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The 2010 Retail Survey - Part 2

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Here are the rest of the results from the 2010 Retailers Survey. There are some definite surprises especially in the areas of compensation.  You'll see that I did not comment on the question about how many of the Google tools are being used. I am going to write a complete report on Google within the next couple of weeks.  I will also be writing an article about creating promotional plans as well. (There is a real need there!) I didn't create this survey to stimulate topics to write about but it certainly inspired some great topics.

 And this brings up an interesting idea. If you have any topics or situations that you would like discussed in this column, please send me your ideas. (I love real life situations, especially ones where I can get my readers to comment.) Thank you for responding to this survey and for all of the comments and encouraging words.

Question #9

I am impressed with the responses to this question. I say that because I believe 20% is the right discount to take on the first markdown. All professional liquidators will start cash raising or going out of business sales by marking everything down by 20%. The fact that 27% opted for 25% is still within a normal range.

The scary part about these results is that there were 14% that believed that the first markdown should be between a third off and half-price. I struggled trying to understand why anyone would want their first markdown to be so deep. However, there is another side to justify those deep markdowns. If the store can sell regular priced merchandise, then the only reason they would mark anything down would be to free up space. If you want merchandise to move quickly, then take the deep markdown immediately. The only question is how do you know if a 20 or 25% markdown wouldn't have worked as well?

My goal has always been  to keep your inventory as fresh as possible. But I also hate to leave money on the table. Taking a markdown that deep takes some of the joy out of the challenge of retailing. But I am just an old retail purist who believes you sell as much at the highest possible price, as fast as possible.

Question #10

The days of having manufacturers sell exclusively to stores in a territory are quickly coming to an end. Business conditions are so tough for many vendors that they will take orders wherever they can get them. This  includes the store across the street, the big-box retailer, and also selling it direct themselves.  That is the reason why you cannot be that dependent on any single vendor!

A major bridal manufacturer decided to open up their own stores and even in locations where the best accounts are located. I don't think that's quite fair but that is the new reality. I agree with just about any response here with the exception of the last one which said to buy more and discount it deeply. I think all of us would love to do that but we are just cutting off our nose to spite our face. Are you doing this because it's sound business practice or for revenge?

There were plenty of great vendors out there that you can use so that no one needs to be dependent on any particular vendor. Remember the most important brand you carry is the brand that is seen above your front door. Have your customers become loyal to you and your store, not a particular brand or the prices you charge. Trust me, in the long scheme of things, it is a much healthier way to build business. But don't stop complaining to the sales rep sales manager and president of the company. After all we're retailers-- we have right to complain.

Question #11

These numbers are good news and bad news because 65% of the stores reported that the sales were either the same as last year or up between 5% and 10% from last year. That part is encouraging in the part that over 50% of the stores are experiencing modest increases is also pretty good even though last year was not that strong a year. The fact that almost 45% of the stores experienced sales decreases in between 1% and 10% is scary but of course we  had one of the worst winters on record.

Of course any politician could read these numbers differently depending on the point of view. I could have said that 60% of the stores reported their sales were the  same as last year to 10% behind. The bottom-line is some stores are doing business and we need to find out what they're doing and how they're doing it.

I would love to hear from the the people who are reporting substantial sales increases. If you are in that group, I invite you to call or write me at Rick@RickSegel.com to share how you doing it. This could be fun!

Question #12

This is the one question that shocked me.  49% of the stores that responded are paying their full time salespeople $10.50 per hour or less.  It's hard to believe because $10 per hour translates into $400 a week which is only a little bit over $20,000 a year. I do realize that full time people  will work overtime and that will bump up their take home pay but it still seems low.  

Having said all of that, the trend is away from the full-time employee to more part-time employees. The biggest issue here is the issue of benefits. The effects of the cost of  healthcare plays a major role in the total compensation package. I won't comment on the current healthcare debate but the state of Massachusetts has a universal healthcare in place and the rates have skyrocketed. Maybe paying $10 per hour is not so bad afterall.

Question #13

This question substantiates the fact that retailing is not a highly paid profession unless you're either the owner, the manager, or crack salesperson who is earning a substantial income from bonuses and/or commissions. Having said that, we also have to realize that many of the people working part-time in the retail store are not necessarily working there because of the income that they can earn. They're working there because they want small part-time jobs to supplement their income because they retired from another profession. Or because they want something to do and like the products or category that you sell.

You must understand it is not always about the money-- the things that motivate people to take and keep a job vary widely. Remember the number one reason why someone will take a job for less money and stay there is because it's convenient to where they live.

One of the things that skews up this question is the geographic area that the reporting stores are from since you have to pay more for help in certain areas of the country. But I think this question gives a good perspective and maybe even a sense of confidence when you offer someone a job.

Question #14

As you can see, this question has an overwhelming response. I am thrilled with this response because I don't see where paying commissions make a substantial difference in the performance of the average retail employee. I do believe in giving incentives sometimes referred to as  "spiffs" on slow selling merchandise. The reason being is if you were going to mark it down you would make less money. So why not give some of that money to your employees if they can sell it before you make the deep markdown. This works well in the shoe industry and it forces the salesperson to show merchandise that they might not normally show.

Having said all that, if a person can earn livable wage from commissions then the system works. At Nordstrom's, commission salesmen in any of their better departments such as shoes, coats, men's wear can earn substantial income and can consider themselves professional salespeople. But for the rest of us, commissions are unnecessary.

Question #15

OOPS! Here is in the area we need help and I promise to write one and possibly two articles about the need for promotional plans and how to do them. We are living in the age of proactive retailing. We can no longer sit idly by and wait for customers to come in. We need to build our businesses through events and let our customers know that there is always something going on at the store. These events do not all have to be price or sale events. There are lots of contests and awards ideas that need to be incorporated in every retailer's promotional plan.

I don't totally understand why 17% of the stores had promotional plans that  only employees and management could review.  My guess here is that the majority of the promotions are price related and it wouldn't be prudent to publish that list in fear that customers might wait.  The way around that is to publish a calendar of events  and title the sale events with a generic name such as Special Savings Event. The goal is to create events that will bring customers in the store that are not neccearily about price.

