Useful Links

I find these very informative.  Take a look


Retail News and Discussions

• Retail Wire - A great site for Retail news, issues, and discussions
• NRF Smart Brief - A compilation of general Retail news stories
• Shop.org - Articles related to Internet Retailing
• Retail Sails - Great reference for Retail Sales information
• RIS News - Articles related to Retail Information Systems
• Retail Traffic - Articles related to Retail Real Estate

• Harvard Business Blog - Brain candy

Practical Advice and Useful Discussions

based on Real-World Experience

There was a great article and discussion at Retail Wire recently.  The article, by Bill Bittner, presented a strong case for automating the scheduling of the various tasks sent down to store level by the corporate office.  The gist of the argument is that "it is easier for everyone dependent on store performance to see how their activities overlap and monitor execution".

While there are certainly advantages to greater transparencies, it's been my experience that automating a flawed process simply results in bad things happening more quickly.

In my opinion, the challenge here is a cultural one.  Here's the typical sequence:

• Multiple departments in the corporate office work diligently to come up with ideas and tactics to improve business.
• Ultimately all these ideas translate into a series of tasks for the stores to execute.
• In most cases, these tasks are sent down to the store independently, with little or no oversight or rationalization.  Rationalization means things like taking into account that store payroll (and execution capability) is usually dependent on store volume (the lower the volume, the lower the hours, the lower the capability).  In over 35 years, I have never seen this obvious fact taken into account in tasking the stores.
• Down the hall in the corporate office, the CFO is looking at weak sales and is trying to make the quarter by cutting expenses.  Since the biggest variable expense for most retailers is store payroll, store associate hours go down, further reducing their execution capability.
• The accumulation of tasks, along with some other directions from regional and district store managers arrive in the store in no particular order.  At no time are the day-to-day tasks at the stores (customer service, processing receipts, price changes, store cleanliness, etc.) factored into these incremental tasks.
• The store manager, realizing that he/she doesn't have enough associate hours to do all the tasks assigned, begins to prioritize, usually based on either what he/she does best/enjoys the most or who is most likely to see what hasn't been done, also known as the "what they don't see won't hurt me" strategy.  The stores become very inconsistent in appearance.
• The individual corporate managers complain that "business would be better if only those people in the stores would just do their job".
• The store managers wonder if anyone at the corporate office has ever been to a store or has a clue as to what it takes to run one.
• The customer bears the brunt of this frustration as the first thing to fall off the list of to dos is customer service.

This is obviously not a winning formula, although you see the results of this approach demonstrated in the majority of large 4-wall retailers.  There's no question that Task Management is a complex task, but as I've discussed in earlier posts, this is primarily a corporate culture issue.  When the corporate office views the stores as a support function for their strategies, it is almost impossible to avoid the situation described above.  There are exceptions.  Steve Temares, the CEO of Bed, Bath, and Beyond has been quoted as saying that he views the corporate office as a support function for the individual sales floors.  This is reflective of the company culture and is demonstrated in a variety of aspects throughout the organization.  It is also, in my opinion at least, the reason for their continuing success and dominance in the Home Furnishings channel.

So what do you think?  What processes have you seen that are effective in managing task loads at store level and avoiding some of the pitfalls described above?

The Big Shrink

• Sears has gone into the sub-leasing business, leasing space to Whole Foods in one store as well as a Century 21 store in another.  Sears is offering deals on its web site for virtually all its locations.
• Best Buy is venturing into new categories, including musical instruments and health and exercise equipment in its big box.  They have also announced that they are slowing the growth of the big box format to focus on much smaller Best Buy Mobile locations.
• Wal-Mart is experimenting with Walmart Express along with much smaller (40,000 square foot) traditional store formats.
• Home Depot is selling off portions of its huge parking lots to fast food and auto repair shops.
• Gap, which used its flagship to spin off separate formats (GapKids and Gap Body) is now reversing the process, bringing these spin-offs back under one roof.

The Big Opportunity.  ?Estas listo?

Retailers, more than most, spend the bulk of their time focusing on next week, next month, and, on rare occasion, next season.  This is the nature of the business.  However, this carries the risk that major, fundamental shifts in the retail environment can go unnoticed.  One of these shifts is happening today and, while retailers are aware of it, most do not seem to be reacting to it in a tangible way.  That shift is the growth of the Latin community in America and the impact it is having and will continue to have on the retail world.

This is not a secret.  A quick review of US Census figures reveals the following facts:

• Latinos are now the second largest consumer group in America (1 in 6 residents)
• US total population growth rate between 2000-2006 was 6%.  The Latino population grew at 3X that rate.
• The 2010 census is anticipated to count 50 million Latinos, 17% of the total population.
• It is projected that, by 2050, Latinos will represent a full third of the US population.

• Latino spending has grown from $200 billion in 1990 to over $1 trillion in 2010.
• Over this period, Latino expenditures have grown TWICE as fast as non-Latino customers.
• In certain major markets in CA, TX, NY, and FL, Latinos represent the majority of the customer base.

• How well do you understand the Latino community - their preferences, their heritage, their interests and priorities, their shopping habits?
• Is there anyone in your organization with specific responsibility/authority to pursue the opportunity?
• How many Latinos are part of your management group?
• How much do you know about the relative size and population trends of Latinos in the markets you serve?  Do each of your stores in these markets have someone fluent in Spanish?  Is there bi-lingual signage in the store?  Are you advertising in Latino channels?
• How big a priority is this customer segment in your assortment planning, marketing, branding, and organizational planning?

Earlier posts here have discussed the glut of retail selling space in America.  The big box stores in particular, with their cavernous space, large inventories, and associate headcount are particularly stressed as they adjust to the "new normal" of lower aggregate demand caused by chronically high unemployment and the ongoing reduction in consumer debt loads.  As I've asked before - what's going to happen to all this space?

Sears, which has watched its performance fall relentlessly for years, is testing an alternative use of space in its Costa Mesa, California location.  Sears is entering into an arrangement with Forever 21, the successful apparel and accessories chain, to take up to 43,000 square feet of the store to create the largest "store-within-a-store" in Sears', if not the industry's history.  This is not a new step for Sears, which has Lands End and, in some stores, Edwin Watts golf shops.  The big difference here is the size of the footprint, which represents 14% of the store's total space.  The other big difference is that Forever 21 will have its own outside entrance with specific signage.

On the surface, this seems like a win-win arrangement.  Sears gets a much-needed boost to its dismal space productivity along with a built-in traffic builder and a draw for a customer segment that they have struggled to attract.  Forever 21 gets (potentially) access to over 800 locations, some with great demographics, along with potentially lower occupancy costs, better terms, great parking, etc.

