Re-Inventing Retail

"The Hacker Way" at Facebook: Sounds a Lot Like a "True Merchant"

2012-02-02T10:14:00.000-08:00

In the 197 page prospectus for Facebook's IPO is a "letter" from founder Mark Zuckerberg. He devotes nearly one-third of his letter to explaining what he calls "The Hacker Way" at Facebook.

"In reality, hacking just means building something quickly or testing the boundaries of what can be done."

"Hacking is also an inherently hands-on and active discipline. Instead of debating for days whether a new idea is possible or what the best way to build something is, hackers would rather just prototype something and see what works."

Parallels to Retailing: "The Merchant Way"

Zuckerberg goes on to explain how The Hacker Way affects the product development and management style at Facebook (where "Done is better than perfect" is painted on the walls.) Given the magnitude of Facebook's $5 Billion IPO, we will be hearing much more about The Hacker Way.

As we read about it, we were struck with its parallels to retailing. In our view, anybody can be a retailer, whether they are running a garage sale, selling on eBay, or owning their own shop.

But only a few in retailing are true merchants. Perhaps this should now be known as "The Merchant Way"?

First, merchants have a bias for action. That is a signature characteristic of merchants. "Get the merchandise out on the floor (or up on the site). Let's see what the customers like...ASAP!"

Then, just as important, the need to continually adapt and adjust. And to be dispassionate about it! "Hmm...that didn't sell like we thought it would. But - look what we ran out of over here! Who knew?? Okay, here's what we're going to do. No matter what we thought of the first item, it's a dog. Mark it down. Get it out of here! Now, whether we personally like it or not, let's re-order this hot item."

Merchants also show relentless resilience, adaptability, and optimism.

We encourage those who celebrate "The Hacker Way" to also pay their respects to all the true merchants among us, those who practice The Merchant Way in retailing.

Get Perspective - Now! Latest Benchmarks for 6 Key Ratios, plus GMROI

2012-01-18T07:29:00.000-08:00

The Retail Owners Institute is known for its display of key business performance benchmark data for 50+ retail segments, from hardware stores to bookstores, to clothing stores, gift shops, wine stores, music stores, furniture stores, tire dealers, and more. These now have been updated with the latest figures for 2011.

The Institute has identified the 6 Key Ratios that are most important for retailers to monitor. And, it has charted and graphed the 5-year trends of each of these key ratios for each retail segment.

Turnover
Gross Margin %
Pre-Tax Profit %
Debt-to-Worth Ratio
Current Ratio
Return on Assets %

Go here to see benchmark trends for your retail segment.

Plus, The ROI has calculated GMROI (Gross Margin Return on Inventory Investment, the #1 measure of inventory productivity) for each of the 50+ retail segments. Go here. Find the GMROI for your retail segment. How does your inventory productivity compare??

How Can These Benchmark Numbers Be Used?

First, for perspective! Caculate these ratios for your own business, and then see how you compare to your retail industry segment.

Second, use these benchmarks when you are setting your own target ratios for the next year.

And third, you should know that whenever you are seeking a bank loan for your business, the bankers will look at industry benchmarks such as these as they assess your store's performance.

Go here to see how your store compares!

"How high is up?" Moreover, "How LONG is up?"

2011-12-14T17:20:00.000-08:00

In the world of retailing, every December is fascinating, challenging, and - especially when the results are positive! - even thrilling. And this December is no exception.

For whatever reasons, the all-important consumer confidence index continues to rise. And retail sales are far stronger than expected just months ago. In fact, November was the 6th consecutive monthly increase in retail sales! It now appears as though they will maintain this robust nature through the end of this month.

Retailers are basking in this "It's all good!" moment. And, with sales being up more than expected and inventories held in check, margins are likely to be higher. All in all, one of the best Holiday Seasons in years.

So, we ask, "How high is up?"

Our estimate today is "Not very high." But more to the point, "How long is up?" That is, can this level of growth be sustained?

We think not. We anticipate that the first two quarters of 2012 will look a lot like the first two quarters of 2011, bleak for retailers. Retailers should relish this fine Holiday Season, but must go into Q1 and Q2 of 2012 with discipline and restraint.

It has been noted that consumers, who on the whole have had more debt than assets for awhile, got religion from recession-fear. For the last 2 years, they have steadily reduced their family debt burden.
Then, this Fall, while incomes have been stagnant, consumers started to put more spending on credit than they paid off. And apparently they are continuing that trend through the Holiday Season. My, what short memories we have!
The unresolved European debt crisis is looking very, shall we say, "European". It lacks a needed sense of urgency.
For every job opening in this country now, there are, on average, 4.25 applicants. In healthy times, it's closer to a 2:1 ratio.
Moreover, those folks in Disneyland-on-the-Potomac seem frozen in a "Wait for the election!" mentality.

All in all, very disappointing. Especially for retailers as we start a new year. We expect the optimistic consumer confidence to be ephemeral.

