This article originally appeared in the August/September 2018 issue of Canadian Music Trade magazine.
By Andrew King
There’s business, and then there’s the retail business – an ever-evolving commercial landscape where passion, dedication, and hard work are vital and very often rewarded, but never a sure-fire formula for success.
MI retail in particular is even more unique, typically drawing in people who are passionate about the art of music and looking to share that passion with others to make their living. Understandably, this often means storeowners and managers who are better versed in the “musical” and “instrument” components of their business than the “retail” ones.
Of course, that’s not to say passion and success are mutually exclusive; however, running a retail operation – particularly a small, independent retail operation – requires you to take on countless responsibilities, some of which are sure to be outside of your wheelhouse or comfort zone. What’s more, the rate at which one learns and gains experience often matches the pace of industry change, making it sometimes feel like you’re shooting at a moving target.
Many retailers – even successful ones – would readily admit that they could use and even welcome some help in overseeing the micro- and macro-level operations of their business and identifying areas for improvement; however, in retail, there’s seemingly always something that requires immediate time, attention, or financial resources just to keep things on track for the present. Sometimes, the future just seems too far away to prioritize, and guidance or coaching seems like too big of a question mark to be a safe investment.
But as Kirsten Hynds, a certified retail coach with Canadian Retail Solutions (CRS), explains, retail coaching is tailored specifically to each client’s business and offers a significant return on investment in the vast majority of cases – anywhere from three to 12 times the cost of the coaching program itself.
Here, she takes us through what retail coaching entails, why retailers should consider it, and the results it can spur.
[Pictured: Kirsten Hynds]
WHAT IS RETAIL COACHING?
Retail coaching firms like CRS essentially aim to take the guesswork out of inventory management and data analysis. By better managing your inventory – both your biggest expense and biggest asset – you can find and free up the cash in your operation.
Through a custom-tailored plan and strategic monthly one-on-one sessions, your coach will:
• Provide a Merchandise Plan – How much to buy and when.
• Review Financials – Are your expenses too high or low?
• Build Promotional Strategies – Know exactly what and how much to put on sale.
• Provide ongoing business coaching – A strategic and objective partner in your business.
WHY SHOULD A BUSINESS CONSIDER COACHING?
“Any retailer, especially an independent facing fierce competition from online and the big-box stores, stands to benefit, as this gives them the kind of competitive edge that the major retailers already have,” offers Hynds.
The bulk of the operations with which she personally consults are independent, mom-and-pop shops with annual sales of about $500,000 and up, though she has worked with stores with annual sales of $300,000 where there’s obvious potential for growth.
“Independent retailers are wearing 57 different hats. They’re the marketing department, they work the floor, they’re doing the buying… They can often feel alone and isolated being so busy, and with retail being such a unique ballgame, it can be hard to see the forest for the trees, so the plans don’t just offer performance indicators; we also identify opportunities to grow that people may not see, or look at Snacksareas that they’re pursuing more out of passion than what’s actually good for business and do course correction.”
Streamlining inventory is the key. She says a common issue is that people are pulling numbers out of the air, buying on a whim or based on factors beyond dollars and cents. “I’d say about 98 per cent of the stores we go into are significantly over-inventoried at first,” she offers. “So that’s just cash sitting around and probably hurting their bottom line.”
In one case, she identified a store that was $1 million over inventoried, “So even just identifying that one issue, the cost of coaching basically pays for itself,” says Hynds – “let alone all the other parts of the program.”
It requires a lot of work on both sides in putting together the plan and executing it, so as Hynds says, “If you’re just looking for a magic fix, this isn’t it.”
HOW DOES RETAIL COACHING WORK?
Initially, the coach will want to go through your numbers via your POS system’s output (meaning a somewhat sophisticated POS system is a prerequisite for effective coaching). “People are often surprised in our first meeting, when we sit down to review plans, just how much I know about their business,” says Hynds, “and I’m just drawing that out from their numbers.”
The first step is using that data to develop a merchandise plan – basically a launching pad for further discussions. “We’ll talk about the store in general, then get into the different departments and talk about each one,” she explains. If sales are lagging in a certain department or category over a long period, for example, that needs to be explored. “That gives us an idea of their unique operations and flows, and then gets us into how they work with vendors, how frequently they buy, how frequently they should buy – all things we can then work into our plan going forward.”
