wrong with this picture? We pay these people thousands in advertising dollars every year, yet they continue to bite the hand that feeds them. We must all be masochists. Perhaps we should start a support group. How do the media know what the mood of the consumer will be in 3 months? The economy has been hot for years. Granted some years have been better than others, but the overall picture has been pretty rosy. Most past year predictions have been based on rather weak data and assumptions, so we really never knew about actual sales until the end of January.

Unfortunately, this year is different. Barring a miracle, it looks like retail is going to realize fewer dollars and less profit this coming holiday season. Why? Because the facts are that the consumer has already started to change his or her buying habits. "The culprit?" you ask. Astronomical gas and energy prices are burning a hole in middle class wallets. Interest rates have risen and the housing market is sliding down a slippery slope for the first time in years. According to an article published in the Washington Post on August 29, 2006, Michael McNamara of MasterCard Spending Pulse stated that retail sales, excluding autos and gasoline, have declined for five straight months on a year-over-year basis. He further states the consistency of the decline is consistent and unusual. Unfortunately, these factors make this year's retail forecast much more predictable than in the past.

Well, enough of the grinch talk. Yes, the average consumer will probably have significantly less disposable income, but they will still spend money for the holidays. What can we do to make sure that they spend their money in our stores? A few proactive action items come to mind:

• REVISIT OUTSTANDING PURCHASE ORDERS— Now is the time to rethink those holiday purchase orders that are due to arrive next month. Did you overbuy or buy too many of the wrong things? Make adjustments now so you don't have to give merchandise away at cost or below after the holidays.
• PLAN YOUR MARKDOWNS NOW— Ideally, markdowns should be planned before making a purchase. Ask yourself how many items you can reasonably expect to sell at full price and in what time frame. Decide when you should take your first markdown, second markdown, and clearance markdown. If you plan carefully, you can usually expect to be far more profitable in the end. Of course, if you find your calculations off base, you can always make adjustments. As I've said in the past, many retailers have a fatal attraction to their inventory and get stuck with it because of a lack of planning.
• BUDGET YOUR ADVERTISING AND PROMOTION DOLLARS NOW— As I have said in the past, planning advertising and promotions well in advance can really pay off. Decide how little you can spend on media advertising and what type of 'feel good', inexpensive promotions or campaigns you can have throughout the season that will bring customers back into your store. Think of a theme that will carry through the season. Perhaps it can be donating a percentage of every purchase to a local charity. Set goals and keep customers informed and involved. Perhaps you can use some instore signage measuring the progress of a charitable campaign.
• PLAN YOUR STORE ATMOSPHERICS— Most people are under tremendous stress during the holidays. We have way too much to do and way too little time. Think about what kind of customer experience you would like to offer in your store. How many times have you been in a store and found it difficult and stressful to shop? You couldn't easily find what you wanted and couldn't find anyone to help you. The top of your head was ready to blow off. Is this how you felt and looked after shopping in some stores?
  
  
  
  Would you like your customers to look like this after they left your store? Think about your merchandising carefully and try to create an atmosphere that relieves stress instead of increasing stress. Perhaps you could hire a masseuse on the busy shopping days. Serve light refreshments and provide soothing music. Just some thoughts:
• TRAIN AND MOTIVATE YOUR STAFF— Last night my wife and I celebrated our 37th wedding anniversary at a very upscale restaurant in Central Massachusetts. As expected, the food was outstanding and the atmosphere was nothing short of extraordinary. On the other hand, our waiter, who was a nice "kid" didn't have a clue. It was obvious from the beginning that he probably had a 15-minute crash course on customer service. I would expect that to be the case at a fast food chain but not at a gourmet restaurant. That one fault caused us to question whether or not we should return to that restaurant. So many times we expect our sales associates to just know what they are doing and so often they don't and won't tell us. Provide regular sales and product training. Ask your vendors to provide training on their products.
  
  Motivate your sales people by setting goals and posting results on a regular basis. Create contests and award prizes. You can also ask your vendors to provide spiffs (incentive fees) when your sales people sell their products. "ASK AND YOU SHALL RECEIVE."
  
  And last but not least, if you see that a sales associate is not working out, terminate. I know that's hard to do but a 'warm or cold body' can often cause you to lose current and future sales.

I'm sure that there are many other things that you can think of to deal with the hard facts of the upcoming holiday season. Don't let the gloom and doom take over. Be proactive, positive, and succeed!