Secrets for Retail Success
Given the many bankruptcies and store closures the retail industry encountered during the past year is it any wonder that retailers across the country are somewhat frazzled? In fact by October 25 of last year the U.S. had already broken a retail milestone for the number of store closures not seen since the 2008 financial meltdown. Nearly 9000 retail locations closed in 2017. This represents more than a 200 percent increase over the previous year.
As always there are nearly as many different reasons for why as there were closures. Increasing internet shopping is only one of them albeit a legitimate one. Financially troubled chains inventory issues changing consumer tastes sameness of selection weather even politics are among the many reasons contributing to the retail apocalypse. One of the biggest factors however is the fact that we are simply over-stored in this country.
The good news is the fact that retail is actually alive and well. The 2017 Holiday Season saw nearly a 5 percent increase in sales including both online and in-store. Retail jobs are not vanishing; in fact they are gaining and the future is bright. New stores are opening and existing stores are expanding. The tax reform bill signed in December of 2017 will have a positive impact on retail most agree.
Given that as a preamble allow me to present The Nine Secrets of Retail Success.
By Ritchie Sayner
The 9 Secrets for Retail Success
- Simple is best
- Expand your classifications
- Build customer loyalty
- Legendary customer service
- Empower sales staff
- Merchandise presentation
- Manage your inventory
- Control your markdowns
- Don’t be afraid to say NO
Inside Outdoor | Winter 2018
Secret #1: Simple is Best
Retailers are finally learning that having more products won’t necessarily win over customers. We already are overwhelmed with too many choices. Who wants to dig
Through racks of sameness to find one great item? Not many. Remember the KISS method. Keep it Simple Stupid.
Larry Schwartz maintains in his book “Paradox of Choice” that given too many choices humans will simply not be able to choose. Many experiments have proven this to be true. One such study was conducted by Professor Sheena Lyengar from Columbia University. In a California gourmet market a booth was set up with samples of W&S jams. Every few hours the offering was switched from a selection of 24 jams to a group consisting of only six.
On average customers sampled two jams regardless of assortment size. All told 60 percent of the participants were drawn to the larger sampling while 40 percent stopped by the smaller one. What’s interesting is that 30 percent of those who were drawn to the smaller assortment bought while only 3 percent exposed to the larger assortment did.
Presence of choice might sound appealing as a theory but in practicality more choice is oftentimes overwhelming and results in lower sales. The takeaway: more is not always better.
Winter 2018 | Inside Outdoor
Keeping things simple applies to your presentations email blasts social media posts and especially your windows. You don’t need to put a sampling of everything you sell in the front window.
Secret #2: Expand Your Categories
Consider a display of items made in your community. The idea here is to keep a store’s brand somewhat regional. One regional chain in the Midwest decided to try this concept with no set sales goals. They ended up doing millions in:
- Apparel
- Glassware
- Blankets
- Jewelry
- Handbags
- Belts
- Scarves
- Candles
- Bath products
Not every item is right for every store. The point is that if you think outside of the box products are available that have a local connection.
Secret #3: Build Customer Loyalty
This is a hot topic in retail today.
Capturing Customer Information
It starts by capturing customer information. Case in point nearly half of all households in the U.S. are Amazon Prime members. Since sales to Prime customers are nearly twice that of non-Prime shoppers brick & mortar stores have become challenged to find ways to keep customers coming in.
Restoration Hardware’s RH Grey Card
One such method offered by Restoration Hardware is the RH Grey Card. For an annual fee of my keyword00 customers get 25 percent off in every department 10 percent additional savings on sale merchandise and design services and early access to clearance events.
Loyalty Programs
Loyalty programs also known as frequent buyer programs have now become commonplace with most retailers. To be effective there must be perceived value. The key element is that the customer knows that by being part of the “program” they are not getting the same offers everyone else does. One note of caution however. Make certain that you understand what your loyalty program is costing you.
Secret #4: Provide Legendary Customer Service
Shoppers are tired of being considered faceless numbers in a crowd. They are willing to pay for a better shopping experience. A recent study showed that more than two-thirds of Americans spend 14 percent more with a company they believe delivers excellent service.
Saks Save Me service allows shoppers to call a dedicated number to resolve fashion emergencies and in some markets even sends a wardrobe van. Some preferred customers are offered rides home in a chauffeured BMW.
A colleague of mine who flies often for business has been shuttled between connecting planes in a Porsche simply because the airline values his business.