Enjoy it while you can, but don't get too used to it.

Tired of the Mystery and Voodoo Around Open-to-Buy? So Are We!

2011-11-14T15:30:00.000-08:00

Most retailers have heard of the inventory managing tool "Open-to-Buy". (BTW, "Open-to-Buy" is slang for a budget for how much inventory to bring in, and when.) But all too often, Open-to-Buy has been shrouded in mystery. Too complex and/or too expensive.

Those days are over! The Retail Owners Institute is on a crusade to spread the word: Managing and controlling inventory IS within the reach of all retailers.

Here's the deal: Open-to-Buy is just a 4-part formula! And any retailer, anywhere, can put that formula to work, on their own!

What can an Open-to-Buy do for a retail operation?
    •    improve margins
    •    improve cash flow
    •    reduce the time spent on inventory management
    •    help have the right merchandise in your store at the right time
    •    avoid excess inventory
    •    invaluable when delegating to buyers
    •    help you sleep at night!

How Does The ROI Take Away the Open-to-Buy Mystery? Here Are Four Answers!
The ROI is the foremost resource for retail financial training and know-how. The Institute is dedicated to taking away the mystery of retail finance. Retailers CAN control the cause-effect connections between sales, margins, expenses, profits, inventory turns, and cash flow.

Here are 4 different ways (free or very low cost) that you (or your staff) can learn more about controlling inventory with an Open-to-Buy plan.

#1. Free TOPICAL TUESDAY webinar
November 15. 10 am Pacific Time/ 1 pm Eastern Time
"Back by Popular Demand: CONTROLLING INVENTORY LEVELS"
Free registration • Go here
About 80% of retailers are over-inventoried some or all of the time. As we approach this particular Holiday Season, having excess inventory may be especially treacherous.

Right now, controlling inventory is the #1 job of the CEO or owner. This live TOPICAL TUESDAY webinar with Pat Johnson & Dick Outcalt, Co-Founders of The Retail Owners Institute, will review the basics of inventory management, and show how The ROI's online multi-department Open-to-Buy Calculator automates the number-crunching for you.

There will be plenty of time for Q&A, so bring your questions (and your buyers!!) Go here to register for free

#2. On-demand info on The ROI site: CONTROLLING PROFITS, INVENTORY & CASH FLOW
This is an entire section at The ROI, dedicated to this major responsibility of retailing. Available online, 24/7, on-demand. Explanatory how-to articles that reduce the mystery. Short videos that teach, explain, and illustrate. Online calculators that automate the process (nothing to download or install; they just work!)

#3. The OPEN-TO-BUY CENTER
This is one of the new "special purpose portals" of The ROI: an entire website dedicated to Open-to-Buy! The remarkable multi-department Open-to-Buy Calculator is hosted here. Any retailer, anywhere, can do their own Open-to-Buy plans in just minutes. (Try it yourself! 1st month is just $4.95!)

And, if you need some refresher, the Open-to-Buy Center includes articles and videos. Just look under the RESOURCES tab.

#4. BASICS of OPEN-TO-BUY eLearning Kit & Calculator
Want more structured training? Need to train your staff in Open-to-Buy? Here's the perfect answer!
The BASICS of Open-to-Buy is a self-paced, online eLearning "KIT": a step-by-step how-to training course, and an online "calculator" that automates the cause-effect number crunching.

Talk about doing away with the mystery! And it's needed more now than ever before! Go to The ROI's eLearning portal for details about this new management training tool for retailers and buyers. (Be sure to watch the short video about the BUYING PLAN Forecaster!) "Learn it. Do it. Profit from it!"

There you have it. Four different ways that you and your staff can make Open-to-Buy planning your new best friend! Just depends on how you like to take in information. But the key: no more mystery about how much to buy, and when. (And, no more intimidation by "the experts".)

Who's Job Is Growing? The CUSTOMER's Job!

2011-10-24T12:25:00.000-07:00

Think about cost-savings programs in stores - e.g., less staff on the selling floor and more "self-service". Self check-out by the customer. Online searches by the customer for product information. Online shopping.

Don't each of these actually shift the work to the customer?

The "job" of being the customer just keeps growing. (In fact, some grocery stores are starting to experiment with programs "allowing" the customer to scan the merchandise, place it into their shopping bag in their grocery cart, and then automatically ring up the total charge and pay via debit card - all using the customer's time, effort, and smart phone! "Attention Shoppers: Bring your own cash register.")

Where is the "value" for the customer in all this?

Reflect for a moment on the definition of "value". Value: Benefits received, for the burdens endured.

Certainly, many of the shopping burdens have been shifted to the customer, especially with the onslaught of new technology. But, what benefit does your customer receive for the increased "burdens" they now endure?

Some enjoy cost savings. Others like the increased sense of control. Still others may relish the time savings, or at least not having to wait for service. But of course, not every customer has the same concept of a "burden".