The 2010 Retail Survey

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This year's retail survey as usual offered some surprises, along with the things we had hunches about that turned out to be right on target. Because of the amount of responses and because the responses keep on coming in, I am going to report on eight of the 15 questions and finish the survey next week.

Let's get to the first question and see how you compare to majorities.

Question #1: Are you using Facebook on a regular basis?

This was one of those questions that surprised me a little bit. Yes, I have preached about the benefits of Facebook but I have also listened to the retailers who have been overwhelmed with the prospects of learning and mastering Facebook. It didn't surprise me that 32% surveyed used Facebook on a daily basis and 16% that use it on weekly basis. That totals 48% or close to a simple majority of the retailers that responded. It is pretty significant because a year ago 40% of the retailers responding had never heard of or were vaguely familiar with Facebook. Then you add in an additional 23% that use Facebook once in a while you have 71% using this tool. That even impresses me! Facebook is no longer on the fringes of retailing-- it is an accepted way of communicating with your customers.

The real shocker to me was the fact that they were only 12% who expressed no interest at all. As hard as it might be to believe, I feel that a year from now those Facebook numbers will even improve. I also am of the belief that Facebook is replacing the traditional website. So my question is, what were those 12% thinking? Certainly there is an application that they could use. But I don't think that's the reason for the 12%. I believe there are many retailers who are simply intimidated by new technology. I might add justly so because we have been trained that new technology doesn't always work and Facebook to them is a new technology.

We will be doing more programs over the next 12 months solely dedicated to Facebook and relationship building between retailers and their customers.

Question #2: Have you created any videos on YouTube for your customers benefit.

I believe by the end of the year Youtube will be used by retailers in multiple ways that are 10 times more effective than traditional advertising and far more cost-effective. Having said that I am a bit surprised that only 5.6% surveyed have created more than five videos. The interesting part of this question was that 33% were not sure exactly how it applies but are curious.

I plan on writing a column and a webinar just on the use of YouTube. But let me give you a couple of quick points on how this can apply to your business. A customer walks into the store and comes right up to the counter to give you a compliment about the last shopping experience in your store. Instead of wasting that testimonial, pull out the camera and make a quick one-minute testimonial about their experience at your store. You can add that your website, put it on Facebook, play it in the store on one of those inexpensive widescreen TVs that can help you and the vendor sell more merchandise. The other way of utilizing YouTube is to prepare a 3-minute educational tip about something you sell and the customer needs to know. Customers will appreciate the fact that you are offering it. Lastly you can create short videos that can be embedded into an e-mail and sent out to your customers personally inviting them to a store event.  It's powerful!

Questions #3: Do you sell from your website?

This question definitely surprised me the most. Maybe the reason I was so shocked at the results is because I remembered just a few short years ago when the retailers battle cry was that customers had to see it, hold it, and touch it before they would buy. I guess those days are over because the survey says, 41% are currently selling online and 36% plan on selling online in the near future. That is a whopping 77%-- a far cry the 5 to 10% or two ago! However, there is a solid 22% that have no interest in selling online at all.

My feelings are there is always some product you can offer your customers online even if it's just a book from Amazon's affiliate program. There's lots of opportunity out there.

Question #4: What percentage of your business are you doing online?

There were no surprises at least to me here. Although the majority of retailers trying to sell online over 83% admit that represents less than 5% of the business. It's as if lots of people are starting to jump on the online selling band wagon but the majority are not doing the biggest part of the business. That's a good sign that traditional brick-and-mortar stores still have a strong place in the marketplace. The interesting coincidence is that the number of 6% is often used for the amount of total retail sales being done online which would put that number in pretty close proximity.

There is some inspiring news within this question and that is 5% (that number keeps coming up) are doing 21% or more online. There is business that is being done there. It's encouraging to know that there is opportunity out there for those that are willing to make the commitment to Web sales and it is a commitment.

Question #5: I am pleased with my website?

I think the answers to this question surprised me the most. I think I've asked myself about 50 times if there was another answer that I could have included that might've made a difference in the response. I'm not sure because I can't think of any specific answer I could have or would have inserted. Having said that, it surprises me that over 62% of the businesses checked off pleased but feel they can do more. I think the term feel they can do more is a relative term and means different things to different people. However I think what people are saying is my site looks good to me but it's not working the way I hear about other business sites.

The thing that's interesting here is that less than 10% considered their sites to be excellent and works really happy. This is where I believe my job begins. The website reviews that I have now been doing for almost 2 years have exposed some sensational and pitiful websites. One thing I've learned is that the prettiest site is rarely the best site.

Question #6: How many various tools that Google offers for free do you employ?

I am not going to respond to this question in this article because I am planning on writing a complete report about Google and all of the free and fee services that they offer. I believe after you read my report on Google, the numbers could change significantly.

Question #7: How is business?

There are a few ways I can interpret responses to this question. I could look at it as if the glass is half-full and tell you that 62% of the businesses responding say their business ranges from I see a little uptick in business to it isn't bad but you have to work much harder to business is great. (As you can see over 13% said business was great.) So considering the depth of the recession that we lived through I suppose that's not bad.

However, almost 38% are saying that the recession isn't over and business is still rough. Let's not kid ourselves-that's scary. It's scarier than we realize because the majority of the people who read my newsletter are considered more proactive retailers. But when you think about it, it really doesn't matter because we have to be proactive retailers in order to survive. We must generate reasons to come to our store or a websites all the time.

#8. When should you markdowns slow selling merchandise?

Boy, things have changed the most is when it comes to markdowns. At one point the retailer would not reduce the price of any merchandise until he came close to the end of the selling cycle, which in many cases was a season or three months. Only about 8% responded that they would hold the merchandise for one month without any activity. The other 92% reported a more flexible attitude toward markdowns. 35% agreed with me that the time to markdown a piece of merchandise was the second you realize it was a dog.

64% did not back themselves into a corner or any rigid archive policy. But they would take markdowns at a time that they believe is appropriate. That's not necessarily a policy that I endorse, however it is a policy that I do respect

That wraps it up for the first half of the 2010 Retail Survey. Look for next week's response to the remaining seven questions and my special report on using Google. Have a great week and remember the Winter Olympics are over and spring training starts this week. There is a light at the end of the tunnel and I think it might just be sunlight. Hopefully we will all remember what it looks like!

