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Tuesday, April 20, 2010

Crafty Retail Superstars know that moving inventory is the key to success!

One of the primary benefits of writing this blog is that offers me a chance to connect with some amazing people.  Creative, smart, driven, focused women who inspire and delight me---women like me and women like you---business owner/ busy  mom/good wife/creative  types.  We are kindred spirits...just trying to keep the balls in the air and the smiles on our faces.  Oh.....and the extra ten pounds off of our asses.  I had a chance to interact with two such women this week...one by design and one by chance.  Both brightened my week.

The first is a Crafty Retail Rock Star who is managing to get it all done.  Jackie Goff is the owner of Uptown Fibers, a fairly new yarn shop near Toledo, Ohio.  You first heard about Jackie in a November post when I happened across a copy of her June 2009 newsletter.  Jackie's newsletters are always chatty and informative, but this one caused my mouth to hit the floor.  

Several of her competitors had closed and customers were asking her if she was going to be following suit.  Jackie told them that it was up to them.  No fairy tales.  No sugar coating.   No slick marketing twist.   Instead, she gave them the following economics lesson:
To honestly answer your questions, I am not PLANNING on going out of business, but it all depends on sales. Plain and simple. And, quite honestly, sales are significantly below what was expected and what is needed for long-term survival of the shop as it exists today. The last thing I want to do is break your heart. . . and mine, and I’ll do anything to try to keep that from happening. Which is why I have information to share with you.

Last week, one of my yarn distributors told me that 3 out of every 5 shops in his territory have closed since September ‘08, and that probably one out of every remaining two will not survive this summer. His territory is Michigan, Ohio, Illinois, Wisconsin and, I think, Minnesota. It includes Chicago, Detroit, Cincinnati and other cities bigger than Toledo. He reports this trend happening across the US.

Why Shops Don’t Survive
1. Customers stop buying. No explanation needed.
2. Profit margins fall below what is needed to re-stock. Example: a skein of yarn is sold at $10. The first $5.00 is needed to pay rent, taxes, salaries, utilities and the remaining $5.00 is left to re-buy another skein of the same yarn to restock. If the yarn goes on sale, the first $5.00 still has to pay rent/salaries/taxes, and now there is not enough money left to re-buy yarn because it still costs $5.00. Suddenly there is less to sell, customers get bored or already have it, and stop
buying. (not all “sales” create this condition, but most do, unless the item was greatly discounted to the LYS at the time the shop purchased it)

The above is a very simplistic explanation, and there are things a small shop owner can do to increase the profit margins somewhat, but the two items listed here are the major components to success or failure for retailers.

Jackie then went on to ask each of her customers to spend $40 a month with her. She was referencing the 3/50 Project, the brainchild of retail consultant Cynda Baxter of Retail Speaks, which encourages consumers to spend $50 per month with the three independent retailers that they would be miss the most if the stores disappeared. Jackie spent some time running the numbers and decided that she didn't need $50 per customer since $40 could keep the lights on.

Jackie's letter was impressive...That gal has brass cajones, to be sure.    Most sales people are conditioned to avoid anything that could be "uncomfortable" so I found her forthrightness quite refreshing. Fortunately, her customers agreed. Most had little insight into the retail experience so Jackie's newsletter was a real eye opener for them.  Read Jackie's entire newsletter.

It has been almost a year since Jackie published that newsletter and I rang her up recently to see how it played out for her.  I was tickled to hear that she is "cautiously optimistic" about the future of her almost two year old store.  The average sales ticket is half of what she projected it would be in Year Two, but the fact that she has doubled her customer base has helped to make up the difference.

As Jackie says....business is "not good, but good enough." Jackie is working aggressively to refine her business and make necessary changes to enhance her chances of success.  She recognized -- and rectified -- one early mistake that was standing in her way.  She made the typical new store error of buying "too deep and too wide."   HA! I hear ya, sister!  We have all made that mistake.  It is easier to deal with when times are flush, but if you don't deal with it when times are slow, dead inventory will kill you.  Well...not really kill you....but it will probably make you eat too many chocolate bars and yell at your husband.  At least that is what I have been told.  By other people.

Jackie was looking at shelves filled with inventory that was one and a half years old.  So were her customers.  They wanted New Stuff and she wanted to give it to them.  Unfortunately, the money was tied up in all that Old Stuff.  Jackie took care of the dead inventory brilliantly in a two part strategy.

First, she did not take the easy route of a generic mark down.  Customers are deluged with "SALE!" signs everywhere and Jackie wisely noted that she does not want to encourage "sale only" buying habits.  However, she wanted to generate fast cash and unload that pesky stock.   This Crafty Retail Superstar designed a fun and engaging store promotion that went a long way toward helping her reach her goal. 

