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TOP 10 MISTAKES OF ESTABLISHED RETAILERS

Any top ten list is someone's opinion, in this case my own based on my years of experience, first as comptroller for a family owned apparel store and then as a consultant. You may wish to change the order of this list; but all of these are, to some extent, the most damaging mistakes made by competent store owners and managers.

Be careful that you do not fall into any of these traps.
10.  Excuse management
 9.  The Lone Ranger    
 8.  No plan  
 7.  Neglecting disaster recovery  
 6.  Managing from the rearview mirror (That's the way we've always done it) 
 5.  Not using social media  
 4.  Ineffective or no web site
 3.  Buying Cheapest  
 2.  Purchasing based on "gut" feel
 1.  Hiring a dishonest employee

10.  Excuse management
When a retailer opens their store, the goal is to sell goods at a profit.  In excuse management, when the going gets tough, the excuses get going.  "The economy is flat in our region; no one is profitable."  We heard this over and over during the last recession, yet all through 2008 and 2009, we consistently had stores continuing to do well even in areas hardest hit.  The difference:  these retailers worked to broaden their customer base and offer the best service and choices to their customers in their area.  They had done their homework and they knew their customers' likes and wants.  They had a plan, worked smarter and bought leaner.  As a retailer, you need to build value into the presentation of your merchandise and always, always, seek to increase your customer base.  Even during tough economic times, some people are out buying.  Don't wait for them to come looking for you and maybe find you. Try new methods of getting customers into your store.  

 
Know your customer.  You will never make everyone happy and you will never have everything everyone wants.  Work to be the best for your customers.  Know "who" your customer is so you can have the merchandise that they want.  Remember when you go to market you are buying for someone else.  What does your customer want? 

Don't make excuses.  Make a plan, commit to it and then work your plan.  You may hit a few bumps, but you can weather most storms, if you have a realistic plan and work it.  If you see your plan is not working, try something else.  Don't make excuses.  Recognize and own both your failures and your successes.  This is you livelihood.  No excuses!

9.  The Lone Ranger
Not even the Lone Ranger worked completely alone.  He had help from Tonto and Silver.  Being a good manager means delegating some jobs so you can do what you are best at.  Unless you are a one-person shop, you have other employees who should  share  in  the work.  Plus, you do not know everything; no one does.  If you are so busy trying to do everything in the store, you have no time left for important things--like your on-going education or self-improvement, or studying to make the best strategic plans for your store. 

Technology is changing almost daily. You have to be proficient enough to adequately serve your customers so they get the most enjoyment from each shopping experience. You may be learning about apps for your store or other forms of social media.  Where do you begin?  As the owner, these are your decisions. 

Finally, everyone has the occasional problem or concern.  If you do not have a good support group, retailer peer advisory groups are excellent in helping you to solve problems.  Peer advisory groups also help you to see solutions you may not have thought of and they can save you from making every mistake yourself.  You can gain experience by learning from the mistakes of others and reduce your worries.  Sharing ideas with others of a like mind is a great way to improve  yourself, avoid mistakes and gain knowledge.  If you would like more information about Peer Groups with TRMA, click here.

8.  No plan
The old proverb says "Failing to plan is planning to fail."  What good does it do to increase sales volume by the use of constant promotions that require huge markdowns?  What good is a 54% Gross Profit if Operating Expenses are 56% of sales?  Retailers need a way to measure the success of their efforts to achieve more profit and a way to track sales performance and react to problems that may prevent the store from reaching its profit goal. This is the purpose of an annual, written business plan.

Writing down your goals will not guarantee that you will reach them; however, it will significantly increase chances for success. Writing a business plan may be like writing a diet plan.  A New Year's resolution of "Be more healthy" is seldom achieved.  However, a goal of being more healthy by doing the following:  Walk 15 minutes 6 days a week (burns 600 calories), substitute a garden salad with lowfat dressing for the regular large fries two times each week (saves 740 calories) and drink water instead of an afternoon sugared soft drink 5 times each week (saves 700 calories).  If the plan is followed, the loss would be significant with an allowance for error corrections and adjustments.  In other words, this is a realistic plan with measurable results and it is much more likely to produce a positive outcome.   

