From The Co-Founders
Verbatim Feedback from Retailers: "Does Social Media Effectively Influence Sales?"
"Social Media". It's all around us. The August 7/10 editions of The ROI NEWS included a very short survey about how retailers use social media.
We were particularly interested in the answers to this key question: "Is it effective? That is, does it raise sales?"
Well, we sure tapped a nerve! Retailers indeed are very active with social media. And, we also confirmed that retailers – at least, those who responded to our survey – are very focused on accountability. They too keep examining "Is it working? Is it effective? Is it driving sales?!?"
Previously we reported the quantitative results from this Social Media Survey. Just to recap the highlights:
But Wait. There's More! Indeed, there is! A number of the survey respondents added their comments, either regarding the effectiveness of each social media platform, or about their experience with social media in general. Here are some recaps, verbatim (yes, including those smartphone typos) of many of their comments.
Is Social Media "Effective" for Retailers?
We asked; you answered!
The August 7/10 edition of The ROI NEWS asked retailers this question about the effectiveness of Social Media: “Does it raise sales?!”
We invited retailers to take a short, quick, 6-question survey about their use of promotional tools in general, and, in particular, “Social Media”: Facebook, Twitter, Pinterest, Instagram, LinkedIn, Other.
We asked, and you answered!
You quickly confirmed that “social media” is in fact a hot topic among retailers!
And, you are willing to share your experience with it with others, and for that we say, Thank You!!
After reviewing the survey results, we have prepared some charts to summarize the findings. Scroll down to see:
And stay turned; next week’s edition of The ROI NEWS will share the thoughtful comments and insights that were included in some of the survey responses.
Social Media Survey Results
Q. #1: In general, over the past couple of years, how has your use of promotional tools changed?
Of those who use these promotional tools, Print Advertising and Direct Mail are being used "much LESS" by retailers.
What is increasing? The "digital media":
But, not all retailers use these types of promotional tools, whether "traditional" or "digital". Here are the percentage of all respondents who "Do not use; have never used".
In particular, "Online pay-per-click advertising" (aka Google ads) has been avoided (or abandoned?) by these retailers.
Q. #2: Now, about Social Media. If you are using it for your stores, which platforms do you use?
Facebook is by far the most popular platform among retailers, being used by 96% of all the survey respondents!
The next 3 in usage - Twitter, Pinterest, and Instagram - each represent but a third of the usage of Facebook.
Q. #3: Of each Social Media platform you do use, how long have you been using it?
Once again, Facebook is the runaway "winner" in terms of longevity among users. But, in fairness, this result may simply reflect the relative "age" of these platforms; some simply are newcomers!
Q. #4: Key Question: Of the Social Media you use, how has it INFLUENCED SALES?
Again, Facebook is "the winner". 76% of the retailers who use Facebook report it "Seems worthwhile" or is "Very Positive!" That likely explains why 96% of the retailers who responded are using/continuing to use Facebook.
Instagram – a relative newcomer – gets "Worthwhile/Positive" ratings from 2/3rds of its users, and Pinterest is similarly strong.
Meanwhile, "Not at all" is a popular choice, isn't it? (Of course, a given platform's effectiveness at influencing sales will be a function of how each one is used.)
Q. #5: Have you used any of the ADVERTISING PROGRAMS that are available on these platforms?
There is a high degree of participation in the paid advertising programs available for users of Social Media platforms, especially on Facebook. Those who are not already active in this way anticipate starting soon.
Q. #6: And finally, just a bit about your stores. How many do you have now?
Sure enough, the survey respondents are "representative" of the independent retailer community at large: about 1/3rd are multi-store operators.
Oh My! Disrupting the Disrupters
Amazon, the disruptive 3,000 pound gorilla among retailers, just announced unprecedented earnings. Their stock price jumped up. Amazon has now surpassed Wal-Mart as the world’s biggest retailer by market value. Jeff Bezos “made” (on paper, at least) an additional $8 Billion. Wow!
However, we would suggest that Jeff peer over his shoulder occasionally. Not only is Alibaba gaining strength, but now comes “Jet.”
