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November 2007

Playing the Price Game, or Not!

During an era when low prices no longer effectively distinguish one business from another, a growing number of retailers (and non-retailers) are attempting to reposition or reinvent themselves. After years of no-frills, low-price flying, Southwest Airlines is doing just that, focusing on business travelers and a higher ticket price range. Southwest realizes that battling for a customer whose sole criteria is price is not necessarily the best business-building strategy for the future. With other carriers offering prices just as low or lower, Southwest knows customer loyalty is fleeting.

Although not evident over the recent Thanksgiving/Black Friday weekend, a few retailers are beginning to learn this important lesson as well. Last year Wal-Mart made some moves in this direction by offering better quality merchandise and improving its store environments. Even its new tag line, Save Money, Live Better, is an attempt to bridge the gap between the low-price-only consumer and those who aren't motivated by price alone. It is a fine line that Wal-Mart walks, and there are questions as to whether it will work over the long haul.

Long-time readers of this newsletter know I strongly encourage retailers to use other strategies, tactics, and tools to attract consumers and distinguish their stores from the competition. It is now evident even to the hard-core advocates that building a business around low-prices creates a customer base that will switch to a competitor over pennies.

When Best Buy began its repositioning plan a couple years ago, it determined that most of its purely price-driven customers only shopped for ³sale² merchandise, buying little if anything else. Best Buy still runs sales and other price-driven events, but it is much more selective in choosing what products to advertise and which prices drive customers through the doors.

Will other retailers begin to position themselves as something other than the lowest-price destination? Or will we continue to see retailers who stick to their price-driven strategy wondering why it is increasingly difficult to stand out and compete?

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The Black Friday Experience

Ah yes, the joys of shopping at midnight and then again at 4:00 a.m. This year, as in years past, I challenged my mental state by showing up at a Prime Outlets shopping center in the middle of the night--along with several thousand other crazy people. Most stores opened at midnight, but Polo Ralph Lauren opened its doors at 11:30 bringing a massive number of eager shoppers into the store.

The longest lines of the night belonged to stores that appealed to younger, fashion conscious shoppers. Such stores included Coach, Calvin Klein, Juicy Couture, Tommy Hilfiger, Banana Republic, Gap Outlet, Guess, and Puma. When I left the shopping center just after 1:30 a.m., the parking lot was packed with cars overflowing onto side streets and into lots of neighboring restaurants and hotels. Hundreds more shoppers circled searching for a place to park.

In the pre-dawn hours of Black Friday, I visited a Best Buy where consumers pushing shopping carts filled to the top waited in seemingly endless checkout lines. As I walked out, I watched a young shopper and store employee make a valiant effort to squeeze a very large flat-screen TV into a very small car. I didn't stick around for the outcome.

In a nearby J.C. Penney, enthusiastic shoppers poured through the doors when it first opened. These shoppers seemed to be enjoying the experience more than in any other store I visited. At a jam-packed Wal-Mart, I was surprised to see plenty of the door-buster items still available an hour after the store opened.

The "experts" tell us traffic was up but the average sales ticket was down for Black Friday this year. Apparently researchers interviewed 2,395 shoppers in various locations across the country extrapolating those numbers to represent a supposedly accurate picture of the entire country. I think I'll wait until December 6 before I decide whether we had a good start to the holiday shopping season. That's when the actual numbers for November same-store sales are reported by the nation's largest publicly held retailers.

REVERSING A POOR DECISION!
Earlier this year in an attempt to reduce costs, Circuit City announced it would lay off 3,400 of its most experienced sales associates. The highest paid people were replaced with lower paid and much less experienced associates. At the same time, Best Buy continued grabbing market share, taking business from Circuit City.

Apparently Circuit City finally saw the flaw in this strategy and invited a number of former employees back to its employ. Since this nonsense happened, the company restructured floor positions so the sole job of Product Specialists is to sell merchandise and serve customers. The stores now have dedicated members of what is called the "Product Flow Team" whose job it is to accept shipments and make sure merchandise is displayed out on the sales floor. In the past those two positions were combined.

WHAT DOES APPLE KNOW?
By every measure Apple stores are hugely successful. It is estimated the average Apple store generates in excess of $20 million a year. What I find so amazing is Apple is doing this kind of sales volume in stores generally under 3,000 square feet in size.

Earlier this year Apple began removing cash register check out areas from its stores. If you've ever been in one of these stores, the reason is obvious. They simply need more room not only for merchandise but for customers. Instead of the standard check-out method, Apple associates use hand-held scanners that process payments and either send a signal to print the receipt in the back or transmit it direct to the customer's email address. It takes a little longer for cash transactions, but I've found this check-out method to be convenient and quick.

During my Black Friday visits, I watched many shoppers opt out of buying based on the length of checkout lines. Store associates using hand-held scanners could easily solve this costly problem. Even on the busiest days, Apple associates are able to handle customer checkouts quickly and efficiently.

THE CHANGING HOLIDAY SHOPPING CALENDAR!
Traditionally the critical holiday shopping periods have been the week before Christmas and the two weeks after. Due to the extremely busy lifestyles of today's Americans, last-minute shoppers are now more important than ever before. While Black Friday once was the number one shopping day of the year, now the Saturday and Sunday before Christmas rank as the two biggest shopping days of the year.

