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Be a Millionaire ShopkeeperHow Your Independent Shop Can Compete with the Big Guys
By Joanna Bradshaw
iUniverse, Inc.Copyright © 2012 Joanna Bradshaw
All right reserved.
Chapter OneRetailing Today
Before opening my retail consulting business I was a retailer for over forty years. During that time I learned a great deal about retailing, having experienced the best in all venues—department stores, specialty stores, outlets, big-box retailers, wholesale manufacturers, import marketers, start-ups, turnarounds, and liquidations.
I also loved every minute of it. You may call me a masochist, but the thrill, excitement, and newness of every day always kept me supercharged. As I have often said, for over forty years, I was paid, and handsomely too, to go shopping around the world. What woman could ask for more?
With all that excitement comes change, which many have called the essence of retailing. Over the years I have witnessed a lot of change, but with the present economic climate, the environment is vastly more competitive—and an extremely difficult one—for the retailer. Indeed, while there has probably never been a more challenging time for any retailer, especially for the independent, there is still money to be made and success to be had!
Today we have:
A Weak Economy
The unemployment rate, the housing slowdown, the credit crunch, the financial meltdown, and fear itself have all severely impacted retail sales. So many people have lost their jobs, had their incomes severely curtailed, or watched their retirement nest eggs dwindle, while the more cautious pundits are still voicing doom and gloom, scaring everyone even more and making them think twice before making any purchase that is not absolutely necessary. Right now the economy is perhaps the most important factor to be confronted and endured, but as they say, this too shall pass. Even as our economy improves, though, it will always be a major factor to be reckoned with—either positively or negatively.
The big are getting bigger and can demand more of everything from qualified workers to enormous concessions from wholesalers. As the big guys expand, they put even more pressure on the independent retailer. The most obvious case in point—the main department stores that have been absorbed by the Macy Corporation and the retailers they had absorbed previously:
The Bon Marché
The Denver Dry Goods Company
Frederick & Nelson
The Jones Store
Lasalle & Koch
L. S. Ayers
Meier & Frank
J. W. Robinson's
Strawbridge & Clothier
Woodward & Lothrop
Overstoring and Overlapping
There are too many stores to survive, and many of the biggest have already bitten the dust. While you can find the names of hundreds of defunct retailers on the web, the following list identifies just a few of some very significant retailers in every category that no longer exist:
B. Altman & Company
Channel Home Centers
Circuit City Stores
E. J. Korvette
J. J. Newberry
Linens 'n Things
W. T. Grant
Warner Brothers Store
F. W. Woolworth Company
A Changing Competitive Landscape
Way back when department stores were king, they were the main competition for everyone. Since department stores usually wanted at least keystone (50 percent markup or double the cost), margin and price weren't anywhere near as critical as today, and life was much easier for the independent. In the interim, since other, more cost-conscious forms of retailers (mainly discounters) now dominate the business, that has certainly changed. As well as I know the business, I was flabbergasted when I reviewed the sales volumes of the various retailers for fiscal year 2010 to see in cold, hard numbers the enormous shift with time.
According to The Value Line Investment Survey # 11, published by Value Line, Inc. on August 15, 2011, in fiscal 2010 the largest department store chain, Macy's, with all its stores coast to coast did $25.0 billion dollars in volume. The biggest home furnishings specialty store, Bed Bath & Beyond, did $8.8 billion, while discounter Target did $67.4 billion, and the biggest mass merchant, Wal-Mart, did a whopping $421.8 billion in volume!
But perhaps the biggest factor of all is the Internet. Today the consumer doesn't even need to leave her or his home to buy almost anything she or he wants, often tax-free and shipped at no cost. The traditional Internet retailers are gobbling up a larger and larger portion of the business. The ever-increasing impact of this type of retailer is already enormous, and will undoubtedly only become a greater factor, forcing virtually everyone in the retail business to join the bandwagon and open a website.
An Evolving and More Demanding Customer
She is no longer a loyal customer. Today's customer now shops where it is convenient and where she is more likely to find what she wants, because her time is very precious. And yes, she has been spoiled to not only expect almost instant access and competitive prices, but better and better prices. Sales! Sales! Sales! What have we retailers done?
