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More Tough Times Advice

Help! I hear that shopping malls are all but dead. Is this true?
I would not exactly say that they are dead. However, I would agree that they are experiencing difficulty attracting new customers and keeping the ones they have. The articles and reports that I have read attribute this situation to a lack of creativity on the part of the mall shops as well as the mall management. The shops expect mall management to pick up the tab for advertising and promotion and vice versa. Meanwhile, rent costs and other fees are escalating and sales are not generating enough revenue to make the business viable. This is not true of all malls. Some are aggressively promoting themselves and attracting both new and existing customers. Those malls have management that recognizes the importance of creativity for building and maintain strong business.
There is a lesson to be learned by this experience. First, individual stores should bear responsibility for their own marketing and advertising. I have advocated this position since I began my career. Then, if mall management contributes with additional programming, the retailer receives a double benefit. Secondly, retailers who are not attached to any mall can capitalize on this situation by becoming creative and using the opportunity to entice mall shoppers to visit their establishment. It has been my experience that shoppers will support retailers who meet their needs whether or not the store is positioned in a mall. Focus on your customer and the benefits that you provide. Shoppers will go where they are welcomed and receive value for their money.
There is a lot to analyze when a mall has difficulty attracting customers (or any store for that matter). The key is to learn from the experience and offer what the competition does not. If you cannot adopt some of your competitor’s programs, focus on being the absolute best at what you do and never stop telling your customers about it. If you don’t blow your own horn, who will?

Help! We have had to be so promotional last season that I am concerned customers will no longer pay full price. Do you think we have seen the end of promotional pricing?
Promotional pricing has always been and will always remain a part of any well constructed business plan. Last season presented some difficult challenges and most retailers took the promotional route “across the board.” One of the problems with this strategy is obvious. If you never take your items off sale, the customer will expect the sale price to be the regular price. This will alter your image from whatever it was previously to that of a promotional store.
To break this cycle, I suggest enforcing a time-frame for all of your promotions. Unless the purchase was a “special-buy” from the vendor that enables you to establish the regular retail price and then lower it to the new promotional (permanent or everyday) retail price, all sales should have a “start” date and an “end” date. In addition, rotate your promotions. If you continually promote the same categories, classifications, or items, customers will easily figure out your cycle and just wait for the next sale event.
I also suggest creating a promotional calendar that stretches over a twelve-month period. This will help you to plan categories and items in a more timely fashion and avoid a frequency pattern that would create the situation I already mentioned.

Help! Should we cut back our market trips? We go to market four times per year in lieu of seeing sales reps in the store. Now we are considering scaling back the expense. Is this wise?
There are a few problems with your thought process. I agree that you should be looking at your expenses very carefully. However, do not cut for the sake of cutting. Market trips are valuable and you should continue to visit the market as needed. To ensure that your market trips do not become a needless expense, I suggest doing a bit of homework prior to your visit. Be sure to have an accurate open-to-buy on hand that is projected over at least three months. That will enable you to stay within your budget and take advantage of any “forward-buy” opportunities that may be present.
Make a list of vendors that you would like to visit. Do not waste time writing orders that could be written at home (basic items, for example). Complete those orders in the shop and mail them to your sales rep or vendor. Spending time riding elevators and escalators to drop off paperwork is counterproductive unless you need to visit the vendor to view new merchandise or discuss other business. In addition to doing your day-to-day homework to prepare for the market visit, be sure to schedule appointments whenever possible. Following an appointment list and an agenda is an excellent use of your time.
One area that disturbs me is your comment about visits from your sales reps. Sales reps can be invaluable to you if you use them properly. While it is true that every sales rep wants to write an order, it is also true that sales reps are a wealth of information. They visit many stores in their territory and can offer creative suggestions for solving problems, merchandising product, advertising, and sales associate training. Successful buyers (and successful sales reps) are interested in cultivating and maintaining good vendor/buyer relationships. If you do have sales reps that are not helpful, I suggest calling a meeting to inform them concerning what he or she can expect from you and what you expect from him or her. Your current thought process is short-sighted and will hurt you in the long-term. The function of a sales rep is to sell. The function of the buyer is to buy. The melding of both though processes creates an atmosphere of understanding and cooperation if the parties view each other as partners and not adversaries.