You know about Jet? You need to.
Jet.com is a new online retailer with goals like this: “Breathe new life into online shopping. Seriously, things haven’t changed much since 1997.” Their first day sales - Jet launched on Tuesday, July 21 - were over $1Million.
Their promise is the web’s cheapest prices. Their focus is that portion of the market beyond the tech-savvy early adopters; when online shopping becomes mainstream.
Their assumption: the everyday shopper really cares about price. And, price transparency, And fairness. And control.
“Want to save more money?
Waive free shipping on returns.
Or, pay with debit card instead of credit.
Or, add more items to your cart.
Or… Or…”
Wherever Jet is saving money, they give the shopper the choice to get those savings. And, they can see their costs change in real time, right in their shopping cart.
See for Yourself
Their website is certainly worth a tour. But, be sure to scroll to the bottom of their home page to see the 5 minute video by a stand-up comic about their business model!
And yes, they are creating quite a stir. Aren’t they a disrupter of the disrupters?
Here are just a few links to some of the commentary:
from Time.com: “Everything You Need to Know About Amazon’s New Rival”
from Fox Business: “Jet.com CEO: We Are the Costco of Internet Retail”
from The New Yorker: “Can Jet.com Take On Amazon and Win?”
from Forbes.com "Jet.com is Making Its Employees’ Salaries Transparent – Non-Negotiable"
Well, you get the idea. You can bet that Mr. Bezos IS watching Jet very carefully.
Might ALL retailers be wise to keep an eye on Jet?
Do "Consumer Spending" Reports Really Tell the Story?
“Consumer fundamentals still appear pretty favorable, particularly the vigorous gains in job creation, but household caution still appears to be holding back a more rapid pace of spending growth.” ---Chief U.S. Economist at J.P.Morgan.
Hmm. Is there really “household caution in spending growth”? Or, is it that households ARE spending more, just in different ways? And, what does that bode for retailers? Consider this:
"Stealth Competitors"
We call these kinds of monthly expenses "creepers". (They keep creeping higher; have you noticed?) These five are some of "the enablers" of our digital lifestyles.
But for retailers, each one represents a major "stealth competitor."
For many households, these monthly charges can add up to hundreds of dollars! And today, essentially no one can avoid them; they are treated like another "utility" charge.
Is it any wonder consumers feel like they have less "spending money"?
The High Cost of Connectivity: Erosion of Retail Spending
All of this connectivity comes at a cost to retailers. Money that is being dedicated to these monthly enabling charges is not available to be spent "at retail."
Traditional "disposable income" is significantly eroded. And that happens every month, essentially out of sight. And to almost every household.
Overall retail sales, by definition, are reduced. That is, "retail spending" tracks sales of merchandise, not services.
So, when the business pages carry gloomy reports of “consumer spending” being soft, perhaps what they should be saying is this:
Traditional measures of consumer spending need to be updated!
Indeed, consumers are spending on themselves and their households. They're just doing it differently.
Some retailers already have made adjustments. They are tweaking their product mix and assortments, revisiting their marketing approaches, and thereby participating in these shifting consumer spending patterns.
All while doing whatever they can to reduce the impact of these monthly "creeper costs" in their own households!
Retailing, as an industry, always has been in flux. Enormous trends give opportunity to some, and devastation to others.
Think of malls springing up 60-70 years ago; downtowns still have not recovered. Or, think of internet shopping today; most catalogs are nowhere to be seen!
Now, as we look ahead to the last half of this decade and all of the next (look, that's only 15 years!), we "see" great opportunities for independent retailers, but a scarcity of adequate young leadership.
The good news: retail entrepreneurship will thrive.
The bad news: it likely will do so without you!
"Go big or go home" no longer applies.
Instead, today it is, "Go young or go home!"
And this trend is not confined to retailing. (It's just that independent retailers have a propensity to be "change laggards". They hang onto the past way too long.) Look at these recent changes, all instituted by outside directors of public companies:
"Why now?", you ask.
Well, just look around. The Millennial Generation (those now 18 - 36 years old) are going to change sciety more drastically than any group since the Baby Boomers. And of all industries, retailing will continue to be changed the most.