Want to deliver more "value" to your customers? Start by understanding what your best customers consider the burdens of shopping with you. Then, as a competitive edge, unburden them the best way you can!

Retailers: Have questions? Want answers? Join online TOPICAL TUESDAYS webinars - FREE

2011-09-07T10:51:00.000-07:00

Success in retailing demands a competitive edge, and there are many ways to do that: product selection; pricing; customer service; location; instore "experience"; services; etcetera; etcetera.

But, retailers fail for only one reason: financial.

For eleven years, The Retail Owners Institute has been dedicated to providing any retailer, anywhere, with financial management know-how to avert financial failure.

And now, that effort continues in yet another way. We are launching a series of TOPICAL TUESDAYS webinars for retailers. Led by Pat Johnson and Dick Outcalt, Co-Founders of The Retail Owners Institute, these are timely and interactive. And FREE!

Free Registration is Now Open
Here are the upcoming topics. Register now for as many as you wish. Let your friends and colleagues know about them. And be sure to bring your questions!

"Make More with Less! The Power of GMROI"
Tuesday, September 13 10 a.m. Pacific Time/ 1 p.m. Eastern Time/ 6 p.m. in London
click here for details & free registration

"Is My Store Failing, Or Am I Failing My Store?"
Tuesday, September 20 10 a.m. Pacific Time/ 1 p.m. Eastern Time/ 6 p.m. in London
click here for details & free registration

"The BASICS of Open-to-Buy"
Tuesday, September 27 10 a.m. Pacific Time/ 1 p.m. Eastern Time/ 6 p.m. in London
click here for details & free registration

"Will you have a profit…or a loss?! How to Know"
Tuesday, October 4 10 a.m. Pacific Time/ 1 p.m. Eastern Time/ 6 p.m. in London
click here for details & free registration

Timing Is Everything!

2011-08-09T16:12:00.000-07:00

The current economic meltdown, while fearful, is beautifully timed for retailers!

Sure, consumer confidence is down. Businesses aren't hiring. Nobody is lending money. But so what?!

The first ten days of August - unless you sell beer - are the absolute dog days of the retail year. As long as world leaders are getting their abrupt comeuppance regarding their fiscal irresponsibility, the timing for retailers is perfect.

Consumer confidence, although presently in the tank, is fickle. In six weeks, or by the holiday selling season, it could be at the highest in years. This kind of crisis brings leaders worldwide to a new sense of urgency. And we have high hopes that they all have gotten the message.

Retailers - be grateful for this timing. And reassure others to do likewise.

Creative Crisis Management Must "Pencil Out"!

2011-07-28T20:52:00.000-07:00

The Internet for Retailers: "The Arab Spring of the Commercial World"

2011-07-09T09:15:00.000-07:00

There's a major sea change affecting retailing right now, whether we're ready for it or not.

Sea changes have hit retailing in the past, of course.

Department stores once ruled retailing. Ah, but they didn't die. Instead, they went horizontal. They became known as Wal-Mart, Costco, Target, etc.
Then "big box" stores, like Circuit City, Borders, Toys R Us, etcetera, stole the thunder from malls.
In fact, there was a time when malls essentially had no vacancies. Now, they are being "re-purposed". Retirement homes, anyone? Charter schools?

But the current upheaval affecting retailing may be the most game-changing of all: the Internet. It continues to dramatically change the retail industry, at an increasingly fast pace. It's the Arab Spring of the commercial world!

All those things that specialty retailers prided themselves on delivering in-store, in-person, are now available on-demand, 24/7 to the shopper via their smartphones.

No matter which consumer segment you target, they are increasingly web-reliant. They depend on the web to give them product information, shopping recommendations, price comparisons, store reviews, and more.

For hints of the future, watch the Millennial Generation. Yes, the "Digital Natives". The ones we know only from the tops of their heads, as they are busily texting.

That group now is larger and more influential than the storied Baby Boom generation that drove so many adjustments during the last 50 years. Watch every shopping decision they make: how, where, when and what they shop.

But don't stop there. All other consumer segments are being affected by the sea change as well. Grandmas buying off tablets? Baby Boomers checking prices from INSIDE a store on their smart phone?!

In fact, the fastest growing group of Facebook users is now the over-50 age group. So much so, that the teenagers are deciding to move away from Facebook. Where will they land?

So, which will it be for you?
There are three kinds of retailers:

Those who make things happen.
Those who watch things happen.
And those who say, "Uhh, what happened?!?"

Don't let the internet - the Arab Spring of the commercial world - turn you into retailer type #3.

The 5 (only!) essential financial levers of a retail business

2011-06-15T13:59:00.000-07:00

Now Available in The Retail Owners Institute^® eLearning Portal

The Retail STRATA:G^® Kit
(That's "strategy". Every retailer needs one!)

Fact: Every retail business has only 5 essential financial levers. Not 50. Not 500. Just five. Manage these, and you can maximize your future.

