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Retailing is a wonderful spectator sport. We pay attention to retailers of all sizes, in all merchandise segments, at all price points.
And often, what we see is inspiring! The creativity and resourcefulness of merchants is a major part of the magic of retailing. We enjoy sharing examples of creativity in one segment to retailers in other segments.
For instance, consider the cleverly multi-faceted way one retailer, in this case Nordstrom, is approaching Mothers Day.
First, they're using major window displays that feature likely Mothers Day gifts. But what sets them apart is the intended audience for these displays: those "digital natives", the Millennials.
Here's the message Nordstrom has on these windows:
"Here's How to Wow Your Mom.
Download our app, scan the barcode on the window display of the item you want, and order by May 1 for delivery by Mothers Day."
In our view - (Note: We're just speculating; we've not discussed this with anyone at Nordstrom) - the Mothers Day merchandise Nordstrom will sell through these windows is secondary. We suspect that Nordstrom's #1 priority for this two week time frame is to connect with more of the Millennials.
- This is a powerful prompt for Millennials to download the Nordstrom app. That's the key metric!
- The emphasis is on ease and speed. That's spot on for this group! No need to go into the store. Just make your choice from the window display (or the app itself.) They barely need to slow down while walking by!
- And then there's the reassurance angle. These time-pressed 20 to 35 year olds being targeted are the offspring of Nordstrom's established customer base. (So a Mothers Day gift from Nordstrom is a safe choice. Or, of course, it always can be returned!)
The Benefit for All Other Retailers
But, as clever as we think this is, here's why we are describing it:
How might you be able to leverage this kind of thinking in your own stores?
You don't have to have an app, or a full time window display department. Just some inspiration, and a good idea of who you want to reach.
Then, 3 basic steps:
- reach them, connect with them on their terms
- make shopping easier for your desired customers
- reassure them that they're making the right choice
We are asked frequently - and again last week it occurred - “Well, Pat & Dick, what’s your view on the economy for retailers?”
We began by recounting the challenges:
“Well, this is the New Normal. That is, modest population growth, many fewer people in the Generation X valley between the Baby Boomers and the Millennials, and the sense that worldwide events may at any moment substantially impair our economy."
Then, we also noted the positive indicators:
- consumer confidence continues to rise
- last week the stock market hit an all time record high
- and of the 54 retail segments we follow, although some are suffering, most are doing quite well. (see Monthly Sales comps on The ROI site - compare your sales trends to your segment).
"Actually, It's Just Like the Weather"
But, here's the real key: in every retail sector, some retailers are declining, and others are doing quite well indeed.
What separates those succeeding retailers from all the others?
- Those who are thriving tend to be focused on the “controllable variables” - managing inventory, expenses, people issues, cash flow.
- Of course, they're always doing what they can to improve sales. But that's not as controllable!
- And, they consciously choose to not be drawn into the distractions of the 24/7 bad news cycle, even though those around them tend to be.
In other words, the economy, like the weather, does have an impact on retailers. But, like the weather, the economy is beyond their control.
The best one can do is:
- pay attention
- stay nimble
- adapt
- and control the controllables!
That's why it seems to us the answer to the question - “Well, Pat & Dick, what do you think of the economy for retailers?” - is this:
Three things: Execution. Execution. Execution.
The "international greeting" among retailers is "How are sales?"
The response almost invariably includes a reference to Last Year. Sales are up versus LY, or flat, or down. This is the common metric among retailers.
- The U.S. Census Bureau collects data on retail sales each month. Once again, The Retail Owners Institute® has analyzed the monthly retail sales by retail sector, compared those results to the same month Last Year, charted the results for the trailing 6 months, and posted them on The ROI site.
- Go here to see how your results compare to other retailers in your sector. Now, thanks to The ROI, it's easy for retailers to get perspective. (For instance, maybe you find that everybody else in your sector also was down. Misery loves company!)
Interesting. But NOT Significant!
Comparing your own results to Last Year, or even to others in your retail sector, is interesting. How to make it significant? Just one way: compare your results to Plan!
Once you know whether sales are ahead of plan or behind, you can use the "lead time" to make adjustments!
And the most important adjustment for retailers is, of course, inventory!
For instance, take another look at your Open-to-Buy plan.
