To be effective in any retail business you must be able to give your customers a reasonable price. You must have what your customers needs anytime they need it. You must be able to offer your customers a clean and friendly store with quick checkout service. If you can do these three things then you will be successful in your business and your business will grow. In 2011 people like service and they do not want to be hampered by unfriendly employees or the inability to get in and out of a store quickly.
The inability to get into and out of a store quickly has cost many retail chains a lot of customers and in effect a ton of lost sales. They lose the customer, and word of mouth from that same customer can cost them other potential customers. The very first thing that any retail business should do is make sure that each and every customer has all options for the service they need and desire. This means employees in place to answer questions and help with requests. These employees must be knowledgeable of the store and must be trained to take the customer where they need to go for particular items, not just point to where it is or what aisle it is on. Training a sales clerk in service to the customer will give your retail store a huge advantage over your competitors that fail to do this.
“Hi where is Milk?” a customer may ask. The sales clerk should never say over there or on aisle 15 or give directions. The clerk should say, “Hi I will take you there.” and then lead the customer to where the milk is kept. The clerk should also go a step further and find the sales associate over that department and bring him or her to assist the customer. The customer may think of other things he or she needs and need further assistance. Having sales clerks always available to help is the key to successful retail and will grow your business simply because of the service you offer. People will always tell other people about a place where they got great service. Have you ever asked someone about a product and they told you a place where they enjoyed going for that item. I know I have many times.
The first key to success in retailing in 2011 is to make sure each and every customer get maximum support on the sales floor and all the help they need. This will certainly be one huge key to maximizing sales while the customer is in the store.
The second key to success is having the items that a customer needs. If a customers comes in and you only have seventy percent of the items they need then you lose thirty percent of your potential sales. One has to have a large in stock of all the items they carry and should be flexible to try and stock customer requests that are not perishables. This meaning that If a customer wanted an item that does not go out of date or perish in a short period of time the retailer should make the effort to stock that item. You would gain sales and not lose inventory because of shrink. Perishable items are different, you can’t stock goat cheese just because one customers requests it. More than likely that would be the only customer needing such an item. Stocking slow perishable items you would, more than likely, lose the rest to shrink. One can’t afford this type merchandising even to please a customer. One could in such an instance offer to get the customer a full case upon delivery. If they agreed to purchase a full case then make it a one time only sale. Doing this for customers gets them what they want and you do not create shrink by trying to stock an item with low demand.
Having a high percentage of in stock and being able to maintain the store in this condition creates sales that you would otherwise certainly lose. I think any store that can’t keep a 99.5 percent instock of the items they carry is a failure. I can understand that there will be some supplier related problems occasionally, but usually these are less than one percent. The big reason for out of stocks and low in stock percentage is the failure of Management and Department Managers to understand their products and potential sales. Another huge reason is ineffective plan-o-grams that fail to offer enough space for big sellers and too much space for slow sellers. You should always have your shelf space allotted for all potential sales of a product until the next delivery. Out of stocks is unacceptable in any retail business and If prolonged will not only cost you sales, but also customers. Customers and business loss, due to out of stock, is something a retail business can’t afford to lose in the 2011 competitive market.
The third key to retail success is definitely price. If you give great customer service like mentioned above and have a very high percentage of in stock this does not mean you can have high prices. You will still have to be competitive in price. This doesn’t mean you have to be the lowest, but you have to be competitive. There are a percentage of customers that will endure bad customer service to save a few cents on an item. Sometimes independent or small retailers do not have the ability to meet the prices of the larger chains. The good news is the percentage of customers who go for price only are in the minority. The people wanting a good price and great customer service are the majority.
You must determine your prices based on your overhead and not try to make to huge a bottom line. Getting greedy is not the way to succeed in retail. You must offer a competitive price and anyone can do this by offering the customer a fair price based on overhead and labor with a decent percentage of profit. I think most retailers should try to work, in the beginning, with a profit of four percent over expenses. This will almost always make your price competitive and allow for enough profit to be successful. I think if you can give quality customer service, great instock, and a fair price you will see your volume rise. Starting out with a huge profit margin is not gonna be successful even with great customer service as people also value being able to stretch their money and save on purchases.
Here is an example. Let us say you have a store doing 50 thousand in sales per week. Your labor cost are seven percent of that total and your other overall expenses are nine percent of that total. Your total operations is 16 percent of sales and your cost of merchandise is 80 percent. This would mean you are operating at a profit margin of four percent. In the beginning this would mean the net profit per week is 2000 dollars. Here you can go two ways If you needed more profit raise prices, lower labor to get overall cost down to say 95 percent of sales. If you maintain your volume of 50 thousand you would be doing well as you profit per week would now be 2500 dollars per week. What if because of less labor to wait on customers and higher prices on merchandise your volume shrinks to 40 thousand. Your higher profit percentage has cost you 10 thousand in volume, but your still making profit of 2000 per week, but your volume is going in the wrong direction. Going in the wrong direction is always bad as it creates less customer service and fewer employees to maintain in stock so it should only be done as a last resort.
A much better way is to maintain the service, labor, and price for a while and see If this results in an increase in volume. If due to this you could go up in sales to 70 thousand per week then you would be going in the right direction and increasing your profit as well. Sometimes it is a tough decision to determine what to do as stores need profit, but personally I believe any retailer should give service and low price every possible chance. If they fail to increase volume then you can gradually go to a higher cost program to increase profits on sales. I think in order to stay in the ballgame you must have competitive prices. This means even If your profits suffer some in the short run, one will have the most successful operation and best success in the end. Retail very seldom fails when they offer the full package and will definitely have a tough time surviving using the less labor, higher price approach.
In summary hopefully your store is giving great customer service, high in stock percentage, and also very competitive pricing. If you have all this then you need just one more thing and that is quick and efficient checkout. You must not allow customers to stand in line this is a business killer unlike non other. Anyone having to stand in line for over five minutes in any retail store has stood in line too long. Retailers need to devise any plan necessary to make sure customers are checked out quickly and effectively. Failure for retailers to deal with this problem will doom them to lost sales and make all other effective operating techniques less effective overall.
Retailers must understand that in 2011 customers demand more service, items they need always in stores, competitive price, and quick checkout. Retailers that offer all this at a high level will be the successful retailers of the present and future.