7 Things I Wish I Knew Before Opening A Retail Boutique
If you own or are thinking about owning a retail business you might be thinking, "Why are all the people that claim to know so much about retail no longer in retail?". It's a legitimate question. Around every corner, a 20 something is promoting an e-book about how to turn your brick and mortar ship around or even get it breathing life in the beginning and then asking you to pay $$$$ for their advice when coming up with $$$$ is the biggest problem you have!
As the owner of a few brick and mortar stores, I too am bombarded with advertisements all over my email and social media. And of course we are tempted to click the ad because they promise a blueprint to success but after your money is spent, you are deeper in the red than before because your focus has been stolen. Now you find yourself asking yet again, "What is the answer to MY problem? That wasn't a blueprint, that was a rah rah speech. Can someone tell me something concrete - a formula or two that is standard? What do other people who CURRENTLY OWN retail businesses know that I don't yet?".
So that is why I am typing this up. I am not a coach. I am not a blogger and I don't want your money. I own retail stores and have made more mistakes (including clicking a few of those ads I mentioned above) than I can count but I think I have learned some things. I have some advice and some formulas, guidelines, & tips that I wish I had known long before I finally did and best of all... because I have no fear of being judged for my advice as a coach or guru, I have no problem telling you the stats I go by, be they right or wrong in anyone else's opinion. So in no particular order here they are....
HOW MUCH SHOULD I PAY IN RENT
Your total rent including taxes, insurance, and common area maintenance should target at about 10% average monthly gross revenue. This took me forever to figure out! Do I put my store in a sleepy side of town for nothing OR on the best damn slice of the best damn street in town for mucho rento? An example would be that if you do $480,000 in annual sales from your store the average would be $40,000 per month which means that your all in target for monthly rent should be $4,000/mo. Now... If you are in the sleepy side of town you need to ask yourself another question, "How much will the ads cost to get people here?". Because if you pay $2,000/mo in the middle of nowhere and three magazines, two tv stations, and 12 facebook ads cost you $3,000 more, there is some data to evaluate. I am a huge proponent of "best location" strategy for retail brick and mortar and my reasoning is more than ever relevant right now. We Never know what the advertising platform winner might be at any given time. For instance, I have spent $2,000/mo on our Santa Fe store ads for print magazines and in one month's time store visits tanked by more than 50%. In a desperate attempt at getting people to the store we launched a $700/mo google ad campaign and saw visitors skyrocket for one month and then tank again! Never was it enough to disconnect from print ads because these are super relevant however people's attention is the market you are budgeting for and at any given time, that market changes. AMANDA's BEST ADVICE: Location, location, location. No ad can do what constant traffic based on location can. Do NOT be afraid of competition. Nothing attracts a crowd like a crowd. This is the same reason you see car dealerships and furniture stores surround each other. Think about it, if YOU were going car shopping would you head to the area with just one choice or to the area with lots? Location always wins in most retail situations.
How Do I Know When To Hire
$1,000 per active employee per day. Don't get wrapped up in this one because clearly rent and location have a major factor but this is a rule of thumb in my experience and to this day, scheduling of staff is based on this model. An example would be: Manager of store is looking to make a calendar of staff needs for the next 30 days. In the past, the store typically averages $1700 per day on Sunday-Thursdays, $2500 on Fridays, and $5000 on Saturdays. This means that in addition to the manager (the first $1000), an employee should be present 7/10ths of the daySunday thru Thursday. On Fridays, There should be the manager and 4 other full day employees. I find that the higher the volume and the smaller the store, this can be on the heavy side at times and so 4 employees total is probably fine unless the store is very big and heavily relies on customer service like a shoe store.
