by Jean Haller, Royce A. Morales, Seasons Koll, Leslie Neilson, Deborah Leydig, Sloane and Casey Simmons
In a special “Best of 2016” edition of Shop Talk, our team of retail experts offers insider tips and sage advice on running a successful independent retail store, from branding to trend forecasting to cash flow—and everything in between.
Q: I WANT TO REVAMP OUR TAGLINE, BUT I HAVE NO clue where to start. What’s the best way to come up with one that truly reflects the unique gifts and shopping experience we offer without being too wordy?
A: Taglines are an incredible asset to any business, but they are equally difficult to create. There is a reason advertising firms make so much money! Still, no one knows your business better than you do, and that makes you the most qualified to quantify your brand in a tagline.
Looking at corporate taglines we are exposed to everyday, it is clear taglines can be incredibly effective in customer retention and brand awareness—we all have some memorized without even knowing it. Here’s the first one that came to my mind as inspiration: “Nationwide is on your side.” I literally can hear the melody of that tagline when I read it. This is a great example of a highly effective tagline. While it doesn’t state exactly what Nationwide does, it endears you to the company and instills the feeling the company wants you to have about it. It also speaks to how you would use its services and what you would most want from a company in that field. The melodic tune fits the words, which makes it easy to remember, and using the company name in the tagline reinforces the company brand.
You also can focus on what you offer and promote your company as the only real source for it. Hallmark accomplishes this with their tagline, “When you care enough to send the very best,” implying they are the source for “the very best.” Focusing on a problem you can solve for people is also a great tactic. Verizon accomplishes this with, “Can you hear me now?”
To start formulating your store’s tagline, break down what it is about corporate taglines such as these that works and figure out how to apply those elements to your brand. Corporations spend thousands of dollars to do exactly that. To boost your brand recognition, starting with your store name is a great jumping off point. Like Nationwide, does your name rhyme with something you sell or services you offer? Or, does your store name work in a catchy sentence that reflects your store’s branding (e.g., “Like a good neighbor, State Farm is there”)?
Sometimes the simplest answer is the best. When someone asks you about your store, how do you describe it? If you can quantify what you do in one sentence for a potential customer, you can turn that sentence into a tagline. For example, the tagline for Lowe’s is “Never stop improving.” Target’s is “Expect more, pay less,” while Best Buy promotes “Expert service, unbeatable price.” Are you the only resource for something special in your area? For instance, do you staff more employees, so you can offer better customer service or faster turnaround? These unique qualities can inspire your tagline.
Put together a handful of ideas, some using your brand name, some speaking to what you sell or do, some designed to inspire confidence, and gather feedback to narrow your choices. Show them to staff, regular customers, family, and friends. They can help you pick the best one and find the right tweaks to arrive at the perfect tagline.
If you just can’t seem to come up with anything that shines, have a contest for customers to create their own taglines for your store. Reward the winner with a generous Gift certificate to your store. You will spend much less than an advertising agency would charge, learn more about how your customers see your store, and end up with a great tagline that fits from the people whose perceptions you can trust the most—your customers!
You want your tagline to be as short and succinct as possible. Look for redundant content. Check a thesaurus for potential alternate words. Consider slang words or abbreviations that are well known and understood. There are many ways to say the same thing, and you likely will have to play around a while to get your tagline right.
Once you have a catchy, memorable tagline you know conveys what your store is about, commit to it. Taglines only work when they are reinforced over time and seen repeatedly. Make sure yours is used everywhere and every time possible. Add it to your business cards and social media presence and include it in all your advertising. The more exposure your tagline gets, the better! — Seasons Koll
Q: WHAT ARE SOME WAYS TO ENCOURAGE MORE IMPULSE buying, not just for small-ticket items at the cash wrap but throughout my store?
A: Encouraging customers to buy isn’t always easy. You have to be very engaged (but not pushy) and carry products you believe in. When you sell products you personally use and love, sharing your experience with customers can prompt them to make a happy purchase they weren’t planning on.
