Don't miss a post! Follow me by Email!

Monday, July 27, 2009

Control Your Expenses and Schedule More Promotional Events to battle the weak economy!

There are a lot of frightened retailers out there, and there is good reason to be cautious. 467,000 jobs were lost in June, bringing the national unemployment rate to 9.5%. Further, the June Job Report noted that the average work week has declined to 33 hours. Adding this diminution in work hours to the equation results in a true overall unemployment rate of 11.7%, making this the worst recession in human terms since the Great Depression. Need more convincing?

United Parcel Service reported a 49% drop in second quarter profits due to a decline in shipment volume. If shoppers aren't buying, packages aren't shipping. The fact is, consumers are choosing to be more judicious with their spending. Nervous shopkeepers are ordering less inventory for fear that they will be saddled with unsellable stock and jittery distributors are reluctant to gamble on new product lines, hoping to weather the storm without suffering a fiscal tsunami. Regardless of media spin, the economy is headed in the wrong direction.

What is the crafty retailer to do?

Control Costs and Schedule More Promotional Events

These steps are simple in theory, but many retailers find execution a challenge, particularly when money is tight and fear is starting to cloud rational judgment. Rest assured, the anemic economy is putting pressure on everyone. Although it is very easy to become frustrated and dispirited, chances are good that your competitor feels the same way. Human nature is such that she will be inclined to batten down the hatches, reduce her marketing budget, forgo new purchases, and hope to still be in business when the storm clears. Bad strategy for her, but good opportunity for you. The more opportunistic retailer will take advantage of the situation to step up her game and be IN IT to WIN IT. Lots of people make good money during bad economies. Increase the odds of success by taking the following steps:

CUT EXPENSES!
It is more important than ever to control every expense. If you are operating on a 10% net profit margin, then a $100 savings equates to a $1000 sale. Of course, you should only cut those costs that do not directly effect your customer. Slashing your inventory budget will have a deleterious effect upon your customer, buying cheaper copy paper will not. Other options to consider:

Ask your landlord for a reduction in your monthly rent. The state of the economy is no secret and he has probably heard similar requests from his other tenants. Show him your sales numbers and negotiate a temporary reduction. A vacant space will be harder for him to fill today than it was a year ago.

Ask your vendors what they can do to help you. I frequently send out door prizes for customer anniversary sales or similar celebratory occasions. Other vendors offer trunk shows or discounted merchandise. Take a deep breath and make the call to see what you can negotiate!

Eliminate discretionary expenses that do not make you money. For example, most stores have a cleaning service once or twice a month. The janitorial responsibilities can be shared by your staff. Fun? Nope. Necessary? Maybe. I use an office supply company that charges exorbitant shipping fees, but since the product pricing is quite low and the selection is expansive, I considered it a wash. My partner recently picked up the phone and negotiated a 20% reduction in shipping rates. The call lasted less then 2 minutes and has saved me hundreds of dollars each month. D'OH! Why didn't I think of that?

The people who ask are the ones who get the goods...so ask!


PROMOTE, PROMOTE, PROMOTE!

The importance of store promotional events cannot be overstated. In fact, if I could wave a magic wand and change one thing about how the average craft retailer operates, it would be a no brainer. I would increase the time and attention spent on developing store promotional events. IMPORTANT NOTE: A price cut does not equate to a promotional event. Every other store on the block is cutting prices to attract customers and the approach has become little more than white noise. Do not train your customers to become loyal only to price because as soon as they find someone advertising a lower price they will abandon you. The shopkeeper who creates excitement through celebration will thrive despite the sour economy. A good rule of thumb is to schedule one major event and three minor events EVERY SINGLE MONTH.

Sample Major Events that have proven successful for others:

Alada Bead's Mystic Night described in last week's post, where the store arranged for palm readers, food, a wine tasting, and several "make and take" projects, ringing up $10,000 in sales during a three hour period.

Pajama Party Craft Marathon which includes dinner, wine, and breakfast before heading back to reality.

