The Top Mistakes of Independent Retailers
By Tom Ryan
In his new book, The Retail Doctor’s Guide to Growing
Your Business: A Step-by-Step Approach to Quickly Diagnose, Treat, and Cure,
Bob Phibbs explains the pitfalls many independent businesses fall into when
running their businesses. The Retail Doc touches on hiring/training, merchandising,
sales techniques, pricing and website presence.
The following is a list of
Mr. Phibbs’ "Top 10 Mistakes Independent
Businesses Do That Hurt Themselves The Most":
- They hire the exact same person as themselves. This works if all
you want to talk to is people like you, but having a balanced crew lets you
speak to all four of the personality types. With only one type of person,
you often find a "hive" mentality where it’s us versus them.
- They fill their stores with merchandise based on "gut feeling." Rather
than having a system to replace the sellers as well as remove the dogs, their
floor is littered with duplicates that leads to the merchandise being dated,
shopworn and inhibits their ability to repurchase best sellers.
- They have no sales process. This leads to customers doing all the
work and employees that become slackers. Clerking has no place except in
fast food. No, it has no place – everyone can up sell.
- They display their merchandise with no flare, creativity or system. Stack
it on the shelves and hope it sells. More often than not, it’s accompanied
with a handwritten starburst sign with a price, rather than a fun sign that
makes us stop and consider the items in the display. Remember: just because
it’s cheap doesn’t make it want-able.
- If they have a website, it frequently is lacking in the most crucial
details – rendering it invisible to potential customers. Because owners don’t
understand the Internet, many throw up their arms and settle or tell themselves
its great, when it misses on the most basic of criteria.
- They train by crisis, instead of logic. This often means the best employees
leave quickly and the worst are rewarded. Being the one "in charge" only
means you’ll be the one taking all the stupid questions when you take
a day off or go to the bank.
- They do not review employees to high standards. This allows the
weak to thrive on the owner’s dime.
- The only quiver in their bow is to discount their merchandise, price
match and participate in multiple discount programs in a wrong-headed
belief it will grow sales. This robs profits and often means they’re putting money
into the business, instead of taking it out.
- They have little or no presence on social media, which means they are unaware
of what customers are saying about their business.
- They whine that it’s the economy, government, or their online competitors
who are ruining them – never taking responsibility that it’s
up to them to make a profit.
Discussion Questions: What do you see as the most egregious failings of
independent retailers identified in the article? Are there others you would
add?
Discussion Questions
Poll
Sorry, there are no polls available at the moment.
I’d go with #10; retailers, like many other people, like to blame their failures on others. Retailers and the unemployed often like to blame the economy for their failure and not face up to the fact that they did not give their customer, or their employer, the kind of service they can’t live without.
Phibbs’ points are well taken, but a key point is missing: what differentiates your store from the competition. Every retailer, like every brand, needs a strong core story that resonates with employees, vendors and consumers. That story sets your brand apart from the others and clearly states why the brand exists, its values, and its goals. A strong core story means differentiation, better merchandise selection, better execution in-store, and more effective media presence (paid and social)–all points raised by Phibbs in the article.
If Bob Phibbs is correct in his in-depth evaluation of many independent retailers continuing faults in a changing world, then one might wonder if independents will be part of the future. Perhaps that breed of operators that Mr. Phibbs identified will become part of the passing parade and a new and innovative breed will emerge and succeed. That’s what happened in technology and other business fields.
Teaching, leading, and motivating the RIGHT associates is a core requirement to any business. By investing in people at the point of HIRE–for attitude and behavior, coupled with the basic gray matter needed in associates to take care of consumers–is critical to the short-term and long-term success of independent and chain retailers.
You have to get it right in the hiring process, or you’re forever playing a ‘catch-up’ game.
I agree with Mr. Livingston that #10 is an umbrella under which all the other nine can fit with the assumption that if they knew it was up to them, they would do something about it. That begs the question: if they took responsibility would they know what to do? In our work with independent retailers we often find “They don’t know what they don’t know and don’t know what they could know.” No one sets out to fail. That being said, it is a lot easier to fail than succeed.
