From The Co-Founders
When Being a “Mirror of Society” Is Not Enough In a week that brought three more incidents of black men killed by police, and then police in Dallas being shot and killed by snipers, we agree with President Obama: "We are better than this. We must be better than this."
Followers of The ROI know that one of our underlying convictions is that "retail is a mirror of society."
But these times demand more from us than just a passive reflection. Retailers are quasi-public figures in their communities, after all. And especially now, retailers have an opportunity to demonstrate what exceptional "citizenship" might be like in their communities.
No, not flag-waving so-called patriotism. Responsible "citizenship".
Think about your leadership opportunity. As a retailer in your community:
And one more thought: If not you, then who?
Who's Really Paying the Freight for Amazon's "Free" Shipping?
A recent study by consulting firm Shipware LLC documented the commanding advantage Amazon has established in shipping. The "big shippers" - so-called Mega-Retailers like Amazon, Target & Wal-Mart - get dramatically more favorable rates from carriers such as FedEx and United Parcel because their volume is "guaranteed and predictable". The discounts they have negotiated provide a decided advantage over their smaller online competitors. As a result, the costs absorbed by the Mega-Retailers to provide "free shipping" are breath-takingly less than those for their smaller competitors.
Shipware estimated the shipping costs that would be incurred by each type of merchant to ship a 10-inch square box weighing 3 pounds from New York City to a suburban residence in Atlanta.
The Big Keep Getting Bigger
For the mega-retailers, free shipping is essentially a loss leader. It drives tremendous volume (and customer loyalty) while also enabling greater and greater negotiating strength with the shippers. And one more price advantage over their smaller competitors.
Might there be some relief for the Small-Medium Retailers as Amazon grows its own shipping fleets? That is, faced with reduced volume from Amazon, might FedEx and UPS be more willing to offer better rates to all the other customers?
Sigh. We wouldn't count on it.
Or, given this huge discrepancy in costs, perhaps other shipping services emerge to fill this vacuum. Perhaps consolidaters of some sort? Or...???
In mid February, we were struck by the contrasting characterizations of the business climate. On the one hand, we were hearing from independent retailers that business was good. Meanwhile, even casual followers of the news heard only of worldwide economic uncertainty, a stock market of major mood swings, and of course, a bonanza of political theatrics.
So, we sought a “reality check”; a short and quick survey of readers of The ROI NEWS.
We asked about retail sales (up? down? sideways?) But, we mostly wondered what really matters to retailers who want to grow. What do they need the most? Here are the results.
“What do you MOST NEED in order to GROW your business this year?”
Based on the percentage of respondents who rated each factor:
Two factors stand out for the #1 MOST NEEDED in order to grow:
In the middle: Hovering in third, fourth and fifth place, needed but out-ranked by other issues:
Better Website for Online Sales
A slightly different priority order emerges when the rankings are averaged, as one factor was consistently ranked #2 or #3.
Overall, the lowest ranking (and hence highest priority of MOST NEEDED to grow) is Better Marketing & Social Media, followed by Better Buying Decisions, and then Better Sales People. Store Managers.
"So far this year, how are sales?"
Sales UP vs Last Year. Transactions UP, but Not As Much.
A majority of the respondents (55%) report that so far this year, sales are UP compared to last year. However, only 42% reported customer counts (transactions) being UP, suggesting that prices or margins have risen, or customers are buying more items per transactions.
Any Online Sales?
Forty percent of the respondents are “omnichannel” retailers, selling online as well as in their brick-n-mortar locations. For most of these retailers, online sales represent up to 10% of their total sales.
NO Online sales - 60%
Up to 10% online - 34%
11% to 25% online - 3%
25% online - 2%
From The Comments: Sensitive Issue #1 = Vendor Support
One-fourth of the respondents are multi-store operators: 11+ stores, 4%; 2 to 10 stores, 20%; 1 store, 75%.
You've probably noticed in the national media that several major retailers are needing to take extra markdowns because they find themselves over-inventoried. See, it can happen to everyone! The list is impressive, and indicates an industry-wide situation: Macy's, Kohl's, Nordstrom, Ralph Lauren, Dick's Sporting Goods, Nike, Lululemon, Under Armour, and others.