Guarantees and no-hassle return policies are an important part of customer service. You don’t have to look further than Zappos to see just how loyal customers can be if a brand convinces them they simply can’t go wrong thanks to a liberal return policy.
Believe it or not customers who return 50 percent of what they buy are also the most profitable.
When I see a sign at the register that states “No Refunds or Exchanges. All Sales Final” I literally cringe. Stores with this approach will have a hard time surviving. Most often you find this with smaller retailers. One reason among several why they remain small – small thinking perhaps?
Customer returns are a way of life.
Online returns account for a third of purchases. Thirty- to 60-day return policies are now the norm. But why make it easier for customers to bring things back? A recent Journal of Retail study made an unlikely discovery. The study claims that the longer a store allows a customer to return something the less likely they are to actually return it. Something far off becomes more abstract. Something closer becomes more concrete and thus changes the subsequent action.
Source: National Retail Federation
Most Important Return Policy When Shopping for Gifts In-Store vs. Digitally According to US Internet Users Nov 2017
% of respondents
Source: Promocodes
Primary Accommodations for New Campers
Source: KOA
- Strongly/somewhat agree
- Poorly designed mobile features
- Slow responding online chat for sales or customer service issues
- Poor features/responsiveness on social media
- Customer service only available via phone or in-person
Strongly/somewhat disagree
- 39%
- 27%
- 14%
- 61%
- 73%
- 86%
Millennials (18-34)
Generation X (35-54)
Baby Boomers (55+)
Which of the following would most likely make you stop using a product service or brand? (Please select up to three)
Source: KOA
Which of the following technologies have you heard of? And which if any have you tried while shopping in a store or online?
Source: National Retail Foundation
- 23%
- 16%
- 20%
- 17%
- 21%
- 9%
- 12%
- 10%
Gen Y (23-37)
Gen Z (16-22)
- 26%
- 43%
- 48%
- 18%
- 31%
- 3%
- 27%
- 4%
New to camping in 2015
New to camping in 2016
- Tents
- RVs
- Cabins
- Other
Provides full refund (i.e. returns are not limited to
Exchange or Store Credit
- Does not require receipt
- No time limit for returns
- Does not require bringing original payment method
- Accepts returns without tags or original packaging
- Accepts returns for used items
- Free return shipping
- Option to return in-store
37.9%
33.6%
20.9%
12.1%
16.1%
10.8%
8.3%
9.3%
6.0%
6.2%
27.8%
11.0%
In-Store Digitally
- Customer Service Training for Associates
- Source: BRP Consulting
- Formal training program for new hires
- On-demand micro-training/education
- On-demand training/education available via mobile devices
- Implemented and working well
- Implemented and needs improvement
- Plan to implement within 3 years
37%
55%
5%
29%
29%
23%
22%
24%
33%
Ways in Which Internet Users in Germany the UK and the US Use Mobile Devices to Facilitate In-Store Shopping Nov 2017
Source: Scandit
Likelihood of Using Digital Wallets Over Next 90 Days
Source: 451 Research
- 35%
- D ‘14
- 0% 20% 40% 60% 80%
- M ‘15
- J ‘15
- S ‘15
- D ‘15
- M ‘16
- J ‘16
- S ‘16
- D ‘16
- M ‘17
- J ‘17
- S ‘17
- 30%
- 24% 25%
- 22% 25% 25% 24% 24% 28% 29%
- 26% 25% 26%
- 25%
- 20%
- 15%
Percentage of Respondents Who are Very/Somewhat Likely to Use Digital Wallets over Next 90 Days
Most Important Factors for Not Using a Digital Wallet
Source: 451 Research
- No Need/Not Interested
- Security Concerns
- Prefer Traditional Methods of Payment
- I Don’t Know How
- Technology is Too New
- Limited Acceptance Among Merchants
- Too Complicated
- Not Available for My Device
34%
29%
22%
5%
3%
2%
2%
1%
Outdoor Participation Trend
Source: 451 Research
- All Americans Ages 6+
- 60%
- 50%
- 40%
- 30%
- 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
- 48.8%
% of respondents
Locate a Store
- Check product prices
- Check opening and closing times
- Read customer reviews
40%
40%
38%
33%
Frequency with Which US Smartphone Users Intentionally Click on Mobile Ads by Generation
Source: Button; App Annie
% of respondents
US Millennial Internet Users Who Would Be More Willing to Purchase a Product/Service
If a Celebrity Endorsed IT Nov 2017
Source: Roth Capital Partners
- Disagree: 27%
- Somewhat disagree: 19.5%
- Indifferent: 31.8%
- Somewhat agree: 14.2%
- Agree: 7.5%
Millennials (18-34)
Gen X (35-54)
Baby boomers (55-73)
- Very often: 2%
- Often: 2%
- Sometimes: 1%
- Rarely: 8%
- Never: 6%
Technologies Tried
- Mobile payment: 3%
- Buy online pick up in store: 3%
- 3D printing: 19%
- Tablet-/mobile-empowered associates: 11%
- In-app store navigation: 47%