But this also raises a host of interesting questions.  The key question - is this a straight merchandise purchase or a sub-lease?  Will Sears staff the space or will Forever 21?  Who will manage this staff? Will there be separate fixturing for the the space?  Who pays for the build-out?  Will a separate entrance provide a meaningful increase in traffic for Sears?  Even if it does, will the Forever 21 customer buy anything else in the Sears assortment?  If this is a straight merchandise purchase, the Lands End experience does not bode well for either partner.  If, however, Forever 21 manages their space (and destiny), this could be a real winner for both sides.

The biggest question, of course, is whether this move represents the beginning of a whole new approach for the big boxes to improve their flagging productivity and profitability for stores that were built when there was much higher demand.  Will the big boxes evolve into "mini-malls" of new and established retailers?  If they do, what does this do to the brands of both the big box retailer and the smaller occupants?

What do you think?

An earlier post discussed the tremendous glut of retail selling space relative to customer demand.  Recapping that discussion; after decades of adding retail selling space faster than the population was growing, there is now over 46 square feet of selling space for every man, woman, and child in America.  This compares to an equivalent of about 2.5 feet/person in Europe.

Inevitably, this imbalance must return to equilibrium and it has begun to do just that.  Over the last few years, several major retailers have closed, including Linens n' Things, Circuit City, Mervyns, and Hollywood Video to name a few.  Others are filing Chapter 11, closing stores, and reorganizing.  Entire regional malls are closing and strip malls and downtown shopping centers everywhere are beginning to look like a mouthful of missing teeth, even with rents going for 20-30% less than they were 2 years ago.

So the really big question is - What's going to happen to all this vacant space?

An article today in the Wall Street Journal gives one alternative - for-profit colleges.  The University of Phoenix has added over 120 properties to its training and education portfolio over the last three years, bringing their total to over 200 locations in 39 states.  These locations focus on providing skills to out-of-work adults in areas like health-care, automotive, and technical trades.

There's also demographics to consider.  There are over 70 Million baby boomers who are now entering retirement age.  This spike of aging in the population is surely going to require more health care, assisted living facilities, and who knows what else.

How about good old American entrepreneurship?  One recent phenomenom is the growth of pop-up stores, which can be seasonal or marketing introductions.

But these are just the obvious ones.  What other possibilities do you see?  Nature abhors a vacuum and while a lot of this real estate will simply be torn down, most of it will be turned into something else.  But what?  What do you think?

What Localization Means

Macys, citing initial success, is expanding the "My Macys" initiative.  Wal Mart recently split itself into 3 separate regions with a merchant organization for each.  H&M admits that it has purposefully focused it store openings on cold weather zones but is interested in moving into warmer climates.  All of these moves are focused on one shared  goal - moving away from a strictly homogenous national merchandise offering and providing a variety of assortments tailored to local tastes and preferences.  Some of the more successful retailers (Whole Foods and Bed, Bath, and Beyond) have been committed to this principal for years and have enjoyed unusual, if not extraordinary success.

So what exactly is localization and how do you get there?

Simply stated, Localizaton is the recognition that:

• Customers in different markets and locales have different tastes and preferences
• There is a significant upside sales opportunity if buying and allocation processes address those differences

. 

So what are some of these differences?  From most obvious to more subtle, they include:

• Climate - average temperature, rainfall
• Demographic - Population density, Average Family Income, Average Age, Number of school age children, etc.
• Psychographic - A combination the first two elements into shopper attributes like Urban sophisticate, Soccer Moms, 1st jobbers, Single Moms, Empty Nesters, Retirees, and so on.
• Culture - The dominant ethnic and cultural backgrounds of the trading area.
• Prevalent Identity - Big City Sophisticate, Old West, America's Heartland, Florida Beach Town, LA Hip, Miami Heat, etc. 

• Organizational recognition of the size and complexity this effort represents.  For decades, retailers have been consolidating decision-making (and standardizing assortments) to better leverage their corporate overhead.  Indeed, it was the primary benefit most often cited to rationalize the consolidation of the industry.  Changing that approach goes right to the heart of most retailers' operating philosophy.  That makes it a big and messy cultural change.
• Senior management commitment to the change.  One of Newton's Laws is that bodies at rest tend to stay at rest.  Large organizations and the way they operate tend to reflect this law.  Unless senior management has the long-term commitment and endurance to see this through, it's better to avoid it altogether.
• Deleveraging of the merchandising organization.  The reality is that it takes the same time and energy to buy and manage a small quantity for a subset of stores as it does to manage a chain-wide purchase.  Localizing the assortment requires more merchants, period.  This also applies to planner/allocators and space managers.  It also means modifying merchant reward systems, both financial and psychic.
• Geographical dispersion of information-gathering and decision-making.  IT systems are one of the primary enablers of centralization.  While these increasingly sophisticated systems can do amazing things, the reality is that they can only give central merchants a reading on how well their previous choices worked, not what choices thay should have made relative to different markets.  Systems also tend to focus attention on national SKU performance and can mask local success stories.  Successful localization requires eyes, ears, intelligence, and decision-making authority in the field so as to better understand the local preferences and competitive environment and capture the opportunities.

It's said that all politics are local.  In the current Darwinian struggle for market share, those that are best able to speak directly to local markets will be well-positioned to be among those left standing when the retail industry reaches equilibrium.

There were a couple of interesting articles recently.  The CFO at Williams-Sonoma announced that "they will continue to close additional stores in large [multi-store] markets.  Our strategy for store closings is to optimize our cost per square foot.  The goal is not closing stores per se."  They have found that closing stores causes customers to use other stores or, more often, use the internet.  Over the next 3 years, 25% of their leases will be expiring.  Williams-Sonoma sees that as an opportunity to re-negotiate leases, relocate, or simply close the store.  There was also a great article and discussion over at Retail Wire titled "The Incredible Shrinking Store".  The article quoted several well-known mall operators who were embarking on a strategy to reduce the average size of their stores as a way to improve productivity.

So what exactly is the future of 4-wall retail? 

Some historical perspective is in order.  Beginning in the 1970's and driven by cheap credit, retail selling space began expanding in America at a multiple (sometimes 5-6X) of population growth.  Masking this lopsided growth was the explosive growth of consumer debt and a precipitous drop in household savings, which went from about 12% of household income in the 70's to -1% in the 2000's (you read that right, the average family was routinely spending more each month than they were bringing home).  This went on, largely unabated, for almost 40 years.  The boxes got bigger and bigger, the malls became ubiquitous, and consumer debt grew ever larger.

Then came 2008 and the implosion of this credit-driven spending spree.  This event, among other things, brought the retail supply/demand imbalance into stark relief.  According to research by the International Council of Shopping Centers, at the end of 2008, there were over 14 billion square feet (SF) of total retail selling space in America, 7 billion of which is in over 102,000 shopping centers of various sizes.  This translates into over 46 SF of total selling space and 23 SF of mall space for every man, woman, and child in America.  To put these numbers in context, in Europe, the equivalent numbers range from 1.1 SF (Italy) to 2.5 SF (UK) to 3.3 SF (Sweden).

