RetailSmart

Entries from March 2009

The true cost of ‘nasty jackets’

30 March 2009 · Leave a Comment

At a recent training session a discussion started on that hoary old topic of what to do with stock that does not sell – the slow movers. The trigger in this case was a particularly ‘nasty jacket’ to use the staff’s words. You know… the stock that everyone said was not going to sell.

The owner demanded that it stayed on the floor (of course) and the staff had to sell it. It had been moved around the store – to no avail: with other jackets, to the hot spot in front of the store, and even a special effort to merchandise at eye level. One of the team attempted to merchandise it with one of the sexiest bikini in the store, and declared that to be her final attempt to get rid of it.

Nothing sold. Every morning staff were encouraged to sell harder. During the previous 4 weeks we used time, money, space, effort, and energy to sell stock, which did not sell and never was going to sell.

The cost of doing all of this is known as creeper cost. From an initial margin of 50 % the achieved (real) margin would have decreased to about 30 % over a 12-month period and you would still have the same “nasty jackets” in stock.

The lesson for the manager (and the team) was not to hang onto stock that is not going to sell. Identify the stock, get rid of it, and make space for the stuff that is going to sell.

Not only will your margins be better, you will have happy staff who like the stock they are selling and serve the customers accordingly. Which is maybe the TRUE benefit…

Categories: Customer Service · Management · People · Productivity

Progress – infinitesimal – but progress nonetheless

30 March 2009 · Leave a Comment

Good news dear reader:

Today we got admitted to the ALLTOP fraternity of Top Blogs. (Check out the new badge of honour to your right.) I have also assembled a bunch of great marketing blogs on Alltop too – just click on the ALLTOP link above.

And not too long ago, also started writing for Dynamic Business magazine – one of the leading business magazines in Australia.

This is on top of the Inside Retailing Blog that has been going for about a year now.

You would think with all that activity, SOMEONE must figured out that we do RETAILING, right?

As it happens, Google does not and can not. Because none of the above gets us onto the first 8 pages (and I did not bother searching any further.)

Our aim is to keep producing authentic content – whether Google thinks so or not… You found us didn’t you? And that will do for us.

Categories: General · Management · Marketing

The science of SALT

25 March 2009 · Leave a Comment

A set of graphs shows the relationship between...
Image via Wikipedia

POP QUIZ: Imagine you (and only you) had the cure for incurable disease. Moral issues aside, how much would you charge?

I hope you said ‘as much as possible’.

Because this, dear reader, is a little secret everybody learns in Economics 101 and then forgets:

A product( such as the cure for an incurable disease) is something that will be very price inelastic. Knowing which items are price inelastic, is a valuable business tool. In practical terms, we use a substitute measure to identify price inelastic itesm. This short-cut is known as KVIs -  Known Value Item (KVI).

Every consumer has a limited range of KVIs in their ‘evoked set’ – and by that I mean customers remember only a limited range of products and even a smaller number of price points associated with those products.

EXAMPLE: Do you know the price for a kilogram of table salt?

Few people do.

How much would you pay when you pop into the supermarket to buy salt?

  • Would you buy it if I told you that it was $2.50 for a 750g container of salt?
  • Would you still buy it if it was $3.00 a container?
  • What about $5.00?

It is actually around $1.70 in Aldi Supermarkets.

I am pretty confident you would be prepared to pay more, AND I am confident you wouldn’t have done a comparison shop for anything under $5.

This means that they COULD have charged 50% -300% more, and not have lost any sales!

APPLICATION: The moral of the story is that KVIs are price elastic, and non-KVIs are inelastic. If a product is ‘price inelastic’ you can and should put the prices up! And keep doing it until the results suggest otherwise.

To the non-marketing readers, here is a little practical tip that shows this principle in action – and you may avoid the ‘trap’ in future. (Never say that I don’t offer helpful advice.)

A supermarket may advertise a ‘special’ – say 2L milk at 99c. Everyone knows that is a good deal because milk is a KVI. They selected milk as the ‘loss leader’ and this does two things:

It creates the perception that this store is ‘price competitive’, and since no-one goes to a supermarket to buy only milk, you will end up buying other things. And importantly, you won’t be paying much attention to prices because you already ‘know’ they are ‘cheap’.

At the heart of this concept is an important profit generator: In order to be perceived as affordable, you only need to be price your KVIs at the appropriate price points. Everything else (-the salt-) should be approached differently.