What Is The Best Way To Display Merchandise
This has so many variables and so I am going to answer it based on general guidelines and best practices. First, put newest inventory in the front of the store. You want repeat visitors to always see what's new to get them excited about continuing their search. If you do not restock often (more than 1x per month) then you need to be moving your store around at least once a month. When products are selling slowly in our stores the first change we make is where they are being displayed. If that doesn't change things we adjust the price. The next step if its still not moving is to change how it is displayed. We have a shopper bag in the stores that in the beginning bombed. We moved the price from $49 to $29 and it helped but still wasn't a heavy hitter. Then an employee folded all of the shopper bags into a cute rectangle and tied a twine bow around it, then placed about 20 into a basket. Next to the basket he filled an unfolded shopper with groceries and colorful fruits. Within a week we had to move the price back up to $45 where it remains to this day. Another rule of thumb in display is to not overcrowd the floor. This is bad for your customers brains because as humans we need order to make firm decisions. Think walking into a messy thrift or antique store versus walking into an Apple store. If you do have limited space, make sure everything is color coordinated and clearly organized. Bags with bags, jeans with jeans, etc. It is ok to have a lifestyle display but keep the floor organized and make it easy for your customers to find what they need. One of my favorite stores is a lighting/antique hardware store in Los Angeles. We have the same type of store here in New Orleans and it totally stresses me out when I try to decide on anything. The reason is that I am not sure if something better is hiding somewhere else in the store. The LA store blew my mind when I first walked in. They had 3x the amount of stuff but EVERYTHING was in perfect order and easy to see. I can go on for 10,000 pages about display but a few highlights are... Use great lighting, hang mirrors high and angle them down to save room and flatter your customer, use consistent easy to read (preferably typed) signage and tagging, create a flow so that the customer walks in and to the right then place sale items in the back left so they follow the opposite side and see all your store has to offer.
HOW MUCH INVENTORY SHOULD I BUY
Inventory is a headache whether or not you are just beginning or have been at it a while. There never was any standard formula I could find that gave me an idea of how to best plan inventory, not just for demand, but for optimum cash flow. My answer after almost six years is 60 days. You should buy enough inventory to last you 60 days at a time which at first will be a total guess but after you have a few weeks data you can calculate this number. For this reason it is extremely important to setup your POS to track each item as well as its variants such as size and color so you can see what your customers are demanding. There was a time that I was able to get significant discounts by buying things in bulk up front and here is why that turned out to be the worst decision I could make: Let's take the shopping bags example from above. Back before we manufactured these ourselves, I was told the minimum order would be 300 bags, each costing me about $15 landed to my door. That is a $4500 up front cost however I found that I was only selling about 50 of these per month so I had purchased 6 months worth of inventory the very first time, not knowing if it would even sell! So I found another supplier who allowed me to make an order of 100 units for $17 each and so the next order I had an up front cost of only $1700. So how do we figure up what that means for cash flow? Well lets say that because I only spent $1700, this saved $2800 from my previous purchase of 300 units ($4500-$1700 = $2800). If I can only sell 50 units per month, that extra $2800 was doing nothing for me before except sitting in dead inventory. So what if instead I was to take that $2800 and purchase another product to sell? Let's say a new hot selling dress costs me $100 to buy and I can sell for $200. So I buy 28 units of these and in the next 60 days double my $2800, which means that by paying just $2 per unit more on 100 units of shopping bags, $200 total, I was able to make an extra $2800! It is time over effort and cash flow makes you more money, period! 60 days is ideal and after that start dumping it to get your cash back and retry. It is better to not have enough than to have too much.
Like my merchandising disclaimer above... Marketing entails too many variables and channels to summarize in a paragraph so I am giving you the hard core principles vs the techniques here and I will say it in 3 steps: Step 1 - Determine WHO your client is. I cannot stress this enough and although many of you sell things to multi generations of all sorts of backgrounds, unless you find the least common denominator of your target client, marketing will be a colossal failure for you. If you truly do cater to "everyone" my best suggestion is to STOP immediately and start niching down to a specific audience. Step 2 - Determine WHERE your particular client's attention is. Are they on facebook, instagram, twitter, newspapers, magazines television, etc? You cannot choose all of the above and be effective so narrow down to 1-2 channels that you can get in front of your ideal client and stick to that. Step 3 - Create a strategy and stick with it for at least 120 days, preferably 180 days unless it is just bombing after the 120. Please please please do not confuse posting a bunch of pics of items in your store as a strategy because it is not. That is shotgun advertising and in most cases you will go broke before you have any decent return on investment doing so. Don't show them what you have, show them who you are! Think about customers the same way you think about meeting new friends. When you meet someone new you do not say, "Hello, I am Amanda and we are now friends." That would be a little creepy! Instead, you introduce yourself and go down the road of exploring each others ideas, likes, dislikes, humor, beliefs and eventually determine if its a fit. Same goes these days for retail. Show the world your store's personality! What kind of music do you play? Who is your favorite football team and what movie is your favorite? Sprinkle photos of product in between. With that I will go on to the next topic.
