Retail Guru

Vote on the benefits of Groupon

noreply@blogger.com (Unknown) — Tue, 29 Mar 2011 03:11:00 +0000

Should Your Business Be on Groupon?

noreply@blogger.com (Unknown) — Tue, 15 Mar 2011 05:12:00 +0000

The popularity and rise of Groupon and now other similar coupon sites such as Living Social, Dealfind and WagJag, have made many businesses look at these sites as part of their marketing and promotion. I myself have considered using these sites to give a boost to my business, especially during slower periods or to promote a specific product line.

As part of my analysis I looked at the pros and cons of Groupon to identify whether it would be a good fit for my business.

Pros:

Get a bunch of exposure FAST - the sheer numbers of people who have subscribed to Groupon and other coupon sites is astounding. Getting your name or brand in front of this many people would normally cost in the thousands of dollars. Groupon promotes your business for you with no up-front cost to you.
Acquire new customers - your advertising often hits the same people over and over again. Using Groupon you have the ability to get a whole slew of new customers that may have never been in your business or website.
Increase sales immediately - many businesses are overwhelmed by the sheer number of customers in the first day after their Groupon campaign ends. A Groupon campaign can quickly change what would normally be a slow month to a big sales period.

Many Groupon customers will become your customer - a number of the Groupon customers who visit our business may become loyal repeat customers. Being able to convert these Groupon customers is key to making this type of promotion work for you.

They will spend much more than their coupon face value - one of the important things to consider when planning your Groupon coupon is the face value of the item. If you can provide a face value that is often less than what most people would spend or if you have an opportunity to sell add-on products or services then your overall discount will be less than the Groupon discount.

No up-front cost - the attractiveness of the Groupon scheme is that there is no up-front cost to the merchant. They only pay from the proceeds of the promotion sale and have no other expenses to worry about.

Cons:

Giving away margin - the minimum discount required to be listed by Groupon is 50%. On top of that Groupon will take from 40% - 60% of the net proceeds as part of their commission. That means that you are giving away from 70% - 80% of the face value of the offer. Unless you have huge mark-ups on the product or you intend to up-sell other products or services, you will go broke using this model.

Groupon has all the information - because Groupon customers sign up through Groupon and not through you, Groupon has all of the valuable customer information such email, address and demographic data. You will need get many of these customers to sign-up for your mail list or loyalty program to justify the promotion.

Everyone wants a discount - do you really want customers who may never buy at regular price and only want to buy at below cost? The Groupon customer is very focused on getting a deal. Once they use up your deal they go on to the next and may never come back to you (unless you offer another deal).

How does this look on me - using Groupon and other coupons sites can help create an image of your business that you may not necessarily want. Do you want to be seen as a discounter, always on sale or as someone that provides value even at regular price?

The bottom line is that you have to decide whether Groupon is right for your business. The pros and cons listed above have led me to take a wait and see approach on Groupon. For now I will resist but I have to admit the thought of having 1000's of customers knocking at my door is very inviting.

Cash is King

noreply@blogger.com (Unknown) — Wed, 23 Feb 2011 03:36:00 +0000

If you are one of the lucky retailers who have maintained or increased sales during this tough economic period then you can skim through the rest of this post (although you may still need find it useful).

In today's economy retailers have to be adept at keeping their head above water and when sales are tough to find and the dollars are not flowing in as they once were you may find yourself a little short on cash. This may sound obvious but shortage of cash is one of the leading causes of retailers declaring bankruptcy. Many successful companies can be very profitable and show good sales gains year after year but if they fail to manage their cash they can still go bankrupt.

There are two main areas to conserve cash: 1) reduce or slow the amount going out and 2) increase or speed up the amount coming in.

Improve Cash Flowing Out
One of the biggest drains on your cash reserves is having to pay for product too early before the product has a chance to sell through. Make sure to set realistic shipping dates on all orders so that the goods arrive no more than 30 days before they are expected to sell. This way you are not paying for something before you get the sales for it.

Talk to each and every vendor when placing an order about getting extended dating for larger orders. Lots of vendors are willing to extend 60 or 90 day terms if you give them a sizable order and are willing to take an earlier delivery.

