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.

Flexibility Is Prized, Especially by Hourly Workers. Make It Your Competitive Edge.

Retailers have the opportunity to make "permanent part-time" positions even more advantageous to the stores and the employee. It could become your competitive edge for attracting and keeping the best employees. Here's why.

Even in this tough economic situation, there are people who want only part-time, hourly work. This includes parents of school-age children (who are not the sole breadwinners, but the "supplementers") and university and college students (of all ages).

However, these people may need flexibility (e.g., last minute changes) in their schedule. If you can provide that time-shifting flexibility, they often become the most loyal employees, according to Working Mother magazine.

Retailers are well-positioned to attract and retain these potential loyal workers. But it might require some revamping of the usual-way-of-doing-things.

Remember, your staff who are on salary can come in early and/or stay late to compensate for a parent/teacher conference or taking an aging parent to the doctor. For an hourly employee to have this flexibility, they typically must trade hours with colleagues. That makes it the employees' problem, and, adds another layer of complexity to the solution. Plus, employees may feel it is "inappropriate" to have repeated requests for changes.

That culture has to change. And fast! It starts with R-E-S-P-E-C-T for the real-life demands of all your employees, not just those on salaries.

How to make the scheduling work for all your workers and for your customers? Start first by asking your hourly staff. They will have some very practical insights.

Then, with their good input, your good intentions, and today's scheduling software, keep experimenting with different approaches until you get the one that serves you best.

Flexibility in scheduling - and respect from the employer - is prized by hourly employees. What the retailer gains in return can be tremendous loyalty. (And yes, breaking the attract-hire-train-repeat cycle can save costs.) What a competitive edge for your stores going forward.

Look, Sam's Club Is Re-Inventing Banking!

Oh my. Once again, our premise holds true: "Retailing is a mirror of society."

All sorts of traditional loan facilities have either dried up or become so very arduous that potential users are discouraged. And this dearth of debt availability - the credit crisis - shows no sign of ebbing.

"Okay," says Sam's Club, "we need to give our customers what they want, in this case, SBA-backed term loans of up to $25,000." And their pilot program has already loaned to about 100 small businesses. Cool, eh?

What we love is watching the competitive juices roil at Costco, Staples, Sears, Office Depot and others. "Let Sam's Club have this 'loyalty program' all to themselves?! Are you mad? No way!"

Banking isn't going away. It's just (finally!) being re-invented, in this case, by retailers who are listening closely to their customers.

My, but this mirror of society can foster some fascinating adjustments, and business opportunities.

Re-Negotiating with Your Landlord? Consider This Innovative Concept

Your retail business has survived to date, thanks in large part to your guts and guile. You have slashed expenses, controlled inventory like never before, and cut deals with vendors and landlords.

As "rent relief" expires, however, retailers are finding landlords much less flexible. (They have financing issues of their own, and are feeling the same cold shoulders from banks as retailers do.)

So, here's an idea for you to use with your landlord. Create an agreement that allows you to pay your rent on the same seasonality as your sales. We are not talking about percentage rents (which essentially accomplish the same thing). Instead, we're proposing "seasonal rents."

That is, for retailers not paying percentage-only rents, monthly rent is a fixed, flat cost per month. Each month's rent payment is 8.3% of the year's total rent.

However, revenues from retail sales are not a flat amount each month. Retailers instead have exceptional seasonality. Each month's sales as a percent of the total year can range from 5% to 20%+.

Our recommendation? First, prepare a spreadsheet for your landlord that summarizes the expected seasonal spikes in your revenues. (You can easily develop this from your pro forma P&L for the year.) Here is an example from one retailer:
(Notice how not even one month calculates to the "average" of 8.3% per month!)

Monthly Sales as a Percent of Total Sales
Feb - 5.7%
Mar - 6.6%
Apr - 6.3%
May - 7.5%
Jun - 6.9%
Jul - 7.2%
Aug - 7.2%
Sep - 6.3%
Oct - 7.6%
Nov - 10.2%
Dec - 20.9%
Jan - 7.3%

Then, given the total rent for the year, agree to pay each month's rent on that same percentage scale. That's what we call "seasonal rent".

You still pay the same total rent for the year. You just are paying it on a schedule that is more suited to the realities of your cash flow.

Moreover, it may give you a better bargaining position with your lenders, because you likely will have a couple more months that show a profit. And it certainly gives you more flexibility with managing your cash flow.

This New Normal continues to demand flexibility. If you - or your landlord - aren't able to go to a percentage-only rent, then this "seasonal rent" approach may be a good alternative.

Let us know what you think of this idea. Your feedback is important to us.

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.