East Bay SBDC - PowerPoint PPT Presentation

Loading...

PPT – East Bay SBDC PowerPoint presentation | free to download - id: 4af5ef-MTg3M



Loading


The Adobe Flash plugin is needed to view this content

Get the plugin now

View by Category
About This Presentation
Title:

East Bay SBDC

Description:

East Bay SBDC Retailing 101 Oakland February 28, 2008 sroth_at_eastbaysbdc.org * www.eastbaysbdc.org * * * * * * * * * * * * * * * * * * * Roth Consulting sroth_at_ ... – PowerPoint PPT presentation

Number of Views:219
Avg rating:3.0/5.0
Slides: 222
Provided by: StevenJ154
Learn more at: http://norcalsbdc.org
Category:

less

Write a Comment
User Comments (0)
Transcript and Presenter's Notes

Title: East Bay SBDC


1
East Bay SBDC
  • Retailing 101
  • Oakland
  • February 28, 2008

2
Welcome
  • Retailing is, always has been and always will be
    one of the most competitive markets
  • Tough to get started
  • Equally tough to stay profitable
  • Classic low barriers to entry low barriers to
    exit business

3
  • Retail businesses can never
  • rest on their laurels

4
  • Must keep working to increase sales

5
Welcome
  • Without rising revenues cost increases will
    inevitably lead to
  • Lower gross margins
  • Losses
  • Frustration
  • Closing at the end of the lease

6
  • Try new things to
  • get and keep your
  • Competitive Advantage

7
Welcome
  • Todays class will look at several aspects of
    Retailing 101

8
Welcome
  • In the context of your Business Plan

9
East Bay SBDC
  • U.S. Small Business Administration
  • NorCal SBDC Network - CSU Humboldt
  • City of Oakland
  • Alameda County GSA
  • Citibank, PGE, Caltrans
  • Cities across Alameda County and the
  • Tri-Valley

10
Cal State East Bay SBDC
  • Work with hundreds of businesses/year
  • Complete package of courses, consulting
    contacts
  • Creating new programs about technology, finance,
    business planning Best Practice Management
  • 2007 150 seminars with 6,000 attendees

11
Steve Roth
  • Director, East Bay SBDC
  • Management Consultant
  • Venture Capitalist Private Equity Investor
  • Corporate Executive Entrepreneur
  • Started, built and sold 5 different retailers
  • KFC for food service operations

12
  • Send questions to sroth_at_eastbaysbdc.org

13
Resources
  • East Bay SBDC
  • Counseling services
  • Team of 15 professionals
  • 20 years of experience
  • MBAs from top schools
  • Broad range of experiences and expertise
  • Services are free to you

14
Counseling
  • Rick Ohlrich coordinates all counseling
    assignments
  • Get the best fit with the company based on its
    individual needs, goals and stage of development
  • rohlrich_at_eastbaysbdc.org
  • 510-208-0412

15
  • Complete the online
  • Request for Services
  • form

16
Linkages
  • Lenders
  • Service providers of all types
  • Credit Counseling
  • Womens Initiative
  • SCORE (www.eastbayscore.org)
  • Small/Minority/Women Owned Cert.
  • Technology Assistance Program

17
  • Get you to the right resource

18
Training Programs
  • Accessing Capital
  • Business Planning
  • Best Practice management techniques
  • Technology series
  • Contracting with the government and large
    corporations
  • Caltrans Vendor program
  • SCORE, Quick Books and others

19
Seminar Schedule
March 4 Pleasanton Business Plans
March 6 Oakland e-commerce web marketing
March 11 Oakland Marketing Plans
March 13 Oakland Legal and Business Issues
March 18 Oakland Buying or Selling a Business
20
Stay in Touch
  • Go to www.eastbaysbdc.org
  • for a full calendar
  • sign-up for email notification

21
2007 Economic Summit Series
  • Four programs
  • Green/Sustainable Business
  • Accessing Capital
  • Contracting
  • Technology
  • Speakers, experts sources of capital
  • Time for networking with Panelists

