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R.J. Calio Consulting, LLC
Helping retailers choose the right system for their store and giving them strategies to use it |
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The purpose of this newsletter is to identify trends and information that will be useful in helping retailers run their businesses more efficiently.
You should think of technology as an information partner in your store. If you can't articulate how a technology investment will make you more efficient, don't buy it! Innovation is not necessarily doing something new, it's doing something in a new way.
GOOD NEWS FOR INDEPENDENT RETAILERS:
Twenty-five percent (25%) of consumers in a survey conducted by BIGresearch indicated that they prefer shopping at independent retail stores. They offered the following reasons:
- Stores tend to be family owned, passed on from generation to generation.
- They generally offer better service.
- They pay better attention to detail.
- They offer product selection tailored to their customer's needs.
- 41.4% Knowledgeable, helpful sales people
- 27% Courteous friendly staff
- 18.3% Low prices
- 8.8% Merchandise organized and easy to find with good signage
- 4.5% Fast, efficient checkout
"When Customers Talk" by T. Scott Gross & BIGresearch is an excellent book that offers extensive research on what customers want when shopping.
KEY INFORMATION:
Retail Point of Sale systems provide more reports than most retailers can effectively use. The key is to identify which reports can provide the essential information for you to make actionable decisions. Actionable decisions are those that can solve an immediate problem or can help your bottom line. I have listed some information that I feel can meet either or both criteria.
- Average ticket analysis
- Average sales per ticket
- Average gross margin % per ticket
- Units per ticket
- Monthly expense comparison
At the end of month, post all expenses by line item to an Excel spreadsheet and determine what percent of sales your expenses are running. By performing this monthly exercise you can establish a baseline to gauge trends. As a general rule, your expenses should run at 39% or less of gross sales. - Inventory efficiency
Excess inventory has led to the demise of many retailers. Inventory that turns too slowly causes a myriad of problems for a retailer. More capital is required to finance excess inventory, markdowns are more frequent, and additional internal carrying costs are incurred. Inventory turn can be calculated by the Cost or Retail Method as follows:
| Cost Method: | Inventory turn = | Cost of goods sold Average inventory at cost |
| Retail Method: | Inventory turn = | Sales Average inventory at retail |
Average turn varies by retail segment. The best way to determine your ideal turn is to do a turn calculation at the end of every month to determine your average stock turn. The following is the average stock turn by retail segment:
| Automotive Supply | 2.50 | Jewelry | 1.30 | |
| Book Stores | 2.15 | Office Supplies | 5.50 | |
| Department Stores | 3.50 | Shoes | 4.20 | |
| Drug Stores | 5.40 | Sporting Goods/Leisure | 2.60 | |
| Fashion Specialty | 6.50 | Supermarket | 10.00 | |
| Home Décor | 3.35 | Toys | 8.50 |
THINGS SMALL BUSINESSES HATE ABOUT TECHNOLOGY
- Paying to fix bugs
- Systems that don't talk to one another
- Over hyped software and technology
- Unnecessary complexity
LOYALTY PROGRAMS
Stores that ignore the value of Loyalty Programs are missing a significant opportunity. Most retailers are more concerned about an expensive inventory item that is missing than they are about the loss of a loyal customer. When the annuity value of loyal customer is calculated it far exceeds the value of an expensive inventory item. The average store loses 25%-30% of its customers every year. That means if you have 10,000 customers you will have to replace with 2,500-3,000 new customers just to stay even. If a store can continue to acquire customers at their current rate, and increase their retention rate of existing customers by 5%, they will double their customer base in fourteen years. That's why customer loyalty is so important to your bottom line.
A great source of information about the value of customers and how customer loyalty effects the growth and value of your business is "The Loyalty Effect" by Frederick F. Reichheld.
A good source of information about Loyalty Programs is www.LoyalTEC.net. They have white papers on loyalty programs that you can download.
CREDIT CARD SECURITY COMPLIANCE
The rising incidence of stolen cardholder account information is a major concern for all participants in the payment process industry. These thefts are resulting in increased costs to both retailers and financial institutions, and an inconvenience to consumers. To protect your business and your customers, the credit card companies have developed a set of requirements governing the security of credit card information. I have listed below a few of the most critical requirements.
- Do not store the following under any circumstances: Full contents from the magnetic strip on the back of the card.
- Store only that portion of the customer's account information that is essential to your business - i.e. name, account number and expiration date.
- Secure and limit access to any credit card that you are storing.
- If transaction data is accessed or retrieved by any unauthorized entity, notify your merchant bank and each card brand immediately.
To view the full details about the Cardholder Information Security Program (CISP) you go can to www.usavisa.com/business. In the search box type in CISP and then choose Small Business Merchant Cardholder Information Security Program.
RETURN POLICY DILEMMA
Is your return policy working for you or against you? The trick is to reduce fraud and to keep your good customers happy. A Babies 'R Us store in Connecticut recently caused a public relations nightmare by refusing to accept returns for a young mom. It seems she was given two baby showers and had previously returned gifts from the first shower. When she attempted to return some duplicate presents from her second shower, their POS system flagged her as a high return customer and they refused to accept any further returns. The problem was the store did not have their return policy stated anywhere. All three local news stations covered the store and the store received an enormous amount of negative publicity. A posted policy or an employee empowered to maintain customer satisfaction could have avoided this disaster. Here are some steps you should put in place to promote goodwill and effectively manage returns:
- Develop a return policy that ensures customer satisfaction
- Clearly post your return policy and all compliance factors
- Make the process easy and understandable to your customers
- Empower your employees to make decisions and avoid conflict
- Audit your returns for both employee and customer fraud
Work in your retail business, not on your retail business!
Dick Calio
Dick Calio
Phone: 860-644-7956; E-mail: RCALIO@SNET.NET; Web: www. Rcalio.com