Finally! The 4th Quarter is HERE

October 1 marks the beginning of the 4th quarter of the calendar year. The beginning of the home stretch. And yes, there is good reason for retailers to cheer. Consider:

Halloween will be HUGE 

According to the National Retail Federation, Halloween spending is expected to reach a record high of $8.4 Billion on costumes, decorations and candy.

  • More than two-thirds of Americans plan to buy costumes this year. For themselves, their kids, or their pets!  
  • This year’s most coveted costume? As reported by the Washington Post, “So far, it’s superheroes across the board: For kids, for adults, for pets,” said Lorenzo Caltagirone, owner of Total Fright, a year-round costume shop in Arlington, VA.
  • After 11 years of being the most popular choice, princess costumes have been dethroned. “The female superhero in particular has really taken off. This is the year of girl power.”
  • Political costumes rank third on the list of popular options for adults 35 and older, bested only by more traditional witch and pirate get-ups.
  • About those costumes for pets? Pumpkins, hot dogs, and bumblebees. 

The Election will be OVER!

And so will the election angst.

  • According to CNBC News, “If history is any indication, retailers could see a double-digit sales lift in November and December, as shoppers focus on the holidays and release pent-up demand.”
  • This post-election sales spike is likely to occur no matter which candidate wins.
  • According to analysis by Alix Partners, “in the 2004 and 2012 presidential election years, year-over-year sales growth slowed an average of 22 percent in September and October, as compared with the prior eight months. It then bounced back an average 16 percent in November and December.” 

Despite the Hanjin Shipping bankruptcy, merchandise WILL be in stores for holiday

  • According to the National Retail Federation, import cargo volume at the nation’s major retail container ports should be at near-peak levels for September.” While much merchandise is still in limbo, “retailers are working hard to make sure it ends up on store shelves in time for the holidays.”

What Black Friday surprises this year? How About The NEW Normal?

  • Remember last Thanksgiving? Some retailers stepped back from opening on Thanksgiving Day. REI made news by closing its stores on Thursday and Friday.
  • How does all that affect customer expectations for this year?
  • And what approach are you planning for your stores for this year? 

Not easy questions. But a sure sign that retailers may indeed be able to get back to The NEW Normal.

Ahh Yes, Christmas

This year, Christmas Day falls on a Sunday.

  • That means offices that typically shut down starting at mid-day on Christmas Eve may instead be doing that on Friday the 23rd, inviting a late shoppers bonanza.
  • Of course, the After-Christmas events will then start on a Monday. How convenient!

Wow, what gifts! 

Especially in retail, timing IS everything. Enjoy the arrival of this year's 4th quarter.

"Entry Exam" for New Items in Your Stores

Question: "We must keep bringing in new items. But, how do we keep from being over-bought?" 

Answer: "Very carefully!"

Ahh, the appeal of new items. Or, your customer's ever-growing "wish list" items. But, when you are also trying to control inventory, and keep turns up, the challenge is, "Really, which should you buy?" 

  • As many retailers are only too aware, if you are not vigilant, you may experience bloated inventories, which can cascade very quickly into cash flow problems.

Here are 6 key questions for you and your buyers to ask yourselves as you consider new items. We think of it as an "entry exam" for merchandise. It's a very quick way to identify which items actually deserve to be in your store.

#1. Can my customers get this item at other stores in my market area? 
If yes, it probably has no pulling power.

#2. Is this a good margin item, or is it subject to a lot of price competition? 
Slow turners with weak margins are double trouble.

#3. Does having this item in stock help me sell other higher-margin merchandise? 
If not, you may not need it.

#4. Can I get faster delivery on this item than I am now getting? 
If yes, you may be able to cut back on your stock.

#5. Do I order larger quantities of this item than I actually need in order to take advantage of price breaks? 
If yes, you may be coming out on the short end when you figure in all your carrying costs.

#6 Do I have an emotional attachment to this item that reflects my personal taste rather than a business-like response to my customer’s desires? 
If yes, get rid of it!