She used a "Brown Bag Sale" to spur activity.   She did not advertise ahead of time because she did not want customers cutting back on buying activity in anticipation of the event.   Rather, she sent out an email blast a few days before the weekend of the event.   Customers were encouraged to stop in to fill up on yarn.  Purchases that fit into a lunch bag were rung up at 20% off.  Once the customer had exceeded the limits of the lunch bag, they were offered the opportunity to move up to a larger shopping bag, with a 25% discount.  Finally, the true bargain hunters were awarded a large grocery bag for 30% off their purchases.


The  response was huge....Jackie rang up half of her monthly sales numbers in just two days.  She followed up with a postcard mail out to those customers who do not use email, offering them a two week window to make purchases.  The response has been strong.  Jackie handed out extra postcards to customers, relatives, and friends offering them the discount yet again if they brought in a buddy.
  
There is no doubt about it...creating an EXPERIENCE  will do more for you than a simple mark down.   Every time.

The second thing that Jackie did was reach out to other yarn store owners via Ravelry's LYS forum.  She offered to sell them the excess yarn at 20% off her cost.  She included the shop model (the sweater/scarf/etc. made from the yarn that serves as a promotional display)  with the yarn.  What a deal for the yarn shops and what a Godsend for Jackie.  She raised the money she needed and her customers are delighted to see the new inventory that she has put on the floor. 

Jackie didn't just sit around bemoaning the economy and wishing that things would be different.  She got busy and made 'em get different.   I have a feeling that Jackie will be around for her second anniversary and many more to come.  WAY TO GO, JACKIE! 

So...what about you?  What are you going to do differently to increase your odds of success?

OTHER NEWS:
I often hear store owners complain about classes...the need to develop an exciting class calendar, the difficulty in finding teachers, etc.  Consider conducting an Etsy search for your teachers!  

Etsy has a  "shop local"  search feature that makes it easy to find Etsyites in your area.  What a great way to identify some local talent!    I did a quick search yesterday and was pleased as punch to find "Glowstoes."   Glow Greenfield-Duarte is the second bit of crafty goodness that brightened my week.  Glow is a Tampa gal who makes incredible jewelry and wearable assemblages from found objects  and I was curious as to her buying habits and experience with Etsy.  She was nice enough to agree to a telephone interview and was generous and engaging.  Unfortunately, I learned that she is not a shopper, per se.  In fact, she does not shop at the local bead stores (Ouch!) because she worries that she will blow her budget.  Rather, she finds most of her materials from her personal stash of found objects, as well as estate sales,  Etsy, and online from Ornamentea [note:  owner Cynthia is another Crafty Retail Rock Star!].  

Glow has no formal training and has never used a crimp bead, or any standard bead store item for that matter...yet she has a very successful Etsy store that affords her a steady little income.    She described Michael's as a "sad place."   She is an "out of the box" kind of gal who is all about problem solving as she deconstructs vintage pieces to painstakingly reconstruct them to serve a new life.  

A vintage silver salt shaker becomes a pendant, while tiny books from a doll house become beads.  It was a treat to talk to someone who has no preconceptions about how things "are supposed to go together" and just follows her instincts.    She is a generous spirit who willingly shares the "thought processes" behind her artistic choices.   A fresh perspective can change everything.   After all, sometimes the best lesson is simply to step back and learn how to look at the world a little bit differently.  Glow does it and does it well.  Central Florida Bead Stores take note:  Glow is a former pre-school teacher who would welcome a chance to teach others what she does.  


Gotta go!  I have some vintage bakelite salt shakers that are crying out to morph into a necklace.  

Thanks, Glow!

6 comments:

  1. Hi there - thank you so much for sharing the above post. It has really made my day. I am a "crafty retailer" over in Ireland and like everywhere times are tough. I found this post really enlightening and motivating to think more outside the box! I look forward to following the rest of your posts...Cathy

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  2. Thanks, Cathy! There are some amazing retail wizards out there and they can certainly teach us a thing or two about running our own businesses!

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  3. Dear Pat,
    Thanks for a lovely chat and including me in this fabulous article... Much appreciative laughter and smiles are currently drifting your way! :) Glow

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  4. The % off everything in the store sale is the one that always gets me....how do they make their margins...

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  5. It is a bad strategy, period. The shop owner who discounts everything all of the time simply trains customers to be loyal to price point, rather than loyal to the store. There is always someone willing to undercut pricing, and those customers will follow the discount, period.

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