A Trade Magazine for New Age Retailers

Shop Talk – November 2016

by Jean Haller, Margaret Ann Lembo, Deborah Leydig, Royce Amy Morales, and Kim Perkins


Q: I HAVE HEARD THAT INCREASING YOUR AVERAGE customer sale will help increase profits, but I don’t know where to start.  Do you have any suggestions?


A: The standard rule of thumb about determining a retail price is to double (“keystone”) it.  However, as you probably know, retail is a tough and expensive-to-run business, and even with a keystone markup, it’s often hard to be profitable.  The solution is often to raise your prices.


The first thing to keep in mind is the perceived value of your items. If something looks expensive, price it accordingly, even if that’s more than double wholesale. For example, an imported, handcrafted item wholesales for a lot less than comparable items made in the U.S. It’s perfectly acceptable to price them higher than keystone as long as customers perceive them to be worth the price. (And, one thing conscious customers value in imported goods is proof that they are certified Fair Trade.)


Take a good look at your profit-and-loss statements.  Some retail programs will tell you exactly what your profit margin averages across the board.  If it’s less than 50 percent, you are not pricing your inventory properly.  Keep in mind that for every sale you make, you are paying rent or mortgage on a space, employee salaries and taxes, utility bills, point-of-sale equipment, packaging, and insurance — just to name a few!  That all adds up.  Plus, if an item lands on your sale table, you don’t want to end up losing money on it.


A guilt-free way to adjust prices on inventory is to consistently factor in shipping costs.  For example, if you order 12 widgets and the shipping cost is $12, add one more dollar to the retail price of each widget to offset that cost.


The best way to price something is to use your expert discretion and mark it where you think it will sell—and then add a bit more to the price.  Trust your gut to tell you how to price it and don’t price it low thinking it will sell better.  It’s proven that, psychologically, if something doesn’t sell at a lower price, you may need to raise it to add to its value. Remember: You can always adjust it lower if you get feedback that you went too high.  — Royce Amy Morales


Q: HOW DO I DEAL WITH ENERGETIC KIDS IN MY STORE?  I’m concerned about them handling our delicate, pricey, and one-of-a-kind merchandise—crystal specimens, statues, and other breakables.  What can I do to deter them without offending their parents or hurting their feelings?


A: The most powerful tool I have used to encourage a pleasant experience for parents, children, other customers, and my store’s merchandise is to use visualization and change my beliefs.  A long time ago I established the intention that children are peaceful, calm, and really mindful in my store. I imagined and visualized all children feeling welcomed and peaceful.  It is important staff members believe and envision the same, as the intention to be welcoming to children must be store-wide for it to work. This technique works the majority of the time. For those times when it doesn’t work, try the following tools:


Have a giveaway basket for children. We have a container with various remnant gemstones. A child can pick one. This activity occupies them for a period while they take the time to choose a gemstone. Once they have picked their special one, they want to play with it. Gifts are always good!


Carry hematite stones.  Because gemstones are part of my product mix, I always have the stone hematite in stock.  In the event a child is hyperactive or disturbing our calm atmosphere, I ask the parent if I can let their child hold our special calming rock so they can have a more enjoyable shopping experience.  Then, I tell the child how this is a very special stone they can visit with while they are in the store.  I invite them to sit down, close their eyes, and take deep breaths.


Talk to the parents.  As a final tool, talk to the parents and the children very quietly and tell them that children who come to the store walk through the store holding their own hands—either in front of them or preferably behind them so they can see better.  We tell them there is a no-touch policy.  This talk isn’t given unless a child is unruly and their parents or adult companion aren’t doing anything to teach them proper behavior in the store.


The well-being of all my customers, staff, and merchandise is always first and foremost.  When a parent or a child becomes insulted or defensive, I remember it is their choice to feel that way.  As much as I want to make a sale, I also recognize that we are all responsible for teaching our children well, with respectful boundaries.  It does take a village, and when parents and children are in your part of the village, nothing is wrong with establishing boundaries for appropriate behavior with ease and grace.