What now?  America has over 20 times the selling space per person that Europe has.  The savings rate has moved back into the black at a little over 3%.  Ecommerce now represents 8% of total retail sales and continues to grow, at least on a relative scale.  One fact is indisputable.  If evenly distributed, every person in America could go shopping simultaneously and it wouldn't be crowded anywhere.  Retailers are now in a market share, zero-sum game.  The only viable avenue to growth is to take it out of some other retailer's share of pocketbook.  While there are signs that retail in general is stabilizing, it is at a level far below what it was.  There is little indication that America will be returning to its spending patterns of the near past, certainly not for the foreseeable future. 

So what happens to all this retail selling space?  Is Williams-Sonoma in front of a larger curve of retailers reducing their 4-wall footprint to bring it into better balance with demand?  If so, what are the implications, both for retailers and the economy in general?  All these stores carry inventory.  What does it mean for manufacturers and wholesalers?  All this inventory has to be delivered to the stores.  What does it mean for logistics and transportation?  All these stores have associates.  What does it mean for retail employment in America?  Finally, what are the alternative uses of this space?  Are we at the end of something or is this a huge opportunity waiting to be captured?

What do you think?   
 

Riding the Gen Y Wave

Gen Y is coming and it will reshape retail in America.

Gen Y is defined as those born between 1985 and 2010.  There are over 110 million of them.  That is almost 50% larger than the baby boomers (born 1945 to 1965) and 66% larger than Gen X (born 1965 to 1985).  They are spending on average $110/day compared to the boomers $64/day (down from $98/day in 2008).  Gen Y's average age is 20 years old.  They haven't even entered the truly acquisitive years (houses, cars, children, investments).  In another 5 years or so, they will be the dominant factor in retailing.  

So what, if anything, should retailers be doing today to be prepared to take advantage of these statistics?  

Here are some key points to consider about Gen Y:

• The aggregate market will be huge, roughly 50% larger than the boomers.  But there will be less individual discretionary income.  As Gen Y ages, they will face a tough job market.  With Gen X being almost half the size of Gen Y, every job that opens up as a Gen-Xer moves up or out will have almost 2 applicants, suggesting high chronic unemployment.  Additionally, subsidizing the boomers on Social Security/Medicare and servicing our monstrous national debt will surely dictate high personal tax levels.  Shopping for value won't be a trend, it will be a necessity.
• They will age and their needs and tastes will change over time.  Individuals want and buy different categories as they age.  There's a great description of what this means to retailers and category managers in a book by Ken Gronbach titled "The Age Curve" which describes how, in the 1980's, Honda motorcycles exploded in sales and demand outstripped supply for several years.  Then, in a very short period of time, demand evaporated.  It turns out that the primary customer for these bikes were males in their early twenties (the average age of the boomers).  It also turns out that the average age (at that time at least) for males to get married was 24 years old.  Guess what the first thing that the average male gets rid of when he gets married?  Right, his motorcycle.  All the price reductions and promotional advertising can't sell when the largest customer segment ages out of the core market.  (PS the average age of Gen Y is 20)
• They will buy based on individual (vs. mass) tastes.  Look at the products they are making successful today - iPods with their personal play lists, iPhones with the option for over 100,000 apps, DVRs to record their favorite programs so they can watch what they want when they want. As they age, this personal specificity will impact more and more categories.  Sales will be driven by specific, and very diffuse, individual needs and wants.  Mass merchandising for all but the most basic commodities will become an oxymoron.
• They will be wired.  Studies show that over 90% of Gen Y subscribe to one or more of the Social Media channels.  Another study shows that if the subscribers to Facebook were a nation, it would have the third largest population in the world.  Most importantly, a survey of Social Media users (see first statistic) shows that 74% trust peer reviews of a product, while only 14% trust traditional advertising.
• They will (probably) be socially and environmentally conscious.  This is a qualified statement because, while the boomers professed to be environmentally focused, they also drove the sale of mini-vans and SUVs to unprecedented heights.  Each generation ages differently in subtle ways.  This one may actually walk the talk.

So what are some practical first steps?

• As a general rule, pay attention to what they are paying attention to.  For instance, the "Fast and Furious" movie series, with its tricked-out cars was a huge smash hit in this age group.  Toyota and Nissan are already producing cars that emulate the style of these cars.
• Review each merchandise category and identify the primary age of the core customer.  Link these ages to the average age of Gen Y.  Right now, that average age is moving into the early twenties.  If  you have categories whose core customers are in this age group (like motorcycles), focus on and highlight them in terms of placement, assortment, and inventory investment.  Also look at categories where there is opportunity to extend the assortment to appeal to this customer.  This is where the money is.  Make this core market age analysis an integral part of your assortment planning.
• If you are not already, start working on localizing your offering.  Macy's and Wal Mart have recognized the need to do this and have launched major initiatives to put it in place.  Anything you do to enhance your ability to micro-market will pay off handsomely in the future.
• Get wired.  A web site goes without saying.  If you have not begun to build a Social Media presence, start.  If you are already investing in this medium, make this a major part of your marketing efforts.  This is obviously a new and very dynamic channel, but it is the future.
• Take a hard look at "green" and "sustainability" initiatives.  This can be as simple as replacing plastic bags with paper or canvas.  It can be as complex as integrating green products into your assortments.  It should, as a minimum, be part of your brand message, but only if it is demonstrated.

As the saying goes "change is inevitable, success is optional".  As Gen Y matures, it will take over retailing.  The changes will be profound.  Some are predictable, many are not.  Now is the time to start focusing on this coming wave.

The "Roaring Zeros" have drawn to a close with most retailers and customers muttering "Good Riddance".  It was a decade with extraordinary ups and downs that ended on a clearly down note.  So what happened and what's next?

There were several long-held retail strategies that ran completely out of steam during the decade.  A short list includes:

• Build it and they will come.  For decades, developers grew retail square footage far faster than population growth.  All this new space brought rapidly increasing costs- inventory, staffing, and occupancy.  This growing imbalance was masked by record growth in consumer debt.  With the birth and rapid growth of e-tail and the collapse of personal net worth in 2008, this imbalance began to move back into equilibrium as many 4-wall retailers disappeared and many stores went dark.   
• Pile it high and let it fly.  Coined by Macy's years ago and helped along with low interest rates, over the last decade this credo morphed into "Pile it high and mark it down".  Retailers worked hard to find the appropriate balance between too much and too little inventory. 
• Competing on price alone.  With promotional calendars now filled, retailers had an increasingly difficult time relying on price reductions to drive incremental sales.  To maintain earnings, this reduction in margins from these promotions forced reductions in service levels and ultimately the quality of the product.  This made it all but impossible to sell product at full price, creating a self-fulfilling, downward spiral. 
• One assortment fits all.  As the consolidations of the last decade produced giant, centrally managed chains, there was a reduction in the number of suppliers who could feed these giants.  Product offerings became homogenized, ignoring, with a couple of brilliant exceptions, local preferences.  When all retailers in a channel carry the same products, the only way to differentiate is on price (see point above).
• One-way marketing.  Retailers started the decade utilizing  "We talk, you listen" marketing through a relatively narrow set of newspaper, radio, and TV channels.  By the end of the decade these three channels were losing effectiveness at a record pace, replaced by explosive growth in new channels and forms of communication which most retailers were trying hard to understand and harness.

