Tip of the Week

Business SMART:	"The Dialog"
	By: Dennis A. Conforto A-Z Media Group

I love a great dialog, it’s better than a debate. A dialog to me is about looking for common ground while a debate is about winning versus losing. What I am going to share with you is what I call “the dialog” which I recently had with a retailer who wrote in and was challenging some of the comments I have made in recent articles. I love it these types of scenarios because I never know how someone will interpret my comments. As you will see in this dialog some of what I wrote was not fully understood. The fault in this lack of understanding lies with me. I am the one responsible for clearly getting the complete message across in each article. Many of my articles are a continuation of the previous one and are written as a series which means that if you read just one you could totally miss my complete thought or point. If you are reading something I wrote to everyone else and you disagree, please take me to task and dialog with me. I am just as happy to teach as I am to learn. Going forward at the bottom of each of my articles we will place a link so you can email me and a link so that you can always have access to all that I have written in the Scrapbooking Business News over the years. Suggestions will also be encouraged – if there is something you want to know more about, let me know; I will do my best to write on the subjects that are important to you. Now here is “The Dialog” This letter and my dialog with it are from Suzanne Slupesky of California Stampin’ in Pleasanton, California. Thank you Suzanne for taking me to task! Suzanne: Hi Dennis. Your recent articles in Scrapbooking.com are very intriguing to me. Dennis: Thank you Suzanne: I’ve been in business over 15 years, starting with just rubber stamps/supplies and then branching out into scrapbooking. Dennis: Wow, 15 years is impressive in this industry, you have my admiration and my deepest respect. I have been in retail now for about 30 years, once as a senior VP of one of the top 40 retailers in the USA located in Seattle. Then I was one of the founders of a large retail software firm and we created a retail school in San Diego that trained thousands of retail and manufacturing executives throughout the world for over 20 years. I love retail and everything about it. Suzanne: I literally had the first stamp website as my husband came home one day in 1995 and said…you know, there’s this thing call the “web’ and you should be on there! Dennis: You were on the cutting edge then as I am sure you are today. In 1999 I owned over 2,000 shopping websites so I was a lot slower than you in getting on the web but I did try to catch up. Suzanne: Of course, there have been huge changes in the industry in that time. Dennis: No question about all the changes. There are even more to come if we are all going to stay ahead of the curve. Suzanne: I started my business, as many, in my garage, with absolutely no business knowledge (pre-med major in college). Dennis: Well now it’s even more impressive to know that what you went to school for and what you did were two different things. After 15 years in retail you have proven that you have the natural skill sets of a solid retailer. Ben Franklin said once, “I never let schooling get in the way of my education.” And so it is with you, because nothing beats the success that is born of trial and error. Suzanne: While I’m not making a 6 figure income, we are still in business and I think there’s something to be said for that. Dennis: Income is not the truest measure of success even in business, but a 15 year run as an independent retailer in my book is. People just don’t know how much a retail business requires of ones life in time and money. Suzanne: We pride ourselves on knowing our customers and providing them with over-the-top customer service. (I have always said the only business knowledge I had was that I am a DARNED GOOD customer. I know what I like in shopping and I can assume that there are at least a few other people out there that are like me and will shop the same way I do.) Dennis: Like you, I pride myself on knowing the scrapbooking consumers, I never state how I feel but how they feel from over 1,000 surveys taken over 3 years with over one million responses. Frankly a lot of what they say in the surveys I would answer completely differently but to my way of thinking the consumer is the boss of all of us and our focus should clearly be with them. Suzanne: Having said all that, I hope you’ll consider the “other side” of some of your recent comments, as I really disagree with many things you say. Dennis: I know that healthy dialog is good and I never fear it, in fact I love it so let’s see what you disagree with. Together we can find out if you really disagree or I am just misunderstood. Whatever the reason I take full responsibility for it. You should know I am happy to change on a dime for a newer or better point of view. I am happy to be taught by you and others. Suzanne: I do not at all mean to be disrespectful or to discredit your obvious business expertise. Dennis: Not at all, I think it is good that you have the courage to dialog my points of view. I believe you are doing it with the best of intentions. I am honored that you would take the time to challenge my comments. Suzanne: Over the years I’ve found that people who know a lot of “business” come in and try to apply what I’ll refer to as “regular business principals” to the craft industry (and of course I can only speak for the stamp/scrapbooking end of that!); and, not to be biased, but many of these professionals are men. Dennis: So you know I have been in the scrapbooking industry since 1998. While I don’t have the 15 years you have in the craft industry, I would say that I have a unique vantage