Your merchandise is NOT like fine wine.......

Like most retailers, you probably have a consistent strategy in place for pricing products when they come in. But do you have the same consistent strategy in place to review and determine the selling performance of those products? In other words, do you have a markdown strategy in place for slow selling products that is consistently executed in your store? If not, the time to talk markdowns is now. Retailers must develop a process for reviewing sales and determine if markdowns should be taken to move products out of stock. Doing this on a consistent basis is a key component to maximizing your inventory turnover and improving cash flow for your business. Let’s discuss some of the reasons that your business might need to lower the ticketed retail price of merchandise in your store. Price reductions typically come in 3 different categories: 1) There are buying related causes. This is where most stores need to address markdowns. Included in this category are reductions due to assortment errors. There are also timing errors that you didn’t catch such as late shipment or ordering too much. Or perhaps you ordered from a new vendor and you misjudged the quality of the merchandise. Another buying related cause could be a supplier error such as late, damaged or incorrect shipments 2) Another category where markdowns would need to be taken is selling related causes. In essence, the product isn’t selling at the ticketed price to an acceptable level on a weekly basis. A good rule of thumb for retailers to use is a minimum sell thru of 5% weekly during regular selling periods. If the merchandise you are reviewing isn’t selling at least 5% a week that should be a basis for determining to take a markdown. 3) And lastly, there are operational related causes that may require you to take a markdown. These include damaged or dirty merchandise, odd lots or consumer shifts for certain products you carry. Depending on the reason that a markdown needs to be taken, retailers must enact a strategy to finish the liquidation of the distressed product. How much of a reduction to take, and when to take the reduction must be decided. This is THE most critical decision after pricing that happens. When products sell, every retailer wins, but having a strategy for dealing with merchandise that isn’t selling, after everything you have tried (correct pricing, marketing activities) is where retailers can either maintain, or give away their ultimate profits. There is no single right answer for when any retailer should reduce prices in their stores. Whether retailers choose to enact a temporary markdown, or a permanent one, retailers must analyze each product as it relates to their overall pricing strategy. Here are some key factors to look at when reviewing when to take markdowns and how much to take them for: a. Type of merchandise b. Store image c. Length of selling season d. Nature of target customer e. Size of initial markup f. Availability of selling and storage space g. Retailer’s sales promo policies - “mini” sales vs. “big-event” sales As mentioned earlier, a general rule of thumb is that products should sell thru at a Minimum of 5-7% per week. When you get to a 60 percent overall sell thru, you should take a first markdown, usually a 25% reduction. This cycle should generally take 10-12 weeks. If you think about how many times you go to market (2 major markets- and perhaps 2 minor markets in between) this makes sense. Each time you go to market, you are purchasing a ‘season’s worth’ of merchandise, so after 12 weeks, if the merchandise sells well, is typically time to get marked down. If you have slower moving merchandise (a sell thru of less than 2-3% per week) you may want to consider taking a markdown with a greater discount- somewhere between 33-40% off. And you may decide not to wait the entire 10 or 12 weeks. Remember this: Merchandise is NOT like fine wine, it does NOT get better with age. If you customers have “spoken” and they don’t like the products you have chosen, no matter how you have priced them, they will not sell. This leads to a serious lack of cash flow and in some cases, can lead to a lack of new products flowing in because there is no money to pay for them! Remember, a good overall pricing strategy and a coordinating markdown strategy is a key component to your stores ultimate success. Take the time to choose a strategy that aligns with your business goals, and then continue to monitor how the strategy is working on a monthly basis. This effort on your part will go a long way to building your brand as a unique and important store in the marketplace, and one that keeps your customers coming back time and time again.

Are you having fun with your customers?

Retail tip of the day: Develop in-store events to showcase store personality. Create fun, entertaining environment for your customers to keep them coming back.

Pricing Right Delivers Profitable Results

As we near the end of our March Madness of Retail tips, today we discuss a topic that is critical to all retailers’ success. Pricing.