While that plan is typically wide reaching, at its core is, again, inventory management.
“The death of retail is when you’ve got cash tied up in inventory that’s not moving,” Hynds says bluntly. “That means we’re looking at everything – how well certain departments or categories are performing, their seasonal highs and lows, how new and fresh the inventory is… We need to see how often you’re completely turning over the inventory in your store.
“Usually, a lot of questions come up just from what we find in the numbers, and that becomes the jump-off point to things like staff training, relationships with vendors, and some of those more personable aspects of the business,” she explains.
Hynds says, at least in CRS’s case, the retailer isn’t bound to any long-term contracts; the sessions go on a month-by-month basis for as long as the retailer sees fit. In some cases, a successful retailer may tap a coach’s services for a finite amount of time to identify and work on problem areas, and then continue forward independently; in other cases, a coach may stay on for years, essentially acting as a long-term, part-time partner, continually guiding the business with an evolving plan.
“We’re making decisions based on what we’re seeing, but also measuring them, which is something retailers often don’t do on their own,” she says. “They’re often flying by the seat of their pants, or maybe using spreadsheets looking back a year or two, but we want to help them zoom out and see the bigger picture – identify trends, take into account what’s happening in their local area vs. in the sector as a whole, and so on. It’s an always-evolving and ever-moving thing.”
As with most long-term planning and execution, it often takes a few months for the plan to start working – at least with tangible results. “Those first three-to-six months at the beginning, we’re facing existing inventory issues, purchase orders that have already been written, so there is some time needed to buy into the plan.”
But then it clicks – and that’s the moment of truth. Hynds says it’s not a question of “if,” but “when.”
From there, the retailer may opt to push forward on their own having solved a few problems and gained some valuable insights into developing plans and measuring their success. In other cases, it’s an ongoing collaboration with the coach that yields consistent and long-term benefits.
In either case, there’s no harm in asking for help, knowing that, so long as you’re working with a reputable professional, you’re not incurring an expense, but rather making an investment in your future growth and success.
Trade shows are a key component of retail success, where attendees get to see what’s new and exciting, identify and explore industry trends, gain useful business tips, build a valuable network of peers, and solidify relationships with existing and new vendors. That said, you only get out what you put in, meaning the key to a successful trade show is preparation and planning.
Here’s a trade show prep checklist with some helpful tips to make the most of your next show:
Staff Discussions: What’s hot? What’s not? What’s missing?
Schedule Appointments with Reps
- Sales by classification (rank top 5 by GMROI or profit margin, bottom 5-10)
- Vendor performance (rank ven- dors by GMROI or profit margin)
- Individual vendor performance (sell-through, fulfillment, GMROI or profit margin from previous selling season)
- Compare vendor sales to total sales (what is vendor’s overall contribution to your sales)
Prepare/review your Merchandise Plan (analyze inventory & plan your future sales)
Pack backpack or roller bag with:
- Notes for discussion points for each vendor
- Vendor scorecard (see “5 Tips to Maximize Appointments with Your Reps”)
- Merchandise plan reports
- Pens & highlighter
- Business cards
Buying is a big part of the fun of owning a store, especially in a passion-driven industry like MI retail; however, some retailers love to buy a bit too much.
There is a difference between having inventory and making money. To put it plainly, just because you have great stuff, doesn’t mean people will buy it. You need to know how to curb your buying and fight frontloading, and how to work with your reps to get stock just before demand.
- The right product …
- In the right classifications…
- At the right time.
To achieve this, you need to:
- Study and analyze your inventory
- Plan your future sales and markdowns
- Know the turn, sell through, and profitability of your stock
- Forecast your sales by classification and by month to determine how much inventory you need to generate those sales.
A merchandise inventory plan includes all of these elements and allows you to identify problems and opportunities that exist in your retail business. It is the roadmap to successfully managing the fine balance between sales, inventory, profit, and ultimately, cash flow.
A merchandise inventory plan includes many key elements such as planned sales, planned markdowns, and planned inventory, which all helps to determine your Open to Buy (planned receivings). This helps you keep your inventory balanced with a “just in time” mentality.
Only with all these pieces of the puzzle working in harmony will you see cash in your bank account.