Review all of your expenses especially payroll. Your staffing is one of the biggest expenses in a retail store and reviewing what your busiest days are, what times of day you need more staff and scheduling accordingly can save you thousands of dollars over time. Make sure you schedule shorter shifts to avoid having to give lunch breaks or extra coffee breaks. Most local labour laws stipulate a minimum numbers of hours before staff are entitled to a break or lunch. By keeping your shifts at or below this minimum you ensure you are only paying for work and an employees break time.

Some expenses such as certain types of marketing are often left on auto-pilot and can be costing quite a lot of money. An example is online pay per click campaigns. These often cost a business a monthly fee but should be adjusted to save dollars during slower sales periods. Postpone print ads that may have previously been booked to stretch out your marketing budget over an extended time.

Improve Cash Flowing In
To improve your incoming cash review your accounts receivables and follow-up with any customers that are delinquent and even those that are still within terms to remind them of upcoming payment due dates. A simple phone call works best and is more personal than a form letter. You would be amazed at how many businesses get paid first simply because they called and not because they would have been the first ones paid.

If you have new customers offer incentives for them to pay up front or by cash. A small discount of 2 - 3% for a cash payment is often enough to convince someone to pay now instead of taking terms or using a credit card.

If after implementing some of the above suggestions you still find yourself cash starved and are having trouble paying bills then follow these guidelines:

Talk to your vendors - tell them your situation and ask them for a little more time. The more dialogue you have with them the better. DON"T shut down and stop answering the phone. This will not send your vendors a good message and will not help your situation.
Speak to you bank or credit facility. While they may not be able to extend you additional credit they may be able to restructure your existing debt or offer different payment terms to help improve your cashflow situation.
Make sure you always pay government agencies and tax remittances on time. These vendors are not negotiable and can cost you significant penalties if not paid in full on time.

Managing Your Biggest Expenses - Payroll and Occupancy Costs

noreply@blogger.com (Gil Garcia) — Fri, 22 Feb 2008 20:08:00 +0000

After your cost of goods, a retailer's largest expenses are payroll and occupancy costs. These two areas if not controlled, can choke a retailer's cash flow and eventually lead them into bankruptcy.

While the retail industry standards for these expenses vary greatly, they should fall within the following ranges:

Payroll Costs: between 10 - 15% of gross sales
Occupancy Costs: between 7 - 10% of gross sales

Controlling Payroll
Some things you can do to make sure your payroll costs are being controlled:

Monitor your payroll costs monthly to make sure they are in-line relative to gross sales. On a month-to-month basis your payroll costs as a percentage of gross sales will vary but on a yearly basis your overall labour costs should fall within the industry guideline.
Review your sales trends by day of the week and hours of the day to determine when you need to add extra staff or where you can cut back.
When scheduling use shorter shifts instead of full days across the board. This will give you more flexibility to have more staff at peak periods of the day or react to cut back on staff on slow days, especially due to bad weather.

Controlling Occupancy Costs
Unlike payroll costs, your occupancy costs are often not controllable other than at the time of negotiating your lease. However, there are a few things you can do to make sure your occupancy costs are within the industry guideline:

Make sure that you understand all of the lease costs you are responsible for when negotiating your lease. Common area costs, management fees or rates based on gross sales often become contentious issues if not clearly understood at time of signing.
Review your controllable variable costs such as utilities. Install efficient thermostats that reduce the temperature at off-hours. Use timers for your outdoor lights so that they are off for a few hours in the middle of the night.
Maximize the space you are renting by reducing non-selling space: storage, office, or any other use other than selling floor.

If you can contain your occupancy and labour costs as well as your inventory levels, you should be on your way to a profitable year!

Buy Plan - Plan your Buying Trips Before you Travel

noreply@blogger.com (Gil Garcia) — Wed, 14 Nov 2007 21:56:00 +0000

Many of you may be scheduling your January buying trips now and making sure you are booked into the right hotels and are taking the right staff along. However, the most important thing you need on your trip is what most retailers forget about; their Open-to-Buy and Buy plan.

The Open-to-Buy and Buying plan are integrally related. The basis for your Open-to-Buy should be your last year's performance and your plan for growth, margin improvement, improved stock turns and/or inventory reduction. These factors will all help determine how much and when you should be buying.

The Buy Plan takes the Open-To-Buy a step further. In the Buy Plan you need to incorporate how much of your budget you want to actually spend, how much you want to use for re-orders and how much you want to allocate for opportunity or discounted buys. Most retailers go out and spend their entire open-to-buy budget up front and don't have the funds available to take advantage of hot sellers or special purchase opportunities, usually heavily discounted vendor excess stock.

