Three reasons to perform a physical inventory:

• Counting your inventory isn’t just for insurance reasons, but a major determiner of your store’s health.
• You can get buy-in from your employees that, once completed, will mean less out-of stocks and having more of the best sellers.
• You are also bound to find items you didn’t know you even had.

I’m sharing a system I’ve used for doing a physical inventory because 95% of retail consists of single store operators who may not see the value in doing one.

That’s because…

Physical inventories can seem daunting – especially if you haven’t done one for awhile or have a larger store. Or expensive if you hire an outside service. But don’t let either of those stop you – you can do a physical inventory on a shoestring budget…

Preparation is the key!

Here’s how to do it and maintain your sanity. If you already have procedures for your shop or other type of business, check to see if you’ve addressed all the points below.

A Week Before

Price it.

• Everything in the store, ideally with category number, price and date/yr.

Organize.

• Everything as much as possible by category.
• Write out an instruction sheet that pertains to your store. For example, what is a unit.

Map it.

• Take an oversize piece of paper and create a map of your store. Sketch out the location of every rack, display, wall, and shelf if necessary. Don’t forget the back room or storage area.
• Beginning at the front and working counter clockwise, walk around and assign each rack, display, shelf a number; each number will represent a different section.
• Number your inventory sheets to correspond to the sections on your map. Your goal is to have lots of sections to make counting easier.
• To speed counting, enter categories (from you POS system) onto the counting sheets with every price in the section listed. If a description could speed counting, enter it prior as well.
• Have plenty of extra blank sheets for sections that have too many price points for one page or missed sections.

Arrange it.

• Try to keep categories or merchandise together; you don’t want a lot of onesies and twosies or it will slow down counting dramatically.

Plan it.

• Decide the date you’ll close early say 5pm. If you’ll close early, put a sign up for customers at least five days in advance. An inventory should take no more than four hours if you have enough help.

Figure it.

• Write up details of how many helpers you’ll need and how you’ll pay them. Teenagers appreciate cash so I always paid out of petty cash having them sign a time card as proof with all their information.
• Call your insurance agent and see if they will cover your liability for a one‐time event.

Recruit counters.

• If you don’t have enough staff, call your local high school counseling center and tell them you want to hire about 15 responsible kids to help with inventory.
• You’ll pay them minimum wage cash and have pizza and sodas. They must call you in advance to confirm.
• Get their name, cell phone and email address. Signup any that call – some won’t show and you’ll be covered.
• Get plenty of pencils with erasers.

Wait.

• Don’t allow yourself to start counting through the day, customer service will suffer.

The Big Night

Feed them.

• Order a couple pizzas to be delivered with soft drinks.

Track them.

• As they arrive, check off their names.

Set the ground rules.

• No horseplay, accuracy is expected, be nice to each other, if you don’t follow rules, you’ll be asked to leave.
• No one will be paid until they have signed their time card and all information filled out.

Buddy ‘em up.

• Pair a person who knows the store with one who doesn’t.

Instruct them.

• Tell them what you are going to be doing.
• Show them how to count; they are to either make tally marks or if practical, count by category and price.
• All prices are at full retail, not sale prices.
• Anything unpriced should be pulled, brought to the counter and counted last.
• Count in pencil.

Show them.

• Count one section as a group to show your process including how to count, hash marks, what the sheet should look like when turned in, etc.
• They should check with you to make sure their first sheet is done correctly.

Help them.

• Before they turn it in, all tally marks should be tallied into one number per line.
• Assign one person the map– usually the manager to be responsible every sheet is counted.
• As sheets are finished they are to put a red check on the map and the inventory sheet
• If practical, the map person can tally up each sheet that night but could wait until the following morning.
• Each sheet should have a total $ at the bottom by category.

Thank them.

• If they did a good job, tell them you will contact them for the next inventory.

The Next Day

Total up all sheets by category.

• Enter your grand total somewhere safe

Once you have these figures, you can easily figure your open-to-buy (how much you can purchased based on what you already have in your store), shrink (the difference between what you thought you had and actually have caused by not checking invoices, sloppy transfers, mis-keyed items and theft,) and plan changes. Without a physical inventory you do not have accurate information.

Oh and if you do inventory matching scans to your POS – make sure you are transferring any shortages out to a dead store like #999 or in from store #999 so you have accurate tracking of the differences.

Even if you use your own employees for inventory, these steps will help it not be a hassle but an organized breeze.

As always if you have questions about temporary workers, age requirements and the like, please consult your local labor board to ensure compliance.