Fact: These 5 financial levers are linked. They're integrated. Inter-connected. Changes in one impact all the others.

Fact: Connecting these 5 financial levers has now been "automated". The ROI has developed breakthrough "in the cloud" calculators that "connect the dots". Now, any retailer, anywhere, can produce fully-integrated financial plans for profits, inventory, and cash flow!

The Retail STRATA:G Kit reveals these 5 essential levers, explains how they work and why they matter, and then provides the "calculators" that automate the process for any retailer, anywhere.
Click here for more info.

See how retailers can learn - then use - the basic financial levers of a retail business.

What People Say About the Retail STRATA:G Kit

"Our retailers need help with inventory control and cash flow, and how to make better business decisions. Your courses are right on point."
--Manager, Field Business Consultants, National Franchiser

"I want all 28 of our S.B.D.C. Certified Business Advisors to use this whenever they are working with a retailer."
--State Program Director, Small Business Development Centers

McDonald's Remodels - Again! (And for WHICH Customer?)

2011-06-09T17:53:00.000-07:00

You probably saw the news. McDonald's is launching a $1 Billion "makeover" of their stores.

The remodeled restaurants will replace bright reds and yellows with subtle colors. They can feature flat-screen TVs, lounge chairs and electric fireplaces. They also are adding free Wi-Fi in most of its U.S. restaurants. Thanks to "seating zones", customers who want to linger will be separated from those who want a quick bite.

What does this mean - or matter - to independent retailers? Simply this: heightened expectations!

When was the last time your store was remodeled? Or, put another way, how many fast-food franchises in your town have been remodeled since your last update? If the price points on your merchandise are somewhere north of a Big Mac, but your store's look places you squarely in the Bush Administration, it may be time to reconsider how you are re-investing in your business. The customers expect no less!

Will McDonald's Remodel Chase Away Families?
Some observers have assumed that this makeover is meant to appeal to laptop-toting workers, and worried that it would drive away the families-with-young-children who depend on McDonald's as a reliable place for food their kids will eat. After all, as her kids run around, how many scowls from someone hunched over a laptop can any mom endure?

Our view is that this remodel is focused on a different market segment: teenagers! Think how Starbuck's has become a cool place for teens to hang out. What if McDonald's could attract them back? Offer a more "grown up" atmosphere, flat screen TVs, Wi-Fi for their texting - and those fries - might McDonald's become a cool place for teens?

The "Theater of Retail"
The "look" of your store says a great deal. It IS an arms race, no question. Once you accept that you need to remodel with some frequency, be certain to keep focused on that customer you most covet. Then make your store a place where that shopper wants to spend her time (and her money!)

Retailers' "Digital Divide"

2011-06-02T14:56:00.000-07:00

According to a research study, mobile shopping from a smart phone "is more frustrating than sitting in traffic or visiting the D.M.V." Get this: Some 85% of the shoppers interviewed expect the shopping experience on their phones to be as good or better than on a computer!

Wow! That's quite a high standard!

The pressure for retailers is relentless: build e-commerce websites optimized for the small screen. And while you're at it, create shopping apps. It is an arms race that just keeps escalating.

Happily, a fast pace and rapid changes are not new to retailers. (In fact, that's what attracted many of you to retailing in the first place!)

As you take on these challenges of integrating new technology into your operation, remember to take advantage of "in the cloud" services. These let you experiment without a major investment in hardware/software.

Just remember: "Don't let the perfect be the enemy of the good." It's better to be in the game than on the sidelines.

Big Box Store's Dilemma: Great Customer Service...for Amazon's Customers?!?

2011-03-29T11:04:00.000-07:00

Ironic, isn't it? Big Box stores are being morphed into specialty stores.

Not so long ago, shoppers were using the specialty stores and their knowledgeable staff as their source for knowledge about the newest products...and then buying from the Big Box stores! The specialty stores were the "showrooms" for the Big Boxes, who as low-cost providers, could offer lower prices.

This is a long-standing "specialty store dilemma": hire, train and keep a knowledgeable sales staff who can educate the consumer about new products (aka "great customer service"), only to lose the sale to the lower cost, lower-priced competitor. This has been long known to specialty retailers in all retail segments, whether audio/video products, art supplies, power tools, whatever.

But now, look what's happening to the Big Box stores. Customers go there to see, hear, and touch the latest products (think Best Buy), so they can decide which one they want to buy. Then - customers being customers - they buy it at a lower price from online providers (think Amazon)!

The Big Boxes have become the "showroom" for the online retailers of the world! In their efforts to provide better customer service, the Big Boxes incur added costs (both in-store for people as well as robust web sites chock-full of more information) only to lose sales to the new low-cost providers of the world.

What goes around, comes around.

Or, consider the impact of category killers like Barnes & Noble and Border's Books on independent bookstores. Now these "category killers" have become dinosaurs themselves. Increasingly, more books are bought online, and/or in digital form, for a lower price at greater convenience.

Retail Darwinism at work.

