Retail executives continue to examine and reexamine
their sales, gross margins and profitability to uncover ways to
make their company more profitable. They look at every line item
in their financial statements and too often conclude, cut more people,
reduce service levels and be more cautious taking customer returns.
Let's talk about American railroads and their demise
in attracting passengers following this "convenient" strategy.
As I wrote in my book, "Predatory Marketing," it's
easier to cut people than grow market share.
Today's competitive environment makes it more difficult
to stand out. Your retail specialty may be cluttered with many primary
and secondary players. No matter how many there are, you still need
to be the customers's first or possibly second store they shop.
- Remember, you can only get a premium when you have earned
Lower margins exist because you do not have a compelling
merchandising strategy that motivates your customers to buy
more profitable products.
More profitable products typically are better, more expensive
products. You must make the setting and the advertising for
that product superior to the lower margin item.
Consumers at the better to high-end are three to five times
more store display driven than their lower-priced counterparts.
Desperate companies with no vision, and in a retrenching mode,
often convince every shopper to pay less and less and less.
- Demand higher service levels from yourself and your people
in the field.
Customers want to be respected. They want to feel the money
they leave is appreciated longer than their car's taillights
are visible from the store's front door.
Service is everywhere and everything. Service is even a clean
store with clean restrooms, as well as employee attitudes
Retail executives who "hide" in their "office
kingdom" barking out executive commands will never survive
today's higher service expectation levels. Service should
be the standard by which all corporate decisions are measured.
And that standard measures each employee, even the top executive.
When the leader moves into a gray area, expect those people
below to follow with a similar attitude.
- It is equally important to market to your employees as well
as your customers. Customer loyalty comes after many years of
contact with the same person; seldom with new employees.
Employees must like their job. They may not love it, but
they cannot hate it. Customers will quickly see through the
daily disguise to uncover the truth: your employee doesn't
want to be there that day or possibly ever!
True marketers understand that employees make the sale; they
determine your margins and they decide your closing rate.
For this core reason they run your company.
Retail executives who cut employees who sell to the customer
may find short-term savings, but they often experience lower
profits in the long-term. In some cases companies are filled
with soured employees who don't want to work there, so letting
them go is a plus.
Additionally the long-term employees can build loyal customers
who will spend more because they trust this employee or the
person makes the shopping experience so pleasant that you
want to return to see this "retail rarity" again.
- When customers see little or no differences, so goes your
As customers weigh all the decisions in their family life,
they migrate to safe choices when in doubt. Often, "I'm
not sure where to go. I'll go to Sears because I can trust
them," is the response shoppers give to buying at Sears.
When in doubt, play it safe.
When shopping for a product, customers will pay more when
they know they should. The customer tries to measure your
display of product in the store to conclude "Which one
best fits my needs? I know I can spend less."
- You need product identity with superior presentation.
Speaking of display, customers invariably look at the one
product with the most visibly commanding position. A retailer
giving all the products within a category equal shelf space
is doing his store a disservice and is not directing the customer.
Making every product equal makes no one product important!
Retail companies need to pick their product identity carefully.
They need to consider existing and future margins and guarantee
their store's presentation is clearly superior to all competitors.
Most importantly they need to tell the world why they are
the right choice for this product and take a stand.
Most companies say, "I want to sell everything."
I will tell you most consumers will respond, "You do
sell everything, just like everybody else!"
I can't tell you the ideal expense level for an item, but
I can tell you that selling too many lower margin items is
a corporate attitude that executives create by their absence
from people on the front line. Sam Walton understood his store
employees' value to the organization. R. H. Macy understood
the power of making housewares a core product identity for
his department store.
Many in corporate America look at numbers and never see
Those few leaders who do see the faces of employees and customers
in their balance sheet will not face the lower margins dilemma.
They will remain market leaders producing healthy bottom lines.
It's too bad we don't have enough of those insightful executives.
America cries out for companies willing to take a stand and
who have employees who respect their customers.