By William J. Lynott
The upheaval in today’s economy has given a re-birth to the basic dynamics of successful retailing. Easy to ignore in good times, the time-honored rules of profitable retailing are a critical component in the recipe for building sales and profits when the going gets tough.
Here are Seven Commandments of Successful Retailing that can help your store survive and prosper in this and in any economy:
1. Make Customer Satisfaction Your Hallmark
Customer satisfaction is the least expensive, most powerful marketing medium available to your store. Nothing will build loyalty faster than satisfied customers bragging to their friends about their pleasant experience with you — and nothing will eat away at your business more relentlessly than unhappy customers complaining about you.
“Some businesspersons tend to lose an opportunity when dealing with a difficult customer,” says Christopher Simmons, CEO of Neotrope®, a U.S. business marketing firm. “By focusing on making every customer happy, you plant the seeds for a long-term relationship. Flexibility in customer relations is essential in building long-term customer loyalty.”
To be sure, it sometimes takes both time and money to resolve a customer complaint, and it can be especially trying when you feel that the complaint is not justified. The point to remember is that the dollars you spend resolving any complaint are marketing dollars — arguably the most effective customer-loyalty dollars that you can spend.
Never allow yourself to forget that the most powerful and least costly source of new business is a personal referral, and the only sources of personal referrals are satisfied customers.
Happy customers hold the key to every successful retail operation.
2. Know Your Market
Don’t think you know it all when it comes to current trends. In the retail gift industry, it’s essential to keep up with local as well as national trends. Know your market. Will it sell in your store? Does it fit your basic theme? And don’t attempt to sell anything that’s way out of your normal pricing range just because it’s trendy. The best solutions to issues such as these will come from your customers. Customers will always let you know what they’re looking for, but only if you ask.
Stocking your shelves, traveling and selecting merchandise for your store, can be the most time-consuming and expensive part of running a retail gift store. It’s an obligation that must not be taken lightly. Every buying trip must focus on the customer back home.
3. Keep House like the Big Boys
The next time you visit one of the chain department stores such as Bloomingdale’s, Target, or Macy’s, look at the housekeeping. See how the floors are clean and shiny, the shelves neat and clean, windows and other glass sparkly bright. That’s no accident. It’s likely that the maintenance crew was busy polishing floors and tidying up before you got out of bed this morning.
Companies with the resources to approach business as a science have long since discovered an important truth: People get in a buying mood more easily when the shopping environment is neat and clean.
The physical appearance of your store will say more about you than all of your paid advertising. A shabby or disorganized atmosphere may seem harmless to some store owners — as one owner was heard to say, “This isn’t a hospital.”
Of course, your store isn’t a hospital, and this is not to suggest that you should be trying to make it look like one.
However, if you want to separate yourself from your competition, you will become a better housekeeper than your competitors. An inviting interior and exterior are relatively easy to accomplish and they offer an easy way to reinforce your professional image.
The physical appearance of your facilities and personnel are built-in advertisements. They say either good things or bad things about your dependability and trustworthiness. What image they convey is up to you.
4. Decide That You Will Never Lose a Client to a Competitor
Experts agree: on average, it costs five times as much for a business to find a new client than to keep an old one. You should focus on the significance of that statement. It is one of the most powerful concepts in the business world.
Once a new client visits your store for the first time, you’ve done the hard part. Now, your job is to instill the notion that shopping with you will always be a pleasant and satisfying experience.
You and your employees must never lose sight of the fact that developing a new customer is a costly and difficult job. Once a stranger crosses your threshold, that first experience will determine whether that person will ever visit you again.
Once you convert a prospect into a customer, a good part of your overall marketing program must be built around techniques designed to make sure that he or she never has reason to leave you for a competitor.
5. Follow the Principles of Profitable Cash Management
Making the sale is only the first part of a profitable retail transaction. How you manage the revenue generated by your sales will have a great influence on how much of that money finds its way to your bottom line.
Profitable management of cash flow calls for never allowing any of your money to lie idle. The worst place to deposit your daily receipts is in a low-interest/no-interest checking account.
Instead, open a money market account at your bank and have it linked to your checking account for telephone or online transfers. From that point on, deposit your daily receipts into the money market account where they will immediately start drawing interest.
Never deposit receipts directly into your checking account. Keep a minimum balance in the checking account and transfer cash by phone or online only as needed to cover checks written. The banks have made this technique so easy to use that there is no longer any reasonable excuse for not using it.
While even money market interest is anemic now, interest rates are set to climb soon and you’ll be ready to enjoy the benefits when they do.
Worst money sin of all: leaving checks or cash lying around in a desk drawer until you can get to the bank. Using every cent of your money to make money is the smart way to bolster business profits.
6. Maximize Profits through Impulse Sales
Ever notice those inexpensive items lined up at the cash registers of your local supermarket or drugstore? They’re known as impulse items — products that are inexpensive enough to be bought on impulse.
Impulse buying – spur of the moment, unplanned decisions to buy – can be a significant profit enhancer for retailers. Most impulse purchases are an afterthought to the customer’s primary purchase. With most operating expenses paid by the primary purchase, the gross profit of the impulse item effectively becomes net profit. That’s why setting up an effective impulse sales display is an important part of optimum retail profitability.
Here are some techniques that will help to boost impulse sales in your store:
● Location is critical. Impulse items are best located at the point where the sale is completed. In most cases, this will be right at the cash register or other point of sale.
● Remember that emotions play a major part in impulse sales. The price has to be low enough that the customer need not harbor any guilt feelings about spending the extra money involved. Under most circumstances today, that means a selling price of $5.00 or less. Don’t be turned off by the need to devote selling space to low-priced items. Remember that most of the income from impulse sales will flow directly to your bottom line.
● Keep the impulse display full. Partially empty shelves or displays are a turn-off for most buyers. While you may want to offer more than one impulse item, keep the selection down to just two or three. Remember, for a true impulse sale, you don’t want the customer spending time mulling over the purchase; indecision will often result in no decision.
● Never forget the basic premise of impulse sales: a price low enough that the customer need not rationalize spending the extra money or worry about explaining it to a skeptical spouse, and an offering of items with broad enough appeal that virtually everyone is a possible buyer.
7. Adhere Strictly to Scientific Inventory Control
Do you know how much of your inventory has been on your shelves for six months or more? Do you know how often you find yourself out of stock when a customer asks for a specific item?
If you don’t know the answer to these questions, there’s a good chance that loose inventory control is eating away at your bottom line. Having the right inventory at the right time is a fundamental requirement for profitable retail sales.
Professional inventory control means knowing which items are your fast movers and which items on your shelves are costly “dead” inventory. This important information comes from analyzing such things as your inventory turnover rate and return-on-investment.
These days, such complexities of profitable inventory control are best left to relatively inexpensive computer software. If you’d like to learn more about this important part of profitable retailing, log on to http://bit.ly/SR-Inventory or pick up a copy of Essentials of Inventory Management by Max Muller (American Management Association 2003).
William J. Lynott is a veteran freelance writer who specializes in business management as well as personal and business finance. His work appears regularly in leading trade publications and newspapers as well as consumer magazines including Reader’s Digest, AARP Bulletin, and Family Circle.