Help! We are usually open for every evening. However, our evening business has fallen off and we only do business three evenings during the week. My employees requested that I close the shop on the slower nights. I disagree because I believe business will return. What is your opinion?
You do not mention whether or not you have tracked your business over a specific period of time. If you have not, I suggest analyzing your evening performances over the past few months. If business has faltered, I would agree with your employees and close on the slower evenings. Although I do agree that better times will return, now is the time to closely examine all expenses and trim where you can.
 
Help! I have heard the term “step discount” but I cannot remember what it means. Can you explain this term?
This has become one of the most frequently requested explanations I respond to each month. Step discounting refers to a program that is directly tied to the size of the purchase. For example, if the minimum order is $250, there would be no additional discount for purchasing the minimum. However, if the purchase exceeds the minimum and reaches another level (perhaps $500), a discount would apply (possibly 5%). A purchase of $501 to another level might reward you with a 7% discount. The levels can vary and the discounts usually range from a low of 3% to a high of 10%. This is only one of many promotional ideas that help to increase business. I suggest brainstorming to generate a few of your own ideas. Then, share them with your vendors. Remember, if you do not ask, you do not get. This economy calls for bold programs and vendor/buyer cooperation. The way we used to do business must change if we are to turn this economy around and move forward. No idea should be considered silly or stupid. Every idea and concept should be discussed and evaluated. Some of the craziest ideas have developed into phenomenal success stories.

Help! How promotional should we become to attract customers? We place high suggested retail on our merchandise so that we can enjoy higher margins and offer a larger discount for our customers when our items are on sale.
While promotions are and will remain an important aspect of business for the foreseeable future, one must not lose sight of the fact that price is not always the issue. I think that value is more important than price. Promotions may drive customers to your store or to your web site. However, if the merchandise lacks value, the customer will reject it. If shopping in your store is not a pleasant experience, the customer will not return. If your web site is too difficult to navigate, it will not produce a satisfactory return for you. Inflating the retail in order to establish a higher “regular price” for promotional comparison is not only unethical, it is foolish. My guess is that you do not sell much at the inflated retail. Therefore, you are not receiving any margin benefit. Customers are pretty sharp and cannot be easily fooled.

Help! We are having difficulty locating talented people to help us with product development. Can you suggest ways for us to attract creative people?
I am familiar with your company and, most importantly, your company mode of operation. The reason you are experiencing difficulty is because you have not treated your previous free-lance staff with respect and you have abused your relationships. Your style is to “pick the brains” of good people and then toss them aside when you are ready to move on.
In my opinion, the only way you will be able to attract good people is change your ways. This may take some time since you have spent years developing the negative reputation that is causing you difficulty. I suggest focusing on developing a “win-win” situation in your business relationships. When all parties involved feel they are being treated fairly, business flourishes.

 Help! In an effort to save money we discontinued our employee discount program. Was this a wise idea?
The fact that you are asking this question tells me that you are feeling guilty about your decision and already know the answer. I would be surprised if the amount of employee purchases was sufficient enough to negatively impact your bottom line. Reinstate your program and be careful about adopting programs that will negatively impact employee morale. When employee morale suffers, business suffers.

Help! We have cut our expenses to the bone and are watching everything carefully. We are so cautious that we concerned about keeping our inventory balanced. Do you have any suggestions?
I commend you for taking such an aggressive stance with expenses. When our economy does turn around, I advise keeping that same discipline in place. You did not mention anything about open-to-buy in your letter. Monitoring your open-to-buy each month is the way to keep your inventory in line. I suggest projecting your open-to-buy over a three month period. Then, at the end of each month, you can compare your results to your plan and determine if you need to purchase more merchandise or mark down your inventory to promote sales. Consider your open-to-buy as your “check book.”
The next report that should be in front of you is your cash flow statement. Monitoring your cash flow will permit you to be aware of tight months before they happen and give you time to strategize about ways to correct any problems.
 
