Do I have a treat for you! I know I’ve become your go-to-online-marketing-for-retail-shop-owner guru. And I also know you love all the tactical info you get from my Shop Talk interviews. But this month I’m beyond excited to bring you a different kind of article that is still very relevant to your business. You’re gonna want to highlight so many sections of this article! So grab a cup of tea, sit in a quiet place and absorb all the gems you’re about to receive. This month, I had the privilege to chat with some very seasoned retail consultants who, not only were super
Back in April, I wrote about Sibling Revelry, a 21-year-old store that is invested in continual learning (learners are lifetime earners!). They shared that in the early stages of their business, they invested in a retail consultant, a highly experienced analyst who gives clients an objective view of their business and shares operational best practices with them. This inspired me to reach out to those very seasoned coaches I mentioned above to see what kinds of gems I could unearth for you, my loyal reader.
Enter Reedy Consulting. Founded by Robert Reedy and Allison Boswell (both previously buyers themselves and with 30 years of consulting experience), Reedy works with retailers to improve cash flow and profitability through managing sales and inventory. They work with a variety of retail businesses (not just apparel), but all of them are small, independent retailers that bring in anywhere between half a million to $25 million annually. As a testament to their success, the revenue for Reedy’s clients last year was just shy of $100 million in volume.
After talking with them, however, I realized that a common thread ran through their stories—and mine for that matter! It’s the mentality of being open to new things, continually learning, and investing in those new ideas, whether it’s social media, adjusting your buying patterns, or rethinking your customer service. And being in the fashion business as we are, I’m sure you agree that keeping up with trends is crucial.
The thing is, Reedy does it with hard DATA. Utilizing a database called Management One, they are able to help clients make very informed and hyper-focused decisions. The sales data that it offers can pinpoint trends like jackets that are trending even though outerwear in general is not or that dresses are down. The database will get even more granular when they move to SKU data in the near future. Big data like this in the hands of small retailers means big success.
“There are very few retailers—even bigger retailers—that would have as robust a system with the kind of deep, rich data that we have.”
These numbers are only one part of the formula, though. The second part of the magic comes from all the experience, success stories, and best practices that Allison and Robert have seen throughout their careers. The third component is you. Your mind needs to be open to possibilities!
“The funny thing about this level of information is that many times, it runs to some degree, contrary to what clients think about their business… People know what they know and it’s their reality. And when they’re presented with another possibility.
.. They have a hard time trusting it entirely.”
This proves to be true with established businesses who, for example, don’t think they need more black pants (but their sales explode when they finally get more) or that they always need to have white jeans on the floor (when in reality, they only sell one pear every couple of months). It’s also true for new store owners who think that they need huge inventory to fill their store, forgetting that they don’t have a clientele yet. It turns out that the management of inventory is a big problem for many of their clients because it directly affects cash flow. In fact, when I asked Robert and Allison to name the top three challenges facing independent boutiques, they gave me an unexpected answer. Unexpected because when I ask retailers this question, they say the challenge is from online sales or, more specifically, Amazon. Robert and Allison disagree. They say the top challenges are:
- Cash flow
- Cash flow
- Cash flow
Like I said, inventory management can be a big dam holding back cash if it isn’t managed effectively. Reedy likes to see things turn over because invested money (in new inventory) can grow into more money whereas a stuck $50 top cannot. Turning six times a year (highly recommended) means new merchandise every two months, so why order four months of inventory when it’ll just tie up your dollars?
If you do have extra inventory, they encourage actively marking things down at strategic times to keep that cash flowing. With data from their database and their knowledge of your store, Reedy can unclog your pipeline by advising you when and how much to markdown, what categories you should invest in given your situation, and even how to shift your buying timing so that you will have less need to mark things down. How great would that be?? And speaking from the social media side of things, you always want to have fresh inventory to feature in your social media feeds, right? Keep ‘em coming in to try stuff on!
It almost goes without saying that there is not one formula that fits all when it comes to deciding inventory, category, and sales strategies. What consultants do is help you figure out a customized sales plan. In Reedy’s case, they factor in your recurring expenses, including rent and payroll, to figure out what your sales need to be. They then plan sales according to seasonal variations they’ve seen throughout their career. They also look at your categories separately to decide how often your turns should occur. This is when their metrics on all different classifications shows its value. They give a store an opportunity to compare themselves to a baseline built on real numbers.
Before you think that this could only be applicable to a niche group of retailers, let me tell you that Reedy has not only helped apparel stores with this information, but even a store that sells fishing gear and guns! They didn’t know anything about their world, but by utilizing the same planning method of seasonal buying, aiming for turns, and targeted markdowns, they still got them to increase their profitability. Clearly there are some shared truths across retail stores so that no matter what Reedy’s 12-month plan looks like for one store, they will typically encourage habits like buying close to delivery, not leaving an order at market if you haven’t totalled it, being up front with your rep or vendor about your needs so you don’t overbuy, and even negotiating with your vendors! In fact, not negotiating with vendors is a big missed opportunity with seasoned owners. You can go to your vendors with hardcore information, like an MSRP that is hurting your business, and ask for their help—with advertising, credit, dating—or whatever form they can give it. It never hurts to ask.