As a general rule of thumb plan on spending only 75-80% of your buying budget up front. Keep the remaining balance in your back pocket to allow for in-season reorders on fast sellers (10-15% of budget) and the remaining (5-10% of budget)dollars on opportunity buys as they present themselves. These ratios may differ a little from retailer to retailer but the the basic premise is the same.

Remember that it us (almost) always better to chase more product than to be faced with too much inventory and excessive discounting.

Implementing a Shrink Reduction Program - Manager Bonuses

noreply@blogger.com (Gil Garcia) — Mon, 10 Sep 2007 19:50:00 +0000

Regarding bonuses based on shrinkage – this is commonly one of the bonus criteria for store managers.

The best way to implement is to set a target shrink factor based on industry average and your own historical store inventory shrink rates. If a store has a very high shrink rate it may be more motivational to base a bonus on a percentage reduction of the shrink rate for the first year or two until it gets to an acceptable level. It is also important to communicate the store shrink rate and targets to all staff. They should know what the last year's shrink rate was as well as the target. All staff should be made aware of the programs designed to reduce shrink and how they can help reach the target shrink goal.

It is amazing how just being aware of the shrink issue and how to prevent it makes the problem go away.

Sources of Retail Inventory Shrink

noreply@blogger.com (Gil Garcia) — Mon, 10 Sep 2007 19:33:00 +0000

Before jumping too quickly to try to implement a shrink reduction program it is important to understand what is the source of the inventory shrink.

Although there is some variation depending on the type of retail store, most retailers' inventory shrink rate should be in the neighborhood of 1.5%-2%. Anything over this usually indicates a problem.

The following is the industry average for the source of inventory shrink in the retail industry:

Internal Theft 45%

Shoplifting 35%

Admin/Paperwork Errors 15%

Vendor Fraud 5%

Internal Theft
Based on the above breakdown, much of the shrink reduction program should emphasize internal controls & processes related to damages and write-offs. Also, cross-store and employee comparison of refunds and unauthorized discounts should be done to ensure that some of the shrink is not happening at the till. Parcel/Bag checks is a bit more extreme but some retailers do implement this.

Shoplifting
Customer Service is the best way to thwart customer theft. Acknowledging and servicing customers can avert many planned thefts. Also, signage indicating shoplifters will be prosecuted and arranging product so that low value items are near the doorway and expensive items are near the cash desk or under lock and key helps reduce easy shoplifting opportunities

Admin/Paperwork Errors
This is the inventory shrink category that you have the most control over. Review current procedures for receiving, transfers, pricing and write-offs to ensure they are being followed and to identify areas for improvement.

Vendor Fraud
This is most common when vendors are used to re-stock items directly in a store – usually this occurs only in larger department stores where vendor managed programs are in place.

Physical Inventory - How Often is Enough?

noreply@blogger.com (Gil Garcia) — Mon, 10 Sep 2007 19:15:00 +0000

A number of my clients often ask if they should do a physical inventory more than once a year in order to cut down there shrink. As a general rule, there is usually no payback in doing inventory more than once a year unless need to for financing purposes or for a potential buyer of the business.

The cost of doing inventory usually outweighs the amount of inventory shrink that can be saved. However, it is recommended that monthly cycle counts be done on high volume items. This means selecting a handful of items (3-5) and having the stores do a count on those items only. This information is then used to verify against your perpetual computer inventory. Usually different items are selected each month so that 40-50 items are counted by the end of each year. However, if you have a problem item then you may choose to have that same one counted each and every month.

Store Opening Checklist

noreply@blogger.com (Gil Garcia) — Fri, 13 Jul 2007 08:53:00 +0000

Here's a simple checklist that can be used when opening a new store:

NEW STORE SETUP CHECK LIST

Location: ____________ Opening Date: ____________ Contractors: _________

STAFFING/SCHEDULE

Store Opening Team

- Name(s):

- Position(s):

- Contact #'s:

Manager:

- Hired:
- Training Complete:
- Trained By:

Team (total # hired including temp.)
- Hired:
- Training Complete:
- Trained By:

Hiring Forms/Schedules

Opening Week

STORE SETUP - Systems and Operations

Banking
Phone/Fax
Alarm
Locks
POS
Float
Fixtures
Manuals
Marketing
Signage
Supplies