22
2007 Economic Summit Series
  • 250 - 350 people
  • Great Networking Events

23
2008 Summit Series
  • 2 larger events planned for 2008
  • Starting a Business in June
  • Technology in November
  • Similar format
  • Goals of education, networking economic
    development

24
2008 Summit Series
  • Contracting Program
  • to expand into
  • a true Regional event

25
  • New Legal Services Relationship

26
Legal Services for Entrepreneurs
  • Network of 36 law firms who provide pro-bono
    legal counseling
  • New relationship with East Bay SBDC
  • 30 minute sessions in Oakland once a month as the
    starting point
  • 3rd Thursday of every month

27
Legal Services for Entrepreneurs
  • Contact East Bay (510-208-0410) for an
    appointment

28
Caltrans
  • Caltrans SBDC partnership
  • Training to help new small and minority- owned
    contractors win Caltrans projects
  • Increase volume of work to existing contractors
  • Combination of training seminars and counseling

29
Caltrans
  • Go to www.eastbaysbdc.org for the Caltrans
    training schedule
  • Register online
  • Special counselor will be at East Bay one day
    each week (510) 208-0410
  • eduarte_at_azteccm.com
  • (925) 837-1050 Eds direct phone line

30
Caltrans
  • 20 billion of infrastructure
  • building bonds

31
Technology Assistance Program
  • TAP is part of the SBA and SBDC structure
  • Full program of specialty technology classes
  • Unique group of technology consultants
  • Hands on and interactive help for the small
    business owner

32
TAP
  • Program flows through your EastBay SBDC counselor
  • Help provided as part of the clients total
    counseling program
  • Both processes will operate in parallel
  • Lots of opportunity to get needed help

33
TAP
  • www.sbdctap.com

34
  • Unique benefits for East Bay clients

35
Panel Discussion
Roberto Costa Oakland Business Development Corp. Focused micro-lender
Peter Grossman Entrepreneur 25 years of retail management
Rick Ohlrich East Bay SBDC Senior Lead Consultant
Maria Powell POSitive Technology Partner
Hank Weiner SCORE 20 years of Restaurant Operations
36
  • The Business Plan

37
Business Plan
  • The Business Plan is the key
  • Integrates all facets of strategy operations
  • Actionable goals objectives
  • Fit tactics into the strategy
  • Special attributes for retailers

38
The Proven Formula
  • S MP5CM

39
Success
  • Mission
  • Product
  • Pricing
  • Promotion
  • Physical distribution
  • People
  • Competition
  • Money

40
Plan Details
  • Handout No. 2 provides a Glossary of Financial
    Terms
  • Handout no. 3 provides details about each step in
    the Business Plan process

41
Length
  • A good business plan is
  • Short
  • Concise
  • Easy to read
  • Easier to follow
  • Builds to a logical conclusion

42
Length
  • People dont read anymore

43
Length
  • Make it easy for them to
  • read your plan

44
  • Mission

45
PIMS
  • Profit Impact of Management Strategy
  • PIMS developed by GE in the 60s
  • How to reward and measure managers in 180
    different businesses
  • Looked at returns against many different metrics
    and the competition

46
PIMS
  • Divided businesses based on
  • Market share
  • Growth rate
  • Capital intensity
  • Competition
  • Other barriers to entry

47
PIMS
  • Market share explained 80 to 90 of the expected
    ROI

48
PIMS
  • ROI would be different for each business
  • High Share and High Growth was the best
  • Low Share and Low Growth the worst
  • High share won every time
  • Tactics counted for very little

49
PIMS
  • Findings drove the 30 year wave of MA at GE and
    across the world
  • Market share became the primary factor in all
    corporate strategy
  • Get it, build it and keep it at all costs

50
Mission
  • ROI Market Share
  • Defines the market
  • Your role in it
  • The more focused and targeted the mission the
    higher the market share

51
Market Share
  • The business must stand for something
  • Unique
  • Different from the malls, catalogs and web
  • Sustainable
  • Easy to communicate
  • Advantage(s) that can be developed over time