— Margaret Ann Lembo


Q: WE’VE BEEN OPEN A LITTLE over a year, and our small town has welcomed us into the fold.  Customers talk about us favorably and we’ve had some good local press.  We’ve added almost 800 new customers to our database, and we offer a customer loyalty program.  You’d think we were doing great, but our sales are not increasing. Our average daily sales are very low, often erratic, and don’t seem to be climbing, even with all the good feedback.  We average seven customers a day, but some days we have none.  I’m not sure we’ll be able to continue in business, and I don’t understand why.  Our store is 1,100 sq. ft.  (950 sq. ft.  Of sales floor) and our sales for the year were $54,150.  When I look at our customer database, I see about 400 of those customers have not been back for months.  Should I be open more days?  (We’re closed on Sundays.)  Suggestions?


A: It doesn’t sound like the problem is related to the number of days you’re open, and for now, I would not open on Sunday.  There are usually two main reasons for the situation you describe: not enough interested customers in your area (you didn’t mention the exact population of your town) and, if the pool of possible customers is large, not enough inventory customers are interested in to fill the space.


The first is not something you can do a lot about except to continue enticing the local population to come in and shop and to perhaps do targeted advertising to a nearby tourist or visitor population.  The tough news is the problem is likely your inventory.  Either the product mix is not what customers want or you don’t have enough of it.  Lack of sufficient merchandise to create a sense of fullness (and subliminally a sense of prosperity) could be the issue, and/or you may not have enough choices to keep customers excited.


Without seeing your store, it’s hard for me to pinpoint the problem, but here’s what I know: Your average sale is $25.28, which is a little below industry average, but not by a lot.  This tells me people who do come in to your shop spend money, although it would be nice if they spent a few dollars more.  But, seven customers per day is a tough thing when you have 1,100 square feet to pay for!  And then we are back to asking, “Is there just not enough population (or population interested in your product) to support you?”


Try to find a local retail consultant to help you assess the situation.  Contact the Small Business Administration (www.Sba.gov) in your area and see if they offer any free counseling.  Or, check if there is a local SCORE chapter (www.score. org) nearby.  Once you find someone with a successful retail background, ask him or her to come to your store and do a walk-through to help you figure out what’s going on.


Take a close look at what’s selling for you and expand that.  Do customers like your jewelry?  Do you have more than one line of candles?  Personal care products?  If this is what they’re buying, don’t be afraid to bring in another line to entice them.


It’s important to regularly feature fresh, new merchandise.  Consider a front display table showcasing what’s new.  Send out emails when a new line comes in.  Customers may love you, but they need to be reminded you exist and have new items to show them.


Also, look at what merchandise is sitting and not selling.  It can be difficult to do this, because of course we think we’ve made great choices and tend to be attached to what we bring into our shop.  No one wants to make a mistake.  So, step back and look at your merchandise without attachment.  In retail we all make a few merchandise blunders.  The key is to put the blunders on sale or donate them rather than continuing to keep stale merchandise on your shelves.  It doesn’t matter if it’s great stuff.  If your customers aren’t buying it, let it go and try again.


You didn’t mention how the 150 square feet of non-sales floor space is being utilized.  Is it a back room?  Could it become a classroom or reader room?  Offering classes and/ or services is a great way to bring customers back regularly.  You might try one class a week or one day of readings to gauge the interest and then expand if you get a good response.


I hope you can hang in there and give the shop a little more time.  With the goodwill you’ve created and assistance from a consultant, I think you have a good chance of turning your sales around.  — Kim Perkins


Q: WHAT DOES THE TERM “inventory turn” mean, and how do I measure it?  Is there an industry standard I should shoot for?  Also, what merchandise categories have the best inventory turns?


A: 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.  For instance, 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.


In accounting, an inventory turnover is explained by figuring out the cost of goods sold (net sales) and dividing it by the average inventory.