While retailers understand that pricing is a necessary component to doing business, many retailers do not fully factor in product pricing as it relates to the store branding, profitability and the long-term success of their business.

When considering how to price products for your business, you need to think about aligning your pricing strategy with your overall business strategy. Choosing the appropriate pricing strategy will insure your business, sales, and profit goals are in alignment.

There are many pricing strategies that retailers employ however; there are three that are typically employed by independent retailers. While some of the methods are simpler to implement than others, there may be unrealized costs associated with using only one for your business.

Keystone Pricing. This is the most common method of internal pricing in retail today. Keystone pricing is simply the doubling of the wholesale cost of any item. (“keystone”)Wholesale ($5) à Retail ($10). Keystone pricing is the simplest method for pricing and one that can be instituted by any and all staff members rather easily based on the invoice costs of any product in the store.

The challenge with employing this as the only method of pricing is that it doesn’t account for all of other costs associated with selling products in your store. (Commonly known as Sales, General and Administrative expenses – SG &A) This can lead to low profit margins and eventually to restricted cash flows as all expenses are not accounted for with this pricing methodology.

Profit Margin Pricing. When using this method for pricing your products, retailers set prices based on helping your business to achieve certain profit margin goals. This method assures that you business will concentrate its pricing efforts around identified profit targets that will help you to meet your business objectives.

While this type of pricing assures that you cover the all the total costs (CGS and all SG & A costs) the argument against with this type of pricing is that many retailers choose products for their store that are widely distributed across numerous selling channels. With prices for any product being readily available on the internet today, retailers cannot randomly determine retail pricing based on their desired profit targets. Doing so may position your store unfavorably in the eyes of the almighty consumer. Customers today are savvier than ever regarding pricing so you can’t over price just to keep your profit margins high without risking losing them to another business nearby.

Discount Pricing. This method of pricing works best for high volume retailers or retailers who sell a high volume on certain products in their stores. This pricing method employs price reductions (temporary or permanent) to stimulate sales activity including incentive pricing such as special introductions, volume discounts, customer loyalty programs, sales affiliate programs.

Note: It is almost impossible to raise your prices on items once you have established low day in day out prices. Customers will expect that your prices remain low. This sets up a lower profit margin for your store on these products which is very difficult to overcome. You also run the risk of positioning your store as lower in quality versus most of your competitors (whether or not it is true).

Remember, a good overall pricing strategy is a key component to your stores ultimate success. Take the time to choose a strategy that aligns with your business goals, and then continue to monitor how the strategy is working on a monthly basis. This effort on your part will go a long way to building your brand as a unique and important store in the marketplace, and one that keeps your customers coming back time and time again.

Who are your partners?

Retail Tip of the Day: Develop partnerships w/local biz like banks or rest. It's a great way to create loyalty w/your cust by offering them added value from their experience with your store.

Who works at your store?

I meet lots of retailers every month. In almost every conversation, store staffing comes up because it is such a critical issue. These retailers share stories (some good, some not so good) and usually point to having 2 different types of employees in their store. Which employees do you have working in your store today? Employee #1 looks at the clock longing for quitting time, doesn’t move from behind the register when there are no customers in the store, and has little interest in helping grow/build sales with any customer. Employee #2 is constantly busy doing tasks (some assigned, some on their own) that make the store achieve sales goal faster, make the store cleaner or run more efficiently. This employee is always asking what else can be done to help make the business better. Of course, we’d all like to have a store full of #2 employees all the time because we know that we would have the running smoothly and that sales would be humming along- even if you didn’t go in to the store for weeks on end. So how do you find employees that are constantly engaged with the business and who are looking to make your store the best it can be every time they work? YOU DO. Your leadership and training from the first day they step into the store sets the tone for their success. YOUR training makes the difference. Today we share tips for creating top-notch employees who are as committed to your store’s success as you are 1) Make your employees THE KEY part of your store success. Share overall store goals and missions with all associates every day so they know what is expected. 2) Create a new employee handbook (can be as small as 2-4 pages) Use this book to share goals and expectations from their first day of work. These can be dress codes, hourly sales goals or any departmental responsibilities they have. 3) Lead by example. Be on the floor to show them how to work with customers, teach them to merchandise the selling floor and windows and how to close a sale properly. 4) Have a sales book at the register with financial goals for every day. Make sure every associate knows the goal from the time the store opens. 5) Track sales results during the day. (Or have your manager do it – show that making goal is priority one EVERY day.) 6) Let your employees know that they must be creative and deliver contingency plans if sales are not trending toward daily goals- empower them to do small things to boost sales in the middle of the day. 7) Announce sales results daily. Praise associates for making goals, work on re-strategizing if sales are down to plan. 8) Give every associate an area of responsibility in the store. Wiping shelves in a certain department, cleaning cash wrap, front door or windows. Everyone is responsible for how the store looks. Not just you. (Rotate tasks if some are more tedious than others.) These are just a few tips to get your associates on board for your stores success. They are not the only ones. Share with us what you do to keep your associates motivated and delivering results. We’d love to hear.