It’s time for our annual retail survey!

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These are questions that readers have been asking. Your answers are all tabulated electronically and will be available for reviewing next week. I will comment on the results. If you have any comments about any of these questions just leave a message in the section for comment.

The results are to benefit YOU, so the greater the participation the better the sample. We will be posting the percentages only for easier comparisons.

Click here to take our survey »

Follow-up to Star Performer or Troubled Employee

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After five years of writing this column plus all the other articles and books I've had published, I have never been so intrigued by the quality, insightfulness, and divergent points of view that my article about a star manager or problem employee brought out. That doesn't even mention the sheer quantity of the responses that the article triggered! I invite anyone who hasn't read last week's column to go to my blog and read it there. It will help you understand this piece. I also want to thank everyone who participated.

Let me give a quick summation of what the article was about. It was about a husband and wife retail ownership team (that sounded better than a mom-and-pop store) that bought another business and made a star employee the manager of the existing store so they could spend time building the business of the newly acquired one. The manager did a spectacular job in every aspect of the retail business. The only flaw in her behavior was that every time the storeowners tried to compliment her with bonuses, perks, or even asking her opinion, she never thanked them or acknowledged their efforts. Again go to the blog for more detail.

One thing that some people picked up on was that I wrote this story as a reporter--I gave no opinions. Trust me, it wasn't easy for me but I wanted to get your opinions before I shared mine. I did not want to corrupt any of your thinking with my point of view. (Many of the comments are posted on the blog but that majority of comments were sent in the form of e-mails specifically to me.)

There seemed to be two ways of looking at this situation. Many of you wrote that you had similar situations of having employees who did not appreciate the things you did for them. Many of you also mentioned the fact that you are looking forward to my response for ideas on how to get your employees to appreciate what you do.

The other and very outspoken interpretation of this is that the storeowners were degrading the employee by pitying her because she was a single mom and they were the wealthy storeowners. What they were really doing was giving charity and wanted the recipient to jump hoops in appreciation.

There are a few clichés that seem to work well here. The first one is "the road to hell is paved with good intentions". Bob and Sue, storeowners, are really wonderful people who just can't do enough for the superstar employee. As difficult as it may be, it's time to take the emotion out of this relationship. They're running a business not running a family party. They should create a formula with a performance bonus clearly stated and understood by all parties and live with it.  
I must agree that putting five $100 bills in a pay envelope is looking for trouble. As someone said there is too much that could be misinterpreted by inserting cash. No, it is not illegal to give cash bonuses, however they must have a paper trail but that's not the reason. Someone pointed out that Amy might wonder if it was from the husband and if the wife was aware of it and what does it mean? Or what's the catch? Is he hitting on her (which by the way is about as far from the truth as you can get but you never know) and is this a little extra and he might want a little extra in return?

However there are some very definite incongruities in this story pertaining to Amy's behavior. Obviously she's a strong salesperson and/or she can motivate her people to sell. Then why is she failing so miserably with some of the very basics of people/selling skills, having an attitude of appreciation?

As one comment said, "Check inventory and cash receipts closely because I'm suspicious of this one. If it's too good to be true it probably isn't."

There was also an issue of pride and charity. Amy is a very proud person and, as it turns out, resents being treated as a charity case. I am able to make that statement because of the follow-up phone call I made to the owners this week. My recommendation was to sit down with Amy and share their feelings. It was interesting that someone wrote in and used the words that Sue finally admitted to. They were being childish. Someone said, "I was raised to say please and thank you and if any member of my family doesn't employ those words I promptly bring it to their attention. But this is a professional situation and although it's nice for the thank you's, they're not required."

There are a couple old another issues that need to be mentioned. Some people don't take compliments well. Trust me, I know. I am the worst at accepting a compliment. I even get embarrassed with standing ovations, which is not a good thing if you're a professional speaker. I have actually been coached on how to accept compliments. I think the problem exists more with retailers than perhaps other industries. It seems as if we have a constant flow of people, be it customers or employees, who are constantly reminding us that we are doing something wrong. In short, as a retailer, we're not allowed to have an ego.

That perhaps answers the incongruity: Amy was a good manager and her people loved her but didn't respond to acts of kindness because she didn't think she was worthy enough, perhaps due to her family situation. I have no idea about the difficulties and social challenges a single mother must go through. But I am sure they look at life different than I do.

The other side issue is why Amy didn't comment on the article. The reason is simple but sad. Amy isn't a reader and hates to sit down to read anything too long. So she skims a lot of stuff but is never quite confident about what she reads.

There is one overriding issue that needs to be reviewed. Just as so many retailers focus only on price, why do these storeowners focus solely on compensation? It's not the number one motivator for keeping employees and having them work for you for less money. That motivator is convenience. The closer that someone lives to work, the more they want to stay regardless of other considerations. Then you couple that with a passion for the product. Amy loves to ride horses and loves the industry but also loves her kids and needs to be close to home for them as well.  You now have two of the three major components for employee retention. Ironically, the third component is being appreciated at work. The only problem here is that you had owners who perhaps tried to hard and mixed personal feelings, emotions, and employee compensation together when they should be clearly separated.

The tool that I have written about in the past that worked effectively in this type of situation is a concept called "involvement from conception". This simply means to ask your employees for a solution and you'll be shocked at how creative and insightful they can be. That was the case here.

My suggestion was to go to Amy the same way they came to me, simply share their feelings, and ask her for a solution or remedy. It worked and now I have to return 3 phone calls thanking me for my advice.  Maybe if they read this article, I won't have to return the calls.

Have a great week.

Star performer or troubled employee?

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Last week I spoke at the equestrian show outside of Philadelphia. The attendees sell both English and Western equipment for the professional and recreational horseback rider, often referred to as tack stores. This is a group of very sophisticated retailers and I always enjoyed returning to this industry.

