If all you have is a hammer.....

I recently read an article on Linkedin about measuring the effectiveness of visual merchandising (click here) 

The article focussed on the role of visual merchandising in increasing 'basket size.'

I don't disagree although I do have an issue with the term 'basket size' (an FMCG term) being used with regard to fashion businesses. 

Putting that aside, the article was correct but that's not all VM can do for your business.

I shared an anecdote in the comments section about 'window pieces' and another about using your windows to encourage sales of slower moving stock and that got me thinking about the 21st century retailer's toolkit.

The retailer's toolkit has grown since I started in retail - it's bursting at the seams with new and improved tools so why then do retailers always go back to the same tool?

The tool I'm talking about is 'price.' 

Inclement weather 'drop the price'
Slow moving stock 'drop the price'
New competitor moved in down the street 'drop the price'
Over stocked 'drop the price'

To use the tool analogy again, price reductions are a like hammer and as the old saying goes - 'when all you have is a hammer, everything looks like a nail.'

The fact is that retailers have at their fingertips so many other tools but none so simple as price reductions and in an era when budget cuts and efficiency dividends mean that there isn't enough time or people, it's easier to use a simple tool than learn how to use a new one.  

Excuses are like a**holes...everybody's got one.

Excuses are like a**holes... goes the old saying but lately everyone's got the same excuse.

'Sales are down due to increased competition from online' say the CEO.
'Online is killing my business' says the small shop owner.

By some measure they are both telling the truth but certainly not all of it.

Both sentences could be improved by adding;

'because we don't know how or are unprepared to make the changes to our business which will make us more competitive'

Online competition is affecting bricks and mortar retailers and some more than others but simply stating the problem and not doing anything about it will not improve the situation.

A few years ago I was working on a citywide retail strategy and we asked retailers for their input. Car parking and competition from online were seen as the two most common challenges.

Few of the respondents could identify which aspect of car parking was the problem - price, location or availability and most of them hadn't actually thought about it but they were almost unanimous that car parking was a problem.

Online competition was a different story, almost every respondent believed that customers were being drawn online by cheaper prices.

Now I'm not going to say that is untrue but one particular respondent caused me to think that maybe, just maybe, customers aren't being pulled, they're being pushed.

This gentleman is a jeweller and has had the same store for 30+ years, not quite and institution, more like a piece of furniture which is useful but probably wouldn't be missed if it suddenly disappeared.

His feedback was 'you have to do something about adding GST (sales tax) to online purchases because it's killing my business.'

In his mind, applying a 10% tax to online purchases would make online shopping so unattractive that customers would come flooding back and he would be there to welcome them with open arms.

To be clear, I have no issue with adding GST to online purchases, especially if it can be done efficiently but I do have a problem with lazy retailers thinking that all of their problems are someones else's fault.

Not long after this exchange, I visited his store and realised that online competition was the least of his problems. A fit out which hadn't been updated since the 1990's, product ranges* and marketing collateral pitched at Baby Boomers, lacklustre displays, unhelpful staff and really, just no reason to shop there.

This was all fairly obvious to me but for him, it was easier to believe that something he couldn't control was the problem.




* a few years later I found myself working in the jewellery trade and discovered that, despite advice from my upper management, it was actually quite easy to introduce new, younger, more interesting and more profitable, product ranges but for some reason the industry is very averse to change.

It's the law

One of the first things you learn in retail buying is the 80/20 rule but that's not it's real name - somewhere along the line people stopped calling it 'Pareto's Principle' or even 'the Law of the Vital Few' and started calling it the '80/20 rule.'

Why? Because rules can be broken but laws are inviolable.

Pareto's Principle (when applied to retail) says that you will make 80% of your sales from 20% of your products.

But what happens when you try to break the law?

In the near duopoly that is the Australian grocery industry, Coles and Woolworths have seen off all almost all competition and now slug it out for market share. If one introduces a new idea, you can be sure the other is not far behind.

Over the last few years, both of them have introduced private label ranges which seem to expand on a daily basis and they're both trying to break Pareto's Law.