52
Market Share
  • Advantages that can lead to
  • Revenue growth
  • Pricing power
  • Better gross margins
  • Long term customer loyalty

53
Barriers to Entry
  • Merchandising expertise
  • Unique product lines
  • Latest styles and colors
  • Constant flow of new inventory
  • Depth in one kind of merchandise category
  • Zigzag away from larger competitors

54
Barriers to Entry
  • Intellectual property
  • Zoning changes
  • Long-term contracts with key vendors or customers
  • Contacts
  • Process, Art or know how

55
Barriers to Entry
  • Experience expertise in a business
  • New products /or new product development
    expertise
  • Specialized services such as
  • Small lot printing
  • Remote PC diagnostics
  • Not for profits

56
Examples
  • Laptop pcs _at_ Best Buy Circuit City
  • Laptop messenger bags _at_ Timbuk2
  • New Balance and widths
  • Talbots Petites
  • AFs provocative clothing ads
  • My Cleaners in Lexington, MA
  • Big Blue for the Hard to find Gear

57
Examples
  • Customizing, logos initials
  • Things Remembered
  • Luggage specialty stores
  • Installation service
  • Home Depot
  • Local specialist
  • Martial Arts web design specialist

58
Examples
  • Depth of merchandise selection
  • Jackson, WY fly fishing store
  • Ute Mountaineering in Aspen, CO
  • Weddings in Las Vegas

59
  • Cost Structure Strategy

60
Cost Structure Strategy
  • All businesses can be defined by their cost
    structure
  • Only 2 basic types
  • High Fixed Costs
  • High Variable Costs
  • Costs will drive strategy and objectives

61
High Fixed Costs
  • Rent, people, fees, marketing keywords
  • Costs that remain even if there are no revenues
  • Restaurants Saturday night
  • Day care centers child counts
  • Consulting firms billable hours

62
  • High Fixed Costs High Volume

63
High Variable Costs
  • Sole practitioners
  • Consultants
  • Artists
  • Out-of-pocket costs are low
  • Consulting for 50 vs. 500/hour
  • Sell a piece of art for 500 vs. 5,000
  • Teach 10 vs. 100 for 20 per person

64
  • High Variable Costs High Price

65
Costs
  • Lowering fixed costs, while still satisfying the
    consumer, will
  • Lower your operating breakeven
  • Increase profits
  • Broaden inventory w/o using cash
  • Leverage other companies fixed costs

66
Costs Retailing
  • All retailers are high fixed costs businesses
  • Restaurants more than most others
  • Mission/Strategy must drive volume
  • Pricing is almost irrelevant compared to volume

67
  • Your plans must drive volume if you are to have a
    chance for success

68
  • Know your cost structure and adjust your business
    plan accordingly

69
  • Simplicity Wins

70
Simplicity
  • General tendency to make plans more complicated
  • 3 business ideas rather than 1
  • Multiple channels and/or markets rather than 1
  • Different customers buying for different reasons

71
Simplicity
  • Beware the multi-body problem

72
Simplicity
  • Failure is inversely proportional to the Square
    of the number
  • of moving parts

73
Simplicity
  • A business with 3 moving parts is only 1/9th as
    likely to succeed
  • Simplicity always wins
  • Follow the KISS principal
  • Get to cash flow breakeven and then add
    complexity

74
  • Insecurity is what drives the need for more
    irons in the fire

75
  • Simplicity is part of all
  • Venture Capital Risk Equity investments

76
ROI Market Share
  • The higher your market share
  • the higher your profits

77
Mission
  • Segment must be large enough to allow for success

78
Mission
  • Greatest business leverage is getting the Mission
    right

79
Mission
  • 90 of the problems I see are due to a faulty
    business Mission

80
Product and/or Services
  • Flow from the Mission statement
  • How you satisfy the Mission
  • Serve the customers needs
  • Make or buy
  • Domestic or imported
  • Experience and expertise