When I entered retailing as a trainee on Bloomingdale's training squad in 1960, department stores were the undisputed kings of retail and set the standards for just about everything. Department stores were closed on weekends during the summer months; and their doors closed at 6:00 p.m. every night, except for Mondays and Thursdays when they stayed open from 9:00 a.m. to 9:00 p.m. We lovingly called those days "iron days." Today most stores are open seven days a week for at least twelve hours a day. During the holiday season, some barely close at all, and in the last few days before a holiday, some don't close at all. I wonder what we should call these days! And, of course, the Internet is open 365 days a year, 24 hours a day.
Today the retailer must understand these changes and what they mean. But, don't despair, with all these changes and challenges do come opportunities—ones on which the small independent retailer can capitalize to succeed and prosper.
You, as an independent retailer, have some very real advantages. You know your business inside and out, along with your customers—often even on a first-name basis. But most of all, your fate is in your hands, rather than under the control of a large organization of people. You are small and agile, with the ability to move much more quickly than your big competitors and take advantage of new opportunities as they present themselves.
I'll say in summary (and please note that I am painting with a broad brush) that to be successful in today's environment, you must develop a plan to continuously respond to these changes and hone your retail operation to meet them and to capitalize on the ever-emerging opportunities. In other words, you must get better and better, more and more professional, and you must be ever vigilant for new opportunities.
You must continually:
? Define your customer more precisely.
? Understand and offer what that customer wants.
? Work on all areas of the shopping experience to exceed her expectations.
As part of this plan you must:
? Constantly refine your vision or mission.
? Reevaluate your store layout, assortments, pricing, and marketing plans to maximize sales opportunities.
? Establish buying controls to better manage the business.
? Work with your vendors for better terms.
? Learn to use today's new technology to either serve your customer or communicate with her.
? Keep a sharp lookout for new opportunities.
I hope that this book will not only help prepare you for the task ahead but will help you to enjoy the fun and excitement of the retail game as well!
Chapter TwoBecoming an Independent Retailer
This chapter will explore two facets of being an independent retailer. The first is highlighting the main traits that most successful independent retailers exhibit; while the second concerns the profitability of retailing and what an average independent shopkeeper might reap for his or her hard work.
Are You Cut Out for Retailing?
If you are already an independent retailer, chances are you exhibit many or most of the qualities I will discuss, and can skip this chapter. Those of you who are thinking about becoming independent retailers, perhaps currently working for larger retailers and thinking of opening your own businesses, will find great value in the discussion (below) of attributes that are common among the most successful independents I have known over the years. While a few exhibited them all, most displayed at least a good many of them.
Above all, the most critical is to have the qualities of an entrepreneur. Webster defines entrepreneur as "one who organizes a business undertaking, assuming the risk for the sake of profit."
The most important questions to determine if you are an entrepreneur include: Are you a self-starter and risk taker? Do you want to be your own boss? Are you willing to tackle almost anything, including procuring the resources you need? Do you feel that you have a good chance of succeeding?
If you think you can answer in the affirmative to all of these questions, let's go a little deeper and examine these and other important inherent traits. To be a successful retailing entrepreneur you have to be a good multitasker, able to keep many balls in the air at the same time. You will need to be involved with merchandising and buying, financial issues, personnel and sales management, advertising and marketing, technology, and customer service.
Since it is difficult to be good at all these things, most large retailers divide the responsibility for these duties. Usually finance and operations are headed up by one person, and merchandising and marketing by a second. Often in a mom-and-pop independent, one partner is the merchant, while the other tends to the bookkeeping and store operations. Two partners share these skills; or the boss has a right-hand employee who exhibits what he or she lacks.
Of prime importance is whether you are competitive. This is essential because in retailing you not only compete against your competitors, but your biggest competitor is yourself from the previous year since retailers compare their daily sales to their sales from the previous year and hope, and usually plan, to beat them.
I vividly remember the first time I experienced the emotion caused by this practice. I had recently been made a buyer at Bloomingdale's, and had just launched my first closeout promotion. By noon that day was the biggest day that my department, the Bath Shop, had ever had, and I was ecstatic! Then a pall fell over me, and my enthusiasm was extinguished. I began to think, "What will I do next year to beat these figures?" Don't believe me? Just wait until you are a retailer, and you will experience this rather odd phenomenon.
Are you confident, a self-starter, and self-reliant? You will be doing many things for the first time without a boss to ask how or where. It will be your business. Its success will be up to you, and you have to believe that you can do it!