My seminars were both breakfast meetings from 7:30 AM to 9 AM. Because of that schedule, I had plenty of time after my presentations to hang around to answer questions and just talk to retailers. I had one very interesting husband and wife team who had been long time subscribers to my newsletter. This probably made them feel comfortable enough to share an interesting dilemma. They did ask to remain anonymous but thought the situation would be the type that my readers might like to respond to. They were also curious about your reaction and wondered if anyone else had ever experienced what they were going through. Here it is:

They've had an employee, whom I will refer to as Amy, who has worked for them for 15 years. They described her as "perfect in almost every way". Three years ago, they had an opportunity to buy a second store, an existing business that was once a leader in the field. It was now was a declining business only because the owner who was dying of cancer. That owner made them an unbelievable deal that they just couldn't pass up. However they realized the business needed some tender loving care and nurturing.

Amy was a single mom and was always looking for any opportunity to work extra on new projects at home because she needed the money. The owners felt that Amy was more than capable of managing this store and would appreciate the extra income it would bring. Amy was delighted with the challenge and of course the money and proceeded to do nothing short of a sensational job. The store looked better than when the owners were running it. The employees' morale was higher than ever before yet the payroll costs were down a couple of percent. The remarkable thing about it was that store's sales for the 2+ years that Amy was the manager averaged over an 18% increase.

If you think that I'm going to tell you that Amy was caught stealing, you're wrong. On the contrary, shrinkage actually improved. They jokingly said the only problem was Amy was actually a better manager than they were. Amy made them a lot of money and they couldn't do enough for her.

So what could be wrong with this situation? You are probably thinking that Amy was planning to open up her own business and compete with them. Wrong! That is the last thing she would ever want to do. She loved the arrangement. So what could be wrong? The owners, which I will refer to as Bob and Sue, would constantly try to show their appreciation for what Amy had done by buying her and her children gifts. They even put an extra $50 or $100 bill in her paycheck at least once a month.

Amy's husband had left her without much money and never gave any money to support the children. Yes, the courts look at him as a deadbeat dad, but he was nowhere to be found and had no contact with the children for years. It was as if he died without life insurance. So you would think that Amy would really appreciate all the little things Bob and Sue would do for her. And she did appreciate it but she never or rarely ever demonstrated that appreciation. In short, she hardly ever said thank you and never wrote any kind of thank you note. It was as if she just expected it or didn't care about the effort Bob and Sue would make. As they described it, it was weird.

Then to make matters worse, Bob and Sue wanted Amy to be aware of everything that was going on in the store and shared all of the plans they had. But Amy was always nice and polite about it. She never had much to contribute other than the cursory, "nice job" or "that's good".

I know this sounds strange but it all came to a head in January. In December, Amy's store did exceptionally well-- not only saleswise but it was profitable as well. On top of a regular Christmas bonus, in late January, Bob and Sue gave Amy an envelope that had five $100 bills in it with a note that said GREAT JOB! Sue NEVER said a word about it. But she continued to work as if nothing ever happened.

Then they asked Amy her opinion on an article Sue had written in the newsletter. She never responded at all. The story was about Amy and her family and how she was a remarkable woman and what she meant to the business. After a week, they asked her what she thought of the article and she told them that she thought it was very nice. But no thank you.

These storeowners are sadly and deeply hurt but just don't know what to say or do. They don't want to lose a great employee but they just want a little recognition.

Any suggestions? Please let us know. Just click here to send an email with your ideas to me. I will share my opinion next week as well.  Thanks and I look forward to hearing from you!

What Do You Do When a Customer Loses Trust in You?

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Trust is a difficult thing to gain but it is a very easy thing to lose. My mother had an expression that she used all the time--she would say "There is nothing deader than dead love".  She used that expression in so many different ways, from personal relationships to relationships with customers. My Mom passed away 13 years ago, and yet this week her quote came back to haunt me and make me think. (She was good at that.)

I have always believed that your integrity manifests itself in the trust that a customer gives you. That trust is your most important asset and should never to be violated. There is no sale that is more important than the value that a customer places in us. Our reputation is our gold. One of the exercises I do in my seminars is that I will ask the audience what's the one thing a business can do that would prevent you from ever going back to that business again? Without fail, someone will say, "They cheated me!" Or "They lied to me!" And because of that, the customer will never return to that business.

But what is trust? I believe trust is a promise of what to expect from another person, leader, or business. I personally feel terrible that President Obama has lost the trust of so many people who voted for him. He simply made promises that he wasn't able to keep, and therefore lost the trust that he had built. Only time will tell if he can rebuild that trust, but this is article is not about politics. It's about running a business.

This past week I experienced a personal crisis in trust and integrity that might not be to the scale of the president, Bernie  Madoff,  Enron, or John Edwards. But to me it is something that quietly kept eating me up inside and a lesson that all of us can learn from. It comes in two parts. Here is the first part.

Last week on The Retailer's Advantage, I had promised to do a program on planning a business' buying utilizing the three basic and most popular ways of planning and controlling merchandise that a retailer needs to do business. I had advertised that I would have the proponents of the various methods (the traditional Open to Buy Method, Gross Margin Return on Inventory Invested Method better known as  GMROII, and my simple alternative the 40/55 formula or what I call Open to Thrive ).

I traveled to Anaheim, California to speak at the craft and Hobby show last week and I had planned on recording the session when I was out in California. However I simply forgot what I had promised and preceded to do the program without the two other guests. Shame on me for not checking and double-checking what I had planned and promised. But then to make matters worse, when I went to record the session, the quality of the recording was as bad as it could get.

Yes I could certainly make the excuse that last week my computer had the worst virus that it could possibly ever have. I actually went out and bought a brand-new Apple MacBook Pro so that I would never be haunted by another virus again. But that would only be an excuse. I received a terrible blow from one of my listeners who said it was bad enough that the program was not as advertised but she couldn't even hear it. I lost her trust. Shame on me.

This person was not a subscriber to The Retailer's Advantage. However, she did spend $25 for a program that was not as promised and was inferior in quality. My mother's words haunted me because she was of the belief that you build a business one customer at a time. It is better to under promise and over deliver. I couldn't agree with her more, but I didn't do that.

I believe that people get into trouble, not for what they do but for trying to cover up for what they do. Richard Nixon would not have resigned if he had just admitted his involvement in Watergate. It's the cover-up that is worse than the crime. So this is how I am handling my violation of the customer's trust.