• "Frugal is cool" becomes the new standard.  The Boomers are now approaching their retirement years and have watched in horror as their personal net worth dropped 40% or more in a matter of months.  The days of taking on more and more debt for conspicuous consumption will shift to demanding exceptional value in their purchases.  It should be noted that this doesn't necessarily mean low prices, but it does mean greater value for money spent.  This means fewer units, but more dollars.  Margins will be key to success.
• Footprints get smaller.  E-tail will continue to expand at the expense of 4-wall retail.  Expect more marginal players (in some cases very large players) to disappear.  For the survivors, there will be a dramatic reduction in new store openings and downsizing in existing locations.  Look for more and more store closings as retailers shift their focus from gross sales to sales productivity per square foot.  Landlords will struggle trying to fill empty stores. 
• More focus on the product.  With consumer demand shifting from price to value, successful retailers across all channels will take a cue from Amazon (Kindle) and Apple (iPhone) to bring out more innovative and exciting new products to differentiate themselves and achieve pricing power, particularly in apparel and home.  Expect more vertical players like H&M and Zara to appear.
• Local goes national.  Retail will come full circle back to the time when all retail was local.  Assortments will speak to local geographic, demographic, and cultural preferences.  Marketing will become a two-way conversation between local stores and local customers via Social Media and web sites that carry both national and local information.  E-Marketing and CRM will merge.  This will be enabled by increasingly sophisticated technology and an organizational shift that moves more decision-making out of a central office and into the field to be closer to the end customer.
• Independents make a comeback.  With a new customer focus on value and innovation, downsizing by the big retailers, terrific real estate deals, and assuming the banks settle down and credit becomes available, new concepts and formats should flourish.
• Gen Y emerges.  Gen Y (born 1985 to 2005) is a third larger than the Baby Boomers.  They are spending at a much higher rate than the Boomers did at their age.  They are already being felt in electronics (iPhone, iPod, Wii) and will have a profound impact on retailing.  That's the good news.  The not so good news is that their average age is 18 and there are still 5-10 years for their full impact to be felt on a broad basis.  By the end of the decade, however, they will define and determine the retail environment.

There was an interesting article recently in the Wall Street Journal titled "Seeing Store Shelves through Senior Eyes".  To summarize, Kimberly-Clark, in conjunction with Walgreens and Rite-Aid, has a project to understand and learn from what the shopping experience is like for seniors.   Test subjects put on thick glasses to blur their vision, put unpopped popcorn in their shoes, and, tape their thumbs to their palms, all to emulate the senior experience.

This is no small concern.  The Baby Boomers, defined as those born between 1946 and 1964, are getting older, entering retirement age, and preparing to live on Social Security and investments.  This is the largest single population bloc, representing 36% of the adult population.  Often referred to as "the pig in the python", the Boomers have historically outspent all other age groups and have driven the economy for decades.

Their habits are changing.  In a recent Gallup poll, the average daily spend by the Boomers has gone from $98/day in 2008 to $64/day in 2009.  Obviously the recession has played into this, as spending has dropped across all the age segments.  The more important news is that the Boomers are no longer the biggest spenders.  That prize goes to Gen-X (born 1965-1979), who spend $71/day.  The Gen-X population is a third smaller than the Boomers.  To get a preview of Boomer spending trends to come, the Silent Generation (born 1930-1945) spends $50/day and the Great Generation (born before 1930) spends $35/day.  Over a third of the consuming population is on this track - $64/day to $50/day to $35/day.  Even if/when the economy recovers, the reality is that the Boomers will be spending less and less over the years to come.  In sheer spending potential, their numbers cannot be replaced by the generation behind them.

So what should retailers and product manufacturers be focusing on to prepare for this inevitable trend?

The real question is "Are the Boomers my target market?".  If your business model today relies on the Boomers, here are some obvious things to consider:

• Real Estate.  If they are spending less and are less mobile, do you really need to have as many stores?  Do you really need to open more?
• Internet.  How big is your Internet business?  Can it replace the lower business in the stores?  How easy is your website to navigate overall and particularly for people with diminished vision?
• Sales and Inventory plans.  With the exception of big gains in market share, the days of "blowing the doors off" are probably over for anyone focused on the Boomers.  Emphasis has to be on margin and profitability.
• Navigation in the Store.  How easy is it to get around the store?  How easy would it be with a bum knee or with arthritis?
• Fixturing.  The so-called "strike zone" or most productive selling space is from 3'-6' off the floor.  This will no doubt become the "selling zone" over time, with all other areas becoming the "markdown staging zone".
• Apparel Sizing.  Gravity always wins.  The size scale will surely shift to the right over the coming years.  Are you looking at and reacting to sales by size?
• Apparel silhouette.  Sleeveless?  Low rise?  Cinch waist?  Probably not big volume drivers in years to come for this market segment.
• Product Packaging.  The lawyers and Loss Prevention folks have made opening most packaging into a physical fitness routine.  Do you think your customers will buy something they can't open?
• Labeling.  If they can't read the label or tell what it is, will they buy it?  Ditto for ticketing, signage, and receipts.

While not immediate, these trends are surely going to have a profound impact on how many retailers and manufacturers operate over the coming years.  As I said, the list of considerations is partial and rather obvious.  Let me know what you think.  What else should retailers and product manufacturers be looking at?  Please leave a comment.

There was an interesting post today on Retail Wire about what buyers expect from suppliers.  It's titled "FD Buyer: Want to Sell me something?".  The article Has three key points, which are:

1. I need to know why your product will be wanted by my customer.
2. I need to know how you are going to educate my customer about your product and get them to try it in my store.
3. You need to know my customers.  I do.