What have you found effective to make counting go smoothly?

Grab a free master inventory sheet you can use right away, just enter a bit of information below.

For more about using your inventory to grow your sales, pick up a copy of my book, The Retail Doctor’s Guide to Growing Your Business (Wiley.)

The challenge

A husband and wife were looking to grow their all natural sausage sandwich sales in an upscale strip center. The owners were frustrated by the long lines at fast-food joints on either side of theirs.

The windows, walls and menu at their stylish eatery were plastered with nutritional analyses that proved the private-label links made with ground turkey, chicken, spices and cheese had less fat, than most burgers, burritos or subs.

They advertised discounts in the local free shopper paper and distributed coupons regularly. But sales, which were below expectations the previous year, were still flat.

“Nothing has worked as well as we thought it would,” the owner told me.

The goal

Get more customers into their store.

The diagnosis

The primary marketing vehicle for this quickserve restaurant was the Penny Saver. Surveying the parking lot full of BMWs and Jaguars, I asked the owner if he thought their drivers read that publication. He quickly realized that his marketing was ineffective. In addition, when asked who he thought his customers were, he said both men and women equally. A week later after keeping track of customers by sex he found 80% were men.

The prescription

The owner wasted his marketing dollars on people who will never try his product no matter how low-fat or high-quality it is. He had forgotten that sausage sandwiches are a want, not a need. And he’d lost sight of their most important selling point: taste.

All the education in the world doesn’t mean anything if food doesn’t taste good.

I had him stop his ads in the discount weeklies and set their sights on getting their delicious product into the hands of the guys working in the community. I suggested that he cater events for the larger employers within a couple miles of the restaurant.

The implementation

Marketing materials were altered to speak to guys and simply say that their sausage was “probably healthier than you.” We came up with new brochures, menus and direct-mail marketing materials. By taking the sandwiches to the people most likely to frequent their business, we were able to get his product into the hands of many without discounting the product.

The results

Sales increased 60% year over year.

Lessons for your business

• Know who your market really is.
• Widely spread discounts rarely bring in the profitable customers you want.
• Target who your customer really is by getting in front of them.

What have you used to target your customers?

About Bob Phibbs, the Retail Doctor

Companies from some of the very largest, to some of the smallest, from luxury brands to startups, from franchises to regional chains contact me as a retail consultant because they are looking for results.

While every client and project is different, the ability to enlist me as a retail consultant who has a fresh set of eyes to look at the challenges you are facing can result in a focused, effective and creative path to profitable sales.  No matter what your size, let’s see how I can help you as a retail consultant that gets results.

Target last week made news with a joint letter from their Merchandising Chief and Chief Executive to their vendors.

According to the WSJ, “Target is reaching out to vendors to help craft a more competitive pricing strategy as it seeks to battle rivals and the lower-priced online market.”

In that letter, the retailer says it is not going to let online-only retailers use its stores “as a showroom” for their products. The result is an undercutting of Target’s prices “without making investments, as we do, to proudly display your [the vendors’] brands,” the letter states. The executives say they will be “challenging” the vendors “to work with us to develop an assortment that will allow Target to be competitive and profitable across all channels.”

Bravo Target!

This sends a bold message to online retailers and to the vendors Target has helped make successful. It is an opening salvo against the foregone conclusion that everyone is switching to buying everything either through smartphone apps or online. And against Amazon hijacking their customers.

Target’s partners are bound to accept the request, and Target won’t be the only one putting it out there. It could be as simple as vendors making minor changes in their products so the Target product wouldn’t have any exact match – the model number/bar code simply won’t exist anywhere except on the Target item. Therefore when customers find items at Target, they can’t swipe them with their smartphones to find them cheaper online. This is a step beyond private label – the reason to create these products is not to be necessarily a cheaper alternative to the brand. It is designed to be exclusive.

It would make it easy for Target to say, if you can find a lower price on the exact same item, we’ll match it because the exact same item won’t exist except at Target.

According to the National Retail Federation 95% of all retail operations are single store units.

Smaller merchants need to be able to mimic Target and say you won’t be able to find this product online either.

Look, 92% of merchandise is still purchased in bricks and mortar stores according to CNBC.

Smaller operators need to claim the kind of power Target has in order to thwart the online retailers who are looking to make bricks and mortar stores into showrooms for online products. But as single operators they don’t have much clout.

How to do it?

Most bricks and mortar retailers belong to at least one trade organization or buying group. They should band together and request this from their vendors so that their SKUS don’t match the online-only sites.