• Step one-- I immediately refunded her money.
• Step two-- I gave her a free membership to The Retailer's Advantage for a month.
• The final step was my sincere apology never to have that happen again.

Yes, I'm upset with myself for being so caught up in the actions of the day that I forgot my responsibilities. However, I'm pleased with myself that I addressed what I needed to address in the first part of this problem. But as I said there were two parts.

The second issue is that I have a team of people who are working extremely hard to build The Retailer's Advantage to become the preeminent retailers' membership site that is a true advantage to the independent retailer. You see, I did not just let the customer down. I let my team down as well. Oh sure, they will probably forgive me but I must work as hard as I can to regain some of the trust that I have lost.

These are the actions steps I plan on taking:

1. The first step is to admit what I had done and not try to hide it.
2. The second step is to demonstrate and maintain my level of integrity. I must be overly cautious about the promises I make so that I will not default on them.
3. The next step is to simply communicate better as to what I am able to accomplish and not. None of us get upset when we know what to expect and good communications helps us avoid problems before they become a problem
4. Treat my employees, subcontractors, and team members as equal partners. It is important to make people feel that they are important to me.
5. Lastly do the right thing, which is what I am trying to do in this situation. It somehow always works for me (as well as for so many other people).

Thank you for reading this and being part of my therapy. We can all learn from this lesson to maintain the trust of our customers by keeping our promises, which will in turn keep our relationships alive and well. Thanks Mom for a lesson I thought I knew but I guess I didn't. Somehow I think you're smiling.

The Smile Is the Shortest Distance Between Two People

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I have spoken all over the world. I have spoken to audiences that can't speak a word of English. I have been translated into 5 different languages at the same time. (That's dealing with 10 different interpreters--2 per language and is it fun and games when they all try to get your attention.) However, regardless of the language or culture, smiling and laughter are universal.

The title of this article is a variation from a quote from one the great humorists of the 20th Century, the late Victor Borge. Of course he is also said that "Laughter is the shortest distance between two people" as well.  

So what does that have to do with running a store during times like these?

EVERYTHING!

We are in the people business. Customers don't buy logically; they buy emotionally. Logic makes us shop BUT emotions make us buy. Many times, the biggest thing that differentiates our businesses is the "Likeability Factor" of our business. The fastest way to likeability is with the use of Fun, Humor and Playful Behavior. My biggest selling book is still "Laugh and Get Rich". It has been translated into 7 different languages and is a big hit in Asia. The book analyzes the power and applications of Fun, Humor and Playful Behavior. 

It is because of this book that I have been asked to speak at the most prestigious Humor Conference in the world,  "The Positive Power of Humor & Creativity Conference". It is the Humor Project's 53rd International Program on Humor and Creativity. The Humor Project is the most comprehensive resource, think tank, and authority of the use of Positive Humor and Creativity in the world today. The conference takes place in Lake George on June 11-13, 2010. This is a real honor for me and for recognition for the work I have done with retailers to adopt many of the principles of these tactics and strategies.

This week I had the privilege of interviewing the Founder and Director of The Humor Project, Dr. Joel Goodman. (I will be interviewing him in a webinar in April as well.) Let me share some of the wisdom from Dr. Goodman who is one of my humor mentors and a legend in this arena. But before I do, I also want to mention that Jeffery Zazlaw, the New York Times columnist who is the co-author of "The Last Lecture" with Randy Pausch, is also on the program at the conference.

Dr. Goodman shared that there is a point where the bottom line meets the funny line and that interception creates endless opportunities for businesses.  It is a powerful connection and a place where memories are made and attitudes are changed. He explained how we should be Service Professionals NOT Solemn Professionals.  He explained that by using humor we gain childlike abilities. Looking at the world through the eyes of child can sometimes give us a new perspective without being childish.

He explained that you don't have to be funny, act funny, or even think funny to utilize the benefits. I believe that when "we humorize, we humanize." We become more approachable. In case you haven't noticed, we are in the "approachability business" and laughter is the great social lubricant that breaks down sales resistance.

Understand that the greater the tension, the more humor is needed and works. Did you ever notice that when many people are nervous or scared, they relieve that tension with jokes or laughter? Think of all of the great comedians who came out the depression era. As Dr. Goodman said, these comics "Saved Society's Sanity".

There are some warnings about the use of humor. Sometimes it offends, so be careful who the focus of the joke is on. It must pass the ATT TEST.

A. Appropriate

T. Timely

T. Tasteful

The problem is that many people define those three categories very differently. What is appropriate humor to people in the health care industry, where any joke about bodily fluids is fair game, just doesn't work in a retail store.  That is why self-deprecating humor is so powerful. Don't make fun of other people, ethnicity, physical characteristics, or religion unless you own it. I used to tell lots of "fat jokes" but after I lost 90 pounds, they because insensitive.

I lost one of my closet friends for 12 years because of a comment I made the day of her mothers funeral. My wife and I went into the private room before the funeral and said, "So what's new?" I was just trying to deal with my own anxieties and try to give a little soft comic relief  (or so I thought) to a very serious and somber moment. Because our friend had an outgoing playful nature about her, I felt the comment was appropriate. 

Oh well, I was so very wrong. We didn't talk for 12 years and even to this day I am highly sensitive about anything I say, because I know I am just one line away from losing a friend. As I found out, people do not have the same sensitivity standards, and although I didn't mean any harm by that comment, the damage was done with just one inappropriate line.

Use humor, enjoy the benefits of fun, laughter, and playful behavior but remember the ATT Rule. It's OK if they laugh at you but to laugh with you is even better.

Have your bottom line meet your laugh lines.

(If you want more information on the conference, go to http://www.humorproject.com/conference/.)

Report from the National Retail Federation's Big Show

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Last week I traveled to New York City to attend the National Retail Federation's 99th annual trade show and conference. Retailers came from around the world came to see the latest and greatest technology, trends, ideas, and tools. Let me share my impressions and some of the tools of the future that are available today.