Greatest Growth Opportunity in Retailing? Better Owners!

2011-03-02T07:00:00.000-08:00

Winston Churchill once said, "Some are born great. Others achieve greatness. And some have greatness thrust upon them." And so it is with business ownership. Some are born to it; others achieve it; still others have it thrust upon them.

Whatever their route to retail ownership, few recognize or appreciate that being the owner is its own job, separate and distinct from any other job in retailing. Whether the "Owner" is one person (perhaps the founder); several people (perhaps family members, business partners, even investors); or, as in the case of a corporation, represented by the Board of Directors, the job of the "Owner" is the most under-performed and overlooked job in retailing!

Indeed, The Retail Owners Institute believes that failures in retail are traceable not to weak management, nor to weak CEOs. Instead, most retail failures can be traced directly to under-performing ownership.

Meeting the Owner-Only Responsibilities
The ROI has identified that every retail business - no matter its size - has three levels of management issues, or responsibilities, each with its own unique demands. The Institute has defined these three levels: Owner level; President level; Management level.

Too often, these three levels of issues are entangled and overlapping. And, just as often, the word "owner" is used interchangeably with "boss" or "president" or "manager". This confusion can no longer be tolerated. Even when one person must fulfill all responsibilities, it is important that the differing roles and obligations be separated.

The #1 responsibility of the Owner? Survival of the business. That in turn demands consensus at the Owner level on this fundamental question: What constitutes success? Without that consensus, a business will flounder. Only the Owner(s) can answer that question.

Success in retail does not depend on "location, location, location." Nor does selling the latest "must-have" product assure success. Today, the true retail success stories will be written by those companies whose Owners are effectively performing their actual job; doing those things that only the Owner can do.

Tale of the Tape: What Retail Benchmarks Show

2011-02-11T10:56:00.000-08:00

The Retail Owners Institute(R) has updated the charts and graphs of performance benchmarks for 52 retail segments, and recently posted them on The ROI site. These are the ratios prepared for and used by virtually all lending personnel. We show charts and graphs of five year trends for 6 key ratios for retailers to monitor (Turnover, Gross Margin, Pre-Tax Profit, Debt-to-Worth Ratio, Current Ratio, Return on Assets).

Most users of the Store Benchmark numbers displayed at The ROI are focused on their specific retail segment. Depends on what kind of retail business they have: gift shop? apparel store? hardware store? pet store? However, we have spent some time reviewing all of the segments. What did we discover? Generally, they look awful!

While there are improvements vs LY (going against "soft numbers"), few retail segments are back to even with 2008 performance levels. That Recession, you remember.

Gross Margin and Pre-Tax Profit Trends
After topline sales, what do most retailers pay most attention to? You got it! Gross Margin, and "the bottom line". And sure enough, over half of the 52 segments showed increases in Gross Margins vs 2009; same with Pre-Tax Profit.

Of course, we are going against "soft numbers", since 2009 was so grim.... Comparing 2010 to 2008, a somewhat different picture emerges:

Margins up: for a whopping 2/3rds of the reported segments (35 out of 52), 2010 GM% exceeded 2008 Gross Margins

Profits down: On the other hand, for 34 of the 52 retail segments, Pre-Tax Profits are still below 2008 levels.

The Lenders & the Vendors
Meanwhile, what do the bankers watch? They keep an eagle eye on your Debt-to-Worth ratio. (Their focus is on getting any and all loans repaid.) There are some promising trends here to report!

2010 vs 2009, only 15 retail segments showed increases in the Debt-to-Worth ratio. And that's a good trend! It shows these businesses are getting financially stronger.

And 20 retail segments showed improvements in the Debt-to-Worth ratio vs 2008. (Might be something to that "survival of the fittest" idea. The retailers still here are in fact stronger.)

What ratio do the credit departments at your vendors pay most attention to? The current ratio. It measures your ability to pay your bills on time. The benchmarks on that measure show how tough the retail environment continues to be.

Comparing 2010 to either 2009 or 2008, a scant 23 retail segments (only 44%) showed improvements in the Current Ratio. In fact, as you look at the benchmark trends, note for yourself how many segments have Current Ratios below 2.0 (a C grade).

Inventory Turnover
What really drives these ratios? Inventory turnover. Here again, the overall indicators are not promising. Twenty-six of the retail segments showed declines in turnover. That means more cash is tied up in (old) inventory. And only 17 segments showed increases in turns for 2010 vs 2008.

As Michael Gould Bloomingdale's Chairman noted, "No retailer ever filed bankruptcy because their turns were too high!"

What's the "bottom line" of all this?
Opportunity abounds! Those retailers who can better manage these key metrics of retail financial strength can quickly separate themselves from the more mediocre performers.

"Why Be Open 7 Days When Only 4 Are Profitable?"