point through my ownership of Scrapbooking.com Magazine. My vantage point is also different because I have walked into hundreds of scrapbooking stores throughout North America. It might be that I have access to more information and I have seen and heard things that others in the industry might not have because of my travels and investments. The fact that I am a man in an industry where the consumer base is 98% female doesn’t mean that I can’t instead rely on the facts and data based on solid research about what the female consumer thinks and feels. Maybe the facts we have gathered by getting input from millions of women might have more creditability to many than the opinion of one woman in one store. However, having said that, please know that you are totally and completely credible to me. I really don’t think my comments should be invalidated simply because I am a man. I do know the research I depend on for my comments is female gender based as it should be. Suzanne: I honestly think that the craft industry, and especially scrapbooking is very different, niche-y shall we say, and the fact that it caters to women so heavily isn’t really given nearly enough attention. Dennis: I totally agree with you. I know the survey results between women and men are often completely different and since the consumer is female and they are our collective bosses in this industry only their opinion should matter, and I want you to know it matters to me. In the end it is women that I represent even if I am a man. Suzanne: So here are my thoughts: The only real “partnership” I have and/or am seeking to develop or deepen is my partnership with my customers. I do not feel any allegiance or partnership with any of my suppliers, nor do I feel that’s a real healthy thing to do. In other words, the customers are my clients and it is my job to find the items they want, similar to a real estate agent, I guess, without any bias or lobbying of any sort. I do not for a second believe that any kind of branding or partnership is going to double or triple my sales. I think that is complete hype and a disservice to my customers. When I shop a show, I most definitely cherry-pick (and will continue to do that). I RARELY buy entire “lines” from anyone for several reasons. Dennis: I believe that the better the partnership is between the consumer and the retailer and the retailer and manufacturer the better the whole value and profit model is for everyone. I agree with you about the way the overall industry works today; you cannot ask a typical manufacturer how they would triple your sales with their products and get a viable answer. But you should know that there are manufacturers who can. Be careful not to put all manufacturers in the same bucket just like manufacturers should not place all retailers in the same bucket. Here is where you have gotten off track with my comment about partnerships. It is the job of the retailer and the manufacturer to know what the consumer wants. It is not the retailer only, that disconnect between the retailer and the manufacturer is why you have to cherry pick a line. You know the effect, but you have missed the cause as to why you cherry pick a line rather than cherry pick who you can have a real profitable partnership with. What you are simply expressing is that the manufacturer is out of touch with the retailer because they are out of touch with the consumer. You bring up the real estate agent as your argument to your point of view but I think the point of view is more like the developer who has to get everything right so that a community with all its parts can work to serve the needs of many. I have never ever stated that any retailer should buy the entire line of any one manufacturer, however in some cases and in some markets for the right store it could be the very thing to do. If I was a scrapbook retailer today I can think of three or four manufacturers where I would display the entire line. But those manufacturers know who the consumer is and they know how to keep a retailer in stock with just in time delivery. The fact of the matter is that your statement is proof that I am right; the current industry system of retailer and manufacturer partnerships is broken because the manufacturers are blinded to what is happening at the retail level and that is because the retailers give little information back at a detailed sales level to know what is working and what is not. True partnerships would start to make the life of a manufacturer and a retailer healthier and stronger. Suzanne: First, I don’t think that the majority of customers shop that way. Yes, a few of the less creative may shop that way, but the real hard-core crafter wants to put things together and they don’t need it all laid out before them. Part of the fun is in the “hunt” for the project items. Dennis: We know from the data, or the facts that newbies like shopping by theme, intermediates like shopping by brand and experts love to shop by category and hunt as you suggest. That is why the CHA SMART Store we built last year showed how a store can do all three at the same time and not duplicate the products three times. There is another group of female consumers that dwarf the previously mentioned three groups of women. It is the non-crafter instant scrapbooker who makes up 45% of all women. While those three groups of crafters only make up 4.5% of all women. Only 12% of women in the USA are into any hobby. Time and money have been the negative drivers that the craft industry has clearly not understood. Women today have less time. Most women have a hard time understanding how women who do scrapbook or rubber stamp find the time. The question is simple, “Should there be products that cater to these non-crafters?” And the answer is yes. Manufacturers and retailers in this industry