Go here in the Library for Owners at The Retail Owners Institute(R) for more useful and practical insights and tactics about protecting your store from inventory bloat. See how quickly you can achieve greater control of your inventory!

New items? Oh my, yes. 

Too much or too many? Not any more!

What your customers really like about your store might be...your customers!

Recently, we heard how the cafe/bar in the recently-opened Whole Foods store in downtown Los Angeles had a live jazz combo playing on a Friday night. "And the place was packed! Can you believe it? All the cool clubs in downtown LA, and people come to the Whole Foods for live music?!? A grocery store??"

Actually, yes. We CAN believe it. Here's why.
  • These folks trust Whole Foods because of the customers it attracts. They know they will be comfortable there; they want to be around people like themselves.
  • And, they may not know much about who they might find in any of the "cool clubs".
Specialty stores are particularly suited to expand on this kind of engagement with your customers. You already have been selecting and editing product assortments - what's known today as "curating" - that speaks to a certain taste level. And attracts a particular group of shoppers.

And thereby, you have also been "curating customers"! You see, it's your customers – not just your merchandise – that really make your stores "special".

And these folks - your "best customers" - might like to hang out with each other when they are NOT shopping. 
  • This is your opportunity to engage in real life(or IRL, as they say) with those who care about your merchandise - and what it represents - the same way you do.
  • Make your stores more than a great place to shop. (Remember, there is the internet, after all.)
  • What experience can you offer that will make your stores the place to be for folks like your very best customers? (They're what really make your stores "special." And don't they love to hear that about themselves?!)
We believe you will find it energizing! One more way to put the fun back into retailing!

Must owners pass through the "Valley of Bankruptcy?"

Recently we received an email from a long-time follower of The Retail Owners Institute®. It included a comment and a question that you, too, may have wondered:
How do you go about changing the mindset of the owner/CEO about GMROI, inventory management best ideas, etc? 
Our CEO stills buys by intuition, hunch, seat-of-the-pants. He likes to use phrases like: stack-em-high, watch-em-fly. One-to-show, one-to-go.
Can CEO's go from mediocre to great, or do they have to pass through the valley of bankruptcy first? 
Wow! Quite a question, speaking volumes about the underlying concerns.

Those Owners & CEOs who still "stack-em-high, watch-em-fly", who buy by hunch and intuition are in fact disappearing. It's what we call "Retail Darwinism". But, must owners pass through the "valley of bankruptcy" in order to change?

Every case is different, of course. In our work with retailers in "turnaround" situations, we've found that the fear of impending failure, the acceptance of being on the brink of bankruptcy, can prompt changes. Unfortunately, sometimes it is too little, too late.

So, how can Owners and CEOs be motivated to change?

  • It starts with increasing their financial skillset and confidence.
  • Enabling them to have a positive answer to "Am I running this business…or is it running me?!"  
  • Doing integrated financial projections can be eye-opening.
  • Knowledge IS power!  

Occasionally, however, fear is more paralyzing than motivating.

  • These retailers simply do not appreciate how much control they could have! 
  • Not able to recognize their alternatives, they become frozen in the headlights.
  • This is especially true for those who have delegated the "accounting and financial stuff."

That's not to say that Owners & CEOs need to do all of the accounting and bookkeeping themselves. Far from it!

But since Owners are responsible for projections, for playing "what if…?" about their business, they must understand the cause-effect financial levers in their business.

That's how they can be empowered, better able to respond as the business environment changes.

Emails such as that one cause us to redouble our dedication at The ROI to help any retailer, anywhere be able to look ahead, compare potential outcomes of their own financial projections, and then use those insights to inform their judgment and decisions.

Or in other words, empower retailers to "Turn on their financial headlights!" 

Who's Really Paying the Freight for Amazon's "Free" Shipping?

A recent study by consulting firm Shipware LLC documented the commanding advantage Amazon has established in shipping. The "big shippers" - so-called Mega-Retailers like Amazon, Target & Wal-Mart - get dramatically more favorable rates from carriers such as FedEx and United Parcel because their volume is "guaranteed and predictable." 