On many occasions in this column I have explained why I have been more bullish about retail business than some. That reason is that when I attend a conference and I do my unscientific survey of asking people how business is, I generally get a response such as, "not bad". The reason for that is the majority of the conferences I attend are specifically designed for independent specialty businesses who have fared much better during this recession. Couple that with the fact that the people who generally attend these conferences are the cream of the crop--the people who are always looking for an edge or an idea that will improve their business. In short, it's the winners who attend the conferences that I go to.

This show was different. It is the conference that primarily large stores attend. Their businesses had definitely experienced the recession and did not fare as well as their smaller colleagues did. So independents give yourself a pat on the back! Along with that observation, there was a theme that was repeated again and again and many of the sessions. That theme pertains to the concept of being "customer centric." Speaker after speaker talked about the importance on focusing on the customer more so than ever before. Duh? I don't get it. What were they focusing on before?

I suppose it seems silly to me because specialty businesses have always had to focus on the needs and wants of the customer. We have never been in a position to dictate to a customer in the way a larger business could. It's not that the larger stores ignored the wants of the customer but they just did not address them in the same way that an independent addresses the wants and needs.

One of the biggest trends that will be affecting all of us shortly is what is now called M. commerce, Mobile commerce or the use of the cell phone. The amount of applications using cell phones was staggering. I think the application that impressed me the most was the use of text messaging in ways that were both effective and cost conscious. Here is one application of text messaging that we all will be doing shortly. You walk by a store, receive an e-mail, or even read an ad in the newspaper, and you read a line that says TEXT 34553 and type in "specials" and within seconds you will receive all of the stores specials, featured products, or sale items sitting right on your cell phone. You can even get pictures and full descriptions.

Think about what happens when someone responds: you have just attracted a new customer that has opted in to your customer database list. Think how simple, seamless, and effective this tool can be. I can't think of another form of marketing/advertising that creates interest and captures customer data instantly. Obviously this tool should never be abused and the process to opt out must be as simple as possible, otherwise we run the risk of killing the goose that laid the golden egg. Remember texting is working now because we have already abused emails.

Some of the other applications that cell phones are being used for are as mini GPS devices in stores to help the customer find the department or items they are looking for. Obviously this is designed for larger businesses.

Cell phones are also now being used as remote credit card terminals. You can have a device attached to your cell phone that will allow you to swipe a credit card through. The implications of this technology are endless. You can eliminate long lines in the cash counter; you can close the sale much faster and eliminate that indecision time for customers who might be on the fence.

The other interesting use of a cell phone which can be used both by customers and store personnel is a barcode reading feature. From the retailer's point of view, a simple scan can unlock lots of information that can be useful in a sales presentation. From the customer's perspective, there are apps for the iPhone and Blackberry that allow you to scan a barcode and send you a report of stores and/or websites that sell the same product and report the various prices. This takes competitive shopping down to the size of your phone. That's scary and the reason why private labels are becoming more important than ever before.

The last cell phone application that is bursting onto the new retail horizon is the use of coupons delivered to your cell phone and used from your cell phone. Talk about saving paper! This is a powerhouse. Instead of carrying around an envelope with all the coupons, they are stored on your cell phone. Then you simply scan it from your phone into their computer system. If you happen to have a profile posted to the store's database system, that simple scan can process the sale using the credit card on file. Are you starting to get the picture that the cash counter of the future might start to look little different?

The next biggest WOW and trend that many of us will be adopting this year is the use of the flatscreen monitor for digital signage. The price of these screens is dropping to a point where they have become affordable to almost every size store. They can be used in so many different ways, from welcoming the customer into the store, to showing merchandise that you don't have a stock but it is deliverable within a day or so are. As powerful as this application is you might consider waiting before you jump in here. The reason for that is I believe vendors will start to see how powerful this tool could be to help promote their lines in stores and will start creating programs that will offer free flat screens to show their images and messages within your store. It's like years ago when manufactures would supply stores with fixtures. I haven't seen it yet but it's just too great an opportunity for any vendor to pass up.

I have to report about one display that everybody was talking about. It was a unique use of projected images that just WOWs you. The name of the company that created all of this is Potion. As you can see in the first picture, there is a table/platform that is a shoe display. It has spotlights above that highlight this but it appears to be nothing out of the ordinary. However, when you pick up the shoe, information about the shoe is now projected onto the platform as you can see in the second image. Of course if someone puts the shoe back in the wrong spot, the display won't work. But talk about signage that doesn't clutter your store! The third image just shows the way the camera is mounted above. Potion has many different applications for this technology and I could go on and on but this was breathtaking.

There was one other interesting thing that happened during the Retailer Awards Luncheon. There is an annual People's choice awards for the stores with the best customer service. Out of the 10 best stores selected by over 80,000 shoppers, five of those businesses are online businesses. The winners were:

10th Place Tie-Nordstrom's & Kohl's
9th Place-- JCPenney's
8th Place-Lands' End
7th Place-- Home Shopping Network
6th Place--Coldwater Creek
5th Place--QVC
4th Place--Amazon
3rd Place-Zappo's
2nd Place-- Overstock.com
1st Place-- L.L. Bean

When you look at this list, you realize that there are only four traditional retailers: Nordstrom's, Kohl's, JCPenney, and Coldwater Creek. The world is changing.

Zappo's also won the award for the most Creative Retailer of the year and the Retailer of the Year went to Ralph Lauren. That's interesting in the fact that Ralph Lauren is a manufacturer that sells to retailers and also has hundreds of his own stores, in all different varieties around the world. There was a time that any vendor selling to retailers and competing with retailers would never even be considered for an award. The times, they are a-changing.

Needless to say, the show was inundated with sessions pertaining to social media and its many uses. The conversation focused primarily around Twitter and Facebook. I finally saw the power of Twitter in the example of when a customer complained about Saks on Twitter. Within six minutes, the complaint was handled and the customer was satisfied. Twitter is starting to find its home.

There were many applications for Facebook but the one takeaway was that Facebook is not a one-sided conversation. Stores that look at it as traditional advertising are making a big mistake. It is social media and it must be interactive.