The key number to be watching with an eagle eye: your targeted Ending Inventory for each month.
- Sales ahead of plan? You may need to adjust your buying to bring in more merchandise to meet your targets
- Sales lagging from plan? Good thing you found out now! You still have time to make adjustments, and avoid excess inventory.
The ROI makes it easy for you to do all this. Just take advantage of our online BUYING PLAN Forecaster. Available 24/7. Free!
- Entries are easy and fast. Planned sales and margins for each month, plus Beginning Inventory at the start, and turnover rate. That's it!
- Immediately see a monthly Open-to-Buy, including targeted Ending Inventory for each month.
- Powerful. Fast. Free, 24/7. Only at The ROI. Go here to use it for yourself.
Now THAT is significant!
Question: Why is specialty retailing like Major League Baseball? (And, why is online shopping a lot like Spring Training?)
- Much like shopping at Amazon, eBay, etcetera, Spring Training games offer lots of selection! Each team's Spring Training rosters number 60 to 70 players! Talk about an "endless aisle"...
- With that "breadth of selection" comes variation in quality. Some are young "prospects"; others are players attempting comebacks; still others are veterans trying to hang. Plus, there are the big-name free agents establishing themselves with a new team.
- Just like online shopping, Spring Training offers every imaginable price point (that is, total team payroll, as well as individual player's contracts.) From prospects to free agents, there is much variation.
- And, while the scouting reports from the pros aren't available, there is no lack of "reviews": newspaper columns, TV reports, blog posts, tweets, etcetera about the relative merits of each player. Opinionated? Yes! Informed? Maybe.
But then, the "regular season" approaches. Rosters must be trimmed to 25 players on each team. As they say, "It ain't slow pitch!"
That "editing" of the assortments - cutting the roster to the best 25 players - is why specialty retailing is like the Major Leagues. Retailing isn't slow pitch either!
The competitive advantage of specialty retailers is much like that of the baseball manager: wisely editing for the most success and the best fan appeal.
- Specialty retailers decide every day which merchandise "makes the team", and of that, which is in the starting lineup.
- Specialty retailers are dispassionate about trying new merchandise, as well as taking markdowns on under-performing merchandise. (Just like baseball managers send players back to the minor leagues, or trade them, or cut them from the team.)
- And yes, just like a baseball manager, a retailer's livelihood depends on how good a job of "editing" has been done, and how it performs.
When it comes down to it, the toughest decision in retailing is what merchandise to NOT carry. (Especially when the vendors want you to carry everything!) And baseball managers risk their jobs with their decisions of which players to not have on the team.
See, good specialty retailing IS the Big Leagues!!
What does it take to survive in retailing today?
Profitable lines of merchandise? Sure, but that may not be enough. Profitable stores? That may not be enough either. Instead, only those retailers with the most profitable customers, whether instore and online, are those who are destined to thrive.
That's why your knowledge of your very best customers is the bedrock of your competitive edge. The more you can know, document and analyze about your customers, the more equity you are growing in your business.
We think this explains what has puzzled some observers of Amazon, who wonder why Amazon is not growing its advertising revenue to its capacity.
"As big as Amazon's ad business already is, it could be much larger," writes Jay Greene, Seattle Times business reporter. "The data that Amazon collects gives it the ability to see patterns Google and most of its other ad rivals could never find.
"That's data nirvana for advertisers.
"But here's the interesting part", Greene continues: "Amazon won't share the most coveted of its data with advertisers for fear of alienating shoppers.
'Customer trust is paramount to us,' said Lisa Utzschneider, vice-president of gloabl advertising sales at Amazon Media Group. 'We would never do anything to infringe on that trust.'"
Amazon has chosen to not sell their customer data to other advertisers. While they claim it is out of respect for their customer's privacy, their decision to preserve this knowledge for only their own uses demonstrates their recognition of the true worth of this information.
In our view, that provides some key takeaways for all other retailers:
- Are you gathering – and documenting! – this valuable customer data in your business? (Your POS system may have more data available than you realize, and/or could capture even more.)
- Are you protecting and preserving this asset – your true competitive edge – as zealously as you should?
Want to grow the value of your business? Invest more – time, resources, even money – in your most valuable asset: knowledge of your best customers.