Blog your way to new retail customers today

As we wind our way thru our March Marketing madness, we continue with todays' the retail tip of the day. Today we offer up a powerful communication tool for your retail business. The blog. Think of a blog as an online journal where thoughts are communicated and comments are posted by readers. It's like an online conversation. Through blogging, you can engage key audiences directly in fast, honest, conversations and while setting up a blog does have an initial time investment, it can be very effective for your business- no matter what size it is!



Why should your business create and keep a blog in it's marketing cache? 

• A blog is a place where you can share information with customers very quickly. You can also use a blog to generate interest with potential customers and even future employees. By writing a blog on behalf of yourself or your busiess, you can demonstrate your passion and more importantly, your knowledge and expertise on behalf of your business.
• Blogs can help market new products, services or events you have going on at your store on a regular basis. 
• And one of the most important aspects of keeping a blog for your business is that you show the readers the personality of your business. Today, retail is entertainment for many customers, and using a blog to showcase the personality of your store can have customers and potentail customers lining up to see what you have to offer.
• Maintaining an effective blog with effective inbound and outbound links can naturally help improve your search engine ranking

Note of caution: Blogging isn’t right for every store, so it’s consider your objectives and your target audiences carefully before beginning the endeavor.  If you decide you've got information that your customers are looking for, and that you have the time to write and coordinate the blog (or the employees who can help you maintain the blog)  then by all means, add it to your marketing tool box. A blog can be a powerful and effective tool to help your retail business prosper.

All Aboard The Social Media Train....

Congratulations. You've decided that March 2011 is the year you're going to embrace social media and start using it to help your business grow. That's perfect because today's retail tip of the day can help you understand what your challenges might be (or should we call them opportunities to overcome) as you look to implement usage of social media for your business.

1.Strategy first. Using Social media is not a case of build it and they will come. As with any marketing endeavor, you must begin with a strategy that defines your company goals and outcomes.  Ironically, the social media tools are not complex however it’s developing the strategy and finding time to commit to it that sinks many companies starting out. Don’t let this happen to your company.

2. Abolish the fear of transparency.  Anyone who has joined CBCG for a seminar knows we believe that this one is key to your success. As you seek to engage your customers in your social media activities, you may also receive some critical reviews of your brand. Do not hide behind your cyber walls. Acknowledge your failings in the public forum and try to right the wrongs as best you can. You may not ever completely resolve the disgruntled voice, but those who see the interactions and how you are trying to correct the situation will be most pleased with your words.

3. Stand out from the crowd.  Yes, you must have a strategy, but don’t forget, we’re talking about marketing here so you must create activities with your social media marketing that create  differentiation among your peers and help your customers see the value in your company and brand!  

4. Givers gain. Companies must learn that using social media isn’t just about constantly selling your brand. They must learn to have a shared communication with customers and give information that your customers find useful.  Think about a cocktail party- if you listen to someone constantly talk about themselves, you are looking for the exits in a hurry, but if they engage in a two way conversation with you, it’s much more interesting and potentially rewarding.

