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.

'Now' is the new 'normal'

I get to speak to a lot of retailers during the course of my day job.

Many of them are struggling to keep their heads above water and most of them think they know why;

'It would all be different if the government taxed e-commerce'
'The economy will pick up after the election'
'It's been a warm winter'
'Everything will go back to normal when the football season finishes'

These reasons all have one thing in common - they all assume that the present trading conditions are abnormal and that the sector will somehow return to 'normal' when this or that thing happens.

Last week I met a retailer who offered a more realistic assessment of the retail industry;

'Now is the new normal'

Experience design

The retail industry loves phrases and buzz words - they keep a lot of consultants and analysts in business.

'Experience design' is one of my favourites - it sounds exciting and usually leads to multi or omni-channel strategies that cost a lot of money.

The best in-store experience you can provide for your customers is.......customer service, delivered by an engaged and knowledgable sales person.

Two ways to increase profitability

After twenty five years in the industry, I'd like to think I know a thing or two about retail.

For example, I know that there are only two ways to increase profitability - increase sales or decrease costs (read 'cut wages/staff')

Some CEOs understand that doing the former means that they don't have to even think about the latter however many CEOs only know how to do the latter (which makes the former even harder)

The customer service paradox

Ask most retailers and they will tell you that their customer service is exceptional.

But ask any customer and they will tell you that customer service levels in B&M stores is dreadful.

The fact of the matter is that they are both right.

Some stores provide outstanding customer service and some don't.

The challenge for B&M is that when customers are asked about customer service, they think of the whole retail sector and not specific shops.

The service that your neighbours provide is associated (in the customer's mind) with yours.

We have all received bad customer service but most of us do nothing about it - perhaps it's time to start demanding better - your own business might depend on it.