It may not be a ‘million dollar’ question, but it may well be a ‘hundred-thousand-dollar’ question:

What is the ‘salt’ in your business?

And once you know… go and put the prices UP!

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Categories: Finance · Marketing · Productivity · Selling & Persuasion

Pretty cool

24 March 2009 · Leave a Comment

One of the key marketing concepts that many people talk about but don’t always ‘get’ – is positioning.

This retailer…DOES.

They just won a major, global  competition. Read all about on their site.

Firstly, congratulations to the owners/team.

Secondly, they have chosen a very interesting POD to position themselves in the market place. What the commercial potential is, I don’t know. But it is brave, intersting, and pretty cool and the deserve the accolades.

Categories: Branding · Marketing

Secret recipe

21 March 2009 · Leave a Comment

Nowadays my job is to observe customers and their behaviour, write it up in manuals to help teach people to serve and care for customers (and occasionally blog about it).

I regularly get people saying that it is easy (for me) to talk about it because I don’t work with people day in and day out. This is true enough, since I am not on the shopfloor every day any more. But I still have experiences that reinforce that some things just never change.

Recently Dennis and I had to work the BBQ at the rugby gala day to raise funds. It was a 2-hour session during the busiest session of the day. The food was hardly glamorous and definitely not healthy, the environment was pretty primitive, but we still enjoyed serving the people.

I was serving people and ensuring that their day at the rugby was fun. I satisfied basic needs in a basic way, something that anyone on the day could do. Yet, it was that satisfying to make a few people happy.

When the little ones came back to get another bacon-and-egg sandwich, and you can just see the anticipation on their little faces waiting for me to recognise them in some small way. They just glow when I ask them “are you back for seconds already?” The other parent endearingly addressed the ‘older’ folks as ‘young ones’ and everyone joked that they had not been called that in a long time. Or a small touch like sending the person around to the BBQ to place the order of how they liked their steak.

We had no complaints, even though at times we had queues -cooking under fairly primitive, not-too-hygienic conditions. People need only a little attention, a dash of care, a little love – and they will come back for more.

Instead of being exhausted, we actually felt energised afterwards. Whilst it is not the same as backing up day after day, spending 10 hours on your feet, it does bring home a very important lesson:

Take care of your customers, and the ‘bottom lines’ and the targets, the KPI’s – all take care of itself.

(And you will enjoy it all the more to boot.)

[Published by Moonyeen]

Categories: Customer Service

20 things you can negotiate – other than price

19 March 2009 · Leave a Comment

Newscube at T2 GTI
Image by BuhSnarf via Flickr

Here is a checklist of 21 things you can negotiate with your supplier.

1. Trade discounts (% off list price)
2. Quantity discounts (based on volume bought)
3. Seasonal discounts (incentive to stock out-of-season merchandise)
4. Cash discounts (reduction based on when bill is paid based on dating of the invoice.)
5. Slotting allowances
6. Markdown guarantees
7. Promotional allowances
8. Rebates (refunds from vendor which does not impact markdowns)
9. Payment options
10. Payment periods
11. Credit terms
12. FOB Origin or FOB Shipping point (e.g. centralised warehouse)
13. FOB Destination (with or without charges reversed.)
14. Free/Additional POS material
15. Exclusivity (for an area or for a period of time)
16. Co-operative advertising
17. Pre-ticketing/ tagging/ labelling
18. Packaged for resale
19. Field Merchandising & stock rotation
20. Dating (when the discounts etc. come into effect.)
21. Price – of course…

How about you let us know in the comments section below how many of these you regularly negotiate or at least try to negotiate?

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Categories: Finance · General · Retail Operations

Funny or Sad?

19 March 2009 · Leave a Comment

I have never really much liked Apple. My sense of the organisation (from a consumer’s perspective) is that they are manipulative, product-driven and arrogant.

Blackberry came out with this:

Later Apple responded with this:

I wonder what your take is on this? Who was/is the most original? WOuld it change what you buy?

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Categories: General

Sick of the experts?

12 March 2009 · 3 Comments

This is a rambling rant, so forgive me while I vent.

I AM SICK OF ALL THE EXPERTS. Aren’t you just sick & tired of all prognostication too? Everybody is an expert. Everybody has a prognosis. Everybody has a cure. Have you noticed how consultants are suddenly experts at developing recession-busting strategies?

