Business SMART:

When Another Retailer Fails
 

By: Dennis A. Conforto
A-Z Media Group

Many retailers of late have been asking a great question: “What do I do when another scrapbooking retailer fails within my marketplace?” The answers may surprise you. First, don’t be happy. It’s not a victory but a failure for the whole industry. Why do I say that? Well, if it was just one retailer going out of business it would be one thing; but it’s 1,000s of retailers who have failed in recent days. Those failures affect the consumer confidence rate in the overall category. So, when one retailer fails we all fail, and that is the problem. The industry is failing at a time when we should be doing nothing but succeeding!

Think about the scrapbooking consumer within a marketplace who sees scrapbooking retailer after independent scrapbook retailer fail. What message does that send about our industry to them? Do you think those retail failures help scrapbook manufacturers? Do you think it helps the retailers who are left within that marketplace? I don’t think so. Believe it or not these failures don’t even help the big-box national chains who sell scrapbooking products.

Each time a retailer fails, the industry should pause and ask itself, “What should we be doing differently than what we are doing now?” “How can we change the tide that is going against our industry?” Well one thing is for sure, we would all have to admit that something is wrong, not just a little wrong, but way wrong.

If you get up tomorrow morning after reading this article and continue to do what you have always done then mostly likely your business practices are doing more to hurt you and are also hurting those that you do business with.

Unfortunately, most people in business want one simple, quick-fix for all of their problems, or they are only willing to commit to a single change. However, there is no one fix. There are a host of changes that need to be made to ensure the success of an independent retailer and in turn change the industry for everyone. We have talked about them many times within the last year. Maybe the industry will start to work on these changes, maybe not. It’s too bad because all of the solutions in and of themselves are simple and cost almost nothing. They can save many retailers and help many manufacturers who are starting to feel the pain of others’ failures and will continue to feel it more and more until real change happens. All of the suggestions that have been made are industry standards that rule the day and night of other industries and have served those industries well.

So, back to the question at hand: “When a retailer fails within a marketplace, what are some things that another scrapbooking retailer can do within that market?”

The following is a list of ideas that you can add to your own list of changes and items to ponder, some of which you may have already implemented:

1. Contact the former owner of the business who is closing and see if you can buy their remaining inventory at 10 to 20 cents on the dollar.
2. Take older merchandise and blow it out at 50% off list as a special purchase sale. Fold the current inventory into your standard merchandise mix.
3. As part of the buyout deal of the inventory, gain access to the former owner’s consumer home and email addresses
4. Combine the home and email addresses with your current database and clean up the duplicates.
5. Send invitations for your most current sales event to the new consumers not found in your database and honor any outstanding coupons or certificates of the failed store.

It’s important to take care of the local scrapbookers in your market who may have somehow been damaged by a fellow retailer who has failed. Like I said earlier, when one of us fails we have all failed.

Now the real question is, “Now that we have taken care of the consumer, what do you do to make sure you don’t fail just like the retailer whose clients you now serve?” Once again, I will give retailers the ten keys to success.

1. Reduce the number of vendors you do business with to no more than 50.
2. Make sure your displays feature the power brands you bring into your store.
3. Increase your turn rate to at least a four time turn, which means nothing stays in your inventory more than 90 days.
4. Make sure you are spending 5% on advertising and that half of it is paid by your vendors to assist in your efforts to sell their products.
5. Make sure that 80% of your advertising dollars are spent on finding new consumers and the other 20% is spent on your current client base.
6. Make sure you have two solid promotions every single month.
7. Team up with other local scrapbooking retailers to promote the category.
8. Train your staff to know your vendors, know the products and know your consumers.
9. Understand why scrapbookers scrapbook. Really understand it deeply and make sure your staff understands it. Then make sure your store reflects it.
10. Know how much volume you have to do monthly to ensure that you make 15% pre-tax profits and work hard to achieve it every month with the support of your staff.

If you can really do those ten things and do them well you will have a great business. It will be a business that is growing and a business that is profitable. Over time instead of paying your inventory with credit cards you will be offered terms by your vendors who will look at you as a solid partner and a good retailer. That is what being business SMART is all about.