need to address the major issue that women have, which is lack of time. If we had those products that addressed the time issue we would increase the number of women who participate in the hobby. If we had more of the products for the instant non-crafter and really advertised it we would see millions more women coming into a scrapbooking store that over time would flip over to the crafter side of the equation. Suzanne: Second, I continue at each trade show to be amazed at how clueless manufacturers are when it comes to what people actually want and use. The CRAP that they try to pawn off on customers is sometimes beyond the absurd. I honestly think they go down the aisles at hardware stores and wonder how they can market those items to scrapbookers. Or a young couple from Utah thinks that this is a cool big money making business, so they say let’s go visit Uncle Joe who owns a printing company and print some paper and we’ll have a paper company!! Just how many paper companies can there be?? Dennis: Well there is no question that the low cost of entry into the marketplace makes it crazy for solid manufacturers to keep the playing field to a reasonable level. The funny thing is that many manufacturers feel the same way as you on that subject. Suzanne: SEVERAL times this scenario has happened to me: Go to show; see latest “SUPER HOT” items; think items are ridiculous and do not bring them into the store; 3 months later get mailing that hot item is being discontinued (BIG surprise to me because I thought it was stupid to begin with); but now manufacturer really needs to unload it, so I’m offered the now-not-so-hot-item at terrific discounts; at next show, “hot’ item is nowhere to be seen or even mentioned!!! How can manufacturers be SO out of touch with what customers actually want and need?? Do they ever bother to ask or do they just ask stores that have been in business 3-6 months?? Dennis: I totally agree with 100%. However whose fault is it that many manufacturers are clueless? I say it is the retailer, who in part is not sending feedback to the manufacturers about what their customers truly want. This I can tell you: If a manufacturer was totally in tune with your consumer you wouldn’t have to cherry pick the line, you would get the right amount of that line to fit the needs of your store based on the size of your store. You cherry pick because the system is broken. It’s a catch 22. What comes first? I say the partnership if you want to clean up the mess you just described. If you hold up a mirror to the problem you will see that you are part of the cause and the effect. I have found when it comes to business problems that you first need to see what you are doing wrong and fix it because you get others to change around you. In other words, I think it’s important for you to know how manufacturers really make a profit and I think it is critical for manufacturers to know how retailers make a profit. When you get into the position of thinking its all them and not you, there is no way you can end up with a profitable partnership and in the long run have a healthy growing industry. Suzanne: Third, I do not care how a manufacturer wants their product displayed. Dennis: You should want the manufacturers to know the perfect way to display their products in your store. These manufacturers need the data by working more closely with thousands of stores that carry their products. They should know what the consumer likes and doesn’t like and shouldn’t find out at a trade show because you didn’t reorder something. This is the one thing Wal-Mart understood; partner with manufacturers and give them lots of data and weekly feedback and we will win, if we don’t we will lose. Why would you want your manufacturer to not know the facts of the independent retailer? Again because the system is broken and you don’t provide them with on going information you can’t value their opinion because they don’t have one. Too many manufacturers see their clients as the retail stores not the retail stores and your consumers. Because they only see you and then you keep the information to yourself that would help them do a better job for you. As a result they don’t know how to help you grow and of course you don’t value the opinion of those that can’t grow your business. One other point - because they know you don’t want their opinion about how their products should be displayed, they don’t seek to understand. It’s a self-fulfilling prophecy which produces a cycle of blame which serves no one. Suzanne: It’s MY store, and no, I don’t want their input! Dennis: Hence the need to create the CHA SMART Store. The store owner needs to own and control the brand look of their store, no question about it. But survey after survey shows that the best stores are the co-branded stores between the retailer and the manufacturers. However, the look and feel of the store clearly belongs to the store and great manufacturers should know how to support it and add value to you and your store. You should want the input of manufacturers that have paid the advertising price to known the consumers just like you have. One thing is for sure, there are not enough manufacturers who have paid that price to go beyond a trade brand to become a true consumer brand which is one more reason why you don’t value their input. You should be careful not to apply that rule to those that clearly know how to add value. Never discount the experience of manufacturers who have been around a long time, they may not do everything right, they may not practice all they preach, but you can never get enough input to say you don’t want their input. Suzanne: Again, I know my customers. Let’s say they come in with their photos to look for paper and determine they need a shade of blue. As my store is now, they can go to the paper