Our message to you has two parts:
We didn't say "over-react". We simply urge greater attention to your inventory levels. Starting immediately!
Every department in your store(s) should adhere to its appropriate targeted turnover rate (as set by the owner or merchandise V.P. for doing mandatory Open-to-Buys). Go to the Retail Benchmarks pages to get segment turnover rates as a guide, if needs be.
The following technique is a must. And yes, it is free! (Close followers of The ROI know how much we value "And it's free".) No excuses allowed!
An additional use of turnover is to readily calculate what we call “one turn’s worth”, an easy way to monitor inventory levels. Here's an example of how easy this is to use:
Alert! Amazon Books Is Only the Start! We have watched the opening of Amazon's first bricks-n-mortar specialty store with great interest. And here is our conclusion: Brace yourself!
In fact, we anticipate an onslaught of entire shopping centers of Amazon "specialty retail stores". (Zappos Shoe Stores, anyone?!) All using the same data-centric efficiencies Amazon is testing at Amazon Books, its just-opened bricks-n-mortar bookstore.
Whether apparel, electronics, sporting goods, kitchenware, jewelry, hunting gear or whatever: Amazon has incredible customer data.
Now, imagine a center full of separate Amazon "specialty stores" of categories specifically tailored to that particular market: hunting and fishing gear in some places; hiking and backpacking gear in another market.
Breath taking, isn't it? But that is our prediction: "Earth's Biggest Store" will find you and others who shop like you, (or your customers and others who shop like them) and set up its own specialty shops.
Talk about target marketing!
A Little Background Last week, in a prominent location – complete with a brick facade – in an upscale shopping center in Seattle, Amazon opened the "real wooden doors" on Amazon Books. Hmm. Actually, Amazon Books has far more in common with Amazon.com than with bricks-n-mortar bookstores.
First, it is VERY data-centric. The books they carry, Amazon says, "are selected based on Amazon.com customer ratings, pre-orders, sales, popularity on Goodreads, and our curators' assessments." And it's hyper-local; it represents the tastes and preferences of the readers in that local market.
Second, they have inoculated themselves from price competition from "the web": all prices in the store are the same as on Amazon.com.
Third, they are constantly gathering customer data. No prices are displayed at Amazon Books. Want to know the price? Just scan the barcode below each book. Be sure to do so with your Amazon app; for convenience, you know.
And, it's true; they do not take cash. Yet another typical cost they have eliminated.
In our view, what they have opened is a new kind of category killer, in a very small footprint.
They are using their vast storehouse of data to offer only the best turning inventory, to a targeted, localized market.
And, they have the pricing advantages that come from size. They are "earth's biggest bookstore", after all.
Their pricing is dynamic; e.g., $16.25 today, $17.85 tomorrow. What will it be next week? That's the marketplace dynamics in action.
And, it certainly continues Amazon's relentless pursuit of turning "the art of retailing into the science of retailing." No more need for judgment calls from the high-salary buyer; just follow the data! (The data isn't temperamental, either!)
The issue is this: with its vast 20+ years of customer data, Amazon is showing its ability to again reinvent retailing. But this time, it's not just e-commerce. This time, it is all specialty retailing.
More Retailers Should Copy REI!
"REI believes that being outside makes our lives better. That's why this Black Friday, we're closing all 143 of our stores and paying our employees to head outside. We want you to join us. #OptOutside"
The news that REI would be closed for business on Black Friday proved to be a stunning announcement to many.
How did the "experts and analysts" react? With suspicion. There must be some defensible business explanation of an otherwise inexplicable business move. What retailer would give up Black Friday sales?!
"Well, Black Friday must be a slow day for them." [Actually, according to REI, it's one of the Top Ten sales days each year.]
"Well, they must expect to make it up via their online sales." [Actually, their online orders will not be processed until Saturday.]
"Well, they are a co-op; they don't have shareholders to answer to." [But the Member's annual dividend rate is based on REI's performance. Sales DO matter.]