81
Pricing
  • Only 3 strategic choices
  • Premium
  • Market
  • Value

82
  • Product Pricing drive
  • Gross Margin

83
  • Gross Margin drives Spending

84
  • Promotion

85
How Do You Reach Your Customers
  • Direct selling
  • Personal selling
  • E-commerce
  • Referrals
  • Retail store location

86
How do You Talk to Them
  • Advertising
  • Key words, banner ads pop-ups
  • Web site as an e-marketing tool
  • Local media
  • Speaking engagements
  • Conferences
  • Training

87
What is Your Message
  • Quality
  • Price
  • Service
  • Selection
  • Hard to find items/sizes
  • Quick response

88
Promotion
  • Fits the gross margin available

89
Promotion
  • Correct for the type
  • stage of business

90
Promotion
  • Makes sense based on
  • Product Price

91
Physical Distribution
  • How do you get
  • The product to the customer or
  • The customer to the product

92
Physical Distribution
  • More than one way to reach customers with a
    retail store
  • Web based retail store
  • EBay outlet store
  • Shipping policies

93
People
  • Nothing happens without the right people
  • Specific to the business task at hand
  • Types of people in key operational positions
  • Partner relationships
  • Outside service providers

94
People
  • Direct experience means
  • success in retailing

95
Competition
  • Someone is already doing this

96
Competition
  • Dont ignore the competition

97
Competition
  • Factor in competitive reactions

98
Competitive Advantage
  • Price is rarely a long-term
  • competitive advantage

99
Competitive Advantage
  • What you get on price you lose on price

100
Money
  • What level of funding does the company need to
    achieve its plan
  • How will the money be used
  • Seasonal funding needs
  • Expansion capital to grow the company
  • Start-up funding to cover operating losses

101
  • Retailing

102
Retailing
  • Community
  • Economic drivers
  • Retail math
  • Merchandising
  • Inventory management
  • Markdown philosophy

103
Retailing
  • Inventory turns vs. New items
  • Expanding your footprint
  • Customer service
  • Marketing
  • Promotion

104
Retailing
  • Discounting
  • Community
  • Post Christmas blues
  • Building brand equity

105
  • Community

106
Community
  • A strong Retailers Association
  • Key to building and maintaining competitive
    advantage
  • Primary advantage for mall based retailers
  • Wal-mart/Sams/Home Depot/Lowes function like
    their own malls
  • Best way to fight back

107
Community
  • Scale economies in AMP spending
  • Radio
  • Print
  • Cable
  • PR
  • Ad agency fees

108
Community
  • Shared hours of operation
  • Street fairs
  • Special events
  • Decorations
  • Christmas specials
  • Parking services

109
Community
  • Safety
  • For women
  • Short winter days
  • Maximize seasonal peaks
  • Walk all women back to their cars

110
Community
  • If you have a Retailers Association then build
    on it
  • If you dont, then get one organized
  • Incentivize everyone to participate
  • Pay the holdouts to be part of the team if needed
    to get 100 participation
  • Get the City to help if you can

111
  • Major mistake not to use all the
  • shared resources available

112
  • Economic Drivers

113
Economic Drivers
  • A few key relationships that drive profits
  • True for virtually all retail businesses
  • Use them when looking to start or buy a business
  • Remember TANSTASFL when thinking about relative
    costs

114
Economic Drivers
  • Occupancy Costs or LT 10 of Sales
  • Occupancy is defined as the total costs
    associated with being open and staying open
    legitimately
  • Rent, utilities, insurance, garbage collection,
    etc.
  • This is a Known Number

115
Economic Drivers
  • Occupancy Costs x 10 Sales needed to be
    profitable
  • Sales/Square Foot is then used to determine how
    productive the location must be to hit the
    revenue number
  • Different for each type of business location

116
Economic Drivers
  • Must determine what is reasonable for your type
    of business at that location
  • Factor in lag time for start-ups as you get known
  • Ask everyone you can think of for input on this
    critical revenue metric

117
Economic Drivers
  • Local retail association
  • Chamber of Commerce
  • Other similar businesses in the area
  • Direct competitors
  • Bankers
  • Accountants