As a result, the costs absorbed by the Mega-Retailers to provide "free shipping" are breath-takingly less than those for their smaller competitors.
Shipware estimated the shipping costs that would be incurred by each type of merchant to ship a 10-inch square box weighing 3 pounds from New York City to a suburban residence in Atlanta.

But are the shippers relying on this "guaranteed and predictable volume" to offset the discounts they offer? Or, are the shippers looking to their smaller customers - with far less negotiating power - to bear a disproportionate share of the costs?

  • For the mega-retailers, free shipping drives tremendous volume (and customer loyalty) while also enabling greater and greater negotiating strength with the shippers. A powerful dynamic: the big get bigger.
  • And for the smaller merchants? Matching the mega-retailers' online prices and absorbing the "free" shipping costs are much higher hurdles. They represent the opposite but equally powerful dynamic, the downward spiral....

Will there be any relief for the Small-Medium Retailers as Amazon grows its own shipping fleets? That is, faced with reduced volume from Amazon, might FedEx and UPS be more willing to offer better rates to all the other customers?  

SIgh. We wouldn't count on it.  

Or, given this huge discrepancy in costs, might other shipping services emerge to fill this vacuum? Perhaps consolidaters of some sort? Or...???

"Smart Appliances". Smart for Who?

The Internet of Things (IoT) – all the web-enabled devices for the home – is a dynamic and fascinating arena. One of the latest devices is the Family Hub, the "Smart Refrigerator" from Samsung. 

The Family Hub has 3 cameras inside the fridge and a 21 inch touchscreen on the front that connects to the web. Samsung says they want to move your refrigerator beyond storage, and bring your kitchen into the digital age.

For that, the Family Hub comes complete with...its own family! (And you thought it was about your family.) It's all about the "home shopping vertical." 

So, when you wonder (or are being asked), "What's for dinner?", the Family Hub has lots of partner-enabled help for you. 

  • First, you can look inside your refrigerator – from anywhere with an internet connection – and see what’s in it right now, including expiration dates.
  • Meanwhile, the Groceries by MasterCard app has been studying your habits, and offers a grocery list of suggestions on specific items and brands.
  • AllRecipes has recipes, cooking tips and suggestions for you (complete with shopping lists).
  • Others in the household have been adding to the grocery list too.
  • Once you approve your shopping list, items are added to a cart at a FreshDirect or ShopRite location, the payment is processed by the MasterCard app, and the groceries are delivered by Instacart.

Whew! It's giving a whole new meaning to "food chain", isn't it?

Our questions: Are these smart fridges - and all their connections - really cool? Or, really chilling?

  • Is this a time-saving, technological break-through? The perfect blend of technology, merchandising, and convenience for today's consumers?
  • Or, despite the amazing connections the technology can allow, Is it even solving a real problem?
  • Meanwhile, as with all these technology advances,  who actually will own all the valuable data these smart refrigerators are collecting? 

It will be fun to watch, for sure. 

And who knows? With the web-connected video screen on the refrigerator, the Family Hub may give a whole new meaning to “binge watching”!!

In-Store Customer Analytics...from the Ground Up!

"How do you do analytics in such a way you don't become creepy?" asked Jill Standish, Senior Managing Director of Retail at Accenture Consulting.

And her answer? A technology that looks at the shoes of customers as they walk in the store.

"You can actually get a lot of pretty accurate demographic information about the customer based on their shoes, such as their age, whether they are male or female, and even their income status. And it's not that intrusive, unlike facial recognition." 

Revealing "Foot Traffic"

That got us wondering: even without that technology, what might you be able to learn about your customers by looking at their shoes?!

  • For example, with just the camera on your phone, get some pictures of the shoes on the shoppers entering your store. Then, take pictures of the customer's shoes at your cash wrap counter.

    Now compare those sets of pictures. How much consistency is there between the folks coming into your stores, and the ones actually buying from you?

  • Considering a new location? Or a different location in a mall? Supplement your research with some "ground up" analysis. What can you discern about the "foot traffic" available in that new location? And how well does that match up with your present customers?
Intriguing, isn't it? It won't take much time, or even an investment in technology. (And it might be a great project for one of your newer and/or younger staff members.) You will undoubtedly find some surprises – and more opportunities!