"Well, it must be a calculated marketing ploy. Just look at all the free press they are getting." [Hmm. Does confounding the business experts really count as "marketing"?]
You get the drift. Try as they might, the search by experts for REI's ulterior motives seems to have come up empty.
Excellent Case Study in Retail Leadership and Citizenship
We find REI's move to be an excellent case study example of retail leadership and citizenship. They simply found a new way to express their dedication to their core purpose: outdoor adventure; conservation; stewardship of the environment.
We hope that more retailers will copy REI. No, not necessarily by closing on Black Friday.
What we would like to see is a renewed commitment by retailers to their own unique opportunities for bold leadership and good citizenship. REI has taken the high road; couldn't more retailers do so, too?!
Now THIS Is Exciting!
For a couple of decades, we have been traveling all over North America helping retailers, presenting workshops and building The Retail Owners Institute. But, as we often explain, "This team travels on its stomach!"
A little background is in order. When we first started working as a team, there were two vital elements that were potential impediments to the partnership:
"Impediments?" You bet! And they had to be resolved very early. We both were concerned.
Then, one of the first retailers we helped together was a rabid sports fan. A classic three-person competition occurred: Who knew the most about Woody Hayes and Ohio State football history?!
Well, that left the food issue to be resolved. But not for long!
Famished one afternoon, we pulled into a McDonalds without a prior discussion. Yes, we were that hungry! Unbeknown to either of us, we each had spent time and money with our respective children at McDonalds. And who doesn't like their fries, after all? (In fact, one time we attended a very ticklish bank meeting with a client in Milwaukee. As we were to meet the frowning banker, our client introduced us by saying, "Oh, I just picked up these folks at McDonalds!")
So, both mysteries resolved. Impediments disappeared. Whew!
Why are we telling you all this (personal) stuff? Two reasons:
You see, for many of you the concurrent World Series and McDonalds better menu may be just interesting. But to us, they are very significant!
We Are Not Yogi, But...
Retailers could learn a lot from baseball, and, if not already, should immediately become students of the game.
Currently, the Major League Playoffs are underway, and we're reminded of the lessons that baseball offers retailers. One of its key lessons really jumps out: Try – Fail? – Forget!!
Consider this: the best team in Major League Baseball this season was the St. Louis Cardinals, who won 100 games. Congrats to them.
But those 100 wins represent just a 62% success rate. So, that means they Tried – Failed? – Forgot! over one-third of their season.
And of course, the very best hitters in the Majors this year tried and failed to get a hit nearly 70% of the time.
And that's where retailing comes in. (You were wondering, right?) Think about it. So many stores (or websites) are stale, drab, unexciting. And why is that? Our conclusion is that too many retailers are too timid to try new things. They are too afraid of making a mistake. Too afraid to fail.
Consider some of the largest retailers in your community. When was the last time you walked in and exclaimed, "Wow! Look at that!!" For many stores, that's probably an experience you've never had, right?? Look, for those retailers without newness, without some excitement, without the "theatre of retail", why shouldn't competition, online and offline, replace those stores even more rapidly?! (Hint: It probably will.)
So we encourage you to take a lesson from baseball.
Timid, stale retailers should try many more things.
Will every one of them be a hit? No, of course not!
But the lesson is, forget it! Come back tomorrow. And keep swinging!
Verbatim Feedback from Retailers:
"Does Social Media Effectively Influence Sales?"
"Social Media". It's all around us. But what retailers want to know is this: "Is it effective? That is, does it raise sales?"
So, in early August, 2015, we conducted a very short survey among readers of The ROI NEWS about how retailers use social media, and whether or not it effectively infleunces 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?!?"
Key Findings from Retailers About Social Media
Previously we reported the quantitative results from this Social Media Survey (go here for those details). Just to recap the highlights:
Now, Here's "WHY" They Say That
We also received explanatory comments from retailers, 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.
And, here are verbatim comments re each platform's impact on sales.
Is Social Media "Effective" for Retailers?
We asked; you answered!
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:
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.
Since 1999, empowering retailers and store owners to "Turn on your financial headlights!"
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!"