The conclusion of these Co-Founders: Retailing always has been a young person's haven. And for the next 15 years, that will be more true than ever! Therefore, "Go young or go home!"
The end of June and the official start of summer is a great time to reflect on how the year's going so far.
And, just as a reminder that we DO "practice what we preach", we share with you one of our conclusions from our mid-year review:
"Okay, Co-Founders. It's time to face reality.
You're not exactly rocket scientists."
Okay, so we cannot ALL be rocket scientists! But, don't let that stop you from recognizing what you HAVE accomplished!
For instance, think about your stores, your departments, your merchandise categories, even your vendors(!) Which ones merit some "awards"?
No, Not About People This Time
While we typically think of people as recipients of recognition – and we trust you already are doing that, right? – this is a different challenge.
This is a fun way for Owners to take a new look at your store's performance. Take advantage of all the analysis your POS system can offer you. We are confident you will find some surprises!
Of your merchandise, for example, which products are Award Winners?! Which would qualify as...
"MVP, Most Valuable Product"? (Hint: GMROI provides good indicators here)
"Rookie of the Season", e.g., Best New Product? (Is it what you expected?)
"Most Unsung Hero"?, or, the most unexpected top-performing product. (Who saw that coming?)
"Most Deserving of a Farewell Tour"? Oops, under-performing once again. (Sidewalk Sales, here we come!)
Once you've reviewed your POS reports for products, take another look at them, and do the same analysis for your vendors. Really! There might be some real surprises there!
How many of your vendors are "award winners" for your stores?
Which vendors have the the best GMROI for your operation?
Which vendors are responsible for your Rookies of the Season merchandise? Your unsung heroes?
About that merchandise most deserving of a Farewell Tour; any concentrations among certain vendors?
Again, the goal here is to do a mid-year review from a little different perspective. You WILL find some Award Winners! (And, some surprises!) What better time for them to get the recognition they deserve?
Amazon has a remarkable merchant’s instinct to try new concepts. The Amazon DASH button. The Amazon Echo “voice command” device. Delivery drones. Anticipatory delivery. Amazon Fresh grocery delivery (including bicycle delivery). Prime Now, etcetera, etcetera.
And this week, the launch of their newest experiment - available initially only in Seattle - the TREASURE TRUCK. It’s a cross between a food truck and a Groupon deal.
Here’s how it works:
The Treasure Truck will carry quantities of one item, and drive around a specific neighborhood.
The deeply-discounted "treasure" items could be a hard-to-find item, a product from a local provider, or even a fresh food item.
Shoppers must download and use the Amazon App (that's the key!) to view the Treasure Truck bounty for that day, and whether and where it will be roaming. (Right now, they're to be active "several days each week." Hmm.)
Want to buy that day's "Treasure"? Tap the app, complete payment, then choose a time that same day to meet the truck and pick up your item. (No shipping; no orders by computer or phone.)
Or, just walk up to the Treasure Truck and buy on the spot.
Limited quantities available for one day only. “Once they’re gone, they’re gone,” says Amazon.
Fascinating, isn't it?
Amazon seems determined to discover how many ways to "do retail" (sell to the ultimate consumer) with
(a) no "retail stores";
(b) no "retail employees";
(c) no "retail schedule".
And frankly, now that 40% of items sold on Amazon are sold by Amazon Merchants, Amazon is increasingly adding a 4th condition: No "retail inventory"!
Will there be a fifth one: "No retail success"?
Don't bet on it!!
So, in 6 months, will Santa's pack be full of aerial drones for every kid (or those who act like kids) on your block?
Don't laugh. It looks like it.
And then what? Will January's skies be buzzing with drone-drama all over your neighborhood? Hmm.
In case you hadn't noticed, aerial drones are selling very well on internet sites.
But the real momentum for them will come from Wal-Mart, Sam's Club, Target, and others who already are seeing a hot sales trend in drones.
So, they are sourcing lower and lower price points.
Is this where the phrase "flying off the shelves" originated??
A drone "invasion", anybody?