- Messaging apps/chat: 8%
- In-Store digital display: 23%
- Visual search: 5%
- Voice search: 19%
- Augmented reality: 13%
- Virtual reality: 44%
- Smart dressing rooms: 8%
Total Aware:
- 68% Have tried
- 65% Haven’t tried
I would like a store/brand to know who I am when I walk into a store because of location-based technologies (e.g. iBeacons RFID geofencing)
Source: Salesforce Research
Customer Service Technologies in Place
Source: BRP Consulting
- In-store real-time order status visibility: 8%
- Product locator app: 5%
- Videoconferencing – customer uses to shop from home with associate in store: 18%
- Customer self-checkout through app: 45%
- Virtual closet: 3%
- Videoconferencing – customer uses in store to speak with call center: 3%
Implemented and working well: 19%
Implemented but needs improvement: 11%
Plan to implement within 3 years: 47%
Inside Outdoor | Winter 2018
This is known as “The Endowment Effect.” The longer you own something the more it begins to feel like it is really yours.
Secret #5: Empower Your Sales Staff
Studies have shown that even after researching online comparing prices and reading reviews 40 percent of customers remain open to persuasion once they enter a store. A well-trained empowered sales force determines your level of sales. Without them your store cannot maximize its true upside potential.
Take the Apple Store which enjoys the highest sales per square foot in the history of the retail business. Employees are taught to solve…
Customer Problems Not Sell Goods
The logic behind The Container Store is that they would rather offer $40000 a year to one super employee than pay $20000 to two so-so employees. Last year the average salary for this retailer was $44000. That’s salary; they don’t pay commission. They put every new associate through 187 hours of training. They are obsessed with teaching employees how to sell and amaze customers. For the Container Store at least the secret to great retail is its ability to motivate its staff. It seems to be working as the store rarely has sales or offers special deals.
Empowering Employees
Every year the Ritz Carlton empowers every employee from housekeeping up to executives with up to $5000 to comp guests. The only questions asked of the employee are what happened and to make sure it doesn’t happen again. Reward good behavior among employees and listen to them. Introduce a suggestion box and have regular store meetings.
Secret #6: Visual Merchandising
There is an old retail adage that perfectly describes the need for visual merchandising: “Goods well displayed are half sold.” Think of the best ads you have seen on television or in store windows. The most effective ones are clean and simple and have a clear message. You might think of Duluth Trading Company as an example of these ideas.
Be sure to pay attention to the first few feet when customers enter the store. This is referred to as the “decompression zone.” This is the space where customers get the “vibe” or feel of a store. From this point 90 percent of customers will turn right upon entry. Your best and newest items should be represented here.
When it comes to in-store displays remember the eye moves up toward the rear of the store. Avoid at all costs large displays in the front of the store that visually block the customer’s view of the entire store. Vary the height of display tables. Most stores I visit have four-way clothing displays t-stands.
And waterfall displays that are set too high.
Unless you run a big & tall operation be sensitive to the height of the average (woman) customer.
Reduce clutter at all costs.
Nothing shuts down senses and promotes shopper anxiety faster than a messy unorganized shopping experience. This also applies to display windows. Avoid the temptation of trying to say too much at one time. Less is more. You don’t have to show everything you sell in the front window.
Finally don’t neglect the only public place where you can take off all of your clothes and try on someone else’s – the fitting rooms.
Most have inadequate lighting poor ventilation and mirrors resembling something you might find at a circus fun house.
Secret #7: Manage your inventory
Inventory is the very heart of the retail store. The best retailers know that in order to keep customers coming back and buying they must have a constant flow of new merchandise. No one comes in your store to see what came in last year. They come in to see what’s new. I call this “The Power of New!”
- If two turns annually is the goal in a given classification then a six months supply on average is what you will need to achieve it.
- If you want to turn 3X you should have very little inventory older than four months in stock.
- 4X turn = 90 days and so on.
