Who REALLY Has First Dibs on Your Customer's Wallet?

Quick: Who are your major competitors? Amazon? Target? Wal-Mart? Other specialty store retailers in your market? 

Yes, all those and more.

But, what about the "stealth competitors" affecting every retailer – whether you are selling apparel, furniture, motorcycles, books, smart phones, or whatever?

These competitors are hiding in plain sight. And, in our view, they significantly impact – and reduce – retail sales.

What are they? The monthly recurring charges that support our digital lifestyle.

Just think about it:

• There are the monthly cell phone data plans, for every member of the household. (Yes, even the grade schoolers. And, maybe even Grandma & Grandpa.)
• Then, the monthly cable TV charges.
• Plus, the monthly charges for high speed internet access in your home.
• Of course, there are the monthly charges for "streaming" online entertainment services, such as Netflix, Amazon, now Wal-Mart, and others.
• And, monthly online access to newspapers, magazines, etcetera

We call these kinds of monthly expenses "the enablers" of our digital lifestyles. And for retailers, each one represents a major "stealth competitor."
 
For many households, these monthly charges can add up to hundreds of dollars! And today, essentially no one can avoid them; they are treated like another "utility" charge. Is it any wonder consumers feel like they have less "spending money"?

The High Cost of Connectivity: Erosion of Retail Spending

All of this connectivity comes at a cost to retailers. Money that is being dedicated to these monthly enabling charges is not available to be spent "at retail."

• Traditional "disposable income" is significantly eroded. And that happens every month, essentially out of sight. And to almost every household. 
• Overall retail sales, by definition, are reduced. That is, "retail spending" tracks sales of merchandise, not services.

Enabling Our Digital Lives
So, given the stealth competition of enabling our digital life, can Holiday retail sales meet the predictions of some prognosticators to be up 4%-5% over last year? If so, that would represent quite a feat.

Or, more likely, consumer spending will be up, but... spending on what?!

Amazon's "Store" In New York City – Our Contrarian View

Not a Store, But a Brilliant Service Center

There has been a bit of a buzz about Amazon's plans to open a "store" in New York City, on 34th Street. This storefront will enable customers to pick up their Amazon purchases, versus having them shipped; to return merchandise; and, likely, to see and purchase Amazon products such as the Kindle Fire, etc.

• We imagine that Amazon will have a real "Wow!" effect available at this location. Perhaps digital displays of their television programming? Showcasing of their products. Demonstrations of how to use their various shopping apps. And no doubt, a special line/faster service for their Amazon Prime customers.

Some pundits claim Amazon is trying to emulate Apple; others compare it to e-commerce specialists like Warby Parker opening brick-n-mortar locations. 

But our comments, when contacted by the American Business Journals, revealed a far different perspective. In our view, what Amazon is opening, on 34th Street, is a service center, NOT a "store."

• That location is at the confluence of virtually all of the transit choices in NYC: Penn State, Grand Central Station, major subway stops, and of course, taxis. Perfect for commuters to pick up their items on the way to their train.
• If Amazon really wanted to "do retail", it would have selected a retail location: SoHo, or Madison Avenue north of 57th; etc.
• By offering this service, Amazon is able to promote "same day delivery" without having a fleet of delivery trucks entangled in NYC traffic. (NY traffic cops and – cabbies – will be delighted with that news!)

Maybe a Defensive Move?

Here's another thought: this could be viewed as a defensive move by Amazon, in response to other retailers' in-store pick up programs. (Also known as "click-n-pick", where the customer orders online, and picks up from the store.) 

As always in retailing, this will be fun to watch!

With That Inventory...What Could/Should/Would Your Sales Be?

The Retail Owners Institute® has just added another online "gadget" that is kind of fun. Quick and easy to use, of course.

1. You enter your inventory on hand (@ cost);
2. You choose which retail segment you are in;
3. It immediately shows you the annual sales of the "median-performing retailer" in your segment

Here's an example for an owner of a women's boutique.

"Your Mileage May Vary"

Of course, this only means something when you compare the sales volume in your segment to your own sales results. Are your sales usually better than that? Or not?

And, if your sales from that level of inventory are significantly lower, does that mean that you should make changes?

Remember, there is no one "right answer". If there are differences, you get to decide what, if anything, you want to do about it. 

