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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!

Monday, July 20, 2009

Focus on the BUSINESS OF BUSINESS to improve your bottom line!

The independent craft store owner is an interesting hybrid---the most successful are an equal mix of creativity and business savvy. Unfortunately, those attributes are not always a natural fit in a single brain. Some lucky "right brain/creative" retailers hook up with a "left brain/logical" business partner, but that is not always the case. Most retail craft store owners are heavy on the creativity and light on the business process. Think about it.....why did you go into business? If you are like me, it was your love of a particular craft that paved the way. I found my zen when weaving tiny little seed beads into larger tapestries. Unfortunately, I could not find supplies locally and the internet was not yet a viable source for supplies. I needed access to beading materials and I wanted to spread the joy of beading.

I had a husband who could afford to get me started and so I set up shop with some friends. It worked...for a while. Competition was minimal and beading was just starting to become the "big thing." It wasn't hard to keep the rent paid, we just needed to have stock on the shelves and smiles on our faces. We priced product by instinct and kept only the inventory that appealed to us. The system worked...for a while. Unfortunately, competitors started to pop up as the bead craze blossomed. The internet retailer became a viable threat. One of my partners left. My kids missed me. I was guilt ridden all of the time. Yup....It worked until it started to seem less like a hobby and more like, well, .... WORK! The naivete of those years is embarrassing to contemplate in retrospect. There was not much pressure on me to make the store profitable. Rather, it was more critical that I simply not lose too much money because then my husband would find it less tolerable. How is that for a business model?

I am willing to bet that many of you recognize that silly store owner. She is the competitor who can sell crystal for less than cost because profit is irrelevant. She is the Yarn Shop Nazi who doesn't respond well to pierced and tattooed shoppers (NO YARN FOR YOU!). She is the needle art store owner who refuses to respond to industry craft trends because she only cares about traditional cross stitch. Be honest....she might even be YOU! The sagging economy and rise in internet competition will make your accountant, your banker and even the most tolerant of husbands, demand a less pitiful bottom line. We know that you love your craft, but are you ready to make the leap into world of responsible business ownership?

There comes a point in every business owner's life where you must have a little "come to religion" meeting with yourself. Excuses don't pay the rent. You are either going to make the changes necessary to succeed or you are going to fail. It is not surprising to learn that many independent craft stores close after the honeymoon phase. Retail is hard work and sometimes the juice ain't worth the squeeze.

What is the crafty retailer to do?



LEARN THE BUSINESS OF BUSINESS! My first step was to read everything I could find on running a business. I have recommended it before and will do so again...Read The E-Myth ReVisited by Michael Gerber. He succinctly identifies the pitfalls that many small business owners fall prey to and offers tangible advice to improve the status quo. I have an extra copy on my book shelf and will send it to the person who makes the most entertaining case for a need for change. Another great resource is The Big Book of Small Business by Tom Gegax.


FIND A MENTOR! Nothing succeeds like success and there is no need to reinvent the wheel. Is there a retail store in your area (but outside of your genre) that is an "it" store? You know the one I mean....the owner has great shop displays, incredible marketing savvy, etc. Invite her to lunch! Most human beings like to feel needed and are willing to lend an ear and a hand to share their expertise. Join a networking club and learn from other business owners.

TAKE THE EMOTION OUT OF IT! Most specialty craft stores are owned by women. Many women have a hard time removing the emotional quotient from the business. Our need to please and to be liked can lead to foolish business decisions. We keep mediocre employees because we cannot bring ourselves to fire them and lack the assertiveness to train them properly. We reduce prices beyond the point that is reasonable because we are afraid to lose a customer. The result is a client base that is loyal only to price and a profit margin that cannot sustain us. We become so attached to our inventory that we refuse to dump the duds because we hope that someone will buy it someday. My very favorite customer confessed to having 5 year old product on the shelf. Ouch.

EMBRACE THE CONCEPT OF THE PROCESS. The personal change that made the biggest impact in my business was my reluctant recognition of the need for a system of fixed processes in my business. A store that operates without fixed processes creates an environment of instability and disorder. Legendary marketing guru Theodore Levitt aptly stated that "Discretion is the enemy of order, standardization, and quality." The younger me often did what was expedient rather than what was right for the business. I made decisions by the seat of my pants, often contradicting a previous decision, and confusing employees. I took bookkeeping shortcuts that cost me thousands of dollars to untangle later because I was too busy to do it right the first time. I hired inept employees because I needed a warm body and then was too wimpy to fire them when it was clearly not a good fit.

PROMOTE, PROMOTE, PROMOTE! Get out your marketing calendar and plan the promotions for the third and fourth quarters! Challenge yourself to come up with something that does NOT include a huge price reduction. There is no need to give away profits. Be creative and inventive. I recently spoke to a long time customer who told me about an amazing promotion at her store. Debbie Huntoon operates Alada Beads in Clinton Township, Michigan. Michigan has been one of the hardest hit states economically, with unemployment numbers well above the national average, and yet Debbie continues to thrive.

