Be a Millionaire Shopkeeper: How Your Independent Shop Can Compete with the Big Guys

Copyright © 2012 by Joanna Bradshaw

All rights reserved. No part of this book may be used or reproduced by any means, graphic, electronic, or mechanical, including photocopying, recording, taping or by any information storage retrieval system without the written permission of the publisher except in the case of brief quotations embodied in critical articles and reviews.

The information, ideas, and suggestions in this book are not intended to render professional advice. Before following any suggestions contained in this book, you should consult your personal accountant or other financial advisor. Neither the author nor the publisher shall be liable or responsible for any loss or damage allegedly arising as a consequence of your use or application of any information or suggestions in this book.

iUniverse books may be ordered through booksellers or by contacting:

iUniverse

1663 Liberty Drive

Bloomington, IN 47403

www.iuniverse.com

1-800-Authors (1-800-288-4677)

Because of the dynamic nature of the Internet, any web addresses or links contained in this book may have changed since publication and may no longer be valid. The views expressed in this work are solely those of the author and do not necessarily reflect the views of the publisher, and the publisher hereby disclaims any responsibility for them.

Any people depicted in stock imagery provided by Thinkstock are models, and such images are being used for illustrative purposes only.

Certain stock imagery © Thinkstock.

ISBN: 978-1-4759-4140-1 (sc)

ISBN: 978-1-4759-4139-5 (hc)

ISBN: 978-1-4759-4138-8 (e)

Library of Congress Control Number: 2012913774

iUniverse rev. date: 8/2/2013

Contents

Acknowledgments

Introduction

Chapter 1. Retailing Today

A Weak Economy

Industry Consolidation

Overstoring and Overlapping

A Changing Competitive Landscape

An Evolving and More Demanding Customer

Chapter 2. Becoming an Independent Retailer

Are You Cut Out for Retailing?

How Much Do Independents Make?

What Is an Appropriate Profit Goal?

Chapter 3. Developing Your Mission and Competitive Edge

The Mission Statement Defined

Your Competitive Edge

The Mission Develops

How to Develop or Hone Your Competitive Edge

The Vision Statement and the Value Statement

Chapter 4. Writing Your Business Plan

Why Write a Business Plan?

General Rules for a Business Plan

What Should the Plan Include?

Where Can You Find Help?

My Promise to You

Chapter 5. Conveying and Enhancing Your Mission

Location

Store Design and Ambience

Store Pricing

Customer Service

Special Services Enhancing Your USP (Unique Selling Proposition)

Conveying Your Mission through Advertising

Chapter 6. Shopping the Competition to Hone Your Competitive Edge

Your Competitors

Preparing for a Visit to a Competitor

Ways to Learn about Your Competitors

Things to Check Out on Competitive Visits

Evaluating Your Shopping Experience

Chapter 7. Differentiating Your Product Line

Understanding Trends and Their Application

Finding and Developing Unique Items

Chapter 8. Utilizing Vendors More Effectively

Types of Suppliers

Where to Find Suppliers

Suppliers as Consultants

Evaluate Your Vendors

Concessions to Increase Your Profitability

Chapter 9. Refining Your Store and Product Line

General Guidelines of Customers’ Wants

Some Techniques to Identify Customers’ Wants

Review Your Product Assortment

How to Conduct a Style-Out

Sally and Sam’s Mug Line: An Example Style-Out

Review Your Best Sellers and Markdowns

Chapter 10. Maximizing a Trade Show or Buying Trip

Preparing for a Buying Trip

Shopping the Market

Chapter 11. Getting the Word Out

Your Marketing Program

Advertising: Creating the Advertising Plan

Tips to Make Your Advertising More Effective

Sales Promotion Opportunities

Public Relations

An Important PS: Taglines and Slogans

Chapter 12. Utilizing Internet Marketing

Your Website

Search Engine Optimization (SEO)

Search Engine Marketing/Pay-Per-Click Ads

Banner Advertising

E-mail Marketing

Blogging

Social Networking

Online Public Relations

Summary

Chapter 13. Using the Profit and Loss Statement

Defining the Profit and Loss Statement

Increasing Gross Margin for Greater Profitability

Chapter 14. Merchandising Plans: The Six-Month Plan and OTB

Creating the Six-Month Merchandising Plan

Using the Open-to-Buy Concept

Chapter 15. Measuring Your Business with Three Key Ratios

Sales per Square Foot

Turnover

Gross Margin Return on Inventory

Review & Conclusion

Acknowledgments

I want to thank four very special, talented people who contributed greatly to Be a Millionaire Shopkeeper, all of whom I have worked with in the past.