• If you want to concentrate on growing sales, you have a target for the increase.
• Or, if you elect to raise turns to reduce inventory on hand, you have perspective on what is reasonable for your retail segment.
• And, of course, you have 12 month's time to realize the effects of any changes.

Every retailer will have different answers, depending on their particular stores and situation. 

That is the whole point! 

This is another free, time-saving tool from The ROI to enable you to compare your choices, and apply your best judgment.

So have fun with it! Go here to check it out for yourself. 

"Listening" to Customers? How to Really Hear Them!

Who knows the most about your customers? Their whims, their likes and dislikes? 

Your front line sales staff!  Even in this environment of social media, online reviews, and pleas to "like us on Facebook", it's the front line staff who are listening to – and actually hearing! – the customers.

Day in and day out. In every retail operation, they are the first ones to know of problems, and, even better, to recognize opportunities.

Now, think for a moment about any large retailer. 

• How many layers of management do you suppose are between their front line sales staff, and senior management at headquarters?
• Contrast that with your own operation. How few layers are there between your front line sales people, and you as the owner or manager?

Therein lies your true competitive edge! But – it must be cultivated!
For example: The sales staff at one specialty boutique recognized that customers ask for products by color, not by brand. So, after much discussion among themselves, they went against the prevailing policy, and reorganized the displays by color.

They then anxiously followed the daily sales to see whether it really was a good idea.

That's the test: did it increase sales?
In that case, the front line staff took the lead, albeit with some trepidation. 

But, the owner wisely recognized the value of encouraging their involvement – after all, they were looking for ways to increase sales – and moved to formalize the approach in all of his stores. Everybody wins - especially the customers! 

• Ask your front line staff for their input. Create an environment that routinely encourages them to pay attention, and welcomes their feedback.
• Give your front line staff the authority to use their insights, and test changes and improvements.
• Demonstrate a willingness to experiment, as long as there is accountability!
• Agree from the start, "How will we know whether it is working?"

And yes, keep monitoring the comments on social media. You might see a nice uptick there as well.

Size Does Matter. Advantage: "Small Retailer"

Consider this assortment of seemingly random events:

• Stephen Marche, former college professor turned novelist, wrote a great commentary for Esquire  on "How to Quit Amazon and Shop in an Actual Bookstore."   An actual bookstore, he contends, is a place of discovery: "The book in the bookstore that you actually want is the one you don't know exists. Somewhere in there is something that's entirely fresh to you, and will reward your soul by exposure."
• An owner of  four specialty stores laughingly described the Millennial Generation shoppers in her stores: "So, they stand in front of the display, checking online reviews on their phone, and ask, 'How come you only have three different brands to choose from?' When I explain that we have already evaluated all those other brands, and selected the ones that are the best, they look baffled. They don't know what a store is! That's what we do; we edit the selections!"
• Wal-Mart announced that quarterly results overall were flat. However, sales at their small-format Neighborhood Markets grew nearly 6%. 
• Meanwhile, Nordstrom announced that its online sales for the quarter grew 22%, while sales at its flagship and mall-based stores declined 1.2%
• Amazon's announcement of its Local Register mobile credit card reading device - competing with Square and PayPal - emphasizes the availability of its 24/7 customer support via phone and email. 

Here are some of the patterns that we take from these events:

1. Yes, customers continue to behave very differently than ever before. Even as the economy continues a slow-growth recovery, we will not be "getting back to normal." And that means customers will not use bricks-n-mortar stores the same as before.
2. Knowledgeable, accessible, and personalized customer service is increasingly a strong competitive edge.

But, most important, we believe this shows that today's customers are hungry for exactly what specialty retailers can provide.

• Edited selections (the Millennials would call that "curated"). But they must have the rationale for those selections well-explained.
• Knowledgeable customer service and product know-how. (YouTube cannot explain everything!)
• Responsiveness, especially when an incoming phone call is answered by a real person!
• Human scale. Smaller formats with personal service are in.
• "Multi-channel" - You know, both online and real life stores that are coordinated, and let the shopper shop as they choose. 

Size DOES Matter

As an independent retailer, you already have an important competitive edge. And if improvements are needed, you still have the advantage: much easier to make changes with fewer stores. 

So, size DOES matter. Advantage: the "small retailer." As Anita Roddick, Founder of the Body Shop, so famously observed:

"If you think that being small means you can't have an impact, try going to bed with a mosquito!"