1. Understands their customers' wants completely and acts strictly and objectively as their representative in the marketplace, relentlessly looking for new and exciting products along with the best value.
2. Is able to look at their business through the eyes of their customers, understanding that their offering is but one that is available to their customer.  They are keenly aware of the competition and strive to make themselves the best option available. 
3. Is a student of the category and knows the technical elements of both the design and manufacturing involved as well as trends and innovative new developments.  This is critical if the buyer is to be able to identify and assess relative value.
4. Has a vision of their sales floor by time frame that is consistent with and reinforces the brand and is driven by their deep knowledge of their particular customer.
5. Has translated this vision into specific details through a rigorously developed assortment plan which encompasses the relative positioning of classifications, price points, key items, basics/newness, growth opportunities, and all the specific components of their particular category.
6. Works towards a long-term win-win situation with their suppliers, to create the best product at the best value for their customer.  Another successful merchant I know describes this as "the perfect buyer has big eyes and big ears and no mouth".

In a recent post, I asked the question "Where are the Merchants".  I'm happy to report that I found one. 

He is Hans Sternberg, scion of a family that started a small shop in Germany in the 18th century, fled the Nazis in the 1930's, and went on to build the largest family-owned department store in the country - Goudchaux's/Maison Blanche, a legend on the Gulf Coast.  Hans has brilliantly recounted this experience in a new book, "We Were Merchants". 

I had the opportunity to speak to Hans at length recently.  Here are his views on the key elements of retail success and the current state.  They are both interesting and timely:

• Leadership and Innovation.  Hans believes this is critical to success.  You have to give the customer a reason to pick your store over your competitor and that comes from leadership and relentless innovation.  He sees little of this today, with mostly followers and very few leaders.
• Understanding you customer.  Hans feels this is another critical element.  In his view, the best merchants are those who spend as much time as feasible in the stores listening to their customers, understanding what they like/dislike, and what they are looking for.  He worries that the consolidation of so many retailers hinders this understanding, with corporate offices separate from the stores and merchants that rarely interact with customers.
• Building an exciting, memorable experience.  Hans believes that the in-store experience - visual, service levels, and displays are a key differentiator, regardless of what business you're in.  He does admire some retailers, but finds them only at the high end of the price spectrum. 
• Communicating your story.  Hans' axiom is that "you need to advertise in good times, you MUST advertise in bad times".  He does recognize that this is much more complicated today with the explosion of channels.  He wryly adds that adaptation is another important element of success.

The book is "We Were Merchants".  It is a terrific read for all retailers, both long-term retailers (who can identify with the challenges and fun from days past) as well as younger retailers, who can gain a valuable perspective on how things got to where they are today.  Everyone can learn something from this book.  I recommend it highly.  Go to his web site for an autographed copy.

Where are the Merchants?

This time it's different. 

Retailing has always had its tough periods, but, in living memory at least, nothing as extended or as broadly based as the current period.  The discussions and commentary these days all seem to focus on things like internet strategies, inventory strategies, Black Friday strategies, social media, CRM, new technologies - worthy topics all.  The one thing that is not being discussed is the most fundamental element of retailing - the merchandise. 

Take apparel for instance.  Go into any regional mall; apparel and accessories are still the dominant category of merchandise in terms of square footage and inventory investment.  But the merchandise offering is stale - same fabrics, same colors, same silhouettes, basically the same thing that's already in your closet. 

One of the basic requirements in retail success is to offer the customer something that excites them enough to part with their money.  How do you excite a customer with merchandise that is the same as what's already in their closet?  It seems that today the answer is to put out lower quality merchandise and then promote it like crazy - coupons, interlocking one-day sales, early bird specials, and so on ad nauseum.

Merchandise assortments belong to the merchants, which brings us back to the original question - What makes a great merchant in today's environment and where are they?

To find the great merchants, you look for who is having the most success without having to rely on POS price promotions.  Is there anybody out there that fits this bill?  Well, it's estimated that Amazon will sell 500,000 Kindles this year at $300+ apiece.  No discount there.  Apple is estimated to sell over 45 million iPhones this year.  No discount there.  There are over 25,000 apps available for the iPhone.  No discount there.  The Apple 4-wall stores, from the day they opened, have completely reset sales per square foot standards, moving the bar from hundreds of dollars per foot to thousands.  No Black Friday specials there.  They're in the same malls as the apparel stores.

What about apparel.  Any examples there?  Well, Mickey Drexler has taken J Crew from a moribund company to a thriving business.  The folks at Buckle, American Eagle, and Urban Outfitters are doing fine.

What do Jeff Bezos and Steve Jobs have in common with Mickey Drexler?  They understand that, in the end, it's all about the product.  It's all about offering innovative products that excite their customers enough to part with their money.

Until the other apparel merchants figure this out, expect continued poor performance and disappointing sales. 
 

This is the third, and final, post of the Holiday Checklist series.  The first dealt with Assortments, the second with Inventory and Receipt Flow.  Depending on your company's format, this post is potentially the most critical. The stores are where all your good ideas and strategies are put to the test - this is where your success is determined.  Here are some key points to consider:

• No changes.  Make sure you are not implementing any new processes or systems after the first of October that will have an impact on the stores.  Your store teams need to be strictly focused on driving the business.
• Reality check on the staffing plan.  A recent Wall Street Journal article reported that over a third of retailers are planning on significantly less payroll than 2008.  With business tough, this is certainly understandable.  If this is your strategy, you need to be sure you have a  plan that can be executed.  If the payroll plan doesn't match the transaction counts, one or more of the following is likely to happen - receipts will pile up in the receiving area to get marked down after the 1st of the year, lines at the checkout will get so long that customers will abandon their purchases and leave, and/or customer service will disappear.  Here's a quick reality check:
• Figure out how many units are coming and going at the store by week, beginning with the start of Holiday deliveries to the stores.  This includes unit receipts coming in and unit sales going out along with markdowns and floor moves.
• Divide that number by the number of Full Time Equivalents (FTEs) scheduled for each week.
• Ask yourself if this is possible.  Better yet, ask your field organization.
• If you're pushing the edge of reality, here's some tips to help alleviate the stress:
• Spread your Holiday receipts out by week based on the sales pattern.  This will help the flow out of the back room.
• Minimize the amount of floor moves.  Better to not schedule a move than have it done haphazardly.
• Put as many of your key items, best sellers, and features on the floor as possible.  These will sell out faster than anything else.  You don't want your associates in the back room on a Saturday looking for fill-ins.  Depending on the merchandise, put it on pallets if you have to.  Your customers are more interested in having the merchandise on the floor than the aesthetics.
• Cross-train everyone, including management, on how to run the checkout process.  Devise a signal based on the length of the lines to bring help to the front end.  Your customers will appreciate your responsiveness.
• Minimize communications to the store during the Holiday period.  You want your General Manager on the floor, not working on e-mails in the office.
• Schedule home office visits to the stores thoughtfully.  You definitely want to see what's going on in the stores, but you also want to avoid distracting the store team.
• Anticipate visual impact on the sales floor.  Another recent article discussed the trend among retailers to reduce inventories proportionately lower than sales.  Even though sales and inventory levels may be lower than last year, inventories will still be at their highest level of the year over the next few months.  Still, it's worthwhile to look at the unit inventories and then match that to the unit capacity of your store fixtures, particularly for the lower volume stores  This will tell you what your customer will see when they come into the store.  If you're having a hard time getting the store to look full, here's some simple tips:
• Replace fixtures with displays bringing multiple categories together for lifestyle or problem-solving themes.
• Face apparel out rather than showing sleeves
• Replace 12" pegs with 4-6" pegs
• Increase the use of graphics to fill dead space.
• Merchandise the checkout area.  Hopefully there will be lots of customers standing around the checkout area.  Make sure you've got a merchandise strategy to take advantage of that fact.  The specific merchandise will vary based on your business, but whatever it is, it should share 3 attributes - low retail, appropriate for the season, solid depth of inventory.
• Energize the field organization.  Sam Walton once said that "your customers will be treated exactly the same as you treat your store associates".  This is without a doubt the most stressful time of the year for your store associates, particularly if there are fewer of them than last year.  If there was ever a time to recognize and reward the people that work with your customers, this is it.

