The Case of the Missing Customers

We're heard from several very experienced retailers this past week that sales and in-store traffic have just dropped off since early February. Altogether spooky.

Indeed, 6 out of 10 respondents to our recent survey of retailers reported that customer counts (transactions) are down so far this year.

What's going on? Where are the customers? 

We can only speculate, but our suspicion: the 2016 Presidential campaigns continues to dominate the news in unprecedented and relentless fashion. Every day, the news is full of more uncertainty and disruption. 

And this democracy-in-action upheaval is taking a toll on retailing. This year, there is no "business as usual"!

• In a nation whose favorite spectator sports are auto racing and football, it's no wonder that this politcal spectacle has commanded our attention: When and where will the next collision occur?
• In this case, a "collision" is, distractingly and potentially, a major change in how our country is run, and how it is perceived around the world.

In fact, it seems to us that no "news item" in recent history has ever been more captivating. It not only is being watched; it is being stared at, mouths agape! 

Our hypothesis: You bet, most customers are distracted. And concerned. And spending less confidently. Aren't you too?

Straight Talk from Retailers About Social Media "Effectiveness"

"Social Media". It's all around us. But what retailers want to know is this: "Is it effective? That is, does it raise sales?" 

So, we asked, and retailers answered. Did they ever! Retailers indeed are very active with social media! 

And we also confirmed that retailers – at least, those who responded to our survey – are very focused on accountability. They too keep examining "Is it working? Is it effective? Is it driving sales?!?" 

The survey gathered two kinds of feedback:

1. Effectiveness ratings about each social media platform (from "Very Positive!" to "Not At All");
2. Comments from the survey respondents (1/3rd of whom are multi-store operators). 

You can see all the findings here on The ROI site, including:

• Verbatim recaps (yes, including those smartphone typos)  explaining why or why not social media is "effective" for retailers.
• Explanations behind the ratings for each platform on the key question: "How has it INFLUENCED SALES?"
• And, of course, the full results from the survey (Which promotional tools have declined in use? Is social media paid advertising being used? And more real-world insights and observations.)

We were certainly intrigued to see how and why independent retailers are using and/or experimenting with social media. We think you will be too.

Go here on The Retail Owners Institute® site for all the info.

Easy Tool to Motivate Sales Productivity

Here's a useful rule-of-thumb when discussing compensation with your front-line sales staff:

• Each employee should expect to generate sales per hour that are 10 times their hourly pay.
• So, someone being paid $12 per hour would be "expected" to ring up $600 in sales during a 5 hour shift.

Now, clearly that 10X multiplier will be different, based on your retail industry, margins, etc. For some stores, it will be 8X; for others, maybe 12X.

But, there IS a number you can determine. And, then you can and should share it with your staff!

Ready Feedback for Each Sales Associate

Since each employee knows how much they are being paid per hour, they can do the math for themselves. Each day. Each week. Even each hour, if they want.

Especially today, people want to believe that they are making a contribution, making an impact. And they want to get frequent feedback on how they are doing.

This way, they can "Do it myself!"

Best of all, by giving this tool to your staff, everyone can properly refocus on productivity.

Whether your store's "number" is 10X, 8X, 12X, whatever: You'll know you have a winner when you hear employees bragging that they beat the multiple!

The First Quarter Is Over. So, How Did You Do?

(What? You're Still Just Comparing to L.Y.? That Is SO Last Year!!)
 
So, here we are: already one-fourth of the way through the year. Went by fast, didn't it?

When most retailers reflect on how the year has gone so far, they are quick to compare to L.Y. That is, how does this year compare to how our performance Last Year? And most often, of course, retailers are only comparing sales results of this year to last year.

In the opinion of The ROI, comparing to L.Y. is interesting, but not significant. Retailers who assess their performance only against Last Year's numbers are essentially driving forward while looking only in the rear-view mirror! Scary!

What should retailers be comparing against? Their 2013 plan! 

• What are their planned (expected) sales for the first 3 months of 2013?
• What were actual sales?
• Then compare: are actuals above plan? Or below plan?    

Now comes the key step. Whether sales vs. plan are up, down, or sideways, determine "Why?" Which of these 3 causes would best explain the difference?

1. Is it because of changes in the number of transactions?
2. Changes in the average sale? (That is, average transaction value)
3. Changes in the number of items per transaction?

Now you are on a path to have some useful management information!

Understanding what drives sales changes provides great insights on how to make adjustments, or how to better seize opportunities.

Plus, your analysis of the transactions will help you considerably. 

• If sales results are better than plan, what does that mean for your buying plan? Any orders you might want to increase?
• If actual sales results are below plan, you will really want to take a close look at your inventory orders. You may want to postpone or even cancel some orders.
• Consider the impacts on your marketing plans. Do upcoming promotions or events need to be changed?
• You will also want to review your expense plans as well. For example, what are the impacts on scheduling your people?   

Have More Fun in Retailing: Be Strategic!

By measuring your store's performance against your plan, instead of just comparing to L.Y. numbers, and, analyzing the transactions, you are managing like the pros do.

More important, by looking ahead and anticipating, instead of just reacting, you will find that you are able to put the fun back into retailing!


For more ideas on managing more pro-actively, see the Managing Store Issues section at The ROI. click here to go there now

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

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.

What Do These Upbeat Retail Sales Results Really Mean?

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.

What's in Store for Retailers in 2010?

Now, we have good news and we have bad news. (As though you haven't had enough of the latter.) Oh, and then we have some more good news.

First, the really good news. Although we have been perched out on this limb for months, we still believe, overall, sales between Thanksgiving and December 31 this year will recoup about 50% of last year's decline. In other words, if you were down 8% during that period last year, we expect you will be up about 4% this year. But of course, you will have to aggressively go get it!

Now the not-so-good news. We're projecting that the first three to six months of 2010, overall retail sales will be flat. Don't look for gains after this month. Not only is the economy expected to be a drag, but deflation looms. You probably will sell as many or even more units in early 2010 as last year, but we believe volume will be flat.

Ahh, but back to the really good news. Since your operating expenses and inventories are now down (they've had to be), we believe there can be improved margins even with flat sales in early 2010. You will have to be a real merchant to capture these margins, but they are available.

Remember, anybody selling merchandise is a retailer. It's the merchants who lead the way! And for the merchants, "flat is the new up"!

Market Upswing in July Means Strong Holiday Sales for Retailers

"He who lives by a crystal ball must thrive on ground glass for lunch."

Ahh yes, a good caution. But some of us believe that the best indicator of the economic future is the six-month predictor of the stock market.

And July 2009 was the strongest July in decades for the stock market. You saw that?!

So, to us, that fact should bolster the optimism of retailers for this holiday season. It's the cause-effect, cause-effect cycle: the stronger stock market leads to improved consumer confidence; consumer confidence drives consumer spending, which should jump up smartly in December-January (six months after the strongest July in decades.)

That's our view. What's yours? (And, shall we save a date in December for lunch?)