STORE SETUP-Stock

Stock
Visual
Cash Desk
Back Office
Marketing

CUSTOMER SERVICE

Product Knowledge
Role Playing
POS Training
Policy & Procedure
Loss Prevention

OPENING DAY

Floor walk Through
Float
POS working
Banking working
Marketing in place
Staffing
Cash Desk Stocked

Retail GM& and Stock Turns - Industry Averages

noreply@blogger.com (Gil Garcia) — Thu, 12 Jul 2007 19:36:00 +0000

Store Type__________Gross Margin______________Stock Turns
Women's Shoes...............44.2%...............................4.1
Men's Shoes....................44.6% ..............................2.5
Women's Sportswear.........47.3% ..............................6.0
All Women's Apparel..........43.6% ..............................7.1
Luggage........................48.1% ..............................7.3
All Men's Apparel ...............42.3% .............................4.4
Cosmetics & Drug...............38.6% .............................3.9
Sporting Goods..................32.2% ..............................3.7
Furniture ........................43.1% ..............................3.3
Electronics........................20.8% .............................3.5

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Advertising Expense Ratios

noreply@blogger.com (Gil Garcia) — Thu, 12 Jul 2007 18:39:00 +0000

Advertising Expenditures as a % of Sales

retail open to buy

7-Elevens become Simpsons "Kwik-E-Marts"

noreply@blogger.com (Gil Garcia) — Thu, 12 Jul 2007 08:33:00 +0000

Over the weekend, 7-Eleven Inc. turned a dozen stores into Kwik-E-Marts, the fictional convenience stores of "The Simpsons" fame, in the latest example of marketers making life imitate art. Now you can get Buzz Cola, KrustyO's and Squishees.

read more | digg story

Inventory Management

noreply@blogger.com (Gil Garcia) — Fri, 18 May 2007 15:43:00 +0000

The most common question I receive from retailers is "how much inventory should I be carrying?" Having too much or the wrong inventory is most often the root cause of a retail store's failure. I haven't been in a store yet that does not have a challenge managing it's inventory. The key to managing inventory is relating all inventory to sales. That is, inventory on-hand should reflect the expected sales for the current and upcoming month. The best way to do this is using an Open-to-Buy (OTB) system. An OTB system, if used properly can tell you if you are over-bought, under-bought or have the wrong mix of product. There are many OTB tools available to retailers. These can be as simple as a spreadsheet or more complex programs that are integrated with the retail accounting system. Whatever the system used, the key is to understanding and using the information provided. In its simplest form, an OTB system takes into consideration your expected sales and factors in your GM% and markdowns. This will provide you with how much inventory will be moved during the selected period. The system will then subtract this from your beginning inventory and will compare the expected ending inventory with your planned ending inventory. If your expected ending inventory is less than plan then the difference is the amount of purchase dollars available to buy more inventory. On the other hand if your OTB is negative (expected inventory greater than plan) then there are no dollars available to buy more product. In fact action may have to be taken to move more inventory (markdowns, vendor returns etc.) The OTB system becomes more complex and often confusing for retailers because the system is actually a rolling calendar that looks at a number of periods at the same time to provide a forecasted OTB. While the OTB system can be quickly learned, the interpretation of the data can be difficult to master, especially for a new store with little or no history. The first problem in interpretation is determining how much inventory to carry in the first place. Do I need twice or three times as much inventory to make my sales target? There are a few different ways to calculate this but the main one is the stock to sales ratio. Without a sales history this calculation should be based on a standard of between 3 to 1 or 4 to 1. This means that if I plan to have sales of $50K (retail$) in a period then I will require between $150 - $200K (retail$) of inventory on-hand at the beginning of the period. Another way of saying this is that I expect to sell approximately 20-25% of my inventory in the period. These ratios apply to most businesses for most months of the year. Some seasonal retail businesses may have to adjust this for their specific needs. Also, during the peak selling period (usually December) the percentage of product that will sell is much higher than 20-25% so the ratio may have to be reduced based on expected sales.Once you start using an OTB system you can get much more finite in your inventory management by using the OTB at the category or department level. This way the OTB not only tells you whether you have enough stock but also if you have the right mix. You can get a free basic OTB calculator at Tom Shay's Profits Plus website. Here you will find other retail tools as well as good retail information. For personal help in developing an OTB system you can contact me or visit our website. You can also visit my store at website.