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.