Help! With the demise of newspapers in the future, how do you suggest we advertise?
 Although newspapers are suffering and some have ceased to operate, I do not think that we have seen the end of newsprint. It is still a viable avenue for communicating your message. I suggest analyzing all of the news vehicles circulated in your area. You may be surprised to find that the ones you previously thought to be marginal are actually receiving excellent readership. Many communities support their local newspaper or a local “shopping guide.” These vehicles tend to have competitive rates and strong readership.
Other possibilities are cable TV advertising and radio. I have found local cable TV rates to be very competitive and radio to be a good choice for announcing special events (providing you purchase “drive time”). Direct mail promotions have proven successful but can become costly unless you are using your own in-house customer list. Coupons have made a strong return and work well in a newsprint offering or a direct mail vehicle. Whatever you choose, remember to negotiate. Just because you are shown the current price sheet does not mean there are no “deals.” Everyone is struggling right now and anxious to get business. Discuss plans that will reduce your overall cost while still providing you maximum exposure. Changing a paper style can save a considerable amount of money when designing a direct mail vehicle. Developing a six or twelve month advertising plan can save you money over the cost of a single advertisement. Although you may be tempted to invest in larger ad space, work with your ad rep to create the “most bang for the buck.” You may be able to get your message across in smaller ads which will leave you additional budget dollars for future ads as opposed to spending the majority of your budget on a single ad. The worst thing you can do in this economy (or any economy) is to completely shut down your advertising campaign. You must keep your name in front of the customer as frequently as you can afford. In that way, when a customer is ready to make a purchase, he or she will return to your store. If you “disappear” until the economy shows improvement, your decision may create an “out of sight, out of mind” situation and your customers will go elsewhere to make their purchases.
 
Help! We read so much about the luxury market that we are thinking of pursuing it. My partner says I am crazy to think of changing course for our shop at this time. What do you think?
 Actually, I support both of you. I commend you for not running around with a “chicken little complex” screaming, “The sky is falling, the sky is falling.” It is true that growth can come during difficult times. Your partner’s concern is justified. It is difficult to find any credible encouraging news about the economy. As in the past, no two economists agree on the path to take or how long we will follow the current road. Since we cannot rely on a consensus, the best advice I can give is move cautiously.
 Since you are looking to enter uncharted waters, it is best to do some homework. If you do change your image, the transition should be gradual. However, before you do anything, survey your trading area to see if you have the clientele to support your new venture. Map out a radius of 5, 7, and 10 miles from your store location. Then, get in your car and drive through all of the neighborhoods that are covered by your territory map. Do enough potential customers live in those areas? Are there enough “upscale” homes in the projected areas to support your luxury theme?   If the answer is “yes,” I suggest developing a plan. Devote about 20% of your open-to-buy for this new category. By taking a “crawl before you walk” attitude, you will be able to gradually introduce your customers to the higher-end merchandise without scaring other customers away. If the change is too rapid, you may lose your existing base before your new base is firmly in place.
Your letter suggests that you wish to completely focus on luxury merchandise. I do not think that strategy is a good one or you. Since you have enjoyed strong support from your existing base for so many years, why can’t you offer the “best of both worlds?” I suggest stepping back a bit, analyzing your opportunities, developing a plan with your partner, and moving forward slowly. Note this last thought carefully...moving forward ... slowly...and with a plan.
 
Help! I am very frustrated. I created a very workable business plan that took into consideration a weak economy. All but two areas are performing close to the goals that I set. Our sales are nowhere close to the plan and I want to take the sales manager to task for this. Is there a way to do this and not antagonize him? I don’t want him to leave the company; I just want him to perform better.
 You letter tells me you are pointing the finger at the wrong person. If I understand you correctly, you should stand in front of a mirror and reprimand yourself! You committed the cardinal sin of planning. That is, you and only you created the plan. In my opinion, this means the plan is yours and you should not expect others to accept ownership of your strategies. All planning should be a team effort that includes the heads of specific departments, the executive level of management, and the day-to-day employees. If everyone plays an active role (especially by department) the ownership of the plan is shared. If you force a plan onto any one person or any department, you are asking for failure.
 If your sales manager was not asked for input, or if his input was ignored, he has every right to tell you that the sales projections are yours and not his, and he would be correct.
Business plans are not meant to be cast in stone. They must be flexible enough to move with the times. That is why I always suggest monthly reviews of plan progress. Frequently examining the plan will enable you to act quickly when the plan is under performing or over performing (over performance can also cause problems if not addressed properly). Armed with this new information about plan flexibility, I suggest calling a meeting of all managers that should have been involved in the planning process. It is time for you to be a little self-effacing. Admit your error and ask each manager to review the existing plan and submit a revised edition. This approach should reap rewards. Firstly, your management will respect your maturity and leadership. Secondly, they will roll up their sleeves and produce a document that is more realistic than the current plan, and thirdly, they will take ownership of the new plan since they have participated in its creation. Then, and only then, can you hold anyone responsible for failure to meet the goals that were submitted. On a positive note, you can also shower praise (and you should) when goals are met or exceeded. Planning is an art that requires teamwork. It should not a document that just appears on one’s desk as a directive from a single planner. Nor should it be a “hammer” for nailing someone’s feet to the floor to “perform or be replaced.” You should think long and hard before replacing employees. It costs much more to find and educate new ones than it does to retrain and motivate existing ones. In your situation, I think the problem is your approach to planning. Change your approach and see if attitude and performance change for the good. If they do not, then take a harder look at your team.
 