5.Create Value. It matters to your customers. Make sure you use social media to help your company showcase the value in your brand. It’s not just being there that matters, it’s about delivering value in the eyes of your customers on a consistent basis that separates you from your competitors on a consistent basis.

Knowing the pitfalls can help you as you look to navigate the social media waters. Don't forget the advisors we mentioned last week who can also help you stay focused by offering information, education and inspiration on a daily basis thru their writings.

Do you have a retail social media strategy?

 

In today's retail tip of the day, we want to help you create a working social media marketing plan for your business. Like any good marketing plan, a social media marketing strategy also requires planning, preparation and the right tools, but if you have a well defined plan, you can focus your time to help produce maximum marketing effectiveness for your business.

Where should you be? The first thing you must do is to decide where you should concentrate your social media efforts. For most retailers today, creating a Facebook Fan page is a good place to start. This will give you access to more than 600 million potential people-- both around the world, and around the corner from your retail store. If however, your business targets a very young audience, perhaps using videos on You Tube and using location based marketing programs such as Foursquare or Gowalla would be a good choice.

Remember, the right answer may be to participate in more than one place on social media at a time and have different messages running to attract different audiences on those media sites. You will have to create specific messages for each media to insure they hit the correct target audiences needs.

What is our company goal using social media?  Once you decide where to be, then you must decide what your goals are and determine how to measure those goals. Your social media goals should be tied to your overall business goals? Ie. Do you want more market share for your business? Then your social media goal should be to gain follwers who may then turn into potential customers for the business.

Warning: Many retailers plan a sales increase as their "goal" for using social media. This can be risky. If you focus your efforts on creating mini advertisements all the time and do not work to engage your audience, you run the risk of turning them away from your business permanently. Build credibility and trust first. Then, and only, then, talk about your products in a selling manor.

What will we say about/for our business using social media?

Think of social media sites as another extension of your store selling floor. No matter what social media tools you choose to use, each one offers a chance to engage with customers in a venue that is their choice. (Remember, the reason social media is such a powerful marketing tool is that your customers find YOU there andthey seek to find more information about YOUR store. Unlike the old days of marketing where you placed a message and hoped they found the ad where you placed it!)  If you have a brick and mortar loation, and you are using social media correctly, your customers should get the same feeling when engaging with you online. So if you're funny in the store, you should show that same personality on Facebook or Twitter or your blog.

The goal is to share information, gain the trust and credibility of your followers and to engage them further with your brand to establish or maintain their loyalty.  

A good rule of thumb for posts (what to say) is the 40/30/30 rule. Spend 40% of your time sharing "personal" type information with followers. No, not your street address, but things like market trips, events in town, employee birthdays, customers of the week, etc. Your goal in this phase is to make yourself and your store human so you can build trust.

The next 30% of posts should be about sharing information. This is where you share knowledge- or share other industry experts knowledge with your fans/followers. This establishes that you are credible in your industry and you are doing them a favor by culling all relevant industry information for them. Even if you haven't written the article, your fans will appreciate that you saved them time and found them valuable, interesting information.

Then finally after credibly and trust are established, you can talk (ie.sell) for your business in the final 30% of your posts. If you've done the first two phases well, they will be engaged and want to learn more about the products you sell, the events you are having, etc.  While it may seem like a long time to get to the sales aspect of the business, think about when a customer walks in the front door. You never start out by saying "Can ring that up for you when they walk by the first table or rack, right?" It's the same with social media. Start with "small talk" then build to the sale!

 

How will I measure the results of my time and effort on social media? After spending your time and energy (the good news with social media is that there are less dollars spent than with traditional marketing mediums, but there is the time factor involved) you want to measure results against factors that will drive your bottom line. With every social media site you use, there are analytics that can help you measure your results. Some of them are shown in overall numbers such as the total number of fans, followers or blog readers you have. If you grow these numbers, than you know that more potential customers are following your business.