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 customers use up and need to buy more of on a regular basis, such as soap or lotion) are good to carry.  Items people will seek you out for, such as specialty greeting cards, one-of-a- kind items, locally made products not available anywhere else, and products 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: I HAVE A TINY JEWELRY STORE ON A SHOPPING STREET with a lot of women’s clothing and other jewelry stores.  The street’s traffic has fallen off dramatically this fall, and we are all very worried and confused.  How can we make sense of what has happened and how can we get our traffic back?  I have only owned the store for a year and I have changed the mix of jewelry a bit, but I don’t think that is the only reason for this situation.  Thank you for any advice you can give me.


A: Well, this has certainly been the same situation for many stores this fall.  Some suggest that in a presidential election year discretionary spending drops off.  I have certainly seen that at my store.


If other stores on your street are having a similar problem, you could perhaps suggest having a “Shopping Crawl” where you sponsor an event to invite all your customers to come and shop the area.  Offer a free gift or hold a drawing for everyone who visits all the participating stores.  Organize a Girls’ Night Out with other stores and offer refreshments and special purchases.  Ask a jewelry vendor to have a trunk show that can be marketed to your customers.  This could create excitement for product they have not seen before and find interesting.


One thing we have been doing differently this fall is calling customers to let them know we have some new products they might be interested in and inviting them to visit.  Having a list of your best customers—I call them my VIPs—allows me to send a special email with a small offer to entice them in to shop.  Continue with your social media and newsletter campaigns, making sure you send emails regularly, so your customers don’t forget you.


It could well be that changing the product mix has changed your customer base.  I have found it important to add new product without taking away the old to be sure the new will be well received by our customers.  Over the years I have gotten bored with some of my product, but my customers have not.


Owning you store only a year may not be enough time to know what changes need to be made.  Carefully review your sales pre and post changes.  Are the new products selling?  If they have been in your shop longer than six months and still are not selling, have a sale and move them out.  This will generate the cash to purchase new merchandise that will sell.


In any case, keep offering the best customer service possible to the people who do come to your shop.  That is the best thing we can do as small, independent businesses.  Good luck and keep the faith.  — Jean Haller


Q: A WOMAN CAME IN RECENTLY TO RETURN AN ITEM THAT had obviously been well used.  It’s a product we used to carry, but she didn’t have a receipt and she wasn’t in our customer database.  When I told her I couldn’t do the return, she caused a bit of a scene that left the other customers—and me—rattled.  Even though I feel justified refusing the return, l’m embarrassed to say I’ve never had an official return policy, and it’s obvious I need one.  Where do I start?  Are there any legal requirements I need to be aware of?  Also, what’s the best way to communicate the policy to my customers?


A: It’s funny how we don’t need a policy until we need one!  We learn from our mistakes, and we also have to decide if it’s worth getting a customer upset and perhaps losing her as a customer altogether.  That is a judgement call and a decision that you, and only you, can make.  L. L. Bean has a very liberal return policy—they take everything back.  Some stores don’t take sale items back, some only with receipts.  You have to decide what is right for you.


In my store, we had a couple occasions when customers returned opened product, resulting in a complete loss for us.  Now we have a sign posted in our lotion and soap area explaining that returns are allowed on unopened products only.  If a customer comes in with a damaged item that we know is not their fault or a toy that doesn’t work properly, we take it back without a problem and get our money back from the manufacturer.  If a customer has a return without a receipt, we try to find the receipt in our system.  If it was a gift, we can usually find the gift giver in our point-of-sale system to check if a discount was given.  We never give cash if it was a gift, only a gift certificate.


Most POS systems let you print your return policy right on the receipt.  A sign at the register works well, too, but you have to decide what the cost is to you.  If you don’t get that many returns, you can be a little more flexible.  I probably would not have accepted the return in your scenario either.  A well-worn item, no receipt, and from a stranger is a bad combination for a small store.


Here’s a good exercise: Make a list of all your returns in the last six months and the reasons the items were returned.  If there weren’t that many and the returns were legitimate (e.g., wrong size, wrong color, and 95 percent had receipts), you have good customers, so perhaps you don’t need too strict a policy.  A bad apple will show up every now and again, but don’t get overly zealous in how you do business because of one or two bad episodes.  — Deborah Leydig


Published in Vol30/Issue 7/2016

Retailing Insight
Author: Retailing Insight