This is the last post of the three-part Holiday Checklist series.  While I won't promise that following these guidelines will guarantee great Holiday sales, I can promise you that following these guidelines will produce better looking stores, inventory in the right places at the right times, better customer service, and a more profitable season.

Are You Ready? 

The Holiday Checklist - Part 1

Back to School is essentially over.  Now is the time to re-assess your holiday plans.  This is the first of a series of posts on getting ready for the upcoming, all-important Holiday season.  The topic is too large to cover in one post, so there will be separate posts focusing on different topics over the next few weeks. 

Part 1 - Holiday Merchandise Assortments

Most retailers have seen a weak, if not unsurprising Back-to-School season.  BTS selling is usually one of the key indicators of Holiday sales potential.  Depending on your trend, it's likely that your Holiday sales are planned flat to down from a very tough 2008.   A recent article in the Chicago Tribune discussed retailers reducing inventories more than the drop in sales would indicate.  The big question, then, becomes "how do you offer a compelling assortment on a much lower inventory?".  Here are some thoughts on how to do just that:

Overarching strategy.  Given the environment, the customer this year is looking for three key elements in Holiday shopping.  They are:

1. Price/Value
2. Quality
3. Newness and/or Fun

• Build on the opening and upper price points, funding this by cutting the middle price points. 
• The customer is obviously cautious about spending and is looking for value.  Show her you "get it" by building the depth and presence of opening price points, keeping in mind your brand quality proposition.  This merchandise should be great value, not cheap.
• A larger relative investment in opening price points creates a dollar deficit since you will obviously need to sell more units to achieve the same dollars.  To fill this deficit, increase inventory at the upper price points.    To do this successfully, however, you must make these higher price point items special.  Simply putting more high-priced merchandise on the floor will not achieve the goal.  In a related post, I discussed how Amazon is forecasted to sell over 500,000 Kindles in 2009 at around $300 apiece.  This is from essentially zero sales in 2007.  The customer will buy it if it's special.  Keep the value proposition by working on a shorter markup and focus on margin dollars and not markup percentages.Search out smaller vendors with unique, fun, and exciting merchandise.  There's a Kindle-equivalent in every category of business if you look hard enough for it. 
• Fund all this by cutting back on the middle price zone.  Look for the slow-turning categories and SKUs, the "but we've always carried this" merchandise, and redundant items.  This is, most likely, where the most inventory dollars are tied up and where most of the post-holiday markdowns will come from.
• Once you've done this, do the math to make sure you've got the same total inventory dollars of the original plan.  Remember, the lower your inventory dollar investment, the higher the sell-through has to be to make the same sales.
• Give the lady what she wants.  Take a hard look at your key item/best sellers from last year along with the key items from this year and ask yourself these questions:
• Are the key items from last year still relevant?  If you've carried these for years, do you expect them to do the same business as last year?
• Are your current best sellers relevant to the holiday season?  If so, can they replace the business from last year's key item business?  If not, what is the right balance between the two?
• Best sellers are your lowest liability merchandise.  This is the place to be aggressive.
• Show optimism with color.  During the depression of the 1930's, bright red lipstick was a best seller.  Regardless of the category, or price zone, there has never been a better time to put exciting fashion colors into the assortment.
• Be Fresh.  This season you must have new, fresh merchandise on the floor.  Take a hard look at the percentage of new items relative to the overall assortment, by major category.  What percentage of the total units and dollars does this represent?  How visually impactful will this be on the sales floor?

Time is of the essence.  Make sure your assortments are ready for a very challenging season.

Next post - Receipt Flows and Inventory.

Tough sales and a wary consumer have moved several big retailers to focus on "getting local".  Getting local is defined as providing an assortment and in-store experience that speaks specifically to an individual store's customers.  WalMart and Macy's have been in the news recently and are both investing time and money on this goal.  This is not just for national/international chains.  Every retailer with more than one location can benefit from this strategy.  Here are some admittedly high-level thoughts from someone who has actually been responsible for localizing assortments.

Ask yourself this: do you think that the customer in Miami is the same as the customer in San Francisco, in Kansas City, in New York, in New Orleans?  Even if you are in one region or one city and have multiple locations, do you think all your customers are the same?  Of course they aren't.  Do you think they will appreciate it if you demonstrate to them that you know and respect that?  Of course they will.  The key to winning in retail has always been getting the customer to drive by your competition to shop in your store.  
  
While this is certainly not the only element of winning this loyalty, your customer will definitely prefer your store if you demonstrate that:

• You have recognized and respect the fact that you're doing business in their neighborhood.
• You have taken the time and energy to understand their specific needs and preferences.
• You have responded with an assortment that speaks to these needs and preferences.  

The first step is to determine the differences and degree of differences between the stores.  There are many ways to do this - community demographics, census information, outside services, and so on.  While these are all useful, they share one common shortcoming - they only tell you about the people that live in the community.  They don't tell you much about the people who are shopping in your store and what they like/dislike about the store.  You can also (and should) do a gap analysis of relative performance by category by store to highlight the variances. 

The most powerful way to get at this information, however, is also the simplest - just ask.  Start with the associates in the store.  They are with the customer every day.  In an earlier post, I discussed the power of having a strong relationship between the field and the home organizations.  That relationship is a critical element of success here.  This communication must be structured, specific, and quantifiable - what is unique/different about the customers in each store, what percentage of the total base does this represent, what are they asking for that we don't carry, what are the local independents carrying that we don't carry that is consistent with the brand, etc., etc.  Again, be specific - vendors, style numbers, price points, UPC codes for products you don't carry along with the number of competitors carrying the product, number of requests the store is getting for these items.  Typically, you will find that the difference in preferences fall into relatively few dimensions with some overlap - ethnicity which can drive sizing and color preference, geographical/climate, and average family income.  The good news is that just a 5% allocation of store level inventory towards location-specific merchandise can make a powerful impact.  The key is getting the maximum exposure and credit for these store-specific buys.  