A good plan will also have other analytics, such as Key Performance Indicators (KPIs):
All these things combined allow you to look objectively at the performance of your store and, most importantly, measure how well you are doing it!
If any of these terms are unfamiliar to you, don’t worry; you can easily find definitions online, or consider this a good starting point for a conversation with a retail coach.
The obvious reason to schedule an appointment with your rep at a tradeshow is to review their line(s) for the upcoming season, but there are many other objectives to consider. You likely don’t get a lot of face time with your reps, so this time is vital to build and strengthen your relationships with your rep and vendor and create a win-win partnership.
Many independent retailers feel that they do not have much power with their vendors and don’t know that they can ask for more from the partnership; however, just as customers support your business by shopping in your store, you support the vendor’s business by carrying their products. When you succeed and are able to grow your business, they succeed by landing larger orders. Win-win.
So what should you do to prepare for your appointment?
1. Rate Your Vendors – Create a vendor scorecard.
It’s important to know how each vendor is performing by class in your store. This presents a starting point for discussions with your reps as to where and how they can improve in certain areas and capitalize on opportunities for growth.
- Rank your vendors by GMROI or profit margin. How do they compare to other brands?
- Compare vendor sales to total store sales to see how much
each vendor contributes to your profitability
- Look at vendor sell-through – how much did you order compared to how much sold? What was the margin for the class
and season? Did you have to markdown that inventory to sell
it? How much?
- Order fulfillment – is the vendor filling 100% of your purchase orders? Are they consistently delivering on time according to your delivery timelines?
2. Review – Use your scorecard as the basis for discussions with your rep.
- Tell the good with the bad. What classes/products really worked and what didn’t?
- Use your numbers to back you up; this is not an emotional
plea but objective, black-and-white numbers on a page.
- Review problem classes for the vendor and ask, “How can we
build/strengthen this together?” You can’t continue to buy
into that class from that particular vendor if it is underperforming; ask what strategies others are using to make it successful.
- Talk about what you have already tried to do to salvage underperforming classes/products.
- Don’t be afraid to tell your rep that you will have to put your buying dollars into something else if they don’t help.
3. Terms – Negotiate
Many independent retailers do not feel they have the ability to get different terms, but often, you can. Just ask. What’s the worst that could happen? Remember you are trying to build a win-win relationship.
Here are some options to consider:
- Net 30, 60, or 90 terms – Net 30 is the most common term for retailers, but why not ask if you can get more?
- If they are offering to ship you product BEFORE you wanted it, be sure ask for longer terms to pay for it.
- On-time delivery or right to cancel with no penalty and/or automatic discount – If you are using a buying plan, you have bought goods to land in a specific month. If the vendor can’t honour those dates, you should have protections
- First right to clear-out – When/if clear-out becomes available, ask for first access to the list.
- Staff spiffs – what can the vendor give you as sales incentives for your staff?
- Promotional items (gift with purchase) for your customers.
- Return to vendors – Did you have a product or series that had zero sell through? Dated product that just didn’t move? Talk to your rep to see what you can do to Return To Vendor (RTV). Sometimes they will allow you to trade the product for one that you know you can sell.
- Exclusives – Can you get exclusive rights to be the only retailer to carry the line within a certain geographic region? Is there any part of the line that you can gain exclusivity on that you can then promote to make you look special?
4. Extras – Additional things to ask for from your rep.
- Product knowledge training for your staff. This is a MUST.
- Co-op marketing dollars – ask for money to put towards marketing, promotions, or events. They get their brand(s) featured in your marketing and you don’t have to outlay so much cash.
- In-store demos – who better to demo their product than the
- Fixtures and display merchandise – fixtures and displays are expensive, so why not see what your rep can provide for you?
- Test orders on consignment – is your rep trying to sell you on the next big thing? Something new to the market or that you
haven’t sold before? If you have the space in your store, offer to test it out provided that they give it to you on consignment.
5. Maintain – Continue the relationship beyond the show.
Just like any relationship, part of building and maintaining your relationship with a rep is constant communication. Call them regularly to tell them how things are performing and see if there is anything new you should know about. Or simply call them to say “hi.” A little holiday card doesn’t hurt once in a while either.
HAVE FUN with it. Remember you both share a mutual goal: the SUCCESS of the BRAND.
Andrew King is the Editor-in-Chief of Canadian Music Trade.