For example, if someone is looking at my Himalayan salt products, I share the benefits of using these products and how much my family enjoys using them. I have write-ups on how to make a sole (a Himalayan salt infusion for health and wellness) and I offer them a copy when they leave. Most people enjoy being educated about things they are interested in, but it’s very important not to overreach and become pushy. If a customer is looking at jewelry or clothing, they may not be interested in hearing about the benefit of adding Himalayan salt to their diet!
Having items out on display for your customers to touch, feel, taste, and test is really important. Many vendors will sell items at an even more discounted price just for this purpose. I have to admit I love gadgets, and I’m always looking for something new and exciting to sell in my tea room. For example, I sell lots of loose-leaf tea, and I’m amazed at how many tea balls for infusing tea I sell, since I find them a bit cumbersome myself. Several years ago, I started carrying in-cup tea infusers. This item changed the amount of tea I drink—and the way I drink it. I always keep an infuser on display now, so I can quickly demonstrate it for a customer. Nine times out of 10 they will buy, and I always feel really good about selling them one.
It also is important to make sure your employees are educated about the products you sell. To accomplish this, I sometimes give them my favorite products as gifts or bonuses for doing a good job. I am so proud when I overhear one of my employees sharing a positive experience about one of our products with a customer.
Lastly, many might not agree with this but if I see a customer really struggling with an impulse buy, an expensive ring for instance, I will encourage them to sleep on it and wait a day or two. If it’s still here when they come back, it was meant to be; if it’s not, then it wasn’t. Why do I do this? Because buyer’s remorse is no fun, and you don’t want your store associated with negative feelings. Some store owners will jump in and tell the customer, “That’s the last one” or “Someone else is interested in this piece.” That’s fine if true, but if you have dozens on hand and no one has shown interest in weeks, be honest. It is much better to have a customer with a purchase they love and can afford and who likely will come back to shop with you again. With the hard sell, a customer who comes back and sees the item you said was “the last one” won’t have a good feeling about you or your store. My philosophy is love your products, love your employees, love your customers, and the money will come. — Leslie Neilson
Q: WHAT IS THE BEST WAY TO move remaining inventory when you’re going out of business? Is it better to sell it at a deep discount or just donate it to charity as a tax write off?
A: When closing your doors, selling off your last remaining inventory can be a challenge, especially if you’ve discounted it to the max and it still hasn’t moved. To answer accurately depends on what your specific needs will be once your store closes. If you are concerned about having enough money to stay afloat during the transition from your current business to your after-closing plans, then by all means get every penny out of your remaining inventory, even if you have to sell items at ridiculously low prices.
Don’t hesitate to put a price on such things as display units, shop fixtures (if they belong to you), and even wrapping paper, bags, etc. Once the public knows you’re going out of business, their vulture instinct will kick in and they’ll swoop in to clear out everything in sight ... for a price.
People known as “jobbers” can take your inventory and liquidate it for you, deeply discounted of course. Some companies specialize in professionally managed “Store Closing Sales” and offer coaching on how to obtain the most cash from closing your business. Beware of those who try to convince you to stage a phony store-closing sale just to generate sales. People will smell it a mile away.
Another option is to contact stores selling similar products and offer your remaining inventory at below wholesale prices. A resale consignment shop might be thrilled (they rarely get new items) and set a reasonable price for your entire stock.
Try offering items online (eBay is an example) or on any of the instant-listing/selling apps, such as “letgo.” Flea market vendors, nonprofits, thrift stores, liquidators, and other bulk sellers scout the Internet for deals and might even pick your items up for you.
Last but not least, contact your vendors. Sometimes they are willing to buy their products back, and they may even offer you what you paid for it if you agree to pay for the return shipping.
If obtaining cash is not an issue, or time is short and you just need to clear everything out, then certainly donate your leftover inventory. If you have leftover display units or building material, contact Habitat for Humanity—they gladly will pick things up.