First I must thank Tony Damiano, who was my inspiration for writing this book. Tony began his career as a visual manager for Pottery Barn and became visual director and store planner for the most fashionable home furnishings specialty chains, such as Terrence Conran’s very innovative European chain, Conran’s Habitat. In 2000 Tony opened Mango Jam, an upscale gift shop in Ridgewood, New Jersey, which has been voted as the best gift shop in Bergen County several times. Very civic-minded, he has served two terms as president of Ridgewood’s chamber of commerce before founding the Ridgewood Guild, a business alliance dedicated to creating a better Ridgewood.

Sharon Adler is largely responsible for the major segment in chapter 7 on trends, how to find them, and how to use them, for which I certainly do want to thank her. She launched her retailing career as a trainee at Abraham and Straus (A&S), where she subsequently held a number of the most creative buyerships (i.e., the Gift Shop) before becoming a global scout, product development merchandiser, and trend and color forecaster for the leading importer to department and specialty stores from the Orient. She is an acknowledged expert in seasonal product development—Christmas and others—and traveled all over the world for the most significant players in this arena before starting her own consulting business in foreign sourcing and product development.

Next I would like to thank Michael Aaronson for his contribution as financial consultant. Michael began his retailing career as an auditor in the Internal Audit Department of Federated’s A&S, where he rose to vice president of finance. He went on to assume senior roles in virtually every area of the business—finance, operations, and merchandising. Leading the acquisition team for Sam Goody, he later was the company’s chief operating officer before becoming business head of Bergdorf Goodman’s merchandising division. After being president of the Rag Shop, a chain of craft and fabric specialty stores, Michael became an entrepreneur and opened a very successful dry-cleaning and valet service serving high-end hotels and businesses. Today he also serves as president of his condo’s board.

Finally, I would like to thank my twin brother, Gregory Bradshaw, for his advertising/marketing input. Greg started his career as a product manager for Borden and has spent a full career in marketing management. His specialty is new products commercialization, but he has an unusual background of having worked in an extraordinarily broad range of fields and product categories—from heavy industrial commodities to major packaged goods brands to retail store brand building. He is founder and president of The Marketing House, now in its twenty-sixth year, from which he lectures professionally on classical marketing techniques.

I am sure you will join me in being appreciative of their input as you read Be a Millionaire Shopkeeper.

INTRODUCTION

Why Read This Book?

You are probably either an independent retailer or are thinking about becoming one. You are, or will be, joining the ranks of one of the oldest and largest business segments.

According to the 2007 US Economic Census, which is done every five years, and reported by Stacy Mitchell in What New Census Data Show about the State of Independent Retail, independent retailers (defined as having fewer than ten employees) account for 28 percent of all consumer retail sales (down from 31 percent in 2002), with approximately 60,000 grocery and specialty food stores, 38,000 clothing shops, 19,000 florists, 18,000 pharmacies, 18,000 furniture stores, 17,000 sporting goods retailers, 12,000 hardware stores, 12,000 nurseries and garden centers, 7,400 appliance stores and 2,700 general bookstores.¹

Much is being written today about the independent retailer’s fight for survival, but the fact is that there have always been new and evolving threats, as there are in any business. In the late 1800s the first department stores started vying for the retail business; then the first chain stores came; and then the giant discounters like Walmart arrived. Next were catalog retailers, and now we have the Internet.

So, while the independents’ overall market share is eroding with the advent of these newer types of retailers, independents are still a vital segment of American retail business. Indeed, some categories, such as bakeries and greengrocers, are even growing with the increasing desire to shop at neighborhood stores, Mitchell reports.