Debbie and her daughters take the business of business very seriously and it shows. She has made the decision to host one major event and two to three minor promotional events each month and is reaping the rewards. She recently hosted a "Mystic Party" which included palm readers, a wine tasting, several "make and take stations", and a food vendor. Debbie took a gamble by making a big investment in radio promotions while hoping for an equally big return on her investment. She needn't have worried! She had to pull the ads after only a few days because such a buzz was created that she worried about her ability to handle the crowd. 300 customers reserved a spot for the event and all of the vendors agreed to participate for free, knowing that the radio spot would generate enough publicity to more than compensate for their time.

Guests were lined up for the event, which lasted for only three hours and generated $10,000 in sales. She took lots of photographs and posted them on her store Facebook, which has continued to generate excitement and interest. What does beading have to do with palm reading? Not much, but this Crafty Retailer knows that a successful promotion is more about THRILLING THE CUSTOMER than showcasing the product. Congratulations on a job well done, Debbie!

Monday, July 13, 2009

Target your existing customer database to increase the bottom line!

There are certain items that are a permanent fixture on my daily "to do" list. These are typically among my least favorite tasks, so they never seem to get crossed off as "done." There is always a squeakier wheel in need of attention. Quitting time comes and I find refuge in the immortal words of Scarlett O'Hara: "I will think about it tomorrow." Unfortunately, tomorrow is often a repeat of today and the task remains sadly neglected.

Many specialty craft retailers are squeamish about Marketing. They got into the business because they were passionate about the craft, not about business. They know that marketing is important, but they don't deal with it. It is easy to let other business demands get in the way. They do not like being pushy. They don't want to annoy their customers. They know that they should schedule more promotions, but it seems like they never have time. They wanted to place that newspaper ad, but the deadline came and payroll was due. Blah. Blah. Blah. Been there, done that. OK, so the business is holding its own but the dismal economy is starting to impact the bottom line.

What is the Crafty Retailer to do?

Put on those big girl panties and DEAL WITH IT! Marketing doesn't have to be costly. It doesn't have to be scary. Start small by going after the consumer who already loves you---your CURRENT CUSTOMER! It takes significantly more time and money to cultivate a new customer than it does to market to an existing one. Surprisingly, many business owners focus on acquisition rather than retention. There is an assumption that once a sale is made, the customer will return. This is not always the case. Unless you are the only game in town (not likely given the close proximity of the Internet competitor!) your customers can, and will, forget about you. It is up to you to remind them about your cozy store, incredible product line, free classes, etc.

Follow these simple steps and you will see an immediate impact at the register:

1. Make a list of all of your customers. An excel spreadsheet is a cheap, low tech way to keep track of the data. Include name, address, phone contact, email contact. If possible, include pertinent details such as birthday, twitter ID, spouse's contact info, and shopping preferences.

2. Classify each customer and devise your plan of attack. I breakdown my customer list as follows:
PITA Customer
The juice ain't worth the squeeze. The PITA is the Pain in the A-- customer who is so toxic that you are well to be rid of her. Plan of Attack: Refer her to a competitor and count your blessings.

Marginal Customer
A marginal customer accounts for 1% to 24% of the sales volume. Plan of Attack: Plan to send her at least one email per quarter and make sure that you do it.

Solid Customer
She represents 25% to 75% of the business. Plan of Attack: Send her monthly emails, and make a phone call to promote big events. Follow through with the plan!

Superior Customer
She represents between 76% and 100% of the business. Plan of Attack: Weekly contact, via face to face interaction, telephone, or email. The follow through is easy here....this customer is always in your store. Three cheers for the SUPERIOR CUSTOMER!

3. Invite your superior customers to become a part of a store "focus group." You cannot possibly read every blog, peruse every craft site, learn every technique. Your superior customers love you and probably feel vested in the success of your establishment. Invite them in after hours. Provide food and drink and then let the brain picking begin! The benefits are tangible: you will gain valuable insight into what your customers are looking for in your store--what is working and what is not. Do you know what other crafts your clients are into? This is a good chance to find out! Your classes aren't filling up? This group will offer feedback. The focus group members will know that you value their insight and you will have turned each customer into a rabid fan! Send each guest home with a little gift for a job well done! Pizza: $30 Wine: $24 Gift: $40 Impact: PRICELESS!

4. Communicate with your customers. Seriously...real conversation, not the ridiculous "let me know if I can help you" mantra so common among sales people who don't give a darn. Find out what other crafts hold their attention. Determine what brought them into your store rather than to the competitor down the street. Did you just make a big sale? Follow up with a handwritten note thanking the customer for her business. Set a goal to send out just five "Thank you notes" a week and you will be amazed by the response you get from the half hour of time you invested.

5. Don't lose site of a lost or missing customer! If you haven't heard from a customer in a few months then it is time to pick up the phone and remind her that you are there and that there are exciting things happening in the shop. She might be taking a break from crafting and your call might be the gentle push that she needs. Her life might be too busy/stressful for her to come out and play, but she will remember that you cared enough to inquire when she is ready to jump back in.

