Archive for June, 2008

Saturday, June 28th, 2008

Poker, Furniture, and Life…

From the 1998 Matt Damon and Ed Norton movie “Rounders,” about the underground poker world of Boston, we can take to heart one of the best business quotes of all time: “A lion survives by being a lion and a mouse by being a mouse.”

It seems lately during almost every conversation this quote jumps to the sketchpad of my mind. Why? Because many independent business owners, feeling the pressure of the difficult economy, are flailing around looking for the miracle cure to what they believe ails them.

Joey Knish, the movie’s card-shark philosopher, was trying to explain to Mike McDermott (Damon’s character) that the only way to win at cards and in life is to be who you were designed to be.

You didn’t become the dumbest person in the world overnight just because your sales are down. However, the flip side of this coin means you probably weren’t the smartest person during your last growth cycle. Growth comes from somewhere outside of your control, but that is another post (one I’m looking forward to writing.)

Assuming you haven’t changed policy, procedure, product, or promotion of your company just before business got tough, I for one will say, “It must be some outside forces causing this decline.” Great. It’s not your fault. But the bank, your employees and your customers still want what they want and expect you to continue to deliver it.

Which leads me to what I believe is the single biggest problem facing independent retailers all of all types: inventory control. Inventory management in the furniture business (my area of expertise) is so out-of-whack that many store owners and merchandise managers have apparently forgotten the old adage that cash is king.

I know dealers who are over-inventoried by more than 20%, who have decided to cut their advertising, turn off some of their showroom lights and lay-off employees rather than do whatever it takes to reduce this inventory!

When offered consulting services that will cost $10-20k over a twelve month period of time focused exclusively on trading $275,000 of excess inventory for the same amount in cash, I’m told, “We can’t afford it.”

Back to Rounders. Knish explained to Mike, “In a heads up match, the size of your stack is almost as important as the quality of your cards.” This lesson could easily be rephrased, “The size of your cash reserves is more important than the size of your inventory.”

A little more sage advice from Rounders is this, “Throw in your cards the moment you know they can’t win…fold the hand.” For those of you who ARE NOT GOING OUT OF BUSINESS, I would tell you not to lay down and get you head beat in during this downturn! If you’ve decided this isn’t worth the work, then contact me to discuss how to get the most out of your going out of business sale.

The last bit of advice from Rounders comes from a conversation between the two lead characters, Mike and Worm, as they discuss the fallacy of a lifetime, that is, “People insist on calling it luck.” Winning at cards or making money at retail is almost never about luck!

Tags: Add new tag, family business, furniture stores, going out of business, inventory reduction, management, retail furniture
Posted in About Retail | 1 Comment

Friday, June 27th, 2008

Idiom: Home

“There’s no place like home… there’s no place like home.”

If you keep up with our posts at The Lively Merchant, you’re likely in retail. You make a living selling stuff for your customer to put in her abode. What do you really know about this place she calls HOME?

Where exactly does she live? Have you at driven through your best-selling neighborhoods?

Are there swing sets in the backyards and bikes on the sidewalks, or neatly trimmed shrubs and clean swept patios? Are there minivans overflowing with sporting goods and fast food wrappers, or Buicks and Caddies tucked into organized carports?

How many people live there? How old are they? What are their hobbies?

Now, how do the products and services you offer in your store make her want to invite you into her home for a cup of coffee?

Do you want to know these answers with certainty instead of taking a wild guess? Contact us to glimpse behind the magic curtain and see what life’s really like in her home.

Posted in Communication, Family Business, Products, Retail Idioms | Leave Comment

Friday, June 20th, 2008

Idiom: Selection

Your customer loves Wal-Mart.

Well, she likes the idea of Wal-Mart, even if she doesn’t like the company. She likes getting groceries and greeting cards, toys and toiletries, sporting goods and sportswear all at one place. Say what you will, Wal-Mart does offer selection!

Do you tout your store as being a “one-stop shop”? What does she ask for that you don’t carry? If you’re not going to carry it, can you form a strategic partnership with someone who does? You know…. you scratch their back, they’ll scratch yours?

How does the depth of your assortment meet your customer’s demand for selection? Do you have something for every room in her home, every price in her range, every style in her mind, every need in her life?

And, can she get her oil changed while she’s at it?

Posted in Communication, Products, Retail Idioms | Leave Comment

Saturday, June 14th, 2008

Cultural Code

What is culture? How does it play out in family business?

A culture can be defined by four foundational stones. They are artifacts, perspectives, values, and assumptions (Schein 1985, Dyer 1986) and on these, researchers agree.

I’m wondering how you may view your family’s and your bisiness’s cultural code? Family units are built upon these same principles and the family business is often an extension of the family themselves.

