The Competitive Edge of Specialty Retailing

What makes "specialty retailers" special? 

The special shopping experience they deliver.


How Specialty Retailers Differentiate Themselves Beyond "Customer 9Self) Service"


It doesn't matter what a retailer is selling – tires, hardware, electronics, books, apparel. Or, how big or small they are; Nordstrom, after all, is a specialty store!  

A specialty retailer's distinctive competitive edge is the special value they add to the shopping experience. 

See above for some quick examples of the difference between just "customer service" – which, increasingly, is customer self-service – and the specialty store retail experience


"Bank Lending Loosens", Say the Reports. Opportunity for Retailers?

According to an Associated Press report on June 18,
"Banks are making it easier for small businesses to get loans, and they're giving companies better terms and lower interest rates. 
"Banks are taking more steps to persuade small businesses to borrow,' said Dun & Bradstreet Credibility Corp. CEO Jeff Stibel. 'Interest rates are falling. Banks are willing to lend for longer terms. We're entering a New Normal,' he said."
This sentiment was echoed elsewhere.
"As the economy improves, businesses are able to get funding from traditional sources, and they are less desperate. We are starting to see a flight away from short-term, high cost money," stated Biz2Credit CEO Rohit Arora on their May Lending Index. 
Well. That sounds encouraging, doesn't it? It also might mark a fine opportunity for retailers looking to refinance, expand, or even acquire other stores.

How to take advantage? As always, especially as retailers, it is essential to do your homework.

  • Make a strong case for where your business is now
  • Show how your business compares favorably to others in your retail segment (the Retail Benchmarks at The ROI can help)
  • Prepare a cash flow plan, showing how and when you will repay the loan 

Approach Banks That Actually Lend to Small Business

And, not to be overlooked, search out those banks most likely to lend to retailers: the community banks. 

Here are 2 useful links for you from the Resources for Retailers page of Retail Startup (one of our microsites.)

  • Independent Community Banks Locator, from the Independent Community Bankers of America. Just enter your ZIP code, say how many miles you are willing to travel (from 25 to 100), and they immediately identify all the community banks in that area.
  • Banking Grades.  Based on data provided by the banks to the FDIC, this organization assigns a letter grade (from A to F) to banks for their small business lending. You can search by bank name, by ZIP code, by City & State, or by county. 

And here's another one from The Retail Owners Institute site:


All 3 of these resources might save you time, and hopefully, frustration! And, they're all free!

Are You Growing Jobs...for Your Customers?

The "Job" of the Customer Just Keeps Growing

Think about some of the programs  becoming more commonplace in retailing, either for their promised cost or time-savings:

  • More "self-service" (e.g., less staff on the selling floor)
  • Self check-out by the customer
  • Online searches by the customer for product information
  • Price lookup kiosks in the store
  • Online shopping   

Hmm.  Time savings – for who? Generally, not for the customer. They are being asked to take on more and more of the work.

This is happening in many retail settings, whether the shopper is buying coffee or blouses or tires. It requires the customer to use their own time and effort. And their smart phone! 
"Attention Shoppers: Bring your own cash register."  

Focus Now on the Transaction

Many of these technology “advances” are focused on the transaction. And as they become more commonplace, sure enough, it seems to us that the pendulum might be starting to swing back. 

Consider these two news items from early June:

  • “Legendary Los Angeles retailer Fred Segal is going global. They envision a ‘major reinvention’ of the luxury shopping experience, under the Fred Segal brand. which will combine fashion with dining, entertainment, cultural events and health and wellness programs.”
  • “Target names a new senior vice-president of media and guest engagement. Target continues to accelerate our efforts to innovate and evolve, and connect with Target’s guests in new and different ways.”

Showcasing Your Competitive Edge

But, here's the deal. “Customer engagement” is already alive and well in most specialty stores. It's what makes you "special". It does not need to be re-invented. However – it may need to be exploited! 

Especially in today's technology-driven environment, the customer engagement and shopping experience you already deliver differentiates your stores. It puts the "special" in specialty retailing. 

So, since you've got it, flaunt it! Dust it off a bit, spruce it up, bring it front and center, and shine a light on it!

And since it is difficult for many prominent retailers to match that (in fact, some are just getting started thinking about it), for you it can be a great competitive edge. 

Will "Retail Democracy" Impact All Retailers?

A newly announced "global study" by Oracle, the international hardware and software data management firm, of "what customers expect today", leads to what Oracle dubs "Retail Democracy." 
“The newly-emerging ‘access anywhere, commerce anywhere’ consumers are demanding access to availability, product information and price in a variety of ways."
Oracle's notion of Retail Democracy is an interesting concept, and, in our view, a likely harbinger of an important trend in retailing. (In fact, we see it as a continuation of the power shift we called "Retail Populism" some years ago, as online commerce was bursting onto the scene.) 

This is all well and good for analysts, consultants, bloggers, futurists, academics, etc. And for retailers who enjoy thinking about lofty issues.