A study by the Rockefeller Foundation revealed that customers leave for the following reasons:

Complaints were not handled effectively: 14%
Lured away by competition: 9%
Customer relocated: 9%
No special reason: 68%

NO SPECIAL REASON? What the heck does that mean? My guess is that the customer simply did not have a reason to stay! Benign neglect made it possible for them to forget about you. Ouch. Fight for 'em! They liked you once and they can like you again! Pick up the phone or send a "We Miss You" coupon to entice them to cross your threshold.

A slow economy simply means that you will have to work smarter. There is lots of money to be made---make sure that you get your fair share! Now if you will excuse me, I have some Thank You notes to write!


OTHER NEWS:
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Congratulations to
the winners of our drawing for the crystal embellishment packages: Lora Holman of The Bead Biz and Kelli Burns of The Hole Bead Shoppe, contributed great comments for our June "dead inventory" challenge and each will receive the spectacular assortment pictured at left!


We will draw a name from those who comment on any Crafty Retailer post from June 30 through July 31 and the lucky winner will receive a copy of Diane Gilleland's Book, Making a Great Blog: A Guide for Creative People. It is a "must have" resource for any new crafty blogger!


Tuesday, July 7, 2009

Wake Up Retailers! It is time to recognize the Indie Crafter!

The craft industry is in the midst of a cultural revolution and many retail store owners are not even aware that there has been a shift. I am referring to the Indie Craft explosion, which like all cultural revolutions, will mean big changes for the way that business is done. The Indie Crafter uses traditional craft forms such as knitting, crochet, paper making, jewelry making, sewing, etc. but utilizes them in a non-traditional way to create hipper, edgier products. She combines multiple craft techniques in her work. There is a focus on preserving the environment, pursuing change through political and social activism, and producing products through the use of recycling thrift store finds and vintage items.

The Indie Crafter is closely connected to her compatriots via the internet, where she communicates via blogging and craft forums. The Indie Crafter knows what she wants to create so she is looking to the retail store for the tools and the components, not the design. She may need guidance on a particular stitch, but she does not want to make the --dare I say it--frumpy cardigan displayed in your window. She wants the yarn and the needles, the beads and the baubles, but she already has a plan. No, the Indie Crafter is not interested in copying someone else's design by way of a kit or a class; rather, she wants to do it her own darn self. She is inventive and resourceful. Good for her!

I had a conversation with an artist friend recently wherein I mentioned the term "Indie Artist" and she was unfamiliar with the term, so I described it and her response made me giggle:

Hey! You just described us! That is what we have always done! We scoured thrift stores! We recycled! We made cool stuff--still do! We are old though, so I guess we are WRINDIES!

I have known her a long time and immediately knew what she meant by WRINDIE: we were wrinkled Indies! ARGHH! So be it. Time does march on, but just because we are getting older, it certainly doesn't mean that independent craft stores should morph into hangouts for the infirm and the elderly!

What is the crafty retailer to do?

In the immortal words of American Idol guru Simon Cowell, you must STAY RELEVANT! Diane Gilleland, the force behind Craftypod, recently interviewed Mike Hartnett, the editor of Creative Leisure News, a craft industry trade e-zine. His publication is focused on the business end of the craft supply industry and he has subscribers from twenty different countries. (Mike offers a free trial subscription and if you don't get it, GET IT! )

Mike acknowledged that the Corporate Craft Industry has historically been devoted to middle aged white women, with designs that tend toward the "cute." Further, many manufacturers continue to market the same products, the same way. He noted that there is a need to expand the focus and I would have to agree with him. Forcefully. He noted that the Indie Crafter has much more of a sense of humor than is evidenced by the big box craft store, which tends to avoid the radical while embracing the center. Craft magazines have been a bit quicker to appeal to the Indie audience with publications such as Stuffed and Altered Couture.

This slow move into the Indie Market can be leveraged by the savvy small independent retailer. For example, cross stitching boomed in the 1980s. The customer of that decade has aged, her manual dexterity ain't what it used to be, and her eyesight has turned traitorous. That customer will move into other crafts. The shop owner needs to cultivate a younger shopper to stay viable. Would you be shocked to hear that many young shoppers aren't interested in the cutesy canvases that appeal to many boomers? Check out the line offered by Subversive Cross Stitch, but note that the language might make you blush. Another line that offers old time embroidery transfers with a fresh twist can be found at Sublime Stitching, a site I discovered a month or so ago. Indie Artist/Owner Jenny Hart is a well established fixture on the Indie scene and authors a business column for Indie Start Ups at Craftzine. Many needle art stores have responded to the void in the market place and are carrying Jenny's line.

The internet is your connection to the Indie market. The brick and mortar shop owner would do well to spend some time traversing the web to gain a better understanding as to what is going on in today's craft community. The links I have posted to the right offer a nice sampling of what you will find. You will be inspired, enchanted, delighted, and more! Get involved in the community forums and offer comments where appropriate....after all, you might not have the Indie viewpoint, but your years have provided you with technique and training. Pass it on! You might be surprised by what you learn in the process!