section look thru all the blues and immediately find what they need. If I had yada-yada plan-o-grams, how many places in the store would they have to look for blue paper to match their project? Dennis: I totally agree with you and have never said otherwise but there are fifteen major categories in scrapbooking and each category if done correctly has a different set of display rules to meet the needs of the consumers. Let’s use the flip side of your point and say a customer walks into a store and is a newbie and only has five minutes to shop for a theme for which they have only 90 minutes to put together. Let’s also say they don’t want anyone to know they don’t know how little they know because they don’t want to look stupid. They just want to quickly walk into the store find it, buy it, walk out and create it. Most scrapbooking stores can’t serve that consumer because they set up the store only for one kind of consumer when there are several kinds. The bad thing about my example is that group is the largest market which this industry has still not yet tapped into. One reason why is that craft stores often think their store can only be for the crafter and they chase away the non-crafter whose money is just as valuable as the crafter’s. The funny thing is that it doesn’t require more space or more inventories. Suzanne: Years ago I insisted on organizing our store by stamp company, so all the PSX stamps/samples/etc were in one area; the Hero in another etc (in a type of plan-o-gram). Eventually, it got very frustrating, as a customer would come in and ask for a horse stamp and we had to wander all over the store looking for a horse. AND then, at least, customers couldn’t have cared LESS about WHO made it - they just wanted the horse stamp!! Perhaps with such strong “brand recognition” and heavy advertising, that has changed, but I still think there are many people who just want the blue paper or the horse stamp and they do not want to wander all over the store looking for it. (I was eventually overruled by my staff and customers, and now we mostly organize things by topic), Dennis: I am glad you changed back because for stamps that is the correct way to do it. Again depending on the category and the mix of customers there are many correct solutions and often times it is not about right or wrong but degree of rightness to a solution. Suzanne: Fourth, I do understand how long it takes to get product from a supplier, and yes, I pick and choose suppliers based on who does that best. Dennis: Those who do best for you are good partners and you should favor them over those that fail you in terms of shipping times, quality, pricing and sales. All that information is part of my point of good partnerships. Suzanne: I also have a track record of refusing to do business with manufacturers who aren’t nice or who screw me (i.e., the recent not to be named manufacturer’s fiasco that didn’t get the promised product out for months and in the end got plenty out to the majors). I will never again buy another item from them! There are plenty of NICE companies out there, and I choose to do business with them. IN ADDITION, if a customer asks why I don’t carry the not-nice company’s items, I have NO problem telling them why. I firmly believe that women especially care about the ethics of a company. Dennis: Amen. I completely and totally agree that you need to do business with companies that maintain your values; if they don’t you cannot maintain your values to your customers. Again you keep proving over and over that partnerships are everything if you want to be profitable. Suzanne: I am one of the few stores in my area that even still offers a class in Scrapbooking 101, so I do know the value of adding new consumers. And while I don’t have much time to do it, I understand that “networking” is also a valuable of adding new consumers. It would behoove the manufacturers to advertise in that way (i.e. forget the ads in all the scrapbooking magazines) and put ads/articles in O (Oprah’s magazine), Good Housekeeping, Cosmo (which I don’t read, but some future scrappers might!!) Dennis: Well the problem with the scrapbooking magazines is that they are for the converted. The magazines do a good job for that group, but the problem is that at $5,000 per page it’s overpriced for the manufacturers. Oprah is great but the problem is that most scrapbooking industry manufacturers do not have $40,000 to spend on one ad. The answer to the problem is simple: spending the money on the retailers through co-op funds and paying for 50% of your ads. Hence I am back to that theme again about healthy partnerships that are an industry standard practice. Suzanne: In a column you recently made this statement: “The scrapbooking industry has been taught that retailing is a price war of the big retailers vs. the small independents. Nothing can be further from the truth. Retailing is about who is the better merchandiser and better promoter.” That sounds nice, but again, after years in business, I really don’t think this is true Dennis: Well I know for a fact having studied and helped thousands of retailers that a good merchant who is a good promoter makes for an excellent retailer. If you are assuming that I am saying it’s the only thing that would be incorrect. There is a long list of great business practices that define what a great merchant is and what a great promoter is. Suzanne: (though “business experts” such as yourself and Kizer & Bender keep telling us this!). Dennis: I can’t speak on behalf of Kizer and Bender. But let me tell you that I don’t like cheap promotions and cheap tricks. I am not into gimmicks but into long term customer loyalty programs. You have taken one line from one article out of context where I was addressing the issue that many independent retailers feel that the big