Retailing IS a "Mirror of Society" Don't you just love retailing? It's always a "mirror of society", whether for good or sometimes, maybe not so good.
But embrace it. After all, it is OUR society. Welcome, drones!
Much of the world regards restaurants as retailers. In fact, they are; they sell to the ultimate consumer.
The Restaurant Sector, and its four restaurant "segments" defined by NAICS, has been added to The ROI’s Key Financial Benchmarks. - Juice & Snack Bars, Coffee Shops - Limited-Service Restaurants - Drinking Places (alcoholic beverages) - Full-Service Restaurants Now we can get perspective on their financial performance. Whether they offer sit-down dining, fast food takeout, or are a neighborhood cafe, brewpub or juice bar, all have telling financial vital signs. And they are fascinating.
Here are some of our immediate takeaways: Higher profits Overall, the median-performing restaurants enjoy higher pre-tax profits than median-performing retailers. Pre-tax profits for the restaurant segments range from 4.1% to 7.3%, well above the retailers’ average profit of 3.5%. High margin businesses Any wonder that some retailers are incorporating snack bars and/or beer, wine and even liquor bars in their stores? Changes the in-store experience, keeps customers there longer - and has sweet margins! But…cash crunch The Current Ratio for these 4 restaurant segments is grim. Very grim.
For each dollar they owe in the next year, they have less than a dollar in current assets. They are constantly in a cash crisis. Is it any wonder that many “alternative lenders” welcome cafes and coffee shops as their customers? And, lots of debt That on-going cash crisis may explain why the Restaurant Sector has such breathtakingly-high Debt-to-Worth ratios. (And remember, as you look at the Five-Year Trends, the improvements - that is, the decline - in the Debt-to-Worth ratio is likely due to seeing the numbers for only the survivors. That is, those places that are still in business.) Yes, restaurants are retailers. But the overall financial picture of restaurants is decidedly different than most other retailers. Go here to see for yourself.
As you no doubt know, one of the hottest shows in TV now is Shark Tank. It's a cleverly-produced series of entrepreneurs who dramatically pitch their business to a panel of five potential equity investors, the "Sharks".
It's quite entertaining, especially for those of us who've tried to raise equity capital. The successful candidates are quite jubilant, of course. The unsuccessful ones always seem committed to carrying on nevertheless. If you've not seen it yet, we commend it to you.
What does this have to do with retailing, or The ROI? Two things keep surfacing as we watch the show:
Retailers, by nature, are very enthusiastic about their store(s), their customers and especially their carefully selected merchandise. "Why doesn't everyone love what we've built?!"
And, with that founder's vigor, an equity partner to help fuel your growth, especially in this lucrative environment, seems like a logical and appealing step. But hold on!
First, what should you do before attempting to raise equity capital? And second, thank goodness we built RetailStartup.com years ago!
A Few Reminders
Unless it's a passive investor like a family member, investors are comparing your opportunity to the many other choices they have for their money. "How risky is this deal? How much return will my money get? And when?!"
Equity partners can be great soul mates and they can be awful, really awful. How can you know in advance which they will be? You probably can't until there's a significant bump in the road. And then you will just have to deal with it. (Or have your attorney deal with it....)
Finally, if you think that owning and running a retail business is a pressure-packed life, just try it with an equity partner! Because we all are shoppers, everybody is an "expert" on retailing. And when that opinionated expert also has money in your business, the pressure can become explosive.
Well, we've warned you! Our conclusion: Don't jump into the Shark Tank of an equity partner with your eyes closed!
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The site www.RetailStartup.com provides insights and resources for all growth-minded retailers: first store launches; growth and expansion; major rollouts. That site as well as much of The Retail Owners Institute is dedicated to you. Knowledge is power!
Are You Leading? Following? Or, Scrambling to Get Out of the Way?
We recently were asked by the owner of a mixed-use development to identify prospective retail tenants. This landlord wanted to be proactive in seeking tenants, rather than just passively choosing from the inquiries they were already receiving from various brokers.