2010-12-21T16:44:00.000-08:00

As we have all read and heard - repeatedly - it has been a VERY tough couple of years for independent retailers everywhere. Lack of willing customers, narrower margins, inability to get traditional bank loans, huge increase in on-line competition, etc., etc. has been brutal on thousands of retailers.

With all that doom and gloom around us, it's a special thrill to tell the remarkable turnaround story of one brave retailer. We've been asked by The National Retail Federation to present this case on January 11 at their 100th Anniversary EXPO in NYC at the Jacob Javits Center. (If you are going to be there, please come by to meet our client, John Whisler, one of the Co-Owners of Kitchen Kaboodle.)

Here's the copy that The NRF is using to describe our presentation:
"Why Be Open Seven Days when Only Four are Profitable?!"

This session will feature a real-life case study in creative crisis management, and how challenging conventional wisdom can help the independent retailer serve their best, most profitable customers with the products they want, at the prices they want, and the times they actually want to shop.
Speakers:
Patricia M. Johnson and Richard F. Outcalt
Co-Founders; The Retail Owners Institute®

And if you cannot be there, here's the gist of the story:

At the moment of steepest economic free-fall, their bank abruptly called their loans, their attorney described Chapters 7 and 11, the owners' respective homes were pledged, it was February and slowest time of the year, their vendors were anxious to get paid, and their 100+ employees were trembling with the uncertainty.

Yet, the owners kept their cool, created a never-been-done-before plan, disregarded the nay-sayers, and then executed it like the pros they are. (Eight months later their industry presented them with a "First-in-America Award for Innovation"!!!)

For 2011, we wish you the kind of strength, fortitude and vision that this retailer displayed. We all need to keep our eyes on the horizon and not be focused on the rough waters around us.

Retailers: STILL on the sidelines about "social media"? Watch this!

2010-11-18T06:15:00.000-08:00

"The Entrepreneur's Pledge"

2010-10-25T10:01:00.000-07:00

The Kauffman Foundation for Entrepreneurship, based in Kansas City, has been helping entrepreneurs leverage their ideas for many years. Their "Entrepreneur's Pledge" certainly resonates with us. It captures the essence of the people we had in mind when we began building The Retail Owners Institute®.

The Entrepreneur's Pledge, from the Kauffman Foundation of Entrepreneurship

I AM

an entrepreneur

following a dream, pursuing an opportunity, taking charge of my own destiny.

bringing something of value to society, making a job for myself and for others, and creating wealth that benefits my family, my community, my country, my world.

one of a movement of millions of entrepreneurs and innovators who made America great, and who will keep our country going...and growing.

what I am, because many people have helped me along on this journey.

THEREFORE, I WILL

tell my story, sharing my successes and failures, so that others taking the entrepreneurial path can learn.

strive to mentor an aspiring entrepreneur.

make my voice heard by those who make policy decisions that affect me and my business.

appreciate and celebrate my accomplishments, and the accomplishments of my fellow entrepreneurs.

give back to the society that helped me to be successful.

build a stronger America.

Retailers: Do YOU Use "Tricks and Traps" with Your Customers?!?

2010-09-19T10:33:00.000-07:00

A columnist for the Tribune Newspapers, Gregory Karp, is warning consumers to beware of today's oh-so-crafty retailers:

"They're using the latest research and high-tech tactics to appeal to your subconscious, in efforts to get you to spend more than you planned. A consumer's best defense is to be aware of these head games and be a more mindful shopper."

What "head games" are impressionable consumers to guard against?

"Luxury cues" - visual cues in displays that connote success, triggering a shopper's desire for luxury indulgences
"Sensory stimulation" - retailers who effectively use lighting, music and fragrance to influence buying decisions
"Live models" - shoppers apparently are more likely to buy clothes that look great on a real person than on a mannequin
"Clever salespeople" who can upsell, and will use "sincere flattery" to make a sale as well
"Online tactics" - suggesting related purchases, and/or having a deadline on a special price

Hmm. This is what we (admiringly!) call "the theater of retailing". Creating an engaging shopping environment for your customer. Or, it's what others call "good customer service".

In our view, to warn consumers that these are "tricks and traps" reflects an enormous lack of respect for today's shoppers. Plus, it suggests that retailers are able to dupe unsuspecting customers into unwarranted purchases.

That is simply not the world of retailing that we know. Instead, we see retailers working very hard to deliver on the deceptively simple basics: Having the right product at the right place at the right time for the right customer.

No tricks. No traps. Just respect for the customer, respect for the merchandise, and lots of hard work.

Flexibility Is Prized, Especially by Hourly Workers. Make It Your Competitive Edge.

2010-07-13T16:35:00.000-07:00

Retailers have the opportunity to make "permanent part-time" positions even more advantageous to the stores and the employee. It could become your competitive edge for attracting and keeping the best employees. Here's why.

Even in this tough economic situation, there are people who want only part-time, hourly work. This includes parents of school-age children (who are not the sole breadwinners, but the "supplementers") and university and college students (of all ages).