Just like the sample plan above, the business plan must be based on sound, attainable goals. Expressed in financial terms, it charts the course of the retailer's goals and future actions. A good retail business plan needs to include the following:

1. A Gross Margin Plan  
2. An Open-To-Buy  
3. A Budgeted Income Statement
4. A Cash Flow Budget  
5. Salesperson Sales Goals  
6. Sales Promotion Plan  

The sales Promotion Plan includes a list and time plan for special promotions, clearance sales, trunk shows, etc.  This may change as circumstances change, but it is critical that you have it written on paper to start with.

It is not enough to just have a plan.  As in the example of the dieter, you too need to be aware of the actual results of the plan and how well it is functioning throughout the year.  This requires some forethought and more planning.  You have to be very clear about what your primary goals are for each marketing effort - generate sales? attract new customers? re-activate inactive customers? build relationships?  What you hope to achieve affects the way you track your results and how you judge your success.  If you can measure it, you can manage it.  Do not permit your marketing efforts to spring from a need for cash, rather than from a thoughtful, well-designed, strategic plan.  Plus, if you prepared a realistic cash flow budget, you should have seen this need coming and acted before the situation became dire.  Remember a well thought out, realistic, measurable plan is evaluated frequently and adjusted as needed.  Although it may be stressful the first time you develop the plan, it will actually relieve your stress as you go forward in the day-to-day retail jungle.

A wise owner/manager also has a disaster plan, written down, with all necessary equipment in an easily accessible location so that if or when panic hits, safety will be the first priority and everyone will know what to do. Your disaster plan needs to include plans for major building remodeling, road construction, natural disasters, rolling black-outs or a computer crash. Each of these can be a disaster if you haven't planned to protect yourself from a poor outcome.

7.  Neglecting disaster recovery 
Have a plan and follow it.  You have invested time and money in your POS and other computer and data collection systems.  What would you do if you got to your store tomorrow morning and found someone had stolen all your computers?  Would your greatest concern be replacing the hardware . . or how to replace lost information?  What if the computer's hard drive just crashed? I say "just" because it will happen-sooner or later-even to you.  When was your last backup?  Who knows how to restore the back up?  Where is it kept?  Generally the answers to these questions become very important after a major problem but few even think about preventing it.  Until it happens.  You have the potential today to reduce the effects of this disaster to merely an inconvenience.  Back it up!  Do not store every back up on-site.  We store our backups in a bank's safe deposit box, but if you do not have a bank box and feel it is impractical to have one, consider storing your back-ups off-site.  That means do not store the backup in the fire-proof file cabinet in your store's office; a tornado can take that file cabinet.   The point is to be proactive and prevent problems.  
   
Whether it is restoring the back-up or a fire drill, practice.  Write down the procedure step-by-step and keep the instructions stored with a computer back up in a safety deposit box or other safe place for use when needed.  Store other disaster plans where they will do the most good.  It is fine to keep an extra copy of the disaster plan in your backroom as long as it is an extra copy.  Make sure the instructions are clear and completeHave the newest employee or a trusted-but-untrained friend, restore at least 1 file of a computer back-up to verify that you have every step recorded in an clear, concise manner.  Then, back up each computer system regularly.  Use a new disk each time you back up if you backup to a CD or DVD.  Spend the time now to educate yourself concerning back-ups and restorations of systems that automatically back up to on-line information storage and retrieval systems.  Be sure you have at least 1 other person, besides yourself, who can retrieve the information.  It is just common sense.

Of course, do not forget other disasters and irritants that can affect your store.  Fires and floods damage everything they touch but road construction can also hurt your business.  Write down your plan for your business in each circumstance so that if your store suffers an attack of Mother Nature or an expansion of the frontage road, you and your employees know what to do . . . and what to do first.  It is important to think of these things when you are calm.  During a disaster, you will not think clearly.  Don't put your business at risk for something you can prevent.  Every person I've talked to who has suffered a computer crash-even just on their home computer-starts backing up the computer to prevent the loss of information.  Are you still waiting?  There's no time better time than today to save yourself from this calamity.

6.  The Way It's Always Been Done   
Do you drive your car maintaining focus on the rearview mirror?  Would you want your doctor to perform surgery on you as it would have been done on your grandparents or would you want the latest and greatest pain-free, microscopic incision?  Just as you cannot drive your car safely by focusing on the rearview mirror, you can not run your business "the way it's always been done."  A vital, thriving business is changing each and every day.  You must seek out new customers and new vendors. You must advertise to reach your customers with the least amount of cost.  All of these duties are focused on the changing face of your business. 