Just a little time and effort can reward you with some revealing and useful insights. All free, too! One more way that independent retailers can work smarter, not just harder.

Update: The Amazon Tsunami

No matter what segment of retailing you are in or what merchandise you are selling, every retailer is keeping a wary eye on Amazon. As we sure do. 

But, the Thursday, April 7 edition of The Wall Street Journal had an update on Amazon that, once again, can take your breath away: "Amazon’s Fashion Secret: Full Price", by Suzanne Kapner.

According to Kapner: “Dozens of brands now sell directly to Amazon, including department store stalwarts such as Nicole Miller, Calvin Klein, Kate Spade, Lacoste and Levi Strauss. And, just recently, Ralph Lauren shoes."

Why is this happening? For brands, Amazon offers growth – now without having to discount – at a time when department store sales are sluggish. 

Indeed during one 21-day time period (Jan. 28–Feb. 17), “Including sales by third parties, Amazon had higher average prices than Macy’s and Kohl’s on 69 items of women’s and men’s clothing and shoes.”

Of course, some department store executives still cling to the idea that Amazon will not be prepared to deal with returns. Hmm. Amazon has proven time and again that operational and logistics issues are not a deterrent.

Moreover, Kapner reports, “Amazon has advantages [for the brands] that traditional retailers are finding hard to match, including analytics data that help brands target shoppers by letting them know which styles and sizes sell best by region, and more sophisticated pricing.”

Ahh yes, “dynamic pricing”. Amazon’s unmatched analytics (and algorithms) allow much more responsive pricing than department stores.  For Amazon, price changes occur online, without having to be matched in hundreds of stores across the country. 

In fact, during that same 21-day time period, “Amazon changed prices 9.2 times on average per item, while Macy’s changed prices 2.1 times and Kohl’s did so 1.5 times.”

"Of course, Amazon will not depend on the brands for its growth; it is making many other inroads into fashion. It has acquired online sellers of designer brands, hired talent, launched a flash sale site, improved its presentation (its photography studio in Brooklyn creates magazine-like spreads for its site), created its own private-label products, and launched a live fashion show that streams each evening on the web."

But the key value persists: Amazon continues to relentlessly seek and capture the real prize, more and more customer data. Their stated goal: "turn the art of retailing into the science of retailing."

Can this tsunami be thwarted? Hmm.

Well, others have been. Think Kresge, Montgomery Ward, several "big box" specialty stores, many department stores, Sears, now maybe Wal-Mart. 

Stay tuned......

The Lure of Retailing for Manufacturers

According to a recently published eBook by Channel Advisor*, branded manufacturers are wondering: "Should we complement the traditional model of selling solely to wholesalers and retailers by selling directly to consumers?"

And the encouraging advice offered to these suppliers by Channel Advisor?
  • "The short answer: Yes, you should."
  • "Luxury brands, apparel brands, household product brands – they're all joining the party."
Meanwhile, The ROI's recent survey of retailers (see all results here) confirmed that manufacturers are seizing this opportunity. Indeed, this prompted some retailers to write:
  • "We need less on-line competition from our vendors." 
  • "Vendors selling directly to the consumer is a huge problem." 
No question, this is a sensitive issue for retailers, and often a frustration

But is it really a problem? 
    Keep in mind that, over the years, many manufacturers have tried it and failed. Not all, but many. They think that retailing looks so easy! 

    But, success in retailing requires a special mix of skills that very few manufacturers can accumulate.
One seasoned specialty store retailer we know exclaims, "Whenever someone says to me they want to open a store like mine, I say 'Great! You should do it!'"

Why so encouraging? He knows that only the pros can make retailing look easy, and work well.

Perhaps those manufacturers tempted to heed Channel Advisor's advice should also be reminded of this old saw: "The best way to make a small fortune in retailing? Start with a large one!" 

Manufacturers selling direct to customers is a genuine frustration. But.... 

*"Branded Manufacturers: Should You Sell Direct?"
Channel Advisor eBook