The next set of analytics involve the content that you publish. In essence, the more views, posts, or people commenting back, mean that your information caught their attention and you have successfully '"engaged" your audience. That is your goal!! Some potential measurement tools for you to review on a regular basis include the number of video or other content views, volume of user comments posted to your blog or fan page, number of re-tweets of your content.

Social media is a fun, engaging, low cost marketing tool which can and should be part of any retailers marketing program today.  The key is to create a strategy that ties to the overall goals of your business and engages your followers with your brand on a regular basis.

Turn your inventory into Gold

Our retail tip of the day today focuses on inventory. It is usually the largest expense that any small business has and yet many retailers do not plan a through purchasing process to maximize the usage of dollars associated with inventory. To maximize your inventory turnover and reduce unnecessary expense on inventory, you must have a plan.

There are many options for you to choose from. If you're a long term retailer, perhaps you've got an inventory purchase system that works for you. Wonderful. Make sure you keep updating your system and checking your stores' overall performance against the key industry benchmarks that are available. The systems out there today keep improving overall performance of inventory- and you should be pushing your store to as well.

For those of you who are new to retail, or for those that haven't done any purchase planning to date,  why not think about having a retail professional help you to set up an OTB plan for your business that will deliver proven results. He/She can help you find the best way to maximize your inventory you do have and not spend too much of your hard earned money on wasted inventory! If you find the right person, their professional advice will pay off almost immediately.

Specialists in inventory planning and open to buy management have had years of experience and can understand even the most subtle nuances of your business. They can translate even the slightest trend data and give you sound recommendations on how to maximize the opportunity at the same time cautioning your progress so you don't spend too much. A professionally managed otb can also help to:

Increase Sales - consistently maximize all key inventory contributors  

Drive Profits - minimize inventory investment; increase inventory turnover  

Enhance Overall Product Mark Up - utilize key retail industry benchmarks to improve mark up and gross margin targets

Improve Cash Flow – optimize inventory investment freeing cash flow for debt reduction  

Improve Productivity Of Store Management – shift time spent on inventory management to building long term strategic sales and marketing efforts  

Create A Proactive Emphasis On Inventory – interpret selling data for future purchase planning decesions

Gain Access To An Expert - an experienced, independent and objective perspective resulting in candid recommendations and action plans  

Should you hire a professional for your otb services, some of the following outcomes are possible:

Sales Growth Typical sales improvements are between 2-5% annually – based on a $500,000 business, that’s an additional $ 25,000 in sales in one year!  

Gross Margin And Profit Enhancement Typical gross margin improvement ranges between 0.5% and 1.0% within the first year - based on a $500,000 business this improvement alone would cover the expenses of running the otb program.    

Inventory Investment Reductions Professional OTB management typically leads to inventory reductions of 8% -13% of average stock while simultaneously increasing sales - as the owner of the business, this adds additional money back into your pocket - almost immediately.

Whatever you decide, your own system, or hired professional, make sure you set plans and goals for your inventory performance. Every business can and should continually look to improve it's turnover, sales and profit performance.

Want to talk to a CBCG team member about OTB services?  Contact us today to learn more.

We're one week in to our March Madness Retail Tip of the Day series. Thank you for all the feedback and for your particpation. Keep the comments coming! CBCG wants to give you as many resources as we can to help your retail business prosper. For today's retail tip, we offer a list of additional resources where you can go to look to for answers that can help you and your business. The list is just the tip of the iceberg, but we find the people listed have great insights and they help us to help you even more with their wisdom and knowledge! Enjoy!  

Social Media:

Mari Smith - Facebook Guru/Expert who can simplify even the toughest new editions to the program

Chris Brogran - Author of Trust Agents, great writer on the how's/why's of Social Media

Marketing/PR:

Duct Tape Marketing - John Jantsch has lots of insights and information to help any size business

Seth Godin - Author of the Purple Cow. Thought leader on marketing and consumers

Helpareporter.com 3x daily newsletter where writers are looking for subject matter experts to comment for their articles. Want to get your store in the press more often? Sign up today for this great newsletter.