118
Economic Drivers
  • The small restaurant with 90K in Occupancy Costs
  • Tactics, marketing long hours are meaningless
    to try and do 900K/yr from 1,200 sq. ft
  • Getting the Mission right starts with this
    critical revenue test

119
  • Retail math

120
Retail Math
  • Important to make sure were talking the same
    language regarding margins
  • Initial Mark On
  • Markdowns
  • Targeted Gross Margin

121
Retail Math
  • Margin management is what separates excellent
    retailers
  • from struggling ones

122
Retail Math
  • Selling price Cost of Goods Sold/Selling price
    Gross Margin
  • 80 GM (5-1)/5 80
  • 1.65 - 1.00 .65/1.0039.4 GM
  • Costco works on 22
  • Wal-Mart works on 21
  • Neimans works on 65

123
Retail Math
  • Costs of Goods Sold is defined as
  • Cost of the item
  • Freight in
  • Labor to get the product into the inventory
    system
  • Labor to get the product on the shelf and ready
    to be sold

124
Retail Math
  • Must build the full product
  • cost into C of GS

125
Retail Math
  • Must build in the level of Gross Margin needed to
    fund operations
  • All spending is driven by Gross Margin s
  • Markdowns needed to drive sales and promotions
    come from IMO
  • Low margins even higher volume

126
Volume Treadmill
  • Not practical for most small
  • format retailers

127
Retail Math
  • IMO of 67 means C of GS 1 and Retail Price
    (RP) 3
  • 1st 25 off RP of 2.25 or 56 GM
  • 2nd 25 off RP of 1.69 or 41 GM
  • 3rd 25 off RP of 1.27 or 21 GM

128
Retail Math
  • Low IMO limits flexibility in season

129
Retail Math
  • Under-pricing
  • is the
  • second most common mistake
  • for Retailers

130
  • Merchandising

131
Merchandising
  • Selecting the right products with which to drive
    the Mission
  • Retailing vision translated through the
  • Merchandise selection
  • Price points
  • Colors styles
  • Sizes

132
Merchandising
  • The idea of standing for something should be
    transmitted clearly through
  • Merchandise
  • Store design, layout and feel
  • Window treatments and displays
  • Interior signage
  • Music and lighting
  • Comfort function

133
Merchandising
  • Good decisions start in the field
  • Trade shows, buying trips, trunk shows
  • The more specialized the Mission,
  • the more time and energy should go into buying
  • The merchandise selection should drive IMO and
    profits

134
J. Jills 6 Seasons
  • Merchandising created 2 new seasons
  • Holiday for winter vacation items warm weather
    goods
  • Christmas for the Best and most expensive items
    for presents with extra services
  • 3 sales events over the year

135
  • Inventory management

136
Inventory Management
  • Your 1 and only hard asset
  • Inventory management is the most important
    component of your MIS
  • Must operate at Best Practice
  • Very high return on investment
  • At a competitive disadvantage if you dont have
    the information

137
Inventory Management
  • Best Practice means
  • An SKU based scanning system
  • Perpetual inventory tracking
  • Daily reports for what has sold
  • What is selling fast
  • What is selling slow
  • Net margins
  • Promotional tracking

138
Inventory Management
  • Avoid the FISH approach to inventory management

139
Inventory Management
  • Excellent PC based systems exist
  • For a single store or networked for multiple
    locations
  • Microsoft offers a solution as do several other
    major vendors
  • Integrate the inventory data into your daily
    reporting thinking about the business

140
  • Must manage your only
  • physical asset

141
Inventory Management
  • Typical management uses decisions
  • Cross correlate the slowest moving 25 of the
    SKUs
  • Vs. the bottom 25 of gross margin
  • Target list for why keep the items
  • Constantly mining the data for outliers

142
  • Low margins High inventory turns

143
  • Slow turns High margins

144
Inventory Management
  • Data for negotiating with vendors
  • Margin protection
  • Price discounts for reorders
  • Special selections assortments
  • Lenders for inventory financing lines
  • Knowledge is power