Communication has changed in the past 50 years.  Marketing and advertising is transforming from an industry reliant on mass market appeal to one which must embrace the power of the consumer and (attempt to) build relationships. The traditional approach of wide-reaching, repetitive messaging is now being replaced by many much smaller, niche and people-centric activities.  Marketing isn't dying, but it is changing form.  The consumer now has more power and more choice.

Prior to the internet, the newspaper was probably the most popular form of advertising along with radio or billboard ads.  Enter the 21st Century.  6 out of 7 American homes have broadband internet access.  PEW research center tells us that in 2010, 61% of Americans get at least part of their news on-line.  That's compared with 54% who said they listen to a radio news program and 50% who said they read a national or local print newspaper.  Almost all respondents, 92 percent, said they get their news from more than one platform.  What do all the statistics mean?  Life is changing and successful store owners must change along with their customers or they risk losing them.  Now, more than ever, it is imperative to keep yourself on the cutting edge of communication technology as well as  merchandise.  Many of your customers want the latest and the greatest, and as the owner, you need to know your customer and what they want.  That means you, too, need to read and at least be knowledgeable about the latest advancements in textiles, styles and communicating with your customers.  You cannot operate exactly like your grandfather.  It's time to join the 21st century!

If your store does not yet have a computer system, email, social media, or a website, you need to correct this NOW!  Unless your store's plan is to die with your customer base in the following years, you need to be thinking about getting new customers.  Statistically speaking, these customers will be on the web.  They need to be aware of your store and the fact that "you've been here forever" is not enough.  Your store may have been there for 100 years or more, but if your customer base is made up of average Americans, many of them will be new to the area.  According to USA Today, 57% of adults under 30 and 28% of the 30-somethings reported moving during the previous year.  Their parents did not know your parents or grandparents or the business they founded; so, how will you reach them?  What are you doing to entice them into your store?  Are they even aware you are out there?  Word of mouth is still a good retailer's best friend, but do not underestimate the power of technology to build relationships and reach new customers.   

Besides communication and reaching new customers, many stores now keep business records via electronic files.  Their customer files, bookkeeping, purchases and checks are all handled on a computer system.  While you may have been in business for years and never used a computer, what are your plans for the future?  Do you plan to sell the business or leave it to your children?  Do your children have your complete knowledge base?  Here is an unfortunate fact:  Even if your children are working in the store now with the plan to take over the store, they cannot know everything you do.  Invest in your store's future now to make sure it's still there in the future.  Join the information highway and learn to use it properly.   

5.  Use of social media 
According to Information Week, 80% of Americans are on at least one social media site. Social media now reaches more than 80% of all Americans 12 years old or older.  If you are not using social media, you are not reaching a lot of potential customers.  There are 1.3 billion of us on the social web, that's close to 70% of what's possible.  Social media allows you to "... keep in touch with people with a level of regularity and intimacy that you wouldn't usually have access to, because time and space conspire to make it impossible."  This is called ambient intimacy.

Here's the deal . . . with so many of your customers and potential customers using social media (most popular sites August 2011 were Facebook and Twitter),  how can you afford to ignore it?  This is where your customers are.  Don't you want to reach your customers?  Don't you want to be seen by your customers and their friends?  Social media gives the store owner and sales associates the opportunity to engage with others and promote their business and merchandise without being intrusive in any way.  Here's another statistic from Mashable.com, an infographic site (infographic is a graphic visual representation of statistics, information and knowledge in a concise usable form) , in an article titled: "What can social media tell us about American society?" 

* 28% of American adults say they give advise about purchases on social media sites. 
* 38 million Americans say their purchasing decisions are highly influenced by others. 
* 90% of all Americans are connected via computer. 

You need to have your store visible to your customers (so you can influence them) and their friends (those your customers influence).  One of the nice things about social media is that it is easy to understand.  If you haven't already, get started now.

4.  Ineffective or no web site
Since 90% of all Americans are connected to the web, you must be on the web.  Your website represents your store, it's presence in the community, the value it provides and the reputation of the store.  You need both social media and a website.  Social media allows you to build influence with a customer base, but a website shows your store and promises a pleasurable shopping experience.  Gear your website to your customer base.  Make it easy to read.  There are all sorts of
decorative fonts, font colors and background colors.  It may look lovely and very artistic on a piece of paper, but once it goes on the world wide web, you must take into consideration that each person's computer is a little different, contrast may be set lower on one person's computer than another's. In short, each computer screen's presentation of your site will differ a little.  Therefore, make sure your site is easy to read and identify.  If your website addresses your store as KAT, INC., but your customers recognize Township Apparel Center, you may not be reaching your target audience.  Go for plain, easy-to-read, familiar text and bright, clear images with descriptions for the visually impaired, given in a concise manner.  You only have 1.5 seconds to get an individual's attention.  Don't waste this quick opportunity on a page potential customers can't comprehend-not even if it looks good.