Retail Industry Websites/Blogs:

CBCG Retail Report (we certainly think this one is helpful, it's ours!)

National Retail Federation (NRF) - free daily newsletter gives you quick pulse of broad range of retail industry

MarketingProfs - Subscription based service that has numerous articles/white papers/seminars across every subject area

TopRank Online Marketing Blog- written by Lee Odden This one is all about blogs. From every angle. All the time.

I could go on and on, but I think you get the point. There are a variety of resources at your disposal to help you with your retail business! We're all here to assist you as you grow your sales and profits!

Is Your Retail Business Social?

1. Social Media is great for businesses of all size. Using social media, small and medium-sized businesses can create marketing campaigns that are able reach large numbers of potential customers but at a fraction of the cost. However, Social Media is not a silver bullet. It must be integrated into an overall marketing campaign and deliver a message that supports the brand and that is focused on achieving a business goal. Note: The costs in dollars for social media may be low, but the cost incurred may be a steep one. Its time. You (or your employees) must be willing to commit the time to social media to achieve the results you desire.

2.Listen and you shall hear. Using social media is a great way to listen and communicate what your prospects and customers are saying about your business. Listening to the online chatter for your brand is critical at all times. Not only can you hear good news and nice things being said in real time to share with other prospects or customers, but you can also deal with potential unsatisfied customers in as timely a manner that can go a long way putting out a fire before it becomes an inferno. 3. Social media can dramatically influence buying decisions. In the past, customers looked for product feedback from trusted friends and influencers. Today, consumers take to the internet seeking online opinions – and as we mentioned earlier – many times from people they have actually never come face to face with. But don’t be fooled, the recommendations of “strangers” can have as dramatic affect on purchasing decisions as a referral from their own brother or neighbor.

4. The More the Merrier. Through social media, businesses can reach a significantly larger pool of potential customers. And while many companies might not be able to increase their physical space, they can afford to increase their online “space” to reach new markets and thus new customers all the time.

5. Social Media creates effective WOM (Word of Mouth) strategies– As we know from traditional marketing approaches, satisfied customers are more than happy to give referrals for a job well done or products they love. Creating a process which uses social media to spread word of mouth referrals for your business can deliver your referral efforts both farther and faster (upwards of 1000 fold more people!) than your current traditional WOM campaigns. That alone is worth the time and effort for your business to use social media!

Need more reasons to use social media for business? Email me directly. I've got to convince you about this powerful marketing tool that can and will help your business grow.

March Marketing Madness Starts NOW...

Today is March 1. It's the start to March Marketing Madness. Every day this month, you'll get tips on all things retail that can help your business grow. Some quick lessons (as in less than 140 characters worth on Twitter) or some longer posts on topics that need more attention for your business.

Make sure to join the CBCG Fan Page or follow us on Twitter as that's where the tips will come. We'll also be offering long tips and articles on our CBCG Retail Report blog so check back often. Let's have fun with the tips and most of all, we hope you learn some tips and tactics that you can use for your retail business.

And don't forget to let us know how we're doing- and what you want to see. We'll add as much content as we can to help you and your business.

So here we go.. The Tuesday Retail Tip of the day is:

Review store selling every week. Determine best sellers to re-order and slow movers that must be liquidated on a regular basis so that your inventory is fresh at all time. As inventory is the biggest expense many retailers have, you must take the time to review what is working and what isn't on a weekly basis so you can make adjustments going forward. Slow moving inventory is one of the largest challenges small businesses have. It hurts cash flow as you've already paid for the merchandise, yet it is sitting on the shelves unsold. By creating a strategy to liquidate these slow sellers, you can free up cash to bring in more of what you have identified as a best seller and to try some new items that your customers might like better. Run a selling report today and see what it says! You might be surprised.