145
  • The one who knows the most about what is moving
    at what margin WINS

146
  • Markdown philosophy

147
Markdowns
  • The 5 Pillars of Retailing Management
  • Mission
  • Merchandising
  • Initial Mark On (IMO)
  • Inventory management
  • Markdowns

148
Markdowns
  • Retailing is the classic high fixed cost business
  • Rent, utilities, staff, marketing are all fixed
    within a narrow band
  • Merchandise has been selected
  • Pricing/IMO decisions have been made
  • Volume is the key to profitability

149
Markdowns
  • Retailing is always a tradeoff between
  • Maximizing Net Margin (IMO MD NM)
  • Revenue
  • Inventory turns
  • Seasonal considerations

150
  • Markdowns is the tool used to balance of these
    factors

151
The Golden Rule of Markdowns
  • Your first markdown is
  • your best markdown

152
Markdowns
  • The longer you own it, the less it is worth
  • Few items will repay you for the cost of holding
    inventory
  • Seasonal items lose value daily
  • Failure to sell means less to buy for returning
    customers
  • No cash to replace inventory in season

153
Markdowns
  • Determine sensitivity to pricing early so you can
    make decisions
  • in season

154
Markdowns
  • Many retail companies run based only on markdown
    dollars
  • Volume net margin drives profits
  • High IMO gives you room to try different pricing
    and promotional strategies
  • Low IMO means little room to move on price

155
J. Jill
  • IMO 58
  • Budgeted for 12 to 14 different types of
    markdowns
  • Sales, specials, disposals, incentives
  • Each had its own line on the Gross to Net Margin
    budget
  • Goal was 46 Net Margin

156
Markdowns
  • Inventory management tells you what is turning
    slower than average
  • Use markdowns to drive turns
  • Move items in season at higher margins than after
    the season
  • What to reorder so as not to run out of stock on
    the best sellers

157
  • Markdowns
  • are the most important
  • tactical tool
  • for retailers

158
  • Inventory turns vs. New items

159
Turns
  • Faster inventory turns are always better than
    slow ones
  • Recycle cash early in the process
  • Keep the store flowing with new items
  • Use the new items to drive more traffic
  • Generally higher net margins as well

160
Turns
  • Filenes Basements commitment to inventory turns

161
Turns
  • Went broke when the new management got scared of
    markdowns

162
Turns
  • Each business will be different
  • Determine what speed of turn is right for your
    type of merchandise
  • Use markdowns to achieve targeted turns
  • Continuously drop slow moving items
  • Impress your banker
  • Be the envy of your competitors

163
  • Increase
  • your margins and turns based
  • on facts
  • and
  • accurate information

164
  • Expanding your footprint

165
Product Expansion
  • Tendency to stick with winners
  • Use your inventory management system to weed out
    slow turning and/or low gross margin items
  • Need to work new lines/items/classes into the
    merchandising mix
  • Stay fresh and new

166
Product Expansion
  • Find adjacent product lines
  • Logical extensions for high volume and/or high
    gross margin sellers
  • Ask your customers
  • Go to the industry trade shows and events
  • Need to prospect for new customers
  • Increase share of wallet with current ones

167
Product Expansion
  • Just be cautious doing it
  • Find vendors who will work with you
  • Use drop shipping whenever possible
  • Either well known brands or ones you can source
    and price attractively
  • Combination of fighting and luxury extensions

168
Footprint
  • Every customer can find something to buy
    something when they
  • enter your store

169
  • Customer service

170
Customer Service
  • The two edged sword of retailing
  • Often used as a means to gain a competitive
    advantage
  • Just as often find consumers buy on price
  • Customer Service has a cost that must drive
    incremental sales profits

171
Customer Service
  • Try to call someone at Amazon.com
  • Big Blue added phone numbers and just got crank
    calls
  • Verizon fired 1,500 customers for calling their
    help line too often
  • Try different value-added features but charge for
    them