Also, make sure your website has the information your customers want. This may include: hours of operation, contact information including but not limited to store's phone number, physical location (a map is very good), direct line to tailoring department if appropriate, parking information (if applicable).  Be sure to include whatever information a potential customer, or an established customer, may need to shop your store at their next shopping expedition.

Finally, make sure that on your web site right now the Spring Trunk show is NOT listed, unless you are announcing the Spring Trunk Show for the upcoming spring.  Your website needs to let your customers know that you are there and available to them.  If your website still has your Mother's Day ads in July, you are telling your customers that you do not take care of your business. 

Finally, a commercial designer tells us that you have about 3 seconds to snag the interest of a potential customer before they are on to the next site on the list.  Put your most perfect, colorful images first.  And in case you wondered, you really need both a website and social media.  As you can see they serve different but necessary purposes.  Link them, but use them independently.

3.  Buying Cheapest
I had not thought of this as a top ten mistake but several other writers did.  They listed everything from point-of-sale software to light bulbs. The problem with buying cheapest is that occasionally you get what you pay for . . . or less.  It's about value. Your customer is looking for value; they want to see that you too are looking for value. They want to see it in your mindset. 

What is a customer's first impression of your store? A clean, comfortable store or a store where someone knocks clothes off hangers as they shop because displays are too close together.  Is there merchandise on the floor or stored on shelves that reach to the ceiling of the sales floor?  Are the restrooms clean?  Is the staff happy, pleasant and helpful? Do you have background music enjoyable to the majority of your customers?  (You and your staff can listen to whatever you want on your own time.) Are there places in the store that need more light, or less? Does a south or west window blind shoppers during sundown?  Customers form their impressions of your store with just a glance.  Is your store, bright cheerful and comfortable? Are dressing rooms clean and neat?  How do your employees handle the merchandise? Each of these affect how your customers view your store.

The problem of buying cheapest is applied frequently to computer system hardware and software. Sometimes the cheapest systems lack programs and reporting necessary for a store to function well (like not calculating stock turn rate or markdown percents) or it's very complicated to work with but staff training is available only at an additional (high) cost. Frequently, the cheapest systems do not offer adequate training but function with distress calls to customer support taking time from established duties, tying up the POS system, adding cost, and frustrating employees and customers alike.

Next consider computer hardware. A frequent item not included in the base price is a battery back-up. Many store owners may have felt that wasn't really needed - until a major storm knocked out power and the system suffered shutdowns and power surges. Many times, if the computer is damaged, these are not covered in insurance policies unless the computer system is kept plugged into surge protectors and battery back-ups. Now is a good time to check your coverage and what terms apply. 

Consider packaging. When your customers leave your store with their purchases in hand, does the bag or box include your store name? Are clothes neatly folded or hung on hangers? How sales associates treat your merchandise greatly affects the intrinsic value of your merchandise your customers have purchased.  Merchandise wadded into a bag is perceived as cheap; respect what you sell.  

This is not a suggestion to add gold plated faucets in the restrooms, just that you make investments in the highest-quality, practical items you can afford. If higher wattage lights make the store more pleasant and bright, change out the lights.  Make sure mirrors and windows are clean. Take the time to spend with you staff to make sure they understand the latest and greatest whether that is use of the POS system or new textile content and care. It does take time and it does cost money, but the rewards can more than cover the cost.

2.  Purchasing merchandise based on "gut" feel
So often we hear of buyers or owners who purchased the most beautiful  _______, only to hear later that those lovely items are not selling. The buyer is stumped. Why? This may happen from time to time, but if it happens with any regularity, it is a sign of buying without regard to the customers.  Remember the original goal: sell goods at a profit. The idea is to have merchandise that you have no emotional investment in but your customers can and do. Buy to please your customers and remember your customers' mind set is ever changing. If you notice that the sale of dresses is declining, look at what is increasing. If dress sales decrease and separates increase, buy more separates and fewer dresses. It's just common sense. This means you must be tracking your sales by classification (customer demand center or what the customer says they are shopping for when they come into your store).   
  