Artifacts are the physical, tangible part of culture including layout of your store, staff dress, company logo, jargon, stories, myths, and ceremonies- might I know you by your uniform, or your lunch parties? Perspectives are the rules that govern decision making. They might be defined as how your employees act when your back is turned. Without question these perspectives are driven by the family manager in charge; however, perspectives are best explained as “group think,” the normal way specific problems will be handled. Examples of perspective are training for new hires, new product launches, performance appraisals, raises, and how they are implemented. The third cultural component is values. Values are different than perspectives because they are not situational. Values are broader, for example, we provide good customer service, or don’t cheat people, or we never question authority. The final level of culture that was uncovered by this research is assumptions. Assumptions lay the foundation upon which the other areas are built. To me, assumption makes me think of the lens of a microscope which is used to improve the focus on an object as you’re trying to get closer to discover its makeup.

Think closely about your company’s four stones. I’m pretty confident if you’ll take the time you’ll begin to see clearly this research is right. Artifacts, perspectives, values, and assumptions play a huge role in how your family business gets things done on a daily basis.

If ordered differently these four cultural stones will produce different types of family leadership. You should also consider a belief of mine, that the strength and focus of the family will also shape these foundational stones. Gibb Dyer’s research team found there are four basic types of family business cultures resulting from the “cultural code” produced by interaction of these four stones. The types of culture are laissez-faire, paternal, professional, and participative. (In a future post I’ll clarify each of these types.)

“Why does this matter?” you might be thinking. Culture and leadership types will be very big keys to your successful transition as you consider the future of your family firm and begin to look toward the time of generational transfer. Thinking about more than this week’s promotion, inventory levels, electric bills, and cash flow will result in a transition where more assets are kept among the family. If you believe business transfer is simply you deciding which one of your family members you’ll allow to buy a controlling amount the company stock, I’m afraid you’ll be very disappointed in the results.

If you decide you would like to have personal conversations about this subject don’t hesitate to contact me.

Tags: family business, family personality types, furniture business, retail, retail furniture
Posted in Generations | Leave Comment

Friday, June 13th, 2008

Idiom: Brands

“Choosy Moms choose ________.”

“When you care enough to send the very best.”

“Quality is Job 1.”

Feeling adrift in a sea of selection on the showroom floor, a recognized brand is like a life raft to your customer. It’s like seeing a familiar face across the room at a crowded cocktail party where you know no one.

She reasons: “If I’ve heard of it, it must be good… or, they’ll make it good. I’ll get a better product and better service from a bigger brand. When my parents bought this brand it lasted forever, so this one will, too. The fancy label will even impress my neighbors.”

Is your customer comforted by the brands you carry? How do you live up to the expectations these brands create?

Or, is there a customer who scorns alligator shirts and logo-ed luggage, who is more concerned with price and availability? Why should she care about the brands you boast of?

Posted in Communication, Family Business, Retail Idioms | Leave Comment

Thursday, June 12th, 2008

The grip and all its trappings

In a previous post I wrote about the archetypes of personality. These archetypes seem to have been imprinted within each of us. To me the key to understanding is to realize at any giving time we may be acting in the father, or hero, or faithful family dog role.

Our archetype can quickly change when we enter the grip. In fact everything changes when the grip has a hold on us.

The grip is a name given to stress by Dr Naomi Quenk, the leading national expert on the inferior forth function ; the area of ourselves we are least likely to enjoy visiting. It has been described as an undesired eruption into consciousness of our deepest secrets. The grip shows up in the way we act when we are ill, fearful, lonely, tired, or hungry. She describes the grip as overreaction, single focus, and highly emotional. You’ll know you’ve been in the grip and returned when someone says to you; “That’s was unlike you.” This is often a person we are not proud of.

This forth function, unfortunately, is the area where many business decisions are made. We have all heard that change isn’t likely without pressure. In business, pressure comes from lower sales or higher expenses. During this current difficult climate both lower retail sales and higher expenses need to be dealt with daily. It is no fun.

But the decisions you make today will affect the course of you company for years to come. Remember, the grip is emotional and out of character decision making.

How can you get quickly out of the grip and back to your normal decision making style?

Try these:

Get up fifteen minutes earlier in the morning. The inevitable morning mishaps will be less stressful.
Prepare for the morning the evening before. Set the breakfast table, make lunches, put out the clothes you plan to wear, etc.
Don’t rely on your memory. Write down appointment times.
Do nothing which, after being done, leads you to tell a lie.
Practice preventive maintenance. Your car, appliances, home, and relationships will be less likely to break down/fall apart “at the worst possible moment.”
Be prepared to wait.
Procrastination is stressful. Whatever you want to do tomorrow, do today; whatever you want to do today, do it now.
Plan ahead. Don’t let the gas tank get below one-quarter full; keep a well-stocked “emergency shelf” of home staples; don’t wait until you’re down to your last bus token or postage stamp to buy more; etc.
Don’t put up with something that doesn’t work right. If your alarm clock, wallet, shoe laces, windshield wipers – whatever- are a constant aggravation, get them fixed or get new ones.
Allow 15 minutes of extra time to get to appointments.
Eliminate (or restrict) the amount of caffeine in your diet.
Always set up contingency plans, “just in case.”
Relax your standards. The world will not end if the grass doesn’t get mowed this weekend.
For every one thing that goes wrong, there are probably 10 or 50 or 100 blessings. Count ‘em!
Unplug your phone. Want to take a long bath, meditate, sleep, or read without interruption? Drum up the courage to temporarily disconnect.