Several years ago, supermarkets carried a range of cordial brands and flavours - orange, lime, raspberry, lemon etc.... and the customer had choices until some bright spark noticed that orange cordial outsold everything else so they introduced private label orange cordial and increased the facings of branded orange cordial for every one of their brands at the expense of the less popular flavours.

Surely, increasing the range of orange cordial would mean that people would buy more orange cordial.

Well er no....it doesn't work like that.

Firstly, customers may have been tempted to buy two bottles of cordial when they had a greater choice of flavours but it would be rare for anyone to stockpile orange cordial without significant discounting and that leads me to the second flaw in their cunning plan;

Given the extra competition created by having so much choice in orange cordial, the buyer has to start discounting their best sellers in order to maintain the rate of sales.

This continues to be a spectacular own goal for the supermarkets and it's happening in every category - not just cordial.

Decoding Buzzwords - 'Customer Experience'

It seems like everyone has stopped talking about ‘omni channel’ and moved on to ‘customer experience’

The cynic in me believes that buzz words are created to sell something because whenever I hear them they are usually followed by a six figure sum for some ‘amazing’ application that will ‘revolutionise’ retail.

I’m not saying that customer experience isn’t important but I am saying that retailers shouldn't let themselves be talked into paying for something they can do for themselves.

Every retailer already has what they need to improve their customer’s experience and it surprises me that so few recognise it so let me make it as clear as I can.

Customer experience = Customer service.

Simple huh?

A friend of mine has a son with Down syndrome who can be very difficult to shop with. She recently shared on social media a glowing account of her experience in one of our biggest supermarkets and everything she wrote was about the outstanding service she experienced rather than the payment system or digital wayfinding or planograms etc..

An empathetic shop assistant took the time to actually help her and this has become a rarity in any shop, let alone a supermarket where it’s unheard of.

The assistant helped to distract her son while she shopped and even took him to the meat counter and introduced him to the butcher who gave him a piece of ‘Smiley’ Fritz (pressed luncheon meat/Devon with a smiley face)

The assistant, assisted and made what had the potential to be a traumatic battle of wills into an unexpected pleasure. 

My friend told me afterwards that she spent almost three times more than she intended to, partly because she didn’t feel like she had to get in get and get out as quickly as possible and partly because she felt obliged to reward the assistant for her efforts.

My friend had forgotten that people work in supermarkets and was surprised to encounter one.

My point is that before you go out and spend six figures on a shiny piece of software, perhaps consider whether that money could be better spent in hiring, training, enabling and encouraging your people to go well beyond what your customer expects. 

Go away! We are not interested in tempting you.

Sadly, many retailers have never learnt or forgotten the value of being generous.

Reading between the lines of the sign in the food court that says ‘tables reserved for food court customers’ means ‘Go away! we are not interested in tempting you’ and the one on the toilet door that says ‘restrooms for customer use only’ might as well say ‘unless you give me money, I don’t care about your basic human needs’ 

You wouldn’t say those things to your customers but your sign does it for you.

Retail is constant and relentless negotiation and one of the secrets to successful negotiation is trading something of low value for something of higher value. 

It costs you nothing to let a non paying customer use your toilet but to your customer it can be priceless - the goodwill it generates for you can't be bought.

It may not seem like it but access to tables and toilets or even a glass of free tap water on a hot day is an extension of how people perceive your business and they are just some of the most passive forms of customer service.

What type of retailer are you?

There are really only two types of retail business model. Fast moving consumer goods (FMCG) and Fashion.

FMCG businesses are those that sell the same product, over and over again - Supermarkets, Pharmacies, Hardware stores, etc.

The drivers of FMCG businesses are familiarity and price - the customer knows what these businesses stock and roughly what they should pay for it.

Fashion businesses are almost the exact opposite - they sell new products.

The drivers of Fashion businesses are an element of surprise and great service and the customer has no idea what they sell or how much to pay but know that they can’t live without it.

It is true that most retailers, have elements of both in their business. Every retailer has new products just as every retailer has basic stock but too many retailers fail to define what type of retailer they are - there are fashion businesses that behave like FMCG and FMCG businesses who think they are Fashion retailers.