Not only do independent retailers account for an awesome amount of business, but there is little doubt that there is still a lot of money to be made as an independent retailer. And don’t forget, most of the larger retail operations (even Walmart) were founded by independent retailers who started as owners of single stores!

No doubt about it, though, retailing in any venue has become tougher. The independent retailer has both advantages and disadvantages over the big guys (which I will discuss at length later). The independent, for example, is more agile and can react much more quickly than the larger chains. However, usually untrained as a merchant, the owner often has to rely on instinct, and learns by trial and error. Some believe that today this is one of the independent retailers’ greatest weaknesses.

I have been an independent and am also a seasoned, well-trained retailer who has been a significant player in the legendary turnarounds of four retailers: Bloomingdale’s, Macy’s, Simmons, and Abraham & Straus. I cofounded a 120,000-square-foot category-killer lifestyle chain, and served as senior merchant and president of two upscale specialty store chains, Conran’s Habitat and Workbench.

During my career I have learned a great deal about merchandising—sometimes through training, often by trial and error—but I have found over the years that many things worked no matter what type of retail operation I found myself in. The purpose of this book is to share with you what I have learned, to hopefully make you better able to compete with the big guys, as well as with other independents, and perhaps help speed you on your way to making a million … or maybe your next one!

CHAPTER 1

Retailing 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 extremely difficult—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 the following factors:

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.

Industry Consolidation

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 is the main department stores that have been absorbed by the Macy Corporation and the retailers they had absorbed previously:

Abraham & Straus

Bamberger’s

The Bon Marché

Bullock’s

Burdines

The Broadway

Davison’s

Dayton’s

The Denver Dry Goods Company

The Emporium

Famous-Barr

Filene’s

Foley’s

G. Fox

Frederick & Nelson

Goldwater’s

Goldsmith’s

Halle Brothers

Hecht’s

Hudson’s

I. Magnin

The Jones Store

Jordan Marsh

Kaufmann’s

Lasalle & Koch

Lazarus

Liberty House

L. S. Ayers

Maas Brothers

Marshall Field’s

Meier & Frank

Rich’s

Rike-Kumler

J. W. Robinson’s

Sanger-Harris

Shillito’s

Stern’s

Strawbridge & Clothier

Thalhimers

Wanamaker’s

Weinstock’s

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:

Alexander’s

B. Altman & Company

Bonwit Teller

Bradlees

Caldor

Channel Home Centers

Circuit City

Crazy Eddie

E. J. Korvette

Eckerd

Gimbels

Grand Union

Hills Supermarkets

J. J. Newberry

Kinney Shoes

Lechters Housewares

Levitz Furniture

Lechmere

Linens ’n Things

Mervyn’s

Montgomery Ward

Rickel

Robert Hall

Seaman’s

Service Merchandise

Two Guys

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 they are 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.,² on August 15, 2011, in fiscal 2010 the largest department store chain, Macy’s, with all its stores coast to coast did $25 billion in volume.³ The biggest home furnishings specialty store, Bed Bath & Beyond, did $8.8 billion,⁴ while discounter Target did $67.4 billion,⁵ and the biggest mass merchant, Walmart, did a whopping $421.8 billion⁶ in volume!

But perhaps the biggest factor of all is the Internet. Today consumers don’t even need to leave their home to buy almost anything they want, 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 it 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

Customers are no longer loyal. Today’s customers now shop where it is convenient and where they are more likely to find what they want, because their time is very precious. And yes, they have been spoiled to expect not only almost instant access and competitive prices, but also 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. 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 continually 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 do the following:

• Define your customer more precisely.

• Understand and offer what that customer wants.

• Work on all areas of the shopping experience to exceed the customer’s expectations.

As part of this plan you must do the following:

• 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 customers or communicate with them.

• 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 2

Becoming 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; 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 you 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. Merriam-Webster’s Eleventh Collegiate Dictionary defines entrepreneur as one who organizes, manages, and assumes the risk of a business or enterprise.

The most important questions to ask 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