HOW DO I TREAT CUSTOMERS IN MY STORE
If you have not read all of #5 please do first because even though most gurus thing marketing is the most important part of a retail store's success, I disagree and here is why. Store energy determines your ultimate success. As retail brick and mortar store owners we have something that online merchants will never have and that is the in store experience. Everything I have learned by having a store in the French Quarter of New Orleans I have learned from the concierges, bartenders, and waiters that surround us. When people come in our store the music is funky and fun, more often than not, it's disco! Everyone is greeted and the experience begins. We talk about our product quickly up front and then start asking the customer about themselves, "Are you visiting and from where?" "Are you up to anything fun this weekend?" "Have you tried the ice cream down the street at Sucre?" Anything that starts a conversation and ultimately a relationship. My company has many things it still needs improvement with and always will but one thing we have down is customer experience. If you aren't bubbly, hire someone who is! The thing is, people want to feel special and if you give them an experience, chances are they will do your marketing for you. We recently had a contest where we gave a chance at winning a trip for two to New Orleans for 2 nights on us and a chance to design their own product in our manufacturing facility. The thing is, most people have never been to the factory but the contest post was FULL of compliments on their experience in the stores and how coming to our stores when they visit New Orleans is as important as having a drink at their favorite bar or brunch at their favorite restaurant. We are "part" of their New Orleans experience and for that reason they send every person they know back home to our website and into our stores if they are visiting. It is by far the best way of guaranteed growth year over year for free by any retailer.
WHAT DO I DO WHEN I AM FINANCIALLY DISTRESSED
Unless you are a super human robot, you know what financial distress is and how much it can affect your business and willingness to move forward. Notice, I do not have a topic on how to avoid financial troubles because I think that is impossible! It happens, especially if you are growing so don't let it scare you. Now I have personally experienced some grueling financial setbacks so this is a topic I know quite well. There have been times in the past where we were "borrowing from Peter to pay Paul" at the first of the month just to make payroll and rent and I have news for you... It will most likely happen again. This is a fact of life for retailers and even though our company does well into the 7 figure range, tightening the belt still happens and it always will, just on a larger scale. So either get used to it or try your hand at something new. This is not to say that some expenses could be avoided and some businesses can go for a long time without these issues however it is always a threat and over time will always cycle back. The trick is to know what to do so that you are best prepared for it. My first bit of advice is to get a book keeper or an accountant or both as early into your business as possible. I hate doing taxes and that meant I was always behind. The amount we have paid in penalties for that is embarrassing and raises my blood pressure just typing this. I will tell you that I made the mistake of not realizing that my sales taxes for both the city and state were not combined via the payment portal I used. To be honest, I paid them so late that the automatically calculated penalties were making me think the total had to include both. I did this for 4 years, not realizing I had never paid my state sales taxes of almost 5% per sale. The terrible thing is that once I realized it I was too ashamed to tell my partner and even though I knew I needed an accountant to help me I was too ashamed to tell any prospective help what I had done. To my surprise, when I finally did come to terms with it, the accountants I spoke to had been through far worse situations and this was just a fact of life and something they see all the time. Own your financial mistakes as soon as you learn of them, there is ALWAYS a solution if you go about it hat in hand. With that I want to say something that I hope to someday soon speak more about... If you want to be a business owner, you can be an absolute rock star once you realize one thing. In order to be in control of your business in all the ways possible, you must educate yourself on business. One of my favorite tv shows is The Profit on CNBC and when I first watched it I was somehow comforted by the fact that all these other small business owners had the same problems I did. I watched the show religiously and from my couch, the problems and the answers became so obvious that each episode gave me hope I could finally see the light and would start the next day as smart as the host Marcus and all my problems would fall away. Well let me tell you a secret, one day I found out my company was chosen for the show and although I am under contract until it airs to not speak about the specifics and outcome, I can confidently tell you that no matter your circumstances, your success will always come down to you. Every day is a lesson so take the good and learn from the bad and as often as possible, educate yourself! Educate yourself on business, finances, HR, inspiration, sales, management, and everything else you can to help you get there faster. It is the only way. XXOO
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