I am not an expert. There are certainly people who know more than others about some things, but they don’t know everything, and they certainly don’t always know enough. There are a bunch of people who think they are experts and there are people who take comfort from following people who know (slightly) more than they do.

The credit crunch came about because spreadsheet models that calculated ‘risk’ – didn’t quite get it that Joe Blo wouldn’t be able to pay his mortgage if he didn’t have a job. It did very well at doing wage projections and calculated beta factors for the risk model, but the essence of human behaviour could not be captured in a statistical model.

I got an email from an ex-student (MBA) recently with a link to an article explaining how the ‘global financial crisis’ is quite possibly because everybody came to rely on a (relatively new, but as it turns out, also fatally flawed) risk model. It was a very elegant formula – and all the smart people in the big financial institutions followed it. It turned it to be wrong, so there goes the Nobel Prize and a pretty big chunk of our future. He said it made him think of the marketing lecture I gave early last year. (Read the article here – it is quite interesting.)

The fact that I taught them (more than a year ago) that they should not rely (solely) on sophisticated models and fancy market research (as MBAs are wont to do) without remembering that those numbers are but a very poor attempt to quantify what is essentially irrational, unpredictable people living their lives.

One student asked me (the very good question): ‘Why are we then here studying this stuff?’
My reply: So that you can figure out what you don’t know, and so that you can learn form the past. This does not mean you should be repeating the past. In a rapidly changing world knowledge is outdated by the time you acquire it.

The ‘market’ is – in case you have forgotten – is just a bunch of people doing what they want.

I know this post is not particularly helpful – except maybe as a warning, but I feel better now.

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Categories: Future · People · Research · Selling & Persuasion · Strategy

Is service too much to ask for?

11 March 2009 · Leave a Comment

[Posted by Moonyeen]
I sometimes feel that I want to give up on this whole customer service thing. Am I the only person who just wants someone, anyone, to talk to me when I enter the store? And I am not talking about the swooping seagull (“can I help you”) approach. I don’t know about you, but that is the phrase that I most hate as a customer.

Recently I was looking for an evening dress to wear to a function where retailers and businesses were rewarded for excellent customer service. I was the ‘judge’ who had to evaluate customer’s service levels.

I have to confess I generally hate shopping, and waited until the last moment to get a dress. I started with a positive attitude thinking that I would magically find the dress, with some help, and within the first hour of shopping. Not to be.

I entered the first store through the Gen X section. Do they care about you? Nope. Do they talk to you? Nope. They stared at me as if I do not belong there. Their body language shouted “get out of my area”. Whilst I mightn’t be the target customer, there is just the remotest possibility that I was shopping for someone else…

Eventually I found the right section, no one within a kilometre to assist me. I looked lost, I looked upset, and around me were at least half a dozen customers also looking lost and needing assistance. In that time 4 ladies walked away me included. Well actually at least $1000 walked away. The store could have paid their rent and some staff for that department.

I could not find anything and thought let net give the other stores a go. I visited at least 20 stores. My goal to find a dress within an hour turned out to be a mission to find a sales person to assist me to find the dress, and the actual dress became a secondary concern. What a miserable day only 2 staff members approached me, albeit with the dreaded “can I help you”. Three hours later, no dress, grumpy and with sore feet I bumped into two of the girls whom I had previously encountered in the first store, still with the same lost expression on their face and still without dress.

At lunch on Saturday before the function I told my story to a few girls and to my surprise (I am a little worried that I am a difficult customers and expect too much of people) all the girls agreed that ALL they require is for someone to care, someone who takes some time out to assist them, someone to asks how their week has been.

EVERYONE agreed they sometimes will spend their money, me included, even if it is not always the perfect dress, shoes or handbag, but it is something that has been sold with care and a little love.

Categories: Customer Service · Mystery Shopping · Selling & Persuasion

Want to know the essence (really!) of Retailing? (Screencast)

9 March 2009 · 6 Comments

We are preparing much material for the soon-to-be launched site (super secret at the moment) but I had this available to share.
It is about 20 minutes – and we cover the essential aspects of retailing. It is pitched at a ‘macro’ level, so it applies to any business really – although the examples are retail orientated.

Your feedback would be much appreciated…

Introduction to retailing

Introduction to retailing

This movie requires Adobe Flash for playback.

Categories: Customer Service · General · Management · Marketing · Personal Development · Retail Operations · Strategy