However, these people may need flexibility (e.g., last minute changes) in their schedule. If you can provide that time-shifting flexibility, they often become the most loyal employees, according to Working Mother magazine.

Retailers are well-positioned to attract and retain these potential loyal workers. But it might require some revamping of the usual-way-of-doing-things.

Remember, your staff who are on salary can come in early and/or stay late to compensate for a parent/teacher conference or taking an aging parent to the doctor. For an hourly employee to have this flexibility, they typically must trade hours with colleagues. That makes it the employees' problem, and, adds another layer of complexity to the solution. Plus, employees may feel it is "inappropriate" to have repeated requests for changes.

That culture has to change. And fast! It starts with R-E-S-P-E-C-T for the real-life demands of all your employees, not just those on salaries.

How to make the scheduling work for all your workers and for your customers? Start first by asking your hourly staff. They will have some very practical insights.

Then, with their good input, your good intentions, and today's scheduling software, keep experimenting with different approaches until you get the one that serves you best.

Flexibility in scheduling - and respect from the employer - is prized by hourly employees. What the retailer gains in return can be tremendous loyalty. (And yes, breaking the attract-hire-train-repeat cycle can save costs.) What a competitive edge for your stores going forward.

Look, Sam's Club Is Re-Inventing Banking!

2010-07-07T16:21:00.000-07:00

Oh my. Once again, our premise holds true: "Retailing is a mirror of society."

All sorts of traditional loan facilities have either dried up or become so very arduous that potential users are discouraged. And this dearth of debt availability - the credit crisis - shows no sign of ebbing.

"Okay," says Sam's Club, "we need to give our customers what they want, in this case, SBA-backed term loans of up to $25,000." And their pilot program has already loaned to about 100 small businesses. Cool, eh?

What we love is watching the competitive juices roil at Costco, Staples, Sears, Office Depot and others. "Let Sam's Club have this 'loyalty program' all to themselves?! Are you mad? No way!"

Banking isn't going away. It's just (finally!) being re-invented, in this case, by retailers who are listening closely to their customers.

My, but this mirror of society can foster some fascinating adjustments, and business opportunities.

Re-Negotiating with Your Landlord? Consider This Innovative Concept

2010-03-22T17:25:00.000-07:00

Your retail business has survived to date, thanks in large part to your guts and guile. You have slashed expenses, controlled inventory like never before, and cut deals with vendors and landlords.

As "rent relief" expires, however, retailers are finding landlords much less flexible. (They have financing issues of their own, and are feeling the same cold shoulders from banks as retailers do.)

So, here's an idea for you to use with your landlord. Create an agreement that allows you to pay your rent on the same seasonality as your sales. We are not talking about percentage rents (which essentially accomplish the same thing). Instead, we're proposing "seasonal rents."

That is, for retailers not paying percentage-only rents, monthly rent is a fixed, flat cost per month. Each month's rent payment is 8.3% of the year's total rent.

However, revenues from retail sales are not a flat amount each month. Retailers instead have exceptional seasonality. Each month's sales as a percent of the total year can range from 5% to 20%+.

Our recommendation? First, prepare a spreadsheet for your landlord that summarizes the expected seasonal spikes in your revenues. (You can easily develop this from your pro forma P&L for the year.) Here is an example from one retailer:
(Notice how not even one month calculates to the "average" of 8.3% per month!)

Monthly Sales as a Percent of Total Sales
Feb - 5.7%
Mar - 6.6%
Apr - 6.3%
May - 7.5%
Jun - 6.9%
Jul - 7.2%
Aug - 7.2%
Sep - 6.3%
Oct - 7.6%
Nov - 10.2%
Dec - 20.9%
Jan - 7.3%

Then, given the total rent for the year, agree to pay each month's rent on that same percentage scale. That's what we call "seasonal rent".

You still pay the same total rent for the year. You just are paying it on a schedule that is more suited to the realities of your cash flow.

Moreover, it may give you a better bargaining position with your lenders, because you likely will have a couple more months that show a profit. And it certainly gives you more flexibility with managing your cash flow.

This New Normal continues to demand flexibility. If you - or your landlord - aren't able to go to a percentage-only rent, then this "seasonal rent" approach may be a good alternative.

Let us know what you think of this idea. Your feedback is important to us.

What Do These Upbeat Retail Sales Results Really Mean?

2010-03-10T17:33:00.000-08:00

Retail sales results for February have come out, and two major tracking services - Retail Forward and the International Council of Shopping Centers - report that comp store retail sales rose at least 3.7% in February: "their best monthly gains since the economy began its meltdown in November 2007." (In fact, we believe that is the sixth straight month of sales increases!)

Then, ShopperTrak reported that while sales were up in February vs LY (just 1.2% on their numbers), shopper foot traffic was down 3.1%. So, either average transactions were higher, or retailers were better at converting shoppers to customers. (Our bet is on the latter: motivated retailer meets purpose-driven shopper!)