box stores’ pricing puts them out of business and my point is that price is only one aspect of retailing. Independent stores can beat the socks off of any national chain if they have the right knowledge and stay with a best practice formula. Suzanne: I think a very recent example is a manufacturer who created a huge debacle for all the independents. For months before its release, I pushed their new product. I was wowed by it, compared to all the competitive machines. For 3+ months we ran a product Ticket promotion: buy $100 and get a ticket for the product, which would give you one chance at winning a free machine when they were released. This increased our sales dramatically; my customers REALLY wanted to win that thing, a lot in part because they trusted my judgment. (I also have never made any bones about telling customers what I think of a product. If I’m not impressed, I’m not selling it. Period. I have to believe in and stand behind products I sell. Customers appreciate the honesty and integrity of that, and they say it frequently.) Then, we all know what happened. The manufacturer gets us to sign our lives away in contracts that they don’t keep their end of; they raise the price on the subsequent batches of machines; and then of course they sell to the huge chains. Let me say this loud and clear: I HAVE MANY CUSTOMERS WHO PURCHASED THAT PRODUCT ELSEWHERE (and bragged about it) BASED SOLELY ON THE FACT THAT IT WAS CHEAPER! The fact that I offer a free class on its use and provide all kinds of knowledgeable help is irrelevant to them (or they came and wanted us to show them how to use it!) Oh yes, we are (mostly) WOMEN, we have been TAUGHT to shop while we were in strollers and we’ve been taught to shop for the best deal. WE WILL SHOP BASED ON PRICE! Yes, customer service is important, but it is NOT the end-all, be-all that Kizer & Bender say it is. Price IS important. Dennis: I totally agree to all you have said and have written many articles saying that at the end of the day price is a driver; not the only driver but the key driver. However pricing is also a perception. Does Wal-Mart always have the lowest price? No, do millions think so? Yes. Who has lower prices Wal-Mart or Costco? Who knows? Can an independent retailer have the perception of low pricing and yet maintain independent retailer margins? Yes, no doubt about it. I have told independent retailers to honor the coupons published by the big chains. I have told them to have signs in their stores showing on a few key items how their prices are better than the national chain prices. Do you have to price the whole store in the basement? No! But clearly every independent store should be a good enough merchant to win the price perception war. Remember that perception is reality, even when it’s not real. We call that merchandising. Suzanne: You also state: “McDonalds always wants Burger King kitty corner, Mobil wants to be by Chevron, and Bank of America wants to be close to Chase Bank.” Hmm…my friend who owns an independent bagel shop doesn’t feel that way, and neither does the independent coffee shop in our center. Why do centers have exclusivity clauses if that’s the case? I just find that statement ludicrous. I know several business and franchise owners and there isn’t one that feels this way; I’ve asked them. Dennis: Again, you have taken my comment out of context. The point was to say that independent retailers who are within the same market should cooperate more. Those industries that have promoted cooperation have sustained growth, those industries that wage total market warfare within their own industry slide backwards. We have many SMART retailers within the same marketplace across North America who now jointly advertise and work together in SMART Co-op Marketing Teams. Last year they viewed each other as mortal business enemies, this year as friends. I don’t think the coffee shop you are talking about views the coffee shop in a shopping mall 10 miles away as a threat, however many scrapbooking stores do. We are better off working to the marketplace to increase in size than working against each other or just by not working together at all. Suzanne: I appreciate that you and the Smart group are trying to salvage the industry, Dennis: Thank you. It’s a labor of love for this group Suzanne: but I honestly believe it’s different than other areas of business. Dennis: I agree that it is different but I know we can learn from other businesses as well. I know I have, so we ought to take what we can learn from other industries and apply it to the best of our ability. Clearly what is going on in the industry right now is not working over all but many things do work. Most all of it is based on ideas the industry came up with on its own. Since areas of the industry are clearly broken I think its time to copy other industries that had the same problem and solved it by copying it from someone else. Suzanne: We aren’t buying cars here, so many things do not apply. Dennis: I never said that all things apply just some things, therefore I agree. I do know there are some SMART things the auto industry did that we can learn from. Did you know that Henry Ford got the idea of the assembly line from a meat packing plant in Chicago? That idea changed the world. I am glad he copied the idea from another industry. Suzanne: Thank you for taking the time to read my comment. I appreciate your time. Sincerely, Suzanne Slupesky Dennis: Thank you for taking the time as well to care. I love your passion. I hope you now see my comments in a different light and see that I agree with you but I hope you agree with me that the system is broken and can be improved and those improvements would be good for your business. Partnerships do work and retailers and manufacturers ought to trust in each other more.