In Store Product Demonstrations generate excitement for little expense. Oftentimes your customer has the desire to learn something new, but the time and effort required is too much. Show your customers how easy it is to learn a new technique by offering in store demonstrations.


Make it, Take It Projects. Plan a day that includes food and festivities. Design several easy kits that can be completed in a short period of time and get a crafty round robin going! You can also "Go Green" by making the focus of the event a Reuse and Recycle Retreat. Urge your customers to bring in an "oldie but goodie" to refurbish into something spectacular. For example, an old sweater can be refashioned into a cute purse like the one pictured at left. Grandma's old jewelry can be refurbished into a smashing contemporary piece of heirloom jewelry created by Etsy artist, BlueMoss.

Have a crafty garage sale! Customers are encouraged to bring in new or gently used craft supplies for a store Garage Sale event. Sales are rung up and attributed to the customer who brought in the item. Upon the close of the event each participant is provided with a store gift certificate in the amount of her sales. The store generates a heck of a buzz and the happy customers have more money to spend on crafts supplies at the store. WIN-WIN!

Although Major Promotions generally require lots of advance planning, minor promotions are easy and should be a staple on your calendar. One of my more successful passive promotions was a Brown Bag Beader series that I offered every Wednesday. I loved to weave beads, but I was self taught and my stitch repertoire was slim. My customers had never worked with seed beads before, so I invited them to learn with me. The stitch changed monthly (eg., January was Brick Stitch, February was Herringbone stitch, etc) and there was never a fee. I chose a free pattern from the internet and we bumbled and fumbled our way through it, laughing and building camaraderie throughout the process. We got to know each other very well, sharing stories about difficult husbands, ailing parents, and troubled teens along with our beading. I made a genuine investment in my customers and they returned the investment in spades.

Other minor promotions include:
Refer a Buddy contest. Offer a prize to the customer who sends in the most referral customers during a fixed period.

Free Gift Day: Offer a free gift with every purchase on one "surprise" day each month. The catch: the gift and the date change every month so frequent shoppers have the greatest chance of winning.

Gold Star customer card. Did you ever have one of those awful customers who sucks the life out of you? You try your best to please her but it is impossible, despite all of the extra time and attention you direct her way. Now think of your best, most loyal customers....you know, the ones who pay your rent. They don't try to negotiate down your sales price, they bring their friends in to shop, etc. Although it is easy to take them for granted, consider rewarding them instead. Give them a "Gold Star Customer" card that comes with some special privileges. The perks don't need to be excessive: consider offering 10% off all purchases every Wednesday and one free class per month.

Schedule an Etsy Workshop. Family budgets are shrinking and crafters are looking for ways to bring in some extra income. Etsy has proven to be a viable means for many women to earn some cash by selling their handcrafted wares. Help them learn the tricks of the trade! The Bead Gallery in Salem, New Hampshire has offered classes on photographing jewelry, which is notoriously tricky. Stitch Craft provides a class on the mechanics of starting a crafty business to help its customers weather the economy.

Many retailers take a baby step by hosting an event but if it doesn't generate immediate and impressive sale numbers they consider it a flop and never try again. This dour philosophy misses the point....the event does not need to generate lots of store revenue to qualify as a resounding success. Rather, if it builds a sense of community and drives foot traffic to your shop, then you have won the first battle. You goal is to spark interest in your shop. You want people to learn that your store is a relaxing and convivial place to hang out and connect with other crafters. You want them to become a member of your tribe...to belong to your knitting/beading/scrapping community...to become invested in your success. Friendships build slowly. Trust happens over time. Promotional events can be a creative and inexpensive way to build your brand and there is no time like the present to take charge of your future. You can use the slower pace of the sales day to feel sorry for yourself and whine about the economy.... or you can use the time to go over your budget, fatten up your promotional calendar, and get ready to succeed. Believe it and ACHIEVE IT!

Coming next week: 25 ways to THRILL YOUR CUSTOMER EVERY TIME!

No comments:

Post a Comment