How about decisions and problems? Are you good at making decisions? Do you have common sense? Do you consider yourself a problem solver? Do you enjoy the challenge of analyzing a problem and finding a solution—often a creative one? As an independent retailer, you will be making decisions constantly and independently, often under pressure. There will be a myriad of problems, some large and some small, which require your attention almost constantly. If you have trouble making decisions, or are a second-guesser, retailing may not be for you. Further, being creative will help you in any number of the tasks that will face you. Indeed, there are many who put creativity near the top of the list of attributes that successful entrepreneurs/retailers share.
Are you energetic, highly motivated, and healthy? In retailing at almost any level (including senior executives in large, well-staffed operations), there are never enough hours in the day because there is always something else that needs to be done. Long hours (often twelve hours each day, six or even seven days a week) will be your fate. Often, too, physical work such as moving the store around, schlepping boxes of merchandise, or being on your feet for long periods waiting on customers will require stamina and determination. Since the buck stops with you, being healthy enough to be on the job, or readily available most of the time, is usually important no matter what size the operation is.
Do you have good people skills? Are you an extrovert, and do you enjoy constant contact with people? You will be selling, handling customer complaints, dealing with suppliers, and directing a staff, all of which are a lot easier if you enjoy interacting with people and are good at it. As your operation grows, you will be hiring people, training them, and leading them. Your employees will be the key to your success—and the better you select and train them—the better your chances of a runaway success.
As already mentioned, are you a risk taker? I want to be very specific here. Can you take calculated risks if the rewards are worth it? I am not asking whether you are a gambler or foolhardy by nature. Being a shopkeeper is like starting any other business. There are risks involved, and you have to be able to take those risks in stride.
But there are some risks in being a merchant that are not inherent in many other jobs. At the most basic level, for example, every time you select and purchase an item for your store, you are putting yourself on the line, taking the risk that someone will buy it from you so you will realize a return on your investment.
Further, the fact is that many more retail startups fail than succeed. Do you have the stomach to put it all on the line?
Do you like predictability, or do you enjoy the unexpected? If you need predictability, then retailing is not for you. If you like the idea that every day is different, with new challenges, opportunities, and problems, and that you will always be busy because there is too much to get accomplished each day, then retailing is for you. In all my years in retailing I can honestly say that I was never bored. I was always exhilarated by the ever-changing kaleidoscope that every day became.
Finally, do you have the necessary experience? If you are thinking of opening your own store, before you jump in, ask yourself whether you have any experience in retailing, or in the products you are thinking of selling. The more you know about what you are contemplating, the better your chances of success will be. The closer your background mirrors the business you are planning to open, if nothing else, the easier it will be to get funding, if you need it.
Entering a new business merely because it is attractive to you is an almost impossible sale to the money people, and about as difficult to make a success. Consider carefully before deciding to open your own store if you really have enough experience. If not, think about first working in the kind of store you want to open to learn as much about it as possible. Otherwise, you should strongly consider teaming up with someone who has the experience you lack or, at the very least, you will have one whale of a lot of research to do!
To illustrate, just liking sports is not sufficient to warrant opening a sporting goods store. However, it could be considered one requirement, since liking the commodity with which you are going to deal makes things easier. It would be far better, though, to have helped manage a sporting goods store, and perhaps helped the owner with the merchandising. This experience would lend great credibility to your claim that you have some good credentials to support opening a sporting goods store of your own, and your chances of success would absolutely be greatly increased.
Experience at every stage of a retail business is at least a help, if not in some instances almost essential. For example, if your credentials are somewhat weak, but you are looking to expand your operation and need some financial aid, you may need to strengthen your story by getting a more experienced partner or employing a seasoned employee. Or, if your business is not doing as well as you want, you may want to do the same.
How Much Do Independents Make?
The answer to that question, of course, varies a great deal depending upon the classification and the success of the business. Usually most people are surprised by how little the average independent retailer makes at the end of the day, certainly at the beginning of the enterprise. After all, you buy something for a dollar and sell it for two dollars and pocket the difference, right? But this is only part of the picture. With the dollar profit, you must pay the expenses— and sometimes there is nothing left. As a matter of fact, while some do make good money from the get-go, many independents do not make any money at all (forgetting those who lose money, especially while getting established), but they do usually at least manage to pay themselves a modest salary and pay some other personal expenses, such as medical bills, out of the company coffers.
Excerpted from Be a Millionaire Shopkeeper by Joanna Bradshaw Copyright © 2012 by Joanna Bradshaw. Excerpted by permission of iUniverse, Inc.. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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