Ideally vendors have to be willing to create products that are slightly different and aimed for sales in either big box stores, smaller retailers or online retailers – but not for all.  I’m sure many will be skeptical this could work.

But if bricks and mortar retailers can use their buying power to increase personalization through their instore channel, then they can leverage the advantage they truly need against the showrooming of Main Street.

What do you think? Could this work? Please comment below:

The situation

Aron Lieberman of Rockland Window Fashions purchased a historic home in a prime neighborhood to showcase his products.

After the purchase closed, he learned that conventional signs would not be allowed on the front lawn.

Traffic was slow even though the road in front of his business was one of the most-traveled roads in the town. He wasn’t getting any bump in sales from his location choice.

The goal

Get more customers into the store.

The results

Traffic to his store increased by 50%. And this all happened during the middle of the recession!

Aron has gone on to put this landmark image of the house on all of his emails, invoices – wherever and whenever he can to leverage the visiblitily his status his house enjoys.

Lesson for you

Nancy, one of your best customers, comes into your store to view your new spring shoes.

Your number one salesperson, Bill, works with her to find just the right shoe, just the right style, just the right color.

Just one thing…

When they find the perfect shoe, you are out of Nancy’s size.  Now it used to be OK for Bill to just say, “Sorry,we’re out, but you might try online” leaving  Nancy frustrated and headed home to her computer to try to find it at another store.

But nowadays, as soon as those words, “We don’t have it” exit Bill’s mouth, Nancy, or any other smart shopper, is on their cellphone to Zappo’s or Amazon to check their stock for that perfect shoe.

It’s not because they didn’t want to buy it from you in the first place, it’s because the Internet has made it so easy that unless you step in and offer to get it for them instantly, they can do it on their phones in a flash.

Wouldn’t you rather have Bill quickly add within a nanosecond,  “But I can have it shipped to your home free of charge?”

Of course you would. It saves the customer the frustration, and also gets you the sale.

How do you incent Bill to always add that?

That’s exactly what a visitor to my website asked me yesterday…

She was looking for how to incent her brick and mortar employees to embrace web sales via the iPad.

The more I thought about how to answer her query, the more I realized that retailers in general are trying to figure out how to provide a seamlessly integrated world, a world where customers can buy whenever and wherever they are, but also where store employees feel motivated enough to make the extra effort before their customer whips out their phone and does it themselves.

No, you shouldn’t incent them to use the web because it doesn’t go far enough.

Employees typically get an incentive for doing one thing. If they sell a shoe tree with a pair of shoes, they’ll get an incentive of $5.00 for every tree. That will sell a lot of shoe trees, but it doesn’t encourage your employee to sell anything else.  All the other add-ons are no longer as important.

You with me?

If Bill had an incentive to sell the red Jimmy Choo shoes, he would try to sell that shoe to every customer. Every other shoe would just sit there.

Look, retailers need to be clear about what an employee working on their salesfloor should really be there to do – sell all the merch, not just one type – however they can.

How do you get an employee to do that?

First and foremost they should be people who should want to have the satisfaction of helping people by getting the merchandise out the door. They should be proud of their brand and be able to move seamlessly from web to salesfloor and be paid equally for wherever they make the sale. That will allow them to embrace the web as just another place to find the item and make the sale. Just like a customer.

What to do

Upgrade your sales force to become commission-based or salary plus commission for every sale regardless of how it is entered in the system.

That means you’ll probably have to  upgrade your POS abilities so those commissioned salespeople can seamlessly get credit whether they help your customer in the fitting room, at the cash-wrap desk, or via an iPad instore.

We often think of upgrades for computers, but upgrading your service means upgrading the people who deliver the service – your employees. Commission raises the bar and attracts people who truly understand the game of selling.  They understand they don’t eat if they don’t sell.

True, commission salespeople have a bad reputation (put there more by movies than actual experiences), but without the reward of doing a very good job for every item they sell, your salesfloor is filled with so much beige.

So many apathetic bodies that result in…

So few sales.

Giving your entire organization a multi-channel commission system is the way to get the true rewards you sought with incentives – better customer service and higher sales.

Look here for more on commissioning you retail sales team. 

If you missed the first two installments of this series, start here.

Who are the customers who walk through your door? Are they already cyborgs?

NO!

Every one is a person who has a mom who has Alzheimer’s, who has a kid who is in rehab or has a dad who lost their job, or whatever.  Their mom could just have just won the All-star game, their brother could have finished his first book of poetry or together they might have completed a 5 mile walk to help cure AIDS.