Although giving to charity is great for the feel-good factor, keep in mind that, depending on your tax situation, donations may not help lessen a tax burden significantly. Talk to your accountant to help make that determination. —Royce Amy Morales
Q: I KNOW RETAIL SALES HAVE PEAKS AND VALLEYS, but my expenses don’t. What are some ways to budget for cash flow throughout the year?
A: What a great question! Nine years in, I think I might be getting an idea of how to keep money in the bank! My biggest expense is staffing. For the last few years, I have Had too much staff during off months. That is a huge drain on cash flow. I always thought I was too small for seasonal help, but not anymore. I will add staff at the end of October for the holidays and have them help with inventory in January. Hopefully they will come back the following year. I also understand my customers’ buying habits better now, thanks to our point-of-sale system.
I have a general store, and when I first opened I didn’t think a scanner and UPC codes would fit with the style of my store. Ugh! That was a very poor decision. Finally getting a POS system was one of the best decisions I’ve made for my store. It saves time and MONEY! Before our POS system, it was difficult to keep track of what customers purchased. For example, now I know exactly how many chocolate Easter bunnies sold last year—and when—so I’m able to buy more appropriately. I also can see in a second which clothing sizes are selling, so I know to buy more of the most popular sizes. That might sound really basic, but I can be on a buying trip, remotely connect to my POS via my phone, and know in an instant which sizes sold and which didn’t. I don’t have staff scrambling to do a quick inventory of book titles to see what is still in stock. All that information is right at my fingertips. As a result, I don’t overbuy anymore. We are much more efficient because of our POS system.
If you don’t have one, I highly suggest you get a POS system. I work with a company called T-Hub, which connects my web store to my in-store POS. Because they talk to each other, our inventories are correct. We no longer spend time calling online customers because we’re out of stock.
I also try to buy more evenly throughout the year to keep inventory up as the year progresses, so we can avoid a huge buying frenzy going into the holidays. If you have most of your expenses paid by November 15, all the money you earn in the next six weeks is yours rather than going to pay bills.
Always take advantage of trade show specials, too. A POS helps you buy Halloween and Christmas at a spring show because you know your sales from the year before. You can enjoy that 15-percent-off show special instead of paying full price later on. You won’t pay for the items until they ship, but you have received the discount and you can budget for those expenses. Earlier this year I had a rep tell me if I ordered my Christmas ornaments by March 31, I would get last year’s pricing. Thanks to my POS, I was able to order one of my bestsellers in a snap, with better pricing. I’m way ahead of the game!
Always look for deals. In this day and age, many deals come via email, so take advantage when you can. Free shipping or discounted product always helps your bottom line.
I also plan one or two events each month, and they really help bring in cash during the slow months. I recently introduced monthly demonstration days as one of my events because I have products I know will sell better if we demonstrate how they work. When the product is made locally, I invite the company to come demonstrate the product themselves.
The power of fun and community is the name of the game to keep the cash flowing in! —Deborah Leydig
Q: HOW DO YOU DETERMINE THE MARKUP FOR your merchandise? Which products should stick to the vendor’s suggested retail price and which can be sold above keystone?
A: How to price product is a great topic for all store owners. There are so many fixed overhead costs we can’t control. However, setting a price for the products we sell is one place we do have control.
When investigating any product you would like to carry, be sure to determine if selling them at the suggested retail price (SRP) will generate enough money to both pay your bills and make a profit. Many products in the health and beauty industry have SRPs, but most of what I carry in my store, other than books, doesn’t come with an SRP. If I had to work with a 50-percent markup (keystone), or even less, I would not be able to stay in business. The days of keystone pricing are gone for independent stores. I believe each store needs to determine a minimum mark up (MMU) that will allow them to cover their overhead costs, payroll, and shrinkage, with some left over for profit.
To determine your MMU, there are things to keep in mind. For instance, the flexibility of purchasing small quantities of different items through a distributor may come with a higher cost and less discount for you to work with. You’ll then need to determine if the ease in purchasing small quantities outweighs your smaller profit.