But, once Oracle suggests that this study “requires that retailers re-orchestrate their operations”, we really slow up. Yikes! Such sweeping prescriptive "shoulds" for retailers must be viewed very carefully.
  • You see, asking survey participants about their preferences and aspirations just produces their wish list.
  • Similarly, asking how they would act in a hypothetical future situation elicits their good intentions. 

Predictions for Business Decisions

In our experience, wish lists and good intentions seldom – if ever! – translate into actual buying behavior. (Steve Jobs, among others, understood this very well.) 

While we relish reading about studies such as Oracle conducted, we always encourage retailers faced with business decisions to examine and learn from the actual behaviors of their present (and coveted prospective) customers. We find that past actions and behaviors are far more telling predictors of future actions.

Best of all, doing so does not require an international market research project. Instead, you can glean a great deal from the data you already have about your customers.

This “data mining” of your POS and ZIP code data, for instance, can provide new, invaluable insights – for free! Yes, it will take some time, especially at the start. Tally and analyze the numbers, compare-and-contrast the findings, and give thought to what it tells you and how to get the most benefit from it.

Have fun discovering more about your customers. But base your business decisions on their behaviors, NOT their wish lists or good intentions!

Remember, when it comes to your decisions about business spending, what your customers actually do is far more telling than what they say they will do. 


For more on the Oracle study, go here

Inventory Turnover...So What?!

We had an inquiry recently from a three-store owner asking about inventory turnover.
"Is it really important?" he asked.
Our reply, after being struck by the question, started out as less than adequate, to be sure. We explained the formula (Cost of Goods Sold divided by Average Inventory @Cost) and he politely agreed.

Then we explained the difference that turnover rates can make:

  • "For example, for every $1 Million in sales at 40% margin, the COGS would be $600,000. If turns were 3, average inventory would be $200,000.
  • "But – if turns were 4", we continued, "inventory would be $150,000, helping cash flow by $50,000."

Again, he politely agreed. Then, after a pause, he asked, "But, is it really important?" 

Finally, we got it! And our answer improved.

Key Number Each Month

An Open-to-Buy system that uses turnover rates as the "governor" projects not only the buying budget for each month. It also projects the targeted ending inventory levels for the end of each month.

"Like the white or yellow lines on highways," we offered.
"Wow!" came his reply. "You mean that our buyers should steer their inventory levels to hit those planned ending inventory numbers?"
"Well, that's what the pros do," we responded.
"Hmmm.  Now I see how it's all connected!
"Hitting those ending inventory targets will control my inventory levels. That will help the cash flow. And that will reduce our debt. All of which will help me get some sleep at night!! 
"Guess turnover IS pretty darn important!"
Then we tossed out the classic line from Michael Gould of Bloomingdales, who so famously told his buyers: "No retailer ever filed bankruptcy because their turns were too high."

Just a Retailer? Or, a True Merchant?

Everyone, and anyone, can be a retailer.

If you put on a garage sale, you are in retail; you are selling to the ultimate consumer. By selling on eBay or Amazon or Etsy or a farmer's market or your own stores, by definition, you are a retailer. And every day, The ROI is helping many of them worldwide.

But, just as in education, or in sports, there exists a highest, ultimate level of professionalism. In retailing, this is to be a "Merchant".

Acres of Merchants

A few weeks ago, we visited the huge outdoor Orange County Market Place® in Southern California.
  • It covers acres!
  • Open Saturdays & Sundays only, 7 a.m. to 4 p.m. 
  • The vendors sell all new merchandise – everything and anything – to the throngs that come each weekend. 
  • And, each year, in the 100 or so days it operates, it attracts 2 million visitors! 
It was absolutely fascinating to watch! 

We came away with a great deal of respect for the Orange County Market Place vendors who survive. They are pure Merchants. And, in our view, retailers who become Merchants will survive. (The others will contribute to the deplorable 8-9% annual failure rate.)

How Do We Define a "Merchant"?

These are the attributes that separate Merchants from "just retailers":
  • Merchants source for a particular group of customers. They are agents for the customers, not agents for - or beholden to - any vendor. 
  • Merchants closely monitor any changes in their customer group. 
  • Merchants judge every piece of inventory they own on whether it (still) appeals to their customer group. 
  • Merchants dispassionately add or delete products, services, locations, personnel as needed to best serve "their" customers. 
Think of retailers around you. 
  • Clearly, some are or have been led by Merchants: Starbucks, Costco, Nordstrom, Crate & Barrel, etc. 
  • Now, think of recent or pending retail failures.
See the difference? Whether large or small, the distinction between success in retail or failure is traceable to the Merchant-instincts between the ears of the top people.

Can any retailer become a Merchant? 
Indeed, yes! But to do so, 110% of their mindset must be on getting and doing what a specific group of customers will pay for. And to do that better than the competitors.

Want to see lots of Merchants?

Go to the largest Farmer's Market or Street Fair you can find. In that environment – as in yours – only the Merchants survive!

Mother's Day Promo That's Really About the Millennials

Retailing is a wonderful spectator sport. We pay attention  to retailers of all sizes, in all merchandise segments, at all price points.

