Marketing Basics for Retailers

For retailers, marketing is one of the hardest tasks to tackle on a consistent basis. Sure, it’s important, but it always seems to come after the pressing things like staffing, inventory, and reports management.

But, even though you may not feel like you have a lot of time to manage a grand marketing campaign, you simply MUST find the time to put on a targeted marketing effort.

Pick a segment of your customer base and use your reports to understand what they like to buy. Rather than hoping they’ll come back to buy more, send them all a postcard with a promotion on similar items, or a new line of items from their favorite vendor. This not only increases the potential that they’ll come back to buy something, it increases your brand status with those customers and makes them feel special.

On that note, make them feel so special that they tell a friend. Give them an incentive to bring a friend in next time they come. If they bring a friend, maybe you give them a free small item or a trinket. Maybe you give them a free service or a discount. Whatever it is, reward the behavior you’re looking for, and make the reward tangible.

Market consistently to these customers, and periodically to new customers, and you can be sure that you’ll have better store traffic than you would simply by having nice displays or a well stocked inventory.

Retail Security is here to stay

Everyone has heard of the major credit card and identity data breaches at retailers like TJX and DSW, but what does that mean to the small retailer?

Well, it means a lot. Small retailers have been lucky for the past few years as hackers and other cyberthieves have targeted the plump, low hanging fruit of large businesses with lax security practices. However, it only takes a few major brands being made an example of for others to start taking extreme measures to secure their payment networks and other customer data.

So, with the big data “banks” locked up, where will the criminals turn? If it’s very complicated and expensive to target the big haul, thieves will focus instead on small returns that can be had with much less effort.

This means that in 2010, especially in light of the desperation in the economy, small retailers absolutely must implement network, firewall, user access, and other data security policies to avoid being breached. Such a breach will cost more than most retailers can afford in fines, fees, lost sales, increased auditing costs and other outlays. You simply cannot afford to NOT secure your data.

Get a qualified security auditor to review your computer infrastructure, including your software, legacy systems, and internal policies. If you still have sticky notes with your login and password stuck to your monitors, you’ve got a long way to go baby.

The time for sticking your head in the sand has passed, and the retailers that can’t demonstrate that they are secure will get passed by as well, by the PCI (Payment Card Industry) and by customers who don’t feel secure in using their credit and debit cards in those stores or on those websites. Security is fashionable now, just like being green, so now’s the time to use the latest GOOD technology to fight the latest BAD technology.

CAP has a full PCI knowledgebase to help retailers negotiate the maze here: http://www.capretail.com/pci.html

Go to VISA’s PCI Knowledgebase to learn more before it’s too late:
http://usa.visa.com/merchants/

You owe it to yourself and your customers to make your business as secure as possible.

The Cost of Lost Sales

We’ve talked a lot about inventory here, and there are lots of great strategies for maximizing turnover and throughput, but I want to talk about some of the less obvious implications of improper inventory management.

First, the obvious problems with poor inventory management are:

1) Lost sales due to empty shelves

2) Shelf space being filled with unpopular items (this takes up useful and productive shelf space, but it also portrays you as out of touch)

3) Customers can’t get the items that they DO want.

So, if you stock your store using your instincts, or by trusting the vendor reps who call on you, you run the risk of all of the above, hurting your profits and your image. But, if you have a good point of sale system to track customer purchases, you can readily compare your recent sales and inventory activity to that same activity in the year ago period for the approaching order period. This allows you to see what is selling now, as well as what sold well a year ago next month. You can use this data to make educated (and likely correct!) decisions about what to order and where to put these items in your store.

If you have the wrong items on main display, then not only will they not sell, but your customers will not be able to get the items they want, meaning you lost that sale, and you’re paying for inventory that may never sell, or at least not without a big discount. Plus, your customers may form the opinion that you don’t carry what they want, and they’ll go elsewhere to get it. We don’t even want to think about the long term costs of this effect, do we?

The takeaway is that instead of ordering and stocking by memory, instinct, suggestion, or any other false metric, dig into the data that your POS system gives you to make the right decision about what to put in your store each and every time you order. Sure, it may take a few minutes longer, but it could mean the difference between success and failure for your business.

The Power of Employees

Do you trust your employees? If so, you’re ahead of the game. But, once you trust your employees, are you happy with their productivity?

My guess would be that you’re not. It’s not necessarily because they are incompetent, or that you didn’t show them how to do the job, but it’s probably tied to the latter. If you have employees that you trust, but are underperforming, they may be lacking the tools to be more productive.

It’s hard to tear yourself away from the immediate tasks at hand to train employees to do the things that you can do yourself, but just think what you COULD be doing if your employees (even just a manager or assistant manager) were handling all of the mundane chores that you find yourself doing.

Spend a little extra time each week with your best couple of employees, including showing them how to use the point of sale system to do things like inventory counts, ordering and receiving, and system maintenance, and they can take a big workload off your shoulders.

There will always be bad employees, or employees you don’t necessarily trust with an open cash drawer, but identifying a few key employees, and then empowering them with training and access to the important information in your store will result in more time for you to spend growing your business, instead of just maintaining it.

More on Upselling

Upselling is great for related or complementary items. It only makes sense to offer a customer some shoe polish when he buys a new pair of high end wingtips, right?

Once you’ve setup your upselling links in your POS system to trigger upsell events for complementary items, it’s time to consider another way to help customers find what they need and what you want to sell.