As an example, in certain parts of Miami, there is a large Cuban-American population.  They enjoy a very strong, very sweet coffee.  Their preferred way to make this coffee is in a relatively inexpensive stove-top Italian espresso maker.  Filling a drive-aisle endcap with these coffee makers costs around $500 (cost) and sends a strong message that you recognize and respect who shops in this store.  The biggest challenge is keeping the endcap filled.  Regardless of the business you're in, there are hundreds of examples of this around the store if you take the time and energy to look for them.
  
Now for the hard part - managing the complexity of varying assortments by store.  The impact (and resistance) comes primarily from the merchant organization.  From a merchant point of view, the time it takes to negotiate and buy items for a single store is the same time it takes to make a chain-wide buy, but lacks an attributable lift in chain-wide sales.  Secondly, this is a headache for whoever is responsible for managing store presentation since this means managing multiple presentations simultaneously, also without an attributable bump in chain-wide sales.   Lastly, it adds complexity to the field management organization since there will now be structural inconsistency from store to store.  Making this work requires shared responsibility and authority between the home office and the field organizations.  It also entails reviewing and adjusting job responsibilities and reward structures along with high-level recognition for the inevitable success stories.

The final, and biggest, hurdle is Newton's First Law - Inertia.  Making this work means change in process.  In some cases, it is a change in company culture.  Making a change like this is difficult when business is good (why should we?).  Making change when business is tough is just as hard (can we risk it?).  Getting the organization over this hurdle requires leadership - from the very top on a sustained and consistent basis, visible throughout the organization.

In the current environment, the winners will be those who give their customers a reason to drive past the competition to get to their stores.  This is a powerful strategy to help realize that dream.

What Were They Thinking?

This is the first of what will be occasional posts to celebrate some of the truly bone-headed decisions encountered in retail decision-making.  The object is to both amuse and, hopefully, help promote the idea of thinking about the "....and then what happens" ramifications before instituting a new policy.  The company names have been omitted to protect the clueless.

Today's award winner is a national chain selling mattresses and related accessories.

I needed a mattress.  Like over 60% of web users, I first did the research on-line and found a mattress that was what I needed and, being the mattress business, was on sale.  I needed this delivered and, call me old-fashioned, but I like to have a human to talk to if anything goes wrong, so I called the nearest store location to make the purchase and arrange delivery.  I spoke to an associate and described the style number of the mattress I wanted.  She then quoted a price that was almost twice the company's website price for the same mattress.  When I pointed this out to her, she let out a big sigh and told me that the company routinely sells products on the web at a deep discount to the 4-wall price.  The logic, if you can call it that, is that, since the overhead costs are so much less with web sales, the website can afford to sell them for less than the stores.  She goes on to tell me that the customers have figured this out and now come to the stores to get detailed information from the sales associates, try the mattresses out, and then go home and order them on the web for about half the price.  Who wouldn't do this?  Did I mention that the associates are paid 100% on commission and that the company has made a significant investment in product and sales training for the associates?

Let's see.  You spend a lot of build-out capital and ongoing expense to open and operate a store location with a long-term lease obligation.  Is there not enough competition out there?  Do you really need your own website taking business away from the stores and commissions away from your sales associates?  Do you think these associates are highly motivated?  Sam Walton once said that "your customers will be treated as well or as badly as you treat your store associates".  How do you think that's working out for this chain?  How do you think the comp sales and ROI are doing for the stores?

What were they thinking?

I'd love to hear your thoughts on this in the comment section below.  Also, if you have any candidates for the award (and who doesn't), please describe them below or drop me an email at bill@emerson-advisors.com. 

PS It's just been announced that GM is going to sell cars on eBay in California.  I'll bet the car dealers are thrilled.

• Finalize your plan.  If you haven't done so already, take a hard look at the Q4 plan and adjust the sales plan and Open-to-buy based on current trends.
• Set yourself up to win:
• Clear out dead wood.  Take aggressive markdowns now on slow selling merchandise.  This merchandise is not likely to start selling better, it takes space, and it detracts from the best sellers.
• Filter out the weakness in your On Order.  Go through your outstanding orders and reduce or eliminate slow-selling basic or commodity SKU's. 
• Get balanced.  Look at On Order by classification as a percent to total and compare to sales by classification for Q4 2008, adjusted for changes in current trend.  Balance the On Order with this selling pattern, increasing on order for classifications that are low and reducing on order in classifications that are overbought relative to selling.  Hoping for the best is not a strategy.
• Focus on receipt flow, not inventory.  Break your On Order into multiple deliveries based on your seasonal selling pattern.  Do NOT bring in all your Holiday receipts in at once.  There are surprises in every season.  As Yoda says "later you ship, smarter you are".  This also gives you the flexibility to reduce/cancel deliveries if sales are worse than you planned.
• Hold on to some ammunition.  If you're set up for it, hold back a portion (10-20%) of new deliveries so you can ship when relative sales strength by store becomes clearer.  This will reduce the need for interstore transfers and help avoid the lose/lose situation of taking post-season markdowns on merchandise that sold out in some stores.
• Don't wait.  Every Holiday season has some dogs.  Take the markdowns in season while the traffic is high.  It will be a lot more expensive later. 
• Don't chase the last dollar.  Begin to bring in early Spring receipts in December.  Remember, (profitable) sales drop off the table on January 1st.

Following these steps won't guarantee you a successful Holiday season.  They will, however, guantee you a more profitable one.

Next post - Part 3 The Stores

Lowering Inventories Intelligently

There was an interesting commentary recently by Doug Stevens over at Retail Wire.  Retail Wire is, by the way, a great resource for timely commentary and discussion of retail issues.  If you haven't visited, you should.  At any rate, the commentary was on "The Three Worst Excuses for Retailers NOT Using Social Media".  Doug's three worst were:

1. "We don't want everyone in the store slacking off and tweeting all day".
2. "We don't want people to say bad things about us".
3. "We're planning to get into it at a later date".

1. Social Media is the child of Gen X and Gen Y.  Senior retail leadership is largely from the boomer generation.  The boomers have heard about it, but, with a few notable exceptions, have not fully grasped the profound impact of this communication channel.
2. Social Media is about listening and collaboration.  Most senior executives grew up in retail organizations, particularly the large ones, that tended towards a top-down command and control organizational structure and a one-way approach (TV, Radio, Newspaper) to marketing.  The notion of employees representing the brand and/or engaging in a two-way dialogue with customers can make these senior executives very nervous.  The irony, of course, is that this is already happening, just without management involvement.