Let me just end with the line that I heard from the CEO of Saks. It's been a rough year but let's not waste a good recession. We have all learned some very valuable lessons from the economic climate we have lived and are living through. We have learned to do more with less. Those values will make us stronger and better in 2010 and beyond. They are right-- it is about the customer and no one understands it better than the independent. We have a lot to look forward to!

What do you do when you can't pay your bills?

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OR What do you do when you are paying your bills late most of the time?
As bad as those two scenarios might be, there are even worse conditions. Such as paying your bills with your credit cards and carrying large balances so that you are being charged 18% interest (or even more from some of these money hungry banks that are trying to cover their losses from other areas). Hardly any retailer earns 18% profit out of their business so what makes them think this concept is going to work? I know-it's because the payments are smaller at the beginning but it's just a delayed agony.

I started to write this piece with the title "The Dark Side of The Recession", BUT that would have been the worst thing I could ever do. Why? Because managing your debt is just part of running your business.

Sure that's easy to say until you have received a collection call from a vendor or collection agency who are the subtle masters in intimidation (many times not so subtle.) We can say to ourselves, "It's just business." However, we know it eats us up inside. It ruins our self-esteem, we feel like failures, and try to avoid taking these calls. And when we do take the call, we make promises for payment that are nothing more than wishful thinking.

Many times the financial condition you find yourself in might not be your fault at all. I once owned a very successful (and extremely profitable) apparel store in New Hampshire that had a great team of people running it and a wonderful customer base. It was a 2200 square foot store with sales between $400,000 to $450,000 annually. Everything was going great for 9 years until two things happened. First, a new mall opened up across the street. We knew it was coming so that was no big deal. What I never took into account was the automobile traffic that a new mall can generate. What made matters worse was the roads getting to the mall were just NOT equipped to handle this traffic increase, so bumper to bumper grid lock would occur during busy days making it almost impossible for customers to get into my parking lot.

Our Saturday sales which averaged around $3000 dropped to a staggering $300 to $400 per day. That was only for about 6 months but of course it occurred at Christmas time as well.

Then when you think things can't get worse... they did. My landlord rented out the store beside us to an Eastern Food Mart/convenience store. Shortly after they opened they had delivered 5000 pounds of curry powder. The problem was that we shared the same air conditioning system. Needless to say the odor made it impossible for customers to shop and employees to work. After lots of efforts to correct the problems, I was forced to just close the business. Did I do anything wrong? Not really, but it created late payments and lots of sleepless nights.

So what should a business owner do when unexpected events occur? Where do you turn to? Since October I have received a number of calls and emails seeking advice. So I wrote up a piece about retailer options when events like this occur and I am including these ideas in this article. There is an old Chinese proverb that says, "When the student is ready, the teacher will appear." My teacher has appeared and my eyes were opened wide to a part of an industry I knew very little about.

I work for many associations representing all kinds of industries. There is an association for every job type or type of business you can think of, but I had never heard of The Turnaround Management Association. A group of (here comes another new phrase) Payable Management Specialists. These people are NOT debt consolidators or credit counselors. Some consumer credit consolidators don't have the best of reputations--they go under the guise of a non-profit organization thinking they are there to help you and some do. However, some of these companies are not always the most ethical companies you can work with and their needs are served first.

On January 20th I will be interviewing Mr. Jim Herst, one of the pioneers of the Turnaround Management Association and the Winner of the Turn Around Specialist of the Year in 2008. He is regarded as this country's leading authority in Payable Management.

So what do they do? Why should you know what they do?

First, understand the signs of retailers in need of a turn around specialist:

1. Sales off or less than anticipated
2. Selling, general, and administrative expenses are rising
3. Gross margins declining
4. Decreasing inventories because you can't get credit or don't have the money to replace the sold merchandise
5. You are writing and holding checks
6. Receiving collection calls from Vendors
7. Increase in employee turnover
8. Larger customers not buying

What YOU can do, what are your choices when you start to experience these symptoms:

1. Start extreme cost cutting
2. Refinance all of your debt
3. Seek new money to invest or find new partners (with money)
4. Debt resolution-Settle your debt with vendors
5. Sell the business
6. Liquidate
7. Hire a professional Payable Management company to start your turn around

So what does the professional Payables Management actually do? "It is the process whereby a debtor in financial CRISIS retains the services of an authoritative third party to professionally represent that debtor's relationship with its selected creditors." You turn your problems over to an experienced pro.

They perform the following services:

1. Stop all the calls and demands from vendors, collection firms and attorneys
2. Perform all creditor contact so you can focus on running your business
3. Eliminate court appearances
4. Protects the retailer's assets from lawsuits
5. Satisfies the creditors within your financial need
6. Works to rebuild your credit rating
7. Creates strategies for long term profitability
8. Facilitates profitable sales of inventory

How do Payable Management people get paid? They are paid on performance only. They receive a percentage of the money they save the retailer.

This is more than just about saving a business. It's more than just savings jobs. It's more than just helping to save a community. It's about saving someone's self-respect and takes a horrible burden off the retailer's back.

I believe this is such an important topic that on January 20th I will hosting Jim Herst to discuss this topic in detail and have open lines for you to ask the pro. This will be a FREE teleseminar for everyone. (It is free if you listen in during the live event but we will be charging $19.95 to download the event for people who are not members of The Retailer's Advantage.) We are doing that so that we can have as many of you ask Jim as many questions as you like. It is a rare opportunity--not to be missed!

Actually I am looking forward to hearing about the success stories that this program generates. Have a great week.

TAKING the Scare Out of the Business Plan

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I don't know about you, but I hate planning. However, the older and wiser that I get, the more I appreciate the good business plan and the execution of that plan. I suppose you could call the appreciation of the business plan an acquired taste. Considering that this is the first article of the year, I think it's appropriate that we talk about business plans. (Actually it will reinforce the webinar I will be doing on Wednesday night about business plans. Plus I write about what is on my mind and that's all I've been thinking about for the past week!)

So the first question is what is a business plan? I like to look at a business plan as your story about your business. Have you ever gotten a stock tip? They tell you the name of the company and the reason why you should buy the stock. They also tell you that the company does this or that, they don't have a lot of competition, they are innovative, and of course the price is always right. That's what a business plan really is and does. The difference is that the business plan goes more in depth into the story. One word of caution. My business plans have a very definite marketing focus. There are plenty of business plans with a financial focus or a production focus.