And often, what we see is inspiring! The creativity and resourcefulness of merchants is a major part of the magic of retailing. We enjoy sharing examples of creativity in one segment to retailers in other segments.

For instance, consider the cleverly multi-faceted way one retailer, in this case Nordstrom, is approaching Mothers Day.

First, they're using major window displays that feature likely Mothers Day gifts. But what sets them apart is the intended audience for these displays: those "digital natives", the Millennials. 

Here's the message Nordstrom has on these windows:
"Here's How to Wow Your Mom. 
Download our app, scan the barcode on the window display of the item you want, and order by May 1 for delivery by Mothers Day."

In our view - (Note: We're just speculating; we've not discussed this with anyone at Nordstrom) - the Mothers Day merchandise Nordstrom will sell through these windows is secondary. We suspect that Nordstrom's #1 priority for this two week time frame is to connect with more of the Millennials.
  • This is a powerful prompt for Millennials to download the Nordstrom app. That's the key metric!
  • The emphasis is on ease and speed. That's spot on for this group! No need to go into the store. Just make your choice from the window display (or the app itself.) They barely need to slow down while walking by!
  • And then there's the reassurance angle. These time-pressed 20 to 35 year olds being targeted are the offspring of Nordstrom's established customer base. (So a Mothers Day gift from Nordstrom is a safe choice. Or, of course, it always can be returned!)

The Benefit for All Other Retailers

But, as clever as we think this is, here's why we are describing it: 
How might you be able to leverage this kind of thinking in your own stores?
You don't have to have an app, or a full time window display department. Just some inspiration, and a good idea of who you want to reach.
Then, 3 basic steps:
  • reach them, connect with them on their terms
  • make shopping easier for your desired customers
  • reassure them that they're making the right choice

So, That Question Again

We are asked frequently - and again last week it occurred - “Well, Pat & Dick, what’s your view on the economy for retailers?”

We began by recounting the challenges
“Well, this is the New Normal. That is, modest population growth, many fewer people in the Generation X valley between the Baby Boomers and the Millennials, and the sense that worldwide events may at any moment substantially impair our economy." 

Then, we also noted the positive indicators:
  • consumer confidence continues to rise
  • last week the stock market hit an all time record high
  • and of the 54 retail segments we follow, although some are suffering, most are doing quite well. (see Monthly Sales comps on The ROI site - compare your sales trends to your segment).

"Actually, It's Just Like the Weather"

But, here's the real key: in every retail sector, some retailers are declining, and others are doing quite well indeed.



What separates those succeeding retailers from all the others?
  • Those who are thriving tend to be focused on the “controllable variables” - managing inventory, expenses, people issues, cash flow.
  • Of course, they're always doing what they can to improve sales. But that's not as controllable!
  • And, they consciously choose to not be drawn into the distractions of the 24/7 bad news cycle, even though those around them tend to be.
In other words, the economy, like the weather, does have an impact on retailers. But, like the weather, the economy is beyond their control.



The best one can do is:
  • pay attention
  • stay nimble
  • adapt
  • and control the controllables!
That's why it seems to us the answer to the question - “Well, Pat & Dick, what do you think of the economy for retailers?” - is this:

Three things: Execution. Execution. Execution.

Monthly Sales Results Are Interesting. Here's How to Make Them Significant!

The "international greeting" among retailers is "How are sales?"

The response almost invariably includes a reference to Last Year. Sales are up versus LY, or flat, or down. This is the common metric among retailers.

  • The U.S. Census Bureau collects data on retail sales each month. Once again, The Retail Owners Institute® has analyzed the monthly retail sales by retail sector, compared those results to the same month Last Year, charted the results for the trailing 6 months, and posted them on The ROI site.
  • Go here to see how your results compare to other retailers in your sector. Now, thanks to The ROI, it's easy for retailers to get perspective. (For instance, maybe you find that everybody else in your sector also was down. Misery loves company!)

Interesting. But NOT Significant!

Comparing your own results to Last Year, or even to others in your retail sector, is interesting. How to make it significant? Just one way: compare your results to Plan!

Once you know whether sales are ahead of plan or behind, you can use the "lead time" to make adjustments!


And the most important adjustment for retailers is, of course, inventory!

For instance, take another look at your Open-to-Buy plan. 

The key number to be watching with an eagle eye: your targeted Ending Inventory for each month. 

  • Sales ahead of plan? You may need to adjust your buying to bring in more merchandise to meet your targets
  • Sales lagging from plan? Good thing you found out now! You still have time to make adjustments, and avoid excess inventory.

The ROI makes it easy for you to do all this. Just take advantage of our online BUYING PLAN Forecaster.  Available 24/7. Free!

  • Entries are easy and fast. Planned sales and margins for each month, plus Beginning Inventory at the start, and turnover rate. That's it!
  • Immediately see a monthly Open-to-Buy, including targeted Ending Inventory for each month.
  • Powerful. Fast.  Free, 24/7. Only at The ROI. Go here to use it for yourself.

Now THAT is significant!