172
Customer Service
  • Be aware of the offsets
  • Gift wrapping vs. longer waits at checkout
  • Next day delivery vs. staffing costs
  • Liberal return policies vs. my mother
  • Standard packaging vs. customers dream
  • No free lunch

173
  • Marketing

174
Marketing
  • Lots of tools to choose from
  • Web marketing and emails
  • Cable TV ads
  • Radio commercials
  • Local print
  • Vertical print
  • Direct marketing
  • Referral marketing

175
Marketing
  • Try them all
  • Set up measurement systems
  • Use the ones that work the best
  • A mix of media is always better
  • Continue to experiment and try new ways to reach
    your customers
  • Must prospect or go broke

176
Marketing
  • Identify your heavy user group
  • Reach and frequency
  • Gross rating points
  • Target them in your marketing message, media and
    theme
  • Dont spend against the medium and light users

177
  • Promotion

178
Promotion
  • Promotion means more than cutting price
  • Understand your Price/Value/Quality vs. the
    competition
  • Promotion should increase your overall awareness
    in the community
  • Reinforce PVQ

179
Promotion
  • McDonalds requires 2 of sales to be spent on
    local promotion
  • Activities such as
  • Childrens sports teams
  • Support for local charities
  • Good works
  • Personal time spent on local government

180
  • Todays Panelists are
  • excellent examples

181
Promotion
  • Networking
  • Referrals
  • Be on the short list for people who represent
    nodes in the system
  • Articles written about what you do rather than
    what you sell
  • Local PR is worth its weight in gold

182
Promotion
  • Beware the long-term effect of using these words
    over and over again
  • Free
  • Sale
  • Cheap
  • Prices never this low again
  • Going out for your Business

183
Mr. Boffo Says it Best
184
  • Discounting

185
Discounting
  • All retailers run sales
  • Discounting is part of converting inventory into
    cash
  • Need to work price cuts into the earlier comments
    on markdowns and inventory management
  • Discounting is addictive use with caution

186
Promotional Tools
  • Goes back to the Business Plan and Mission
  • Friend get a friend discounts for one business
    vs. local newspaper ad for another
  • Medium should match the business
  • Message should fit the medium

187
Discounting Policy
  • Your first markdown is your best markdown so make
    it count

188
Discounting
  • Dont want to cross the line and become known as
    a discounter

189
Discounting
  • Often a good idea to have a permanent sale rack
  • Keep it small but filled
  • Move odds and ends out as well as random sizes
  • A good traffic builder if customers know it is
    there and constantly replenished

190
  • Community

191
Community
  • Make community a core component of all these
    techniques
  • Easier to drive traffic to a cluster of merchants
    than just one
  • Part of events, ads, PR et al
  • Community can have its own brand which ads to
    yours

192
Community
  • Be part of your organization
  • Links to
  • Marketing experts
  • Other retailing groups
  • Town/City development and planning groups
  • Regional events
  • PR for the Association

193
Community
  • Especially valuable for peak sales periods
  • Christmas
  • Back to school
  • Valentines Day
  • Mothers Day
  • Equally important for the worst of times

194
  • Post Christmas blues

195
January
  • The worst of times for all retailers
  • Short days, rain, colder temperatures exacerbate
    seasonality problems
  • Index at KFC for LA went from 3.25 to .75 from
    late June to mid-January
  • Dont use your bait when the fish arent running

196
January
  • Spend the last of your markdown money right after
    and/or just before Xmas
  • The last markdown is the worst so make sure it
    converts the goods into cash
  • Take your losses to raise cash for the next
    season
  • Pay down your bank lines and vendors

197
January
  • Spend your marketing dollars by Jan 10th
  • Goal of ending with an empty store
  • Reduce operating expenses quickly
  • Rebuild inventory - next seasons goods
  • Work in a 5th season if possible
  • Get some rest

198
  • Retail Financing

199
Financing
  • Get whatever help you can to provide the working
    capital to build inventories
  • Revolving lines of credit
  • Purchase order financing
  • Dating terms from vendors
  • Larger asset based bank line