• Get the facts.  There's a great 4 minute video out by Eric Qualman called "Social Media Revolution".  If you haven't seen it already (Over 800,000 views on YouTube), give it a look.  It has some extremely powerful statistics that may change your perspective.
• Look at what the exemplars are doing.  Start with Brian Dunn at Best Buy.  He is fully vested in this medium, both personally and organizationally for Best Buy.  There's also a great post by Amy Mengel on Social Media Today titled "Five Reasons that Corporations are Failing at Social Media".  The title is a little misleading as the bulk of the article is about success stories.  Worth a read.
• View this strategically.  If you've watched the video, you know the old forms of communicating with the customer (TV, Radio, and Newspapers) are rapidly losing effectiveness.  Make the use of Social Media a priority - as in specific accountabilities, funding, goals, timelines, etc.
• Engage the organization.  You'll probably be amazed at how many of your associates are active, expert users of Social Media.  Get them involved, along with the Marketing department, in defining uses, channels, and approaches that are best suited for your company.
• Jump in.  Start some pilot programs and pay close attention to the results.  The good news here is that these programs are easy to track since you are actively engaging both your customers and your associates.  There's plenty of feedback.
• Listen and adjust.  This is key.  The medium is changing rapidly, with new channels and uses every day.  A heuristic approach will yield the best results.

An earlier post "Still Not Sure about Social Media" gave some amazing statistics about the explosive growth and potential impact of Social Media on the business world.

There's a terrific new post at the Harvard Business blog called "How to extend your customer experience through Social Media".  It was written by Peter Merholz, who is credited with coining the term "blog" and is a recognized thought leader in this topic.  Peter provides 4 basic principles for a successful Social Media execution.  They are:

1. Only hire people who embody your brand.
2. If you do need policies, keep them lightweight and human.
3. Experiment, prototype, pilot - try stuff out.
4. It's a conversation, which means you listen and take part.

Some of these (like #1) are surely a lot easier said than done.  However, the article has several links to some very useful information and statistics on companies that are already engaged along with an example of a company policy statement.

More than ever before, retailers need to "extend their customer experience".  If you are already using Social Media, this article can give some insight into what others are doing.  If you're not using Social Media, you should be.

Either way it's a terrific article, well worth the read.

Still on the fence about Social Media?  If you think it's just for Gen X and the Millenials, you need to think again.  This is not just another fad.  It is becoming the cheapest and fastest way to bring in new customers and, if done well, build customer loyalty.

Take a look at a presentation from the Socialnomics blog page.  This short video has some truly eye-opening statistics about the current breadth and unbelievable growth of the Social Media phenomenon.  Take time to read the comments as some of the statistics in the presentation are a bit squishy.  This does not lessen the impact of the presentation, as it is well-researched and documented.  Social Media is on its way to becoming THE form of communication and, if you're not using it now, you need to think very seriously about it.

This is also not just for big companies.  In an earlier post, I cited a report on a creme brulee cart vendor in San Francisco who uses Twitter every morning to tell his clients where he's going to be located and the flavors of the day.  He started using Twitter recently and now has over 5,400 followers.  Business is booming.  Regardless of the size of your company, you need to understand the phenomenon and begin to harness it.

What does harnessing it mean?  For starters:

• Learn about the various channels that are out there.  This is relatively simple.  Google "Social Media" and you'll get all the information you need.  Look at some of the users that are already using it.  Talk to anyone you know who is a maven and find out about their experiences.
• If your company is large enough, select someone to take responsibility for managing the day-to-day operations of the process.  If possible, this should be someone who is well-versed in the various applications.  This includes selecting the applications, managing content, monitoring results, and keeping up with the advent of new applications.  This is, by the way, your only cost.  The applications themselves are free.  If you don't have the staff, consider doing it yourself.  It's that important.  Regardless, make sure you keep yourself involved.  This is the voice of your brand.

This is big and getting bigger at an unbelievable pace.  It has the potential to change the business.  You need to know about it.  If you are already using Social Media, please share your experiences in the Comments section below.  We can all get smarter.

Social Media and Retailers - Upside Down Marketing

The conventional one-way approach to marketing - newspaper, radio, and TV are losing effectiveness.  On the other hand, Social Media is exploding. 

The big questions facing retailers are 1) Can Social Media help drive business and, if so, 2) how to harness it effectively. 

There is an interesting article at  MediaPost.com that suggests the answer to the first question is a resounding yes.  According to their research, companies with the highest levels of social media activity averaged 18% increases in revenues over the last 12 months while those with the lowest activity had a 6% drop.  There is also a great study at blogher.com that shows, among other things, that women in the study made 45% of their purchase decisions based on what they saw in blogs and that they were twice as likely to trust information in the blog as in conventional advertising.  This is something that retailers of all size, and particularly smaller retailers, should be investigating.

The bigger question is how to harness Social Media effectively.  First of all, there needs to be a different mindset about the medium.  The conventional way of marketing was to broadcast a message out to the customer and then measure the lift in sales.  This medium is far richer.  Done correctly, you are not just talking to the customer, you are communicating with them.  As in all communication, this means listening to the customer.  While this can sometimes be unpleasant, it can also be incredibly powerful.  Asda (WalMart in the UK) has selected 18,000 customers, called the "Pulse of the Nation" and is involving these customers in their buying decisions, before they make the buy.

The second requirement is to get familiar with the medium.  If you're not on it already, take a look at Twitter, Facebook, and YouTube to see what it's about.    Go to Google Reader and search around for related topics.  Just sign on and use the search function to find retailers that are already engaged.  As the study from blogher points out, this is not just tweens talking about what happened at the mall this afternoon.  There is a significant, and rapidly growing, percentage of the population that is using these different mediums.  Ask around and you'll find people that are into this.  Talk to them about it.  Sign up for the SmartBrief on Social Media to get periodic updates and articles.  In other words, jump in.

Finally, commit time and resources.  The really good news here is that getting on to these different media channels is free, which is a lot less than newspaper, radio, and TV ads.  Secondly, the technology is not complex and requires no investment on your part.  Moreover, you really don't have to build a big organization to manage it.  A recent New York Times article "Mom and Pop Operators Turn to Social Media" described Curtis Kimball, who has a creme brulee cart in San Francisco.  Curtis sends out a tweet on Twitter every morning to let his followers know where his cart is going to be along with the flavors of the day.  He's been doing this for three weeks and has 5900 followers.  Cost to Curtis - Zero.  Larger retailers have already or are in the process of setting up positions with a singular focus on managing their Social Media effort and harnessing the potential.
 
Now, more than ever before, connecting with your customer is critically important.  This medium is here, is growing exponentially, and offers that opportunity basically for free.  How could any retailer, regardless of size, not do this?