In order to set your MMU, it is necessary to determine the perceived value to your customers. If the product is something they can buy down the street or at the grocery store for less than what you need to sell it for, then perhaps you need to decide if you want to carry that product.
My bottom-line MMU for any item is 2.3. If I pay $10 wholesale for an item, its minimum retail price needs to be $23, and the retail price could go up from there. If I don’t feel I can get that price, I may consider lowering the retail price a little. Some categories of product allow for a greater markup, such as jewelry, crystals, and incense. For jewelry, the industry norm is 3 times the cost. Tumbled stones can be as much as 6 times their cost.
When you are deciding what to price an item for your store, it’s very important you first know the fixed monthly costs you have to meet, without even considering profit. Knowing that will give you a true idea of which products you can sell profitably in your store and clarify for you what your minimum markup needs to be. —Jean Haller
Q: WHAT DOES THE TERM “INVENTORY TURN” mean, and how do I measure it? Is there an industry standard I should shoot for? I also would love to know what merchandise categories have the best inventory turns?
A: In accounting, an inventory turnover is explained by figuring out the cost of goods sold (net sales) and dividing it by the average inventory. A simple way of understanding inventory turns is to determine how many times per year you actually sell through the wholesale value of all the merchandise you have in your shop. If your inventory value right now is $100,000 wholesale, once you sell $100,000 you have accomplished an inventory turn.
Experts say that for a shop to be profitable, it should have at least three inventory turns per year, and even that might not be enough depending on expenses. That Means if your inventory value is $100,000, your yearly sales would need to be $300,000 for your shop to be doing well.
It’s difficult to say what merchandise categories have the best turns, since each shop is different. The demographics you attract, the location of your shop, the time of year, and other factors will determine how fast something sells. Expendables (things that customers use up and need to buy more of on a regular basis, such as soap or lotion) are good things to carry. Things that people will seek you out for, such as specialty greeting cards, one-of-a-kind items, locally made products not available anywhere else, and things that speak to your unique demographic are what people shop small businesses to find. The best words of advice I can give is to experiment and see what works best in your shop and buy deep in that SKU. Create your own niche, and your shop will become a destination! — Royce Amy Morales
Q: DO YOU KNOW AN EASY FORMULA A NON-FINANCIAL PERSON CAN use to calculate their break-even point? I have been in business a few years and would like to figure out if and when I realistically can afford to draw a salary.
A: We are direct women. We have been told by our small business consulting clients that we offer a tough “slap in the face” when it comes to many of our answers. This is one of those moments. It is important to value your time, talent, and vision with a salary. You must learn to value yourself before you can truly value the people who work with you and for you. It is a good sign for your business future that you are planning to pay yourself.
Hire a professional accountant today with specific experience in small business. Happily pay them. Learn everything you can from them and ask every question you can think to ask. You’ll never regret the expense or the time you spent with them.
With that said, here is what you need to know. There are four basic numbers to calculate to determine your break-even point: You need to know your fixed costs, sales revenue, average gross profit for each sale, and average gross-profit percentage. Once you capture these numbers, you can divide your estimated fixed costs by your gross profit percentage to determine the amount of sales revenue you’ll need to break even. If your fixed costs, for example, are $3,000 per month and your expected profit margin is 65 percent, your break-even point is $4,615 in sales revenue per month ($3,000 divided by .65).
Many business owners are bad at capturing ALL expenses. If you don’t capture all your expenses, your break-even calculations won’t be accurate. This is a good time to find three sample business-expense templates. Go through them by line item, checking off all possible expenses. Easy, right? Not so much. This is why we strongly encourage you to hire a professional.
The variables during the start-up years are very hard to consider. Will You reach your projected sales? Will your expense projections hold? Have you captured all possible expenses? Have you considered the costs of employees and all their potential associated expenses?