And here is my bonus offering…realize the world doesn’t have to be so hard.

Simplify, simplify, simplify. . .

Tags: family business, Persona, personality type, retail
Posted in Personality Type | Leave Comment

Monday, June 9th, 2008

Your Media Mess

David has a great presentation called “Manage Your Media Mess” that helps you get the most bang for your media buck. He was taught by one of the masters, best-selling author Roy H. Williams of the Wizard Academy. Click here to read some straight dope from Roy about choosing the right media.

Says the Wizard of Ads, “Ad campaigns don’t fail because someone chose the wrong media. Ad campaigns fail because someone chose the wrong message. The job of the media is to deliver your message. Your job is to give the media a message worth delivering.”

And, we would add, your job is to give the customer the experience you promised in your message. David can help with that, too.

Posted in About Retail, Communication, Family Business | Leave Comment

Friday, June 6th, 2008

Idiom: Preparedness

She says, “How much is this?”

You say, “Well, I’m not really sure. Let me go look that up…”

She was never a Cub Scout, but your customer knows what it means to “Be Prepared.”

She happily traded her Mini Cooper for a minivan and swapped her briefcase for a diaper bag. At any given moment she is within arm’s length of a baggie full of Cheerios and a change of clothes for every member of the family. She always has a tissue, a nail file and a safety pin.

So, what kind of impression does it make when you can’t find the price of the item she likes? Or when no one is available to make a decision about her problem? Or when you deliver her new purchase – for which she paid top dollar, thank you very much – and it’s not even the right item? Not the right color? It has a tear or a scratch? It’s dirty? It’s missing parts?

Are you prepared for her?

Do you do your best to do your duty?

Posted in Retail Idioms | Leave Comment

Tuesday, June 3rd, 2008

The Funnel to Failure

Store owners and general merchandise managers know that good inventory management is essential to producing profits. You also know that bad inventory management can cause failure and limit profit.

Soaring Inventory Strangles!
Source: Outdated non-salable discontinued inventory leads to high taxes and increased opportunities for theft.
Result: Lower margin

Most studies show the annual additional costs for excess inventory can be 25 to 33%.

Here’s the deal: First, estimate the total inventory at cost you currently have on hand. For example, $100,000 of inventory on hand at cost. If you carry 15% more inventory than you actually need, what’s it cost you?

$100,000 inventory x 15% excess = $15,000 in excess inventory
$15,000 excess inventory x 25 to 30% = $3,750 to $4,500 annual waste.

The cost of holding excess inventory could be sidestepped if you invested in an inventory management system that would last you the life of your business and pay for itself in a year’s time.

Source: Low gross margin causes pressure to sell more in order to maintain appropriate cash flow. Pressure to increase volume results in higher selling, advertising and operating expenses.
Result: Increased expenses = reduced profits. Pretty simple!

Being over inventoried leads to two serious operational failures. Typically, once you figure out you’re in inventory overload the next step is to increase advertising in order to increase traffic by promoting some version of clearance, liquidation, or other gimmicky transactional promotion. As soon as the gimmicky promotion begins to drive foot traffic higher, your selling cost as a percentage of sales increases and the GM% decreases.

The process I’m describing is playing out daily in retail stores throughout America. Visually it looks like a 1980’s beer bong; profits seen funneling quickly into the belly of the already overly intoxicated crowd.

Source: High inventory causes poor cash flow.
Result: This results in excessive debt servicing, slow selling inventory remains in stock and best sellers become difficult to re-buy.
With every sales transaction, cash is generated, which drives the system. Cash is used to purchase inventory and pay expenses. The faster this cycle turns, the more efficient and expedient is your use of your investment.
Hopefully you have a good banker who will inform you of the destructive cycle that is beginning. If your banker loans you money, he or she will also want to improve your inventory control to squeeze the excess cash out of your inventory. This problem may appear temporary, but it may not be. The loan is a short-run solution: it will not eliminate the long-run problem.

Plan for Inventory Needs

How do you know if you have high inventory? One way to judge is to determine your current inventory turnover rate (sales divided by average inventory at retail OR cost of goods sold divided by average inventory at cost). To get the most out of your inventory, settle on a turnover rate producing just the right flow of merchandise to enhance sales, optimize cash flow, and maximize your profits.

Effective inventory management takes planning—not dumb luck!

I cannot emphasize enough the importance to plan your inventory needs, which means implementing an open-to-buy system. This enables you to commit yourself to receiving a certain amount of inventory in a given amount of time. These amounts are predetermined based on a carefully calculated sales plan and corresponding inventory level (based on your predetermined turnover goals).

Keep this in mind before you embark on your next season’s purchases. The hottest new merchandise is not always the solution to what keeps you awake at night. Cash flow improvements will only come from a conversion of bad inventory to debt reduction. And new inventory that turns at the correct pre-planned amount. Anything else is like moving your credit card debt from one interest card to another. It feels good now, but the problem remains.

Posted in About Retail, Products | 1 Comment