The methodology by which retailers control their buying and hence manage inventory is known as open-to-buy. This mathematical formula serves a multitude of essential services for the retailer. It provides for sales and inventory target goals; it provides guidance for how much to buy; it establishes benchmarks for evaluating progress; and it can be used at any level desired.
Good sales and inventory forecasting too is essential to maximize success in a retail operation. A failure to plan oftentimes leads to a plan to fail.
Secret #8: Control Your Markdowns
Today’s retailers know that rely-
Impact of Deep Discounts on Customer Behavior
Relying too heavily on deep discounts to move excess inventory not only hurts margins but can actually train the customer to wait for the sale. Hence the way we frame a sale or price our goods is very important. “Save” makes customers see how much they saved versus how much they spent. Percent off (x%) sales are way over-done irritating to the customer and dangerous for the retailer.
Most Important Return Policy When Shopping for Gifts
In-Store vs. Digitally
According to US Internet Users Nov 2017
% of respondents
Source: Promocodes
Primary Accommodations for New Campers
Source: KOA
Strongly/somewhat agree
Poorly designed mobile features
Slow responding online chat for sales or customer service issues
Poor features/responsiveness on social media
Customer service only available via phone or in-person
Strongly/somewhat disagree
39%
27%
14%
61%
73%
86%
Generational Preferences
Millennials (18-34)
Generation X (35-54)
Baby Boomers (55+)
Factors Influencing Product Service or Brand Usage
Which of the following would most likely make you stop using a product service or brand? (Please select up to three)
Source: KOA
Technologies in Retail
Which of the following technologies have you heard of? And which if any have you tried while shopping in a store or online?
Source: National Retail Foundation
- 23%
- 16%
- 20%
- 17%
- 21%
- 9%
- 12%
- 10%
Gen Y (23-37)
Gen Z (16-22)
26% 43% 48% 18% 31% 3% 27% 4%
New to Camping
New to camping in 2015
New to camping in 2016
Tents RVs Cabins Other
Return Policy Preferences
- Provides full refund (i.e. returns are not limited to exchange or store credit)
- Does not require receipt
- No time limit for returns
- Does not require bringing original payment method
- Accepts returns without tags or original packaging
- Accepts returns for used items
- Free return shipping
- Option to return in-store
37.9% 33.6% 20.9% 12.1% 16.1% 10.8% 8.3% 9.3% 6.0% 6.2% 27.8% 11.0%
In-Store
Digitally
Customer Service Training for Associates
Source: BRP Consulting
Formal training program for new hires
On-demand micro-training/education
On-demand training/education available
Ways in Which Internet Users in Germany the UK and the US Use Mobile Devices to Facilitate In-Store Shopping Nov 2017
Source: Scandit
via mobile devices
Implemented and working well: 37%
Implemented and needs improvement: 55%
Plan to implement within 3 years: 5%
29% 29% 23%
22% 24% 33%
Likelihood of Using Digital Wallets Over Next 90 Days
Source: 451 Research
35%
D ‘14
0% 20% 40% 60% 80%
M ‘15 J ‘15 S ‘15 D ‘15 M ‘16 J ‘16 S ‘16 D ‘16 M ‘17 J ‘17 S ‘17
30% 24% 25% 22% 25% 25% 24% 24% 28% 29% 26% 25% 26% 25% 20% 15%
Percentage of Respondents Who are Very/Somewhat Likely to Use Digital Wallets over Next 90 Days
Most Important Factors for Not Using a Digital Wallet
Source: 451 Research
What’s the most important reason why you’re unlikely to use digital wallets on your smartphone or tablet?