Owing to gift cards and the fact that many retailers stock merchandise specifically for after-Christmas and clearance-sale events, the two weeks after now generate millions of dollars in sales for retailers. For another perspective on holiday shopping, I encourage you to click on the link below to read an excellent article by Newsweek columnist Daniel Gross. www.newsweek.com/id/72017

THE TOY INDUSTRY FIGHTS BACK!
Recently the Toy Industry Association announced a toy hotline and web site for consumers to get up-to-the-minute information on recalled toys and toy safety. The hotline is 1-888-884-TOYS and the web site is www.toyinfo.org.

THE CONTINUING NEWSPAPER CIRCULATION SLIDE!
The weekday circulation numbers for our nation's daily newspapers continued their decline over the last six months with The Dallas Morning News down 7.68%, the Minneapolis Star Tribune down 6.53%, The Atlanta Journal-Constitution down 9.08%, and the San Diego Union-Tribune down 8.53%. For many of these publications, the Sunday circulation numbers were down as well. I wonder if any of these newspapers are reducing advertising costs for retailers since readership is down.

TRULY SENSELESS CRIME!
I am so sorry to report that Robert Bills, the manager of an Ashley Furniture Homestore in Las Vegas, was shot and killed on Black Friday on his way to make a bank deposit. The ski-masked robber didn't actually get the money but did get away before the police arrived. I hope they catch this guy and lock him up for the rest of his pathetic life.

FINAL THOUGHTS...

After making a small initial investment, it looks like Sears is making an all-out attempt to buy Restoration Hardware. This is hardly a match made in heaven.

Fast growing Dick's Sporting Goods continues to buy smaller, weaker sporting chains including 15-store Chick's Sporting Goods based in Southern California.

British retailer Tesco is beginning to open its new Fresh & Easy Neighborhood Markets here in Southern California with many more to come.

As this is written, online retailers are reporting that holiday weekend and Cyber-Monday sales generally have exceeded their expectations.

Until next month...

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Speeches and Seminars for Retailers

As one of the nation's best-known and most popular retail speakers, George's speaking schedule includes events for retailers and consumer products manufacturers all across the country. He's added some exciting new convention and trade show topics. If you are a meeting planner or are involved with speaker selection and would like to book George for your next convention, we encourage you to call as early as possible. George's calendar fills up quickly.

Topics for conventions and trade shows:
(Click on a topic for details)

Retail Success! Increase Sales, Maximize Profits, and Wow Your Customers in the Most Competitive Marketplace in History

Into the Future! Powerful Trends Shaping the Future of Retailing

Stop, Look, Touch, and Buy: The Dynamics of Merchandising

12 Powerful Advertising Secrets Every Retailer Should Know

Power, Punch & Pizzazz! Create Advertising that Grabs Customer Attention and Sells More Merchandise

Customer-Direct Marketing: Increase Retail Sales with High-Impact Direct Mail & E-Mail

Double Your Sales and Triple Your Profits with High-Impact Marketing and Promotions!

Competition? What Competition! Standing Out in Today's Competitive Retail Marketplace

How to Find an Eagle in a Flock of Turkeys! Finding, Hiring, and Keeping the BEST Retail Employees

Every Customer Every Day!

For more information go to our web site or call 800-766-1908.

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Seminars and Training Programs for Managers and Associates

Delivering performance-enhancing speeches and seminars for retailers since 1987, George jam-packs his presentations with practical, real-world information. His seminars for managers and associates teach store management skills, customer service improvement, and sales techniques. If you want to improve store productivity and profitability, we encourage you to call George Whalin. Don't wait, his calendar fills up quickly.

Topics for managers' meetings and corporate conferences:
(Click on a topic for details)

Great Store Managers Make Great Stores!

How to Find an Eagle in a Flock of Turkeys! Finding, Hiring, and Keeping the BEST Retail Employees

Customer Focused Selling

Every Customer Every Day!

For more information go to our web site or call 800-766-1908.

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Resources for Retailers

George Whalin's book RETAIL SUCCESS! is now in its ninth printing. A number of consumer products manufacturers have purchased the book for their retailer customers. Retailers have provided copies for their managers who regularly refer to portions of the book in their managers' meetings. And managers are referring to the book in their daily store meetings. If you haven't purchased a copy yet, what are you waiting for? For multiple copies, call us for volume pricing. For individual copies, there are also some very good deals to be had at amazon.

Go to our web site today where you'll find several other books in addition to RETAIL SUCCESS that George recommends. Check it out often, he keeps adding to the list.

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If you have an opinion or thoughts about any of the topics posted, I invite you to comment at retailerblog.com It's easy to do. And if you have a topic you would like to see addressed on the blog, send me an e-mail at george@whalinonretail.com.

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In addition to speeches and seminars, George also consults with retailers helping them improve the operation of their businesses. His consulting services include helping retailers with strategic planning issues, marketplace positioning, merchandising and store layouts, developing results-driven marketing and advertising programs, personnel management, and improving store performance. If you need solid, practical, proven insights and ideas to grow and improve your business, call us toll-free at (800) 766-1908.

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We encourage you to pass this publication along to your associates and colleagues. If all or any portion of this newsletter is reproduced in another publication, attribution should read as follows: Copyright 2007. Reprinted with permission from George Whalin's Retail Management E-Letter. To occasionally reprint portions of this newsletter one time, no express permission is required. To reprint in more than one venue or multiple articles, please contact us at 800-766-1908 or info@whalinonretail.com.

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