It not only takes work but knowledge to succeed. One of the failures we find is that independent retailers do not often take advantage of the information they have access to. Either they don’t realize it exists or simply don’t know where to find it.
Sometimes you just know the truth has been spoken, and I think Bob has laid it out as raw as it can be. But I don’t see this as a wake-up call only for “independents;” I hope it wakes up every organization that sells something.
I haven’t read the book yet, so I don’t know what new direction Bob provides. My hope is we realize that these 10 effective behaviors result from ineffective thinking. That means the answer isn’t a simple mechanical one like taking a course on creative product displays. Until that thinking changes, the circumstances and results won’t change either.
Let me start by saying that “The Retail Doctor’s Guide to Growing Your Business: A Step-by-Step Approach to Quickly Diagnose, Treat, and Cure,” by Bob Phibbs is recommended reading by David Biernbaum & Associates. The lists of mistakes and oversights are right on the money. One area though where smaller independents will never be able to be completely competitive with major retail chains are in the area of pricing the every day high volume commodity items.
What I strongly recommend is that every independent retail store go out of its way to carry some specialty and niche items not necessary carried by all of the retail chain competitors. I guarantee you that if the right items are selected they will become destination items to drive consumers to the independent store.
As someone who got her first real taste of retail management under an independent retailer, I can say that most of these resonate painfully well. But there is one that he missed: under-estimating, or not understanding, the competition. At least in my experience, independents tend to have a very narrowly focused view on who the competition is–and it’s usually only the most direct competitors. My own experience with an independent owner of a housewares chain found her laser-focused on places like Pottery Barn and the copycat down the street, but completely ignored the Macy’s and JCPenney in the other direction, and also refused to acknowledge that she was competing for the same dollars as every other retailer at her location–especially for tourist dollars.
But you know, you have to have a pretty big ego–a strong belief in your own success–and a high tolerance for risk to be a successful independent retailer. I saw an owner pull off feats of ingenuity that rival the biggest, most innovative retailers, all to keep her little enterprise afloat. So a lot of these seem to come with the territory. You’re not going to change them, but if you can recognize them and hire people who aren’t like you–and listen to them!–you can protect yourself from the worst.
I’m sure Bob could have created a much more exhaustive list beyond these ten. At the same time the list could be turned around to identify the top ten, twenty or more things that independent retailers are doing right. I’ve seen and experienced a lot of retailers who are doing these things extremely well. It’s one reason they’re still around and prospering during and post recession.
Another mistake or strength I would add to the “beyond 10” list is being responsible for their own traffic. I’m amazed at the number of retailers who open their door and hope they get enough traffic to succeed. The best retailers focus every day on driving their existing customer back into the store and finding new customers as well.
Bob has put together a great list. My choice for the most egregious trait is #1 – hiring people just like themselves. The truly successful entrepreneur is the one that “knows what he/she doesn’t know,” finds individuals with the skills and/or experience that he/she doesn’t have and then, most importantly, listens to them. This is typically much harder than it sounds because the entrepreneur, almost by definition, does not like taking advice/direction from others–that’s why they chose to be entrepreneurs in the first place.
The one omission from Bob’s list that I see all the time and is, in my view, the primary cause of failure is the lack of sufficient cash flow management. Too often, there is no forecasting, no expense analysis, and no working capital planning. Entrepreneurs are aggressive and optimistic by nature and, without sufficient planning and control, will run out of cash. When the cash runs out, the lights go off.
What I see as the missing #11 should be #1; they do not understand the financial aspect of the business. They leave it to an accountant who frequently understands accounting but not independent retailing.
With regard to #2 and the gut feeling of ordering merchandise, I see too many that order according to what they like. It doesn’t matter what they like unless they find customers just like themselves. They do need categorization and tracking of merchandise along with an inventory control format.
My father was an independent retailer for almost 60 years. His problem remained the same from my earliest memory until his retirement 5 years ago. He ALWAYS overbought. ALWAYS. And he never quite knew when to cut his losses and get rid of his dead product. The result was, he thought he had $250k worth of inventory at cost when he retired, which fetched about $20k at auction.