Our humanity is what connects us to each other, not a machine.

The kindness and care that we give our employees and our customers speaks to who we as individuals are in the world.

If you aren’t willing to take that mantle, then get out of retail and start an online deals site. Because real human-to-human connection is the foundation of modern society.

And that’s what’s being lost right now.

This is a plugged in generation with multiple ways of connecting to everyone from texting, to IM to Facebook and the rest.  Maybe because their parents were working two or three jobs trying to keep the house, maybe because class sizes have grown too large, maybe because they were taught to fear strangers at an early age, whatever the reason – young people have sought to make the human connection in the only “safe” way possible – online.

So while they may have 200 virtual friends and only give a one-sentence status update – they care if someone “likes” it or comments immediately upon getting it.  That’s my point, they still care.

They talk to their smartphone like it is a person; they search online with their iPad, disregarding anyone around them.  Those with an iPhone treat Seri like their BFF.

In short, the machine has become the good-looking, smarter, more reliable friend who never disappoints.

So when they show up to your very human retail store, they are bound to arrive thinking people are not as reliable as their machines; humans have quirks and emotions they don’t understand.

Instead of employees being coached how to deal with that, to make a relationship, to truly connect, retailers have given up and let them be bored and in turn bore customers.

Customers have been ignored and are increasingly being left to rely on their machines.

If we don’t fix that, the world just becomes colder and colder and we are one step from cyborgs.

The answer is not to supplant cold technology because you can’t.

But don’t mistake it for the very heart of your bricks and mortar store – your employees.

2012 doesn’t have to be a battle between technology and humanity with winners and losers.

Embrace the latest technologies, of course, but they must go hand in hand with your employees, and your employees won’t be willing to do that until you fix their motivation.

And I cover that in the third in this series, “Should you offer incentives to bricks and mortar employees to embrace the iPad?” You can also …

If you missed the first installment of this series, start here.

Your job is to create an exceptional experience for everyone who walks into your store. That’s the mark.

That means people who purchase from you would crawl naked over broken glass to come back and have that experience again.

And if they don’t, then you have some work to do.

What could get in the way? Customers entering your store embraced in a cold virtual world; earbuds drowning out all sound, eyes focusing down toward the blue glow coming from their smartphone.

Its up to you to warm them up. That comes partially from your store design, displays and merch but mostly from human contact.

The good news is that most people still buy products at a physical bricks and mortar store.

The rush to all things digital got a shock last week when the New York Times reported that only 1% of consumers generate half of all traffic.  Meanwhile, the top 10% of users are consuming 90% of wireless bandwidth.

Even though the top 1% are skewing the results, retailers are rushing to bring cold technology further into the store.

Evidence GUESS announcement that they are going to give in-store consumers access to their online and in-store products via iPads mounted on rolling stands serving as kiosks.

“Great,” some customers will say, “less contact with employees who don’t care about me anyway.”

But how do employees end up so uncaring? Because they are treated that way.

Yes, employees are messy and harder to manage than a cute little app where customers check-in or shop from, but if you don’t commit to making your retail space a great place to work, to undertake the job of teaching life skills for individuals, if you say it doesn’t matter because everyone will soon be on their Smartphone … then how in the world will retail survive?

We’ve already found that hiring employees without training them beyond the basics has created a group of latchkey employees who pretty much do what they want.

The answer lies with you – the owner or executive – to realize that we must value the person in front of us, whether they are a customer or an employee.

No one who walks through your doors is a thing to get through or avoid.

How are you going to make that happen? Check the second in this series here … you can also:

It is a safe place for them to stand, fortified to withstand the attack of customers.

You want service? Come to the castle and we may lower the bridge to give you the answers, otherwise you’ll stand in the moat until we are ready for you.

Have you ever seen something in a store that looked interesting, then noticed the bored employees behind the counter looking bored and walked on?  I have.

When a store is empty, it is much harder for that first person to walk in because they feel all eyes are on them. They are afraid of three things:

1. Being attacked by an overly aggressive greeter.
2. Being ignored and unable to find what they need.
3. Being judged.

Timid employees will compound these fears by remaining behind the counter. Er, castle.

Get your employees out from behind the counter and keep them active, especially if you have windows.

Customers outside need to see people inside trying on clothes, matching prints, perusing books, comparing products so they will want to be part of the group.  If you don’t have any customers at that time, have employees act as if they were customers.

That way customers will feel more comfortable walking in as they won’t see a group of employees just hanging out behind the counter. (For more on this read, my post Training Customer Service Is Like A Game of Pool.)