What do reports such as these mean to independent retailers? Especially since they are reporting results of major national chains.

Well, we believe they do matter in several ways. First, they provide yet another benchmark against which to measure your own stores' performance. How were your February sales? You now have some context for assessing your own progress. (And maybe feel a bit better about what you did accomplish!)

Second, it provides insights into how consumers are feeling. Maybe "Frugal Fatigue" is in fact becoming more prevalent. For the 90% of the population that still have their job, they may be gaining some confidence that it is okay to spend.

No question, the spending that does occur will be much more purposeful and restrained than 2007. There is no going back to that! But those retailers who have edited their assortments to better match what their very best customers want will be well positioned going forward.

Even better prepared are those retailers who have been analyzing more than top line sales numbers. When sales are down, why? Fewer transactions? Smaller average transactions? Fewer items per transaction? These insights can be powerful for planning your store's progress in this New Normal.

Third - and perhaps most important about benchmarks - the financial community is reading these reports as well. Bankers and the credit departments of your vendors should be encouraged by these positive signs. In your discussions with them, be sure to have armed yourself with the most recent perspective on consumer confidence.

Remember, unemployment is a lagging indicator of the economy; consumer confidence is the leading indicator, particularly for retailers.

Needed Now More Than Ever: A Bank for Retailers

2010-01-26T15:52:00.000-08:00

The SBA is extending its incentives to banks to lend. What will it take for those funds to be available to retailers? They sure haven't been so far.

Many independents need to replace their legacy POS system. Upgrade other technology. Remodel. Create a more exciting "customer experience." Add in-store video/digital signage. Switch to different merchandise categories and vendors. Provide more training for their staff. Conduct data-mining of their customer lists. Redesign their website. Add e-commerce capability. Well, you get the idea: retailers must catch up to retailing in 2010!

Each of these things creates or sustains jobs, both for the retailer and their suppliers and service providers. All of them and others have to do with the on-going reinvention that must occur in retailing.

However, it seems that retailers continue to NOT be on the safe, defensible list of credit-worthy businesses. Why? Isn't there at least one bank somewhere that will fill this vacuum?

The economic meltdown of 2008 occurred at a particularly punitive time for retailers, who already had their Holiday merchandise purchased. They had no alternative to deep, deep discounts, with the resulting losses. (Seasoned retailers know, when you have to choose, cash is ALWAYS better than profits. "Halitosis is better than no breath at all.")

Then, as 2009 wore on, retailers tried to recover, but many found their oxygen supply cut off. That is, banks slashed their working capital lines ("Look at these losses each month," they would say in June, July, August, September) as the retailers struggled to weather the Great Recession.

So, just when retailers needed to be purchasing for Holiday 2009, their ability to buy was further stifled. Holiday sales (and profits) were constrained, placing even more financial pressures on them going forward. The historically slow months of the winter and spring of 2010 cannot make up for the lost opportunities of the Holiday season.

In our experience, retailers have done a fine job of focusing on "the controllables" in their business. That is, they have better managed their inventory, cut expenses, and otherwise shown great "street smarts" and survival instincts. In particular, they are highly motivated to continue to provide jobs for their employees.

However, it is the uncontrollable variables that continue to punish them. Chief among these uncontrollables is access to working capital...from any bank, anywhere!

In our view, there are retailers who deserve to be the Poster Child for the SBA. Where are the banks who can recognize that promise?

Believe It or Not...SBA Loans for Retailers

2010-01-18T12:17:00.000-08:00

Common wisdom is that banks are not lending, especially to independent retailers. "Ah, those deadbeats!"

Well, last week we did what you could do. And guess what happened? We were amazed that four banks out of four initial bank meetings took great interest in potentially loaning over one million dollars to a client of ours!

For perspective, here's a little of the background to this discovery. Our client has five stores and does about $9MM a year. (They do not own real estate.) Because they've had three years of losses, their bank of ten years has moved the account into "special credits" in order to liquidate the loan balance and/or exit our client from the bank altogether. Pretty typical of the times, we'd say.

Then recently we've become aware, as you no doubt have, that the Federal government has relaxed some of the onerous conditions around the SBA loan guarantee program, specifically "7(a)". As you can do, we had our client download the SBA's loan application form, provide all of the requested info, and then have Kinkos make nice bound copies.

Meanwhile, we found on the SBA site about seven community banks that had "PLP" status; they qualified for the SBA's Preferred Lender Program. Next, we got four of them to meet with us last Friday "for no more than 60 minutes", we promised. When they heard our request and were handed the completed SBA application, all four essentially said, "Well this is very interesting to us. We're looking at the retail sector now as a way to diversify our loan portfolio from real estate loans we currently have on the books."

"Oh, really", we exclaimed. "How sweet is that! Do other retailers know about this availability?" None of them were forthcoming with an answer. So we're taking this blogosphere route. Get the word out! The Feds aren't going to keep this liberal SBA program going forever!!

Let us know if we've helped you.