– No Need/Not Interested: 34%
– Security Concerns: 29%
– Prefer Traditional Methods of Payment: 22%
– I Don’t Know How: 5%
– Technology is Too New: 3%
– Limited Acceptance Among Merchants: 2%
– Too Complicated: 2%
– Not Available for My Device: 1%
Outdoor Participation Trend
Source: 451 Research
All Americans Ages 6+
60% 50% 40% 30%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
48.8% of respondents
Locate a Store
– Check product prices
– Check opening and closing times
– Read customer reviews
40% 40% 38% 33%
Frequency with Which US Smartphone Users Intentionally Click on Mobile Ads by Generation
Source: Button; App Annie
% of respondents
US Millennial Internet Users Who Would Be More Willing to Purchase a Product/Service if a Celebrity Endorsed It Nov 2017
Source: Roth Capital Partners
% of respondents
– Disagree: 27%
– Somewhat disagree: 19.5%
– Indifferent: 31.8%
– Somewhat agree: 14.2%
– Agree: 7.5%
Generational Breakdown
– Millennials (18-34)
– Gen X (35-54)
– Baby Boomers (55-73)
2% 2% 1%
Very Often
– Often
– Sometimes
– Rarely
– Never
8% 6% 3% 23% 49% 24% 28% 46% 18% 31% 42% 17%
Have Tried vs. Haven’t Tried
– Mobile payment
– Buy online pick up in store
– 3D printing
– Tablet-/mobile-empowered associates
– In-app store navigation
– Messaging apps/chat
68% 65% 52% 45% 35% 31% 30% 27% 21% 20% 18% 13%
In-Store Digital Display
- Visual search
- Voice search
- Augmented reality
- Virtual reality
- Smart dressing rooms
Total Aware: I would like a store/brand to know who I am when I walk into a store because of location-based technologies (e.g. iBeacons RFID geofencing).
Source: Salesforce Research
Customer Service Technologies in Place
Source: BRP Consulting
- In-store real-time order status visibility
- Product locator app
- Videoconferencing – customer uses to shop from home with associate in store
- Customer self-checkout through app
- Virtual closet
- Videoconferencing – customer uses in store to speak with call center
8% 5% 18% 45% 3% 3% 19% 11% 47% 8% 23% 5% 19% 13% 44% Implemented and working well Implemented but needs improvement Plan to implement within 3 years
Inside Outdoor | Winter 2018
First of all you are asking the customer to do the math and most are math-challenged. Secondly customers over time develop an immunity to the percentages. It takes a higher and higher percentage to get them to move. In today’s world 20% barely moves the needle unless it is used on an item rarely discounted.
A $25 coupon has more motivation than a 25% off coupon even though it might represent the exact same discount on say a my keyword00 item. A recent online study tested the effectiveness of various email offers. A “$50 off” a purchase was chosen as a good incentive that would still maintain sufficient margin. Using the same parameters a 15% off offer was selected as being of equivalent value. The $50 off coupon had a whopping 72 percent higher conversion rate and generated 170 percent more revenue.
While poor buying – including selecting bad styles incorrect sizes and price points duplications and buying minimum quantities that are too large to absorb – can all be root causes for excessive markdowns the number one cause is still overbuying!
Ninety percent of profitable sales come from inventory that is less than 10 weeks old. Knowing that progress…
Secret #9: Don’t be Afraid to Say “No”
The people you hire in the early days of your retail career are not always the ones you might hire later. The right skill sets and attitude for the stage your company is currently in should be a determining factor. Sometimes that means saying “no” to a would-be employee who fits all the other criteria.
If a certain line doesn’t move you or more importantly your customers don’t waste their time or yours writing token orders just because someone showed you the line. That’s their job. It isn’t personal it’s business. One of the main reasons I encounter for retailers getting overstocked and overbought is that they buy from too many vendors.
Finally you need people in your organization with the smarts and confidence to respectfully say “no” to you. Surround yourself with people in your company and outside advisors who have the integrity to stand up for what they believe even if it differs from what you may think.
Adopting these “Nine Secrets of Retail Success” will help you stay focused and profitable this year and beyond.
The “Nine Secrets for Retail Success”
Along with many other topics these are discussed in Ritchie’s book “Retail Revelations-Strategies for Improving Sales Margins and Turnover” available on Amazon or by contacting the author at RSayner@rmsa.com.
Winter 2018 | Inside Outdoor
Summary of Retail Success Strategies
Despite a significant number of store closures in the retail sector due to various factors such as increased online shopping and inventory issues the industry remains resilient with new stores opening and sales increasing. The article outlines nine key strategies for retail success including simplifying offerings expanding categories building customer loyalty and providing exceptional customer service.
“The takeaway: more is not always better.”
Real-World Examples of Retail Success Strategies
Here are some real-world examples that illustrate the application of retail success strategies discussed in the article.
- Apple Stores are a prime example of empowering sales staff. Employees are trained not just to sell products but to solve customer problems leading to high sales per square foot.
- The Container Store invests in extensive training for its employees offering competitive salaries to ensure they provide excellent customer service which contributes to the store’s success without needing frequent sales or discounts.
- Restoration Hardware’s RH Grey Card is a successful loyalty program that offers exclusive discounts and services enhancing customer loyalty and encouraging repeat purchases.