He is not alone. Overbuying is the single biggest problem of the independent retailer.
I think Tom has it right, they don’t have a strong grasp of the financial ramifications. That is a pretty common thread.
I’m obviously in the minority, but I disagree with many of the top 10 listed. Of course not all, but many of the independent retailers that I’ve seen have a fabulous knack for beautifully displaying product, creating fantastic assortments for their niche, offering far better customer service than can be found in a chain store.
Their websites may not be great, but many do a great job of social networking and reaching out to the community. They offer unique products in an environment that is far more appealing than the cookie-cutter look in the mall.
I am going to buy the book!!! Just in this article alone Bob has hit a bunch of nails on the head with one thrust of his hammer. Let’s look at some more discussion points the author writes about….
While I understand where Bob is coming from, the recession has shaken out a lot of independent retailers who exhibited the kind of problems listed here. Those that remain are pretty sharp operators.
That said, I think those that remain have two great challenges, both already touched on above. First, they must become much more aggressive in reaching out to their existing customers in a personalized pro-active way. They must become more skilled in connecting with their core customers, in a way that’s compelling and meaningful.
Second, they must become much more financially astute. They must be more skilled in generating consistent cash flow from their base of revenues. Most significantly, this means they must manage their inventories much more closely, so cash doesn’t get needlessly tied up in excess or underperforming stock.
I would have to agree with the point of customer creation, selling, and retention is missing for both independent and corporate retailers. Growing up in an independent retailer, I learned that the entire focus was making every customer a primary customer and a return customer. It was inherent in all that was done. It was reiterated daily and there was a presence alongside of everyone reminding by action and word that this was our primary objective.
I don’t see this happening at most independents or corporate retailers. There seems more a mentality that customers just show up and come back because your doors happen to be open. Worse yet, is the attempt to create this through a customer card.
Regardless, customers want a reason to enter your doors and an experience worthy when they do. Make that happen and its amazing how many other things follow along a lot more easily.
I think the area where independents miss most often is in the area of systems and the utilization of the information these systems are capable of providing the independent retailers.
Point of Sale, Internet, and Social Media are all tools that provide information that could shape the course of the business.
I did not agree with the comment about gut feeling. I believe that is very much an asset to the independent retailer. It just needs to be supported with information.
From the list in the article, I tend to believe that “the only quiver in their bow is to discount their merchandise, price match and participate in multiple discount programs” is a key shortcoming of indie retailers.
Many retailers have low levels of participation in social media as well, and are missing out on a low cost channel for customer acquisition.
Independent retailers often do not invest in a proper database and do not target their marketing spend based on specific customers and behaviors. The result is to fall back on the discount and sale mentality as mentioned.
There’s a point that’s conspicuously absent from the list that, in my opinion, is paramount to everything else.
They begin with undifferentiated business concepts and keep them that way.
In my experience, this is the number one cause of death. If you don’t have a differentiated position to begin with as an independent, everything else you might do is like rearranging deck chairs on the Titanic.
I totally agree with the above points. Working directly and speaking directly with many small retailers, ALL of these are relevant to small retailers–it is 2010 guys! Often, the way they communicate is really poor. Especially with the next wave of consumers being GenY, if they are unable to connect with them, GenY will completely ignore them and they will miss out on that great opportunity. For GenY, a great website, a well designed brick and mortar store and well designed website is VERY important.
Another thing that really bugs me is that fact that many small retailers still use a cash register to do transactions and paper and pen to do inventory. That is countless of hours wasted doing inventory. I have experienced retailers with over 20,000+ items still using paper and pen to do inventory, purchase orders, and reporting. Imagine all that wasted time that can be better utilized connecting with your customer on a more personal level. Its 2010 folks! Cash Registers have been used for more than an 100 years. It is time to invest in a point of sale system to run more efficiently. There are solutions out there now that are affordable for the masses. It seems like technology at retail is still in the stone age while everyone is moving at 10,000,000 MPH.