But this isn’t just for retail, if you’ve just opened a restaurant with an outdoor patio and no one is there at lunch – put your excess employees on the patio with food until it is busy.

If your auto repair bay is empty, have an employee put their car up on a lift so they will be available when someone comes in or people see you as busy when they drive by.

Get the idea?

Here are Five Tips to Make the Castle Less Comfortable:

• Remove any seats or stools
• Remove comfort pads or rugs off the concrete floor
• Make both sides open and accessible
• Cut the counter in half so it is more of a desk
• Move the phone

If you’ve trained them well, salespeople are never behind the counter waiting; telegraphing the world how bored they are. They are active, moving around all the time creating excitement, not barricaded behind the castle.

To learn more about growing your business, read The Retail Doctor’s Guide to Growing Your Business (Wiley)

In fact, I often raise their prices to help them become profitable.

Before you read on, if you are one of the extreme couponers or use them religiously, this site, this blog and this post are not for you.

Untrained marketers who say we need to do something always go the easy let’s discount way. It takes very little imagination and since everybody else does it, they assume it must work.

As I’ve said in speeches around the country, anyone can be a discount whore; it takes no brains or skill.  And once you do it, you’re often condemned to repeating it as a lifestyle.

Here are 7 Reasons Coupons Shouldn’t Be Used For Your Marketing:

• Coupons are looked at as an ongoing effort. In effect, they become the whole marketing plan.
• By the time you factor in your time in creating them, printing them, distributing them and factoring in the actual discounting itself, you have a very expensive promotion.
• You have taught the customer that your product is not worth what you priced it at. In fact, you may have given the illusion you are raking in the big bucks on their backs.
• The people who found you through coupons will wait for your next one.
• You are rewarding people who have no relationship to the success of your business.
• Your sales staff will keep a copy of the coupon to offer to their own customers or friends.
• If your regular customers who have supported you find out someone who’s never been there is getting a better deal than they are, they just might not return.

That’s precisely what happened at a local restaurant in Long Beach, California where a group of us went for a birthday celebration. Located in an old craftsman house with antiques and a wood-burning fireplace, this was a great place to enjoy a great meal. We had ordered wine before dinner, enjoyed fabulous entrees and saved room for their signature desserts.

When the couple at the table next to us paid their check with a 50 percent off coupon, the owner must have been tipped off. He went to their table and sat down. We overheard him talk about his participation in the 50 percent off Entertainment Book.

He said that he valued the Entertainment Book because it brought in customers who had never tried him before. He told them the story of his business, how he and his wife built it and how many years he’d been there.

The coupon bearers told him they were from Pacoima, about an hour’s drive from the restaurant and that they would never have come without the coupon. He smiled, wished them well and said he looked forward to seeing them again.

Our table was incensed!

We lived in the neighborhood. We’d gone there for years, paid top dollar and received no special recognition. How did we feel? Who was more important? Here we had paid full price as usual and the people next to us who had no relationship paid half-price.

We never went back….

What to do instead

Reward those who buy from you 24/7 365 days a week. Those who shop with you regardless of the coupon, the “deal,” or the “steal.”  Getting them on your best customer list pays them back for their loyalty.

Getting the coupon users on your preferred list misses the point…

Now I’m not talking about giving people who don’t know you 50% off to come in the door with the online deal sites and then, as some have suggested, getting them on to your preferred customer list.

Why?

Because you just gave them 50% off, unless you are going to offer that regularly, they’ll feel your subsequent offers are not enough incentive and they’ll go elsewhere to someone else offering extreme coupons. Which means you took all the hit for giving them the deal with none of the promised rewards.

If you repeatedly market your business with coupons to people who don’t know you, you’d better cut your staff.  That’s because profit is what suffers.

And once your best customers find out others else get a better deal than the regulars they’ll be like me and never return. No one likes to feel they are being taken advantage of..

Two final thoughts on coupon marketing

1) The media are filled with how redemptions are way up on coupons and free-standing inserts like you find in the Sunday papers are at an all-time high.

Don’t be fooled. In the past two years coupon-hunting sites have proliferated, from mommy bloggers to individual business models that only exist to showcase the latest deals with tips and tricks.  Never has it been easier to find a coupon from anyone, anywhere.

2) Price isn’t everything – you have to make a profit. You can’t compete on price, you have to build your brand or you won’t be around for long.

If you’d like help meeting the challenges of 2012, especially in regards to your retail sales training or marketing efforts so you can be profitable please contact me.