200
Financing
  • Banks and specialty finance groups have programs
    for retailers
  • Some combination of trailing revenue and your
    personal credit rating
  • Dont start the season without the capital to
    build the inventory needed to succeed
  • Never easy but a key to success

201
Financing
  • The finish is as important as the start
  • Get back to good with all financial partners
  • Cash is often more important than profits
  • Need to think one to two seasons ahead

202
  • Cash buys new goods

203
  • Building brand equity

204
Brand Equity
  • Creating a long term vision for the business
  • One store or a chain
  • The end expression of the plan
  • Mission Merchandise AMP
  • Stand for something

205
Brand Equity
  • 30 seconds for someone else to describe your
    business

206
Brand Equity
  • Brand equity will build competitive advantage
    over the long term
  • Create more value when you go to sell the company
  • Get known to vendors who need
  • new distribution reference accounts

207
Brand Equity
  • Berns Restaurant of Tampa, FL
  • Prime beef
  • Their own organic farm for produce
  • A Wine Spectator Grand Award Winner
  • Dessert room
  • Cigar room
  • 10 kinds of coffee

208
  • Things to Remember

209
Things to Remember
  • It all starts with the Plan
  • The Mission statement defines the business
  • Long-term goal is to build Market Share
  • Drive ROI and profits
  • Build competitive advantage in the most
    competitive of markets

210
Things to Remember
  • Community always wins vs. the Lone Wolf
  • Be part of your retailers association
  • Need to cooperate to compete with
  • Malls
  • Mass merchants
  • e-commerce
  • Catalogs

211
Things to Remember
  • Merchandising is how you translate the vision
    into products services
  • Inventory management means the difference between
    winning and losing
  • Markdown plan drives turns, net margins, new
    goods in season and cash

212
  • The Good, the Bad and the Ugly

213
The Good
  • Florida Kiteboarding retailer
  • Developed a specialty training course
  • Teachers and new students came from all over the
    world
  • Sales and service
  • A few high end brands
  • Great depth of merchandise
  • Travel and adventure business extensions

214
The Good
  • Specialty tile and floor covering retail chain
  • Home Depot took away the hard core DIY business
  • Customers wouldnt believe that it could match
    price and quality
  • Diversified product line to high-end specialty
  • Better group of installers

215
The Bad
  • Art gallery
  • Sales have been flat for 4 years
  • Cost increases erode profits and cash flow
  • No attempt to change merchandising mix
  • No use of new and/or different marketing tools
  • Very little use of the web to reach old and new
    customers
  • Wants to sell but for what and to whom

216
The Bad
  • Specialty interiors/furniture retailer
  • Nice business model
  • Unique and different sources for high-end and
    semi-customized products
  • No inventory management, markdown, project
    tracking or accounting systems
  • 2006 and a negative cost of good sold
  • No idea where they are or what to do next

217
The Ugly
  • KFC and Promotional Heroin
  • Marketing was replaced by price promotions
  • Coupons, coupons and more coupons
  • List price became meaningless
  • No fooling the consumer
  • Eventually the Nth coupon generated nothing
  • Had to cut the coupons
  • With great pain to revenue for 6 months

218
The Ugly
  • Specialty womens lingerie concept
  • Trapped between larger competitors
  • Department stores used the items as loss leaders
    to drive traffic
  • Wal-Mart had the low cost position
  • VS had the sexy, stylish and cheap segment
  • No reasonable position available to build share

219
Panel Discussion
Roberto Costa Oakland Business Development Corp. Focused micro-lender
Peter Grossman Entrepreneur 25 years of retail management
Rick Ohlrich East Bay SBDC Senior Lead Consultant
Maria Powell POSitive Technology Partner
Hank Weiner SCORE 20 years of Restaurant Operations
220
Summary
  • Mission
  • Merchandise
  • Marketing
  • Markdowns
  • Community
  • Think ahead to the next season

221
Summary
  • Thanks to the panelists
  • Thanks to Oakland
  • Class Evaluation Forms
  • Thanks to all of you
About PowerShow.com