What the business plan is supposed to do is answer the following questions:

1. Who are you?
2. What do you sell?
3. What's your method of selling it?
4. What makes you different?
5. Who is your customer?
6. How we are going to attract a customer to buy from you?
7. How much will this cost?

Before I answer all of these questions, understand that many people create business plans because it's a requirement by a bank or lending institution. The sad part about it is after they do the business plan, they place it on the shelf and never look at it again. Your business plan should be your Bible or map that your business is going to follow. My advice is create a business plan and then review it, at a minimum, monthly. Let's get started.

Structurally, most business plans will begin with an executive summary which is merely the seven questions I listed above, each answered in a brief sentence and a closing paragraph that sums it all up. That's followed by repeating the same questions and including more detail.

1. The first question is Who are you? In the executive summary you might answer it by saying, "We are a husband and wife team with 15 years experience with corporations and have a desire to run our own (gift) business.

On the more detailed business plan you would describe the actual management experience by company name and responsibility. The size of the company and the sales volume will also be important. This is also the spot that you add your vision, mission statement, and/or positioning statement. The vision statement tells us where you see the potential of the company. The mission statement states who you are and what values are important to you. The positioning statement, or as I sometimes refer to it as the signature line, just narrows the vision and mission statement into a workable slogan to live by.

You can see how the longer business plan basically says the same thing as the executive summary. It just has more detail. Or at least it should say the same thing. I have seen business plans with these wonderful executive summaries written but then when you get into the detailed plan, the business goes off in another direction. Why? The debate goes on-- do you write executive summary first or write the detailed business plan first? My feelings are the detailed report comes first and executive summary later. It tends to avoid mistakes.

Here is the interesting part about the first question, Who are you? In the executive summary, it's easy or it least it should be easy to write and is always short. But in the business plan, the Who are you question is the largest part of the business plan. This is because it also goes into detail about your beliefs--towards employees, service, customers, merchandise, price, and anything else that is important to you. Most business plans also include the SWOT questions in this section: Strengths, Weaknesses, Opportunities.

2. What Do Sell? Is the much easier question to answer. It covers usage, quality level, category, price levels, and looks. Again these are short questions that generate much longer answers.

3. What is your Method of Selling Your Products? Are you going to be selling it at retail, online, what is the business going to look like, what is your business model and who are you emulating? That's a nice way of saying who do you look up to or who are you copying? Instead of copying I like to say what practices are we adopting or adapting.

4. What Makes You Different? What is your special sauce? Why are you different than the rest of your competition? Don't ever just say price. Why would you want to make your customers loyal to price? If someone were five cents cheaper, then the customer will go there. So I automatically throw away business plans that proceed to say that they are the cheapest in the state unless they have other differentiators that make them stand out in a crowded market place.

I want to know what benefit the customer will have in doing business with you. I want to know what ability you have that you are the most proud of? I also want to know why your best customers keep coming back and why new customers are attracted to the business. Answer these two questions in this section:

We enhance customer's lives by _______________________________.

If a newspaper would write a story about you and your business what would it be about?

5. Who is your customer? Know as much about your prospective customer and existing customers as possible. I want to know the demographic information such as age, sex, marital status, income level, homeownership, education and children. I also want to know the lifestyle information, a.k.a. psychographics.

That's a fancy way of saying what type of social activity are they into--such as gardening, home décor, reading, golf, travel, etc. This information is much easier to get than you realize. Just ask your customer what activities they are into and find the corresponding magazine that caters to that audience. Then contact a list broker and purchase contact information for prospective customers in your target area.

6. How we are going to attract a customer to buy from you? Another way of asking this question might be how are you going to market and advertise to your existing and prospective customer? Today there are so many different options from the traditional radio, television, and direct mail. These include billboards, websites, and all of the new social media options available today. Many times the true business differentiator rests in the way the business markets and advertises itself. It is not the best product or the best price that wins, if nobody knows who they are or what they're selling.

In this section it's advisable to list all of the possible advertising options, your choices on each one, and the choices that you have decided to use. I believe it's important to include a Calendar of Events in this section because you want to show as many events as possible. Events are important because you are giving the customer a reason to come into the store. These events do not have to be sale events. They can be classes, workshops, book signings, or any type of activity that brings people for the front door.

It is important that you address how you are going to market to your current customers and what strategies you can to adopt to attract new customers to your store.

7. How much will this cost? Here's the part that's not as much fun-- trying to figure out how much all these initiatives will cost and then putting them into a projected budget format. This is a good spot to employ my 40/55/5 Rule: The Profitability Formula. What that means is that in the average retail business, 40% of every dollar of sales will go to expenses. That is anything except the cost of the merchandise and the principal amount of a loan. It does include the interest charges on a loan and your salary. Then 55% of sales will go toward merchandise. The 5% left over is considered a positive cash flow. Any principal payments you have on loans will come out of the 5%.

Different industries will vary percentagewise, but every industry has a formula for profitability. In the jewelry business the expense percentage jumps up to 43%, but the cost of merchandise drops down to 52%. This is because in most jewelry stores payrolls are higher but the margins are better.

I explained all that because I have seen business plans that are brilliant from the first to the sixth question and then they blow it by having totally unrealistic costs and projections. I recently had a store owner tell me that 90% of every dollar that came into that store went to merchandise. Then she proceeded to tell me that she is very profitable. That is possible but highly unlikely. If I were asked by a bank to render an opinion on whether this business should or should not received a loan, I would have to deny the loan. The bottom line is to make sure your numbers make sense.

Finally end your business plan with a closing statement about how you plan on utilizing this business plan and updating it in a timely manner. It's even advisable to list the dates the plan will be reviewed and updated. Business conditions change quickly these days and business plans cannot be cut in stone. Remember it is a guideline and a map and even the best of maps can't take into account the detours life brings us.

I know that I have given you a lot of information in this article and I will be going over it in more detail in this week's Wednesday night event for The Retailer's Advantage. This program is also available for purchase as a single event for my readers who are not members at the following link:

Have a great week and remember planning does pay off.