Keep in mind that your formula can change, too. Don’t plan according to history (remember that white jeans example?). Plan on your current level of performance, current trends, and current opportunities. You can only do this, however, if you take the time to look at your numbers. According to Reedy, it is the most common mistake made by store owners. The numbers will help keep emotions from making the decisions that could lead to inventory and cash flow issues.
Another common mistake is overbuying the highest-volume category. An understandable reflex to a hot-selling category is to buy more of it, but you can’t just buy more of the merchandise that’s hot if you already have all the merchandise you need. Reedy explained with an example:
“If you spend way more money on dresses than you need, you’ve eroded your best profit opportunity.”
You can, however, plan a cushion for re-orders. Just because you have a budget to spend at market doesn’t mean you have to spend every dollar. Holding back 20% gives you control over reorder opportunities without endangering your budget or inventory. It also serves as a buffer for unforeseen situations like poor or non-selling items.
The other big factor that affects cash flow is your sales staff. I spoke with Reedy for quite a bit of time about sales training (having done retail sales myself, I had a lot of input) and how it affects the revenue side of cash flow. They believe in training staff exactly according to the owner’s expectations (in regards to customer service and interaction) and that new staff should be reviewed just after three months, which gives you the opportunity to train them as you measure them. However, they are more concerned about staff as a business expense. Staff is typically the biggest expense after rent, but their research shows this can be managed in a way that is more successful for both owner and employee. sales staff should be hired on an hourly+commission basis. They admit that this usually strikes fear in the heart of retail owners who fear a negative vibe or arguing salespeople in a small store. Yet it’s a proven successful business tactic and according to Reedy, most of the successful specialty boutiques are commission based.
“Any salesperson that is really really good will realize that they can make more money by increasing their sales and that motivates them. And then from the owner’s perspective, even if they sell more, their percent to the payroll doesn’t change… it’s sales growth without salaries going up.”
Robert offered an example of a client that took three years to agree to the incentive program. When she finally tried it with a sales manager and after six months, the client came back to them saying “I’m sold!” because her business started growing by double digits! And we’re talking 30% one year and 20% in the year after that. I’m convinced and I don’t even own a store!
There are a couple things that Robert and Allison shared with me that hits closer to my home front and that is social media and the store experience. We’ve covered this a lot this year, but it’s interesting to hear it from people whose work is to observe the inner workings of dozens of stores. Suffice it to say that they know that social media worries a lot of business owners.
“Everybody that I work with right now, they are working harder than they ever have before
because10 years ago… the social media skills necessary to market your business demanded a lot less attention and in some cases, some clients weren’t even doing anything five years ago. It’s a big black hole to them and the other side to it is: they’re already stretched thin as it is… It keeps them up at night. The last three clients I had this week have all admitted the fact that they wish they could find somebody that they could hire to do their social media so that they could be creative about it but they wouldn’t have to dive into the minutiae of actually doing it because they don’t think that they’re good at it.”
For those of you who do struggle with time and social media, I hope it helps to know that you’re not alone. Take advantage of the new resources around you. I’ve published many articles on the blog about social media and online marketing that are totally do-able for a beginner and you can always monitor your competitors to see what they’re doing. It was also helpful to hear Robert talk about the importance of the customer experience. It means a lot coming from professionals who are focused on the business side of our businesses.
“The nice thing about retailers is that they’re very visual people. The majority of the time, what you have to do is focus in on what makes you different. What makes you unique and tie that into a vision and create an experience. In the last couple of years, people have talked much more about the takeaway, or the experience, when you come into a store. The merchandise drives it to a greater degree, but it’s also partially the service, the people that are on the floor, on the front line. They’re the ones that interrelate with the customer. So if you’re on-message with all those things and you’re working hard to make yourself different and create an experience… people that embrace new strategies can prosper no matter what the economy. Even during the recession, there were those few clients who didn’t get scared. Yes, they paid attention to a lot of things very very rigorously, but they still did well in spite of the downturn in the economy.”
You heard it here, folks! The numbers that don’t have dollar signs in front of them (social media engagement) and the things that can’t have numbers attached to them (in store experience) count as much as the actual dollars themselves, and in fact, they help grow the dollars.
This was such an invigorating interview for me—jam-packed with a lot of information. I’d love to hear what you learned and also what you thought of this type of article. It’s different from what I normally do but I thought still supports what you all do.
If you’d like to meet Robert and Allison or ask them about their FREE consultation and analysis of your business, their information is below AND they’ll be in Las Vegas at the MAGIC show next week so stop by, say hello, and tell them you read all about them here!
Retail Seminars Monday August 12
Las Vegas Convention Center
Central Hall – Buyers Suite 64145
For times: https://www.management-one.com/magic2019