Help! How can we motivate our sales reps? Times are tough and we do not want to be too demanding.
 Motivation and demands are two completely different concepts. Demands will only be viewed as “rantings.” Programs that motivate create excitement and enthusiasm. I suggest speaking with your sales reps and/or rep principals to obtain feedback. Ask questions about individual territories, and illicit suggestions about how to excite customers as well as the sales reps. It might be good for you to offer to visit key accounts with your sales rep so that you can learn firsthand what the customer is desiring. It is very powerful if you can meet those requests “on the spot.” Visiting the territory with your sales rep can be quite a learning experience.
I would also like to suggest spending time at the various trade shows. Trade shows are an excellent opportunity for training sales reps, learning about their “typical” day, and listening to customers. Years ago, there was a movement that encouraged “management by walking around.” It is time to revive that concept. You cannot direct your business from behind the desk at a few hundred or a few thousand miles away. You must get into the trenches with your people so you can understand what they are experiencing. Whether it is sales reps, customers, your office personnel, or your warehouse personnel, the more you understand about their daily challenges, the better prepared you will be to assist in addressing key issues and building business.
 
 Help! Can you suggest the five most important things we should be doing during this difficult economic period?
Since I do not know the current condition of your business, I can only respond in a general manner. Assuming you have closely examined expenses and have a business plan in place, I suggest talking to your sales reps frequently, talking to your customers frequently (especially “key accounts’), and talking to your employees (especially the customer service and credit departments). Then, visit (if possible) or speak with your suppliers. If there was ever a time for vendor-buyer relationships to be strong, now is the time. The fifth thing you should do is look at your marketing plan. Never stop putting your name in front of the customer. You may not have the financial resources to advertise as strongly as previous seasons, but you should not eliminate the budget completely. Eliminating advertising is the same as taking the sign off of your business establishment. How can customers find you if you hide yourself? Getting the word out about who you are and what you sell is your lifeline.
As a hospital gift shop we have unique challenges. We have rarely visited the markets and rely heavily on our sales reps. However, due to the expense of covering their territory, many of our reps are passing us by. What can we do?
Some sales reps have decided to cut back on visiting accounts that are not profitable. In other words, accounts that make small purchases are visited less frequently because the expense is not offset by the order generated. Although I disagree with this practice, I understand the rationale and the reality for making such a decision. This does not mean you cannot receive good service. Ask your sales rep for the name of your customer service person at “headquarters.” Perhaps you can call that person when you want to place a reorder. Better yet, call your sales rep rather than wait for a visit.
Part of your problem is that you do not visit the markets. This is a huge mistake. You should have a good balance between market visits and in-store sales rep visits if you expect to be successful in this economic climate (or any economic climate). You can’t sell from an empty cart and you need to discuss this problem with your management. Hospital gift shops are very lucrative and your approach to buying is severely curtailing your growth opportunities. Prepare a travel budget and submit it to your supervisor for approval. You are really missing out on many opportunities by not going to market.

Michael Russo is president of the Gift Association of America. He gives numerous seminars on retail operations annually. He can be reached at Gift Association of America, 115 Rolling Hills Rd., Johnstown, PA 19505-5225; 814/288-1348; e-mail info@giftassn.com.

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