One of our first steps for this project was to recap current retail trends, in order to identify retailers from each sector of retailing who were on the leading edge of embracing one or more of these trends.
Seven Retail Trends For Your Consideration
Meanwhile, we invite you to consider seven of the trends we focused on. As you do that, keep these questions in mind:
In recent years, it has become quite trendy for large, major retail chains to announce the roll out of smaller versions of themselves for urban centers or "neighborhoods". Examples include Target, Wal-Mart, Macys, Kohls, Lowes, and many others.
The inference in the media - powered by these corporation's press releases - would lead one to believe that these smaller formats would be like specialty stores. "Well, aren't specialty stores small? So are these new formats."
It's humorous to us how frequently the artform of successful independent retailers is totally lost on "the outside world". Somehow, independent retailers are able to make their craft look so darn simple that seemingly anybody could do it, right?
Meanwhile, back at headquarters, "Of course our new format can compete with those locals. After all, we've got millions to spend, and our big stores are so well known."
We think that we will be watching many of these small format rollouts "walk right off the end of the plank"!
Why?
Here's the Bottom Line:
Simply reducing square footage does not transform a major chain into a specialty store. It's that misconception why we see some of these "smaller format" rollouts walking the plank.
Do you see that same plank as we do??
As we recognize almost daily, there is a long list of what we are not. We're not brokers or lawyers or accountants or gurus.
In addition, mercifully, we're not economists. (You've heard that an economist is an accountant who has predicted nine of the last two recessions, right?)
Nevertheless... We want to call your attention to a unique worldwide economic situation that is now (and will be for some time) affecting retailing in unfamiliar ways: a glut of almost everything.
Unless you are selling water to California, there is a worldwide backup of almost all products, which now is filling warehouses and far exceeding demand.
No one really knows what impact this situation will have this year, and perhaps for a decade to come.
[For an in-depth examination of this phenomenon, see "World Awash in Too Much of Almost Everything", The Wall Street Journal, April 25, 2015.]
"Yikes! Is this an opportunity, or...?"
Here's a Strategy to Consider
To turn this situation into an opportunity – or at least a basis for being opportunistic – consider this:
If a retailer could methodically and stringently raise his/her annual inventory turns, say 10%, their cash flow would significantly improve. (And, of course, higher turns means less "glut" in your operation!)
For example, for every $1,000,000 in sales at 40% Gross Profit, the difference between 3 turns and 3.3 turns (a 10% increase), is a bit more than $18,000 more cash.
There is nothing like cash to help a retailer be more opportunistic for cutting deals! And in this new environment, "deals" will certainly be out there!
As you may be aware, we are witnessing a surge in new retail businesses. Most of these are entwined with the internet. They rely less than ever before on a brick-'n-mortar presence, further reducing the "barriers to entry."
Two groups of individuals are the primary drivers of this current surge of new retail concepts: the Millennials. And the Baby Boomers, especially those in their 50's and early 60's.
It's this second group, the Baby Boomers - who of course have never lacked for confidence - that have been most likely to assume "Retail? Why not? That looks so easy!"
Many are "refugees" from corporations, relishing the opportunity to "Finally! I will get to be my own boss!! And manage my own time."
Owning a retail business can be very exciting, challenging, creative, and a wonderful way of life. In fact, we believe that they very best citizens in every community are the owners of retail businesses.
But, these newby-owners often are startled to learn an old axiom:
"As Owner, yes, I do get to manage my own time. That is, I get to choose which 80-90 hours each week I work!"
SURPRISE!!
The "ripple effects" of the Minimum Wage changes are affecting all retailers. The biggest question: not "What will this mean?", but "How will we address this in our operation?" First issue, of course: WHEN will your business implement any changes? Well in advance of the laws? Or, coincident with the laws? Why does the timing matter? Because of the perception. Are you out in front of this issue? Or, seeming to lag behind? Next big issue: IF the minimum wage (the "floor") of the pay scale in your business needs to be raised to comply with the laws, what effect will this have on the wages of your mid-management team?
There are no right or wrong answers here. Every retailer must evaluate this, and determine what is appropriate for their business. And, of course, that analysis must include how you will be able to pay for any changes in payroll.