No one knows your customers better than you do, so buy according to their likes and wants, not yours . . . even if you pass on a great buy at market.  When you order merchandise for the next season, be sure to save some money for in-season buys of those hot commodities. That means you must use your Open-to-Buy. Make purchases according to plan.
  
Plan your sales first, then produce and study your Open-to-Buy, then place orders. Be willing to adjust orders as the year progresses.  Select vendors who accept tweaks in your orders to increase purchase orders for hot selling items and decrease or eliminate orders for items that are not moving. Be prepared to find new vendors. Have a plan and follow it.    
  
Remember, sales fueled by high markdowns are destroying your profit. A good Open-to-Buy will account for planned markdowns and will also allow you to easily adjust for in-season sales changes. You have to accomplish 2 things: one is to know your customer, their likes and dislikes and two is to follow your plan. Just as you should not do any grocery shopping when you are hungry or without a list, do not attempt to shop for your store without a plan and stop using your emotions as a guide.
  
Sometimes, you just make a mistake. It happens. Do not compound your error by storing this merchandise until the next  season. Storage costs may seem trivial, but are much higher than you think.  We have seen several studies that have shown that excess inventory costs 30-35% of its cost.  That is expensive.  Also, inventory takes up space at your store or requires a special facility, it never looks as fresh the second time you bring it to the sales floor, it loses its ability to generate excitement, and your regular customers always know it's a "repeat performance." This cheapens the entire store in the eyes of the most important people-your customers. Get rid of mistakes as quickly and efficiently as possible.  Use your peer groups to discuss the best ways to dispose of these mistakes if you still need ideas. Then do NOT repeat the mistake! Most often, these purchases are made in addition to planned inventory purchases based purely on the emotions of the buyer. Have an Open-to-Buy, understand it and use it. 
   
1.  Hiring a criminal
While no one intentionally hires someone who will steal from them, employee dishonesty has the potential to be the most costly loss category facing a company. Police tell us that given the proper motivation, 90% of people will steal. Some will take cash or merchandise, while others take time and services. Still others will take your piece of mind or your good reputation. 

Employee dishonesty is one of the most under-reported crimes against businesses. Why? Owners and managers are so devastated, disappointed, and embarrassed to be victims of this crime, that often they will simply terminate the offender and "sweep the incident under the rug." However, no other single act or policy will do more to perpetuate a climate conducive to employee dishonesty than sweeping it under the rug. Let all employees know that if they are caught stealing, they will be prosecuted - - and then DO IT!

Criminal background checks are legally required for some jobs; but for most jobs, it is seen as only an extra cost of hiring a new employee. However, it may save a lot of time and money later. Negligent employment cases make criminal backgrounds seem more important. According to K.C. Bettencourt, an undercover investigator, one in three employees steal and it's rising 5% a year. Bettencourt's studies also showed that 20-25% of the work force will cheat when the stakes are high and supervision is low either by stealing merchandise, cash, supplies or time. Furthermore, about 10% will cheat no matter what.  Are you still positive you don't have any thieves or potential thieves working for you? The Wall Street Journal reported that up to 75% of all employees have stolen at least once.  On the average, 43% of retail workers admitted they have stolen from their employer. 

Some authorities  recommend integrity testing and criminal background checks. They explain that the benefit outweighs the cost. As that is a personal choice, here are a few facts:

* Most resumes (33%) contain flattering overstatements of accomplishments or employment positions held. 
* The replacement cost of a bad hire is up to 3 times the salary of the job in question. 
* Employers lost 60% of negligent hiring/supervision jury trials. 
* Police recommend that criminal history checks be repeated every 3 - 5 years in case an employee's circumstances have substantially changed.

Do not ignore the facts in front of you. If your shrink is higher than average, you have a problem. If your cash is consistently short or over, you have a problem. If an employee is secretive about what they are doing at work, you have a problem.  Here's an interesting statistic to close with:  44% of employees say their employers could do more to reduce employee theft and their employer chooses not to. You don't have to do something major to check up.  Just occasionally do it for yourself. Close the store for the evening help a few times a year.  Occasionally open for the manager who normally opens.  Check out the discrepancies in the paperwork. You are the owner. It is your store and your future.

If you'd like more information on the open-to-buy, employee theft or strong internal controls, please visit our web site.

SUMMARY
This is the end of our four-part series of the top ten mistakes of established retailers.  If you would like more information or help in any of these areas, on some other, please contact us today.  We are here to help.

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