You are probably spending a lot of time finding new and competitive items in this down economy, including, most likely, discount items or lower price point items to help your customers find what they need while saving them some money. Remember, keeping customers in these hard times will engender loyalty and position you for a strong rebound ahead of the general curve of the economy.

Use upselling techniques to highlight these new and price-conscious items to your customers. Let’s take the example of a boutique cookware and kitchen appliance store. If a customer is buying a new butcher’s knife, maybe you can upsell them into a new set of knives that are not as high end as the single knife but will help them get an entire new set for a better price than the set of knives like the single butcher’s knife. This way you get a bigger sale, and the customer gets a better value.

It’s a similar strategy to selling complementary items, but you can tweak it a bit to drive sales. Don’t forget to try different strategies and test, test, test. Once you’ve set all this up in your POS system, you MUST make time to run the reports to understand the outcomes of your offers. This will help you better plan your inventory to be more competitive and more in line with your customers wants and needs.

Social Media and You

Social media is one of the hottest topics out there right now, and many small retailers are strugging to decide how to use the various outlets and to understand how they might apply to their businesses.

Should you be using Twitter?  Should your business have a Facebook fan page?  What should you be doing with your website?

The answer to all three is, “It depends.”

If you have a local business with a strong following or a unique product set or message, and you want to promote your sales, special events and other news, then social media can definitely help.  If you think that a good percentage of your customers are likely to be using some form of social media, then you should seriously consider looking into it.

Setting up a Facebook fan page for your business, and then inviting your best customers to join your Facebook page gives you an easy to way to send out invites to events, and news about promotions.  Twitter gives you a similar capability to send out short updates about your business and any relevant news.

You should give your customers some incentive to sign up and follow you on these social media sites, such as a discount or special notice of events and new items, etc.  Make these customers feel special and use social media to enhance your customer loyalty programs.

The bottom line is social media is important, and it’s here to stay, but you need to figure out which sites are useful to your business, and then set out a realistic strategy for implementing them.  Even though most sites are free, your time isn’t, so you need to carefully choose and budget your time in order to execute properly.  If you can do this though, you should definitely benefit.

I’d love to hear from you about your business and whether or not you’re using social media.  Check out our site at www.capretail.com or follow CAP on Twitter @CAPTime.

The Power of Gift Cards

Gift cards are pretty ubitquitous these days, but what are the real pros and cons of issuing and accepting gift cards as a tender type in your store?

The obvious answer is that they can help increase sales. Sure, people buy them as gifts and give them to their friends and relatives. The recipients come to the store and buy products with the intent of paying with the gift card, but one common tendency is for people to view the gift card amount as “free money,” which it is, so they will spend more than the face value of the gift card. They see it as getting a $55 item for $5 if they use a $50 gift card. Data shows that the average spend is greatly increased when a gift card is used as a tender type.

So, increased sales are a clear benefit. But what else can gift cards do for you?

There are cashflow implications that aren’t always considered. With a gift card, you get paid up front for the purchase of the card, meaning you are essentially pre-paid for the items that the recipient of the card eventually purchases. So, even if the gift card is never redeemed, you have that cash up front. This is never a bad thing.

The other side of that is that often gift cards aren’t redeemed, or aren’t redeemed fully. So, if you sell a gift card that is never redeemed, it’s technically a liability on the books, but it may never materialize. Then you have cash on hand that never has to be applied to cost of goods sold, because the goods never get sold.

A less tangible, but critically important aspect is the loyalty factor. Gift cards drive traffic to your store, and a customer who may have never purchased anything from you is now in your store. If you can provide them with a positive and pleasant shopping experience, then you can convert them into a loyal return shopper. So, a $50 gift card may turn into a long term revenue stream from a new customer.

One way to increase your store traffic is to use gift cards as promotional items. If you give away $5 or $10 gift cards to target customers, you can drive that traffic into your store and turn them into repeat customers. If they end up shopping at your store regularly, that $10 investment could turn into hundreds or thousands of dollars in future sales. Not a bad return, right?

Good gift card programs are processed through an integrated payments gateway in your POS system, and as such you should be able to get good reporting out of your POS and from a web page. This data can help you understand the buying patterns of your gift card customers and how they relate to your regular customers. Use this data to determine how to use gift cards as promotional items and to drive the type of traffic you want in your store.

In review, don’t just view gift cards as a necessary evil. They can not only increase sales on single transactions, but they can drive traffic, increase customer loyalty, and enhance brand awareness if used properly. If you’re not accepting gift cards today, you should be.

Inventory Profitability

Increasing your sales is always a good thing, but what do you do when you’re really having a hard time attracting new customers, especially in a down economy?

Adjust your inventory to take advantage of your more profitable items. If you have your inventory set up and configured correctly in your software system, you should be able to easily determine which item categories or departments provide the best profit margin.

Rather than trying to sell to more customers, maximize your profits by emphasizing these more profitable items. If you can do this, then you will sell the same number of items, or sell to the same number of customers, but you will realize greater profits.

In addition, you can work with your vendors to find replacement products for those with low profit margins. Perhaps you have a popular item that carries a low margin because it is commonly available. Check with your vendors to see if they have an item that is essentially the same, and carry that item as well. Offer samples or demos to your customers. If you can show them that the alternative item is as good or better, then they’ll buy that item and you can make a bigger profit.

Simple tricks like this can help you make the most of your inventory without making major changes to your store or your product offerings.