Again, there is no one-size-fits-all answer. But, we sure encourage all retailers to ponder this issue, and to examine all of your options.
Get Out in Front of This Issue!
As we all know, good people are very hard to find. How you choose to compensate - and therefore motivate and retain - your key staff is a key factor in the on-going viability of your business. We urge you to get out in front of this issue! Want more ideas? Check out this thoughtful article from The Library for Owners at The Retail Owners Institute®: Beyond the Paycheck: Motivate Employees with Creative Compensation.
Hmm. Follow that conventional wisdom at your own peril! Instead, we believe retailers should focus on making their stores MULTI-GENERATIONAL. After all, each group is ± 80 million people, totaling about half the U.S. population.
You don't have to choose one group at the expense of the other. Cater to both of these major market segments. Yes, simultaneously! (Just not the same!)
"One size fits all" does not apply! By strategically and pro-actively managing your operation to be Multi-Generational, you can – and must! – treat the Baby Boomers and the Millennials the way each group most wants to be treated.
Retailers must think strategically about your unique competitive advantages. Then, update them to cater to EACH of these important market segments, on parallel tracks. It's called "multi-tasking", and you can do it!
Are you still counting on your bookkeeper or your accountant to let you know which months you are going to be short of cash?
Actually, that is terribly unfair to them!
Which is exactly why The Retail Owners Institute has built so many online projecting calculators for retailers.
And our (free!) SPEEDY HEADLIGHTS makes quick work of knowing in advance what your monthly cash surplus - or shortfall - would be!
Do yourself - and your accountant - a big favor. Take a few minutes to see where your business is headed.
(Remember, if you don't like what it shows, you can play "what if...?" All privately, on your own.) And...priced right for retailers: FREE!
No, we're not talking just about the weather. Spring is really a state of mind! And that of course means it is a wonderful opportunity for retailers.
It's easier than you think. And can be quite energizing for your staff as well as your shoppers!
Whether you are a retailer, or you work with retailers, The Retail Owners Institute® makes it easy for you to get a quick financial health assessment.
Go to the Benchmarks page on The ROI site, and choose any one of the 53 retail segments listed. When that page opens, immediately see 5-Year Trend Charts of these 6 key ratios (out of dozens) that The ROI has identified for retailers to regularly monitor:
These Benchmark Charts, available only from The ROI, offer a snapshot view of the financial viability of each retail segment.
Compare and Contrast Several Segments
Now, look at some more retail segments. (Use the Benchmarks menu bar tabs at the top of each page.) Fascinating, isn't it? Quickly compare and contrast different types of retailers; gain insightful perspective.
Want to Know How Your Stores Compare? Of course you do! See the "Do Your Own Ratios" tab? Click on that tab from any of the Benchmarks Segments pages, and use The ROI's KEY RATIOS Calculator. (Yep, that's free too.)
Just enter a few numbers from your financial statement. Immediately - and automagically! - see all of your Key Ratios. Then, use the built-in comps from 53 retail segments to compare your results to the median-performing retailers in your segment. Available Only at The ROI The Retail Owners Institute® makes these Benchmarks charts and the KEY RATIOS Calculator available online, anytime, 24/7, for free. Be sure to take advantage of this information!
The Co-Founders of The ROI - Patricia M. Johnson and Richard F. Outcalt - are the principals of Outcalt & Johnson: Retail Strategists, LLC. Pat and Dick consult with retailers throughout North America on strategic growth, transition, and turnaround issues. Since 1999, they have been building The Retail Owners Institute®: an extensive, online-only resource of specialized retail financial know-how and tools, used and loved by retailers worldwide, 24/7. Ten years later, with the launch of Retail Startup in 2009, they began developing additional special-focus websites for a retailer's most demanding management issues. Today, these Retail STRATA:G® Online Resources - The ROI plus seven additional proprietary sites - offer unmatched strategic financial know-how and resources to any retailer, anywhere. "All it takes is a little desire...and a web browser!"
Since 1999, empowering retailers and store owners to "Turn on your financial headlights!"