1. shopping
2. retail

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PERSONAL PLANNING
Guidebook #42:
Starting & Operating a Retail Business ....... 3
Types of Retailers ..................................................... 4
Outlet Retailers .............................................................................4
Non-outlet Retailers.......................................................................6
Strategies for Expanding into Retail .......................... 8
Retail Business Start-up Strategies ...............................................8
Retail Business Operating Strategies ..........................................12
Window Display Strategies ..................................... 25
Common Mistakes of Small Retailers ..................... 29
FIG. 1 – Sample Financial Ratios for Retailing Businesses ..........34
FIG. 2 – Checklist for Retailers ! ................................................35
FIG. 3 – Percentage of the Year’s Total Sales Each Month .........36
4 2 Starting & Operating a Retail Business
Harry’s Pet Supplies Downtown
Only 358 Shopping Days
to Christmas Left!
BACH
Mozart
CAT NIP
We now also sell . . . CLASSICAL MUSIC
“So I says to myself . . . You know Harry, there
isn't any place in town, where you can buy
pet supplies AND classical music!”
Smallbusinesstown.com
2
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4 2 Starting & Operating a Retail Business
STARTING & OPERATING A
RETAIL BUSINESS
EXPANDING into the retail industry whether you’re presently a manufacturer, wholesaler or mail order operator, can be a good way to consolidate and increase your market share, as well as increase your total
take of the profits by eliminating compensation paid to retailers.
It can also be an excellent way to build brand name loyalty and increase your credibility in the eyes of the consumer, as retailing is one
of the oldest and most visible forms of business in the civilized world.
3
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4 2 Starting & Operating a Retail Business
TYPES OF RETAILERS
tomers in order to understand their needs
better. Usually this outlet will look like a
THERE ARE two basic types of retailers:
shoebox with one end having an entrance
and show window, and the other end, a
#$outlet retailers
partition and back room. Inside it will have
#$non-outlet retailers
floor, wall and ceiling coverings, and contain fixtures, merchandise, displays, store
Outlet Retailers
personnel, and most importantly,
Outlet retailers are merchants who
The retail marshoppers. Depending on the size
buy merchandise from wholesalers
ketplace is the
and scope of this outlet, your initial
or manufacturers for resale to the
soul of modern
investment can be as low as several
public. Four major types of outlet re- civilization.
thousand dollars to considerably
tailers are small outlet retailers,
POWERPOINT
more than $100,000.
chain store retailers, franchise retailers and no frills discount retailers.
Chain Store Retailing – Adding
several retail outlets to your business opSmall Outlet Retailing – Adding a single
eration is an option worth considering if
retail outlet to your business operation is
you want your multiple locations to make it
an option worth considering if you need to
more convenient for customers to find you.
display your merchandise, clear out old
Opening a few or many retail outlets will
stock, or want to get closer to your cusalso lower your overall advertising budget
4
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4 2 Starting & Operating a Retail Business
as a percentage of sales, since radio, TV
and newspaper promotions can cover your
entire market area for all stores.
NOTE If you are considering adding
several retail outlets to your existing
operation, in addition to the added
costs of real estate and holding multiple inventories, carefully analyze
the cost of hiring a manager for
each location, the cost and
availability of labor and training, and
the cost of installing an efficient
monitoring and accounting system.
These costs must be justified by the
potential increase in sales.
Franchise Retailing – Adding a
While an exact
figure is hard to
pin down, it is
estimated that
currently more
than a halfmillion retail establishments are
franchised and
their income is
approximately
$650 billion a
year.
franchise outlet to your business
operation is an option worth considering if
you don’t have access to the necessary
5
capital to add retail outlets yourself. It is
also a good idea if rapid expansion is necessary to secure your market position.
NOTE The movement towards franchise operations is one of the most
notable trends in retailing. While an
exact figure is hard to pin down, it is
estimated that currently more than a
half-million retail establishments are
franchised and their income is approximately $650 billion a year.
No Frills Discount Retailing –
Adding a no frills discount retail
warehouse to your business operation is an option worth considering if
the market you are selling to is
highly price conscious. This is especially true if customers in your market
area have the habit of waiting for mark-
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4 2 Starting & Operating a Retail Business
downs and returning merchandise
bought at a regular price after seeing the identical
item advertised or
on display somewhere else at a
lower price.
Non-outlet
Retailers
Non-outlet retailers are the other
types of retailers
who do not depend on store
premises to transact business.
Three major types
6
Retail Sales/Unit, by Kind of Business
Type of
Establishment
Eating places
Grocery stores
Hardware Stores
Used merchandise stores
Drinking places (alcoholic beverages)
Gift, novelty & souvenir stores
Auto- & home-supply stores
Family clothing stores
Drug and proprietary stores
Radio, television, computer, stores
Building materials & supplies
Used car dealers
Florists
Jewelry stores
Sporting goods stores, bicycle shops
Hobby, toy & game shops
Furniture stores
Shoe stores
TOTAL
Number in
Category in
1987 (1000)
Number in
Category in
1992 (1000)
402
197
27
89
88
79
67
27
56
54
51
75
50
50
50
28
46
43
2,420
474
186
25
124
84
104
63
33
51
61
51
92
55
55
55
38
48
42
2,672
Approximate
Sales/Unit*
1987
Approximate
Sales/Unit*
1992
354,794
1,447,051
408,741
58,618
123,114
106,911
397,343
795,259
967,357
462,093
1,202,000
243,933
108,820
106,760
225,120
266,107
581,304
339,395
$636,472
396,114
1,925,527
509,160
66,282
147,690
115,731
473,286
1,006,727
1,525,255
593,311
1,477,608
277,293
116,967
151,436
283,945
297,316
650,333
431,476
$729,488
*Figures derived by dividing total retail sales figures for each classification by the
total number of retail establishments in the category. Source: U.S. Bureau of the
Census, Statistical Abstract of the United States: 1992 115th ed.
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4 2 Starting & Operating a Retail Business
of non-store retailers are direct selling
companies, mail order houses, and vending machine operators. This guidebook will
focus on outlet retailers.
!
7
Scott Witt, author of
“How Self-Made Millionaires Build their
Fortunes” says, “If
you can run one
business profitably
you have the knowhow to operate dozens or even hundreds
of others just like it in
other locations.”
FUNFACT
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4 2 Starting & Operating a Retail Business
STRATEGIES FOR
EXPANDING INTO
RETAIL
signs direct customers to different departments and point out special features