In the beginning, you don’t have enough years under your belt to place confidence in your sales averages and expense projections. You simply don’t have the historical data to go by. Professionals can help. They will share a more realistic and conservative approach to calculating your numbers. That doesn’t mean you shouldn’t educate yourself and learn how to calculate these numbers yourself. You should. We spend countless hours each week, month, and year “crunching the numbers.” We have learned to listen and research effectively to become knowledgeable business owners. You must understand your own statistics. That knowledge will serve you very well when times are tough. —Sloane and Casey Simmons
Q: I FEEL MY STORE AND THE gifts I carry have a timeless appeal, but I “get” that it’s useful to stay current with trends in order to attract new customers and inspire repeat visits. What business and consumer trends are you paying attention to right now, and in general, how do you stay on top of trends that affect your success in business?
A: What a great question! As store owners and decision makers, we could spend all our waking time researching trends, reading marketing websites, searching for new product, establishing ideal product mix. However, I believe there are several manageable ways to stay on top of trends that do not consume all your time.
Right now, I’m watching the Pantone colors, so I can make displays that will attract attention based on colors alone. I continue to scan trade magazines and consumer publications, so I know what is being presented to my customers, and I take time to read articles about trends in trade and business magazines and newspapers. Here are six of my go-to ideas for keeping up on product trends in the marketplace. Try to find what will work for you so you can continue to stay on top of what is happening:
1) Trade and consumer magazines. Of course, since you’re reading this, you’re getting one of the best trade publications out there. Retailing Insight offers the latest ideas for product, business education, and marketing ideas. While you are thinking about magazines, be sure you regularly look at the publications your customers are reading. Real Simple is one of my favorites. Regional magazines are also a great resource for your store.
2) Trade organizations. COVR (Coalition of Visionary Resources) is the trade group by and for store owners, artists, and vendors that service the conscious-living market. Several Shop Local organizations offer ideas and support for small retailers. AMIBA (American Independent Business Alliance) is a national organization, and many cities have local organizations.
3) Trade shows. There are trade shows every month all over the country. (Editor’s note: You can find a comprehensive listing at www.retailinginsight.com.) In the body-mind-spirit market, INATS, G&LW Gem Shows, ACRE, and the Natural Products Expos are all great choices. There, you will find the newest products as well as old standbys. Larger shows such as NY NOW, AmericasMart in Atlanta, and the Dallas Market Center have a wide range of exhibitors, many of which may not be appropriate for your store. However, these shows are increasing their vendors for Fair Trade, handmade, and green products.
4) Publisher and vendor catalogs and sales reps. More and more companies are making their catalogs available online to the trade. Often they have sales representatives who can work with you in your store or at shows. I often will have my team look through catalogs to get ideas of what we may want to order for a season, or to add to our regular lines. This is also a way to see what is trending enough for companies to devote time and money to produce new product. Book-publisher catalogs, especially front list (upcoming titles), tell us what topics are trending by the titles being published. Review these often.
5) Other stores. I find it important to visit independent stores in my area regularly. I often will notice similar colors, patterns, and product that I note and keep an eye on. I also like to see what lines are being carried so I don’t miss something I should have noticed, and I don’t spend money on something that is already well represented in my area. Don’t shy away from stores that are not like yours, especially big-box stores and discounters like Marshall’s, TJ Maxx, and other off-price sellers. Your customers are probably shopping there, so it’s important to know what has been closed out by vendors and publishers. You will be shocked to see product on your own shelves at full price being offered in these stores at greatly discounted prices.
6) Social media, online resources, and mobile devices. Pinterest, Instagram, and Facebook are all critical to follow. Your customers are using these channels to see what is new, and their boards, pictures, and newsfeeds will tell you what’s trending and popular. Online sites such as Zulily, where vendors and manufacturers can unload overruns and discontinued product, are raising havoc with lots of independent retailers. I found products that were actually in my store on the site. I considered these items valuable since they were no longer available, but customers see the same thing and think I stock “old news.” Again, take time to check what’s there, because your customers surely are. Don’t underestimate the importance of mobile devices, either. More and more people are reading their email and surfing the web on their mobile phone, so it’s imperative your website is mobile friendly, and your newsletter platform is readable on a smartphone. —Jean Haller
Published in Vol31/Issue 1/2018