I have recently completed some work for a previously successful jewellery chain who were experiencing a decline in sales and profit.

On closer inspection of their inventory, I found that nearly 80% of their product lines were more than five years old - product bought and price promoted, over and over again because, as one buyer put it “that’s what sells”

To make matters worse this business did not have an item which was newer than six months old and while there were systems in place to manage aged stock, nobody seemed all that bothered that there was nothing new or fresh in their business.

When asked about this, the same buyer said, “the people in the stores have no idea what’s new and what’s not” These statements explain quite a few problems the business was facing - their customers (and staff) were uninspired by a ‘same old, same old’ product range and this was being compounded by a buyer who clearly had never worked in a fashion business (or on a shop floor)

This business relied on ever bigger discounts to move their stock (leading to lower margins) and there were no plans in place to attract new or returning customers by refreshing their range.

The buyers were hamstrung and spent most of their time and OTB, buying and promoting stock which should have been either automatically re-ordered or deleted.

To solve this, we developed a new benchmark which took into account the product’s profitability over a given period i.e. when the profit dropped below a certain level it was time to think about introducing a replacement.

Simple stuff but ‘groundbreaking’ for some businesses.

One new product every month (not just a variation of an old product) and the deletion of two old products became one of the merchandise team’s KPIs.

I have also spent time with a pharmacy group which had the opposite problem.

Pharmacy is a lot like grocery except that, due to a lesser buying power, the large manufacturers tend to ride roughshod over the buyers.

Pharmacy, like many other sectors, receives co-operative funding for promotions and many range, display and promote new products according to the size of these cheques rather than the product’s performance.

In this particular pharmacy group, the buyers were inundated with new products which competed with old products for space on their planograms leading to best sellers being frequently out of stock while new products sat there, not selling despite the promises of the manufacturers.

We initiated a promotional program that focussed on the best sellers from the biggest categories - using them as, not quite loss leaders (but close) and the print and TV was backed up in stores with designated gondola ends.

This meant that the stores had to order enough stock of their best selling, promoted products (rather than an untested new product) to fill a gondola end for the first week of the promotion and despite some early underestimates this promotional program was a resounding success.

Again, it’s simple stuff but wresting back control of the group’s promotional program resulted in enormous increases in sales, profitability, basket size and value - not to mention that the stores had sufficient stock of what they needed and didn’t have to send their customers elsewhere.

So what type of retailer are you?

Apples, Oranges and Disruption

Let's say that you sell oranges.

You've built your business through hard graft over twenty years, and become the market leader..... 

You are the Orange King of (insert your city's name here)

Then one day, someone sets up a shop selling apples but not just any apples - these apples come on sticks and they're toffee coated. 

For a while, you pass off your drop in sales as a bad day or bad month, you blame the upcoming election or a big sporting event for taking away your customers (the excuses that retailers use are many and varied) but then you start to notice that more and more people are walking around eating apples on sticks.

So you drop the price of your oranges, you offer two for one deals and all the while you tell yourself that what you are doing is innovative because you've never discounted before and you're oranges are the cheapest they've been in twenty years but no matter how cheap your oranges, the customer isn't buying them and you are still losing customers to the toffee apple seller. 

In an attempt to save your business, you ask the government to step in and ban the sale of toffee apples or add an extra tax on the grounds that toffee apples aren't healthy and that serving apples on sticks is dangerous but when the government defends the free market, the same free market that made you the Orange King, you scream 'foul' and blame the toffee apple seller for not playing fair.

In reality, you're blaming them for having a better idea or  maybe even just the right idea at the right time - you're blaming them for disrupting your business and stealing away your customers with a product or service they didn't know they wanted.

And that is where bricks and mortar retail is at the moment.

Over the years, many retailers have been lulled into a sense of security by the discretionary spending power of the Baby Boomer generation. Far too many retailers have kept the same business model they opened with, they've sold or served the same thing for years because that's what their customers wanted. 

But what was right for the Baby Boomers is not right for Gen X or Gen Y and the generations after them will want something different again. 

Many bricks and mortar retailers have stopped innovating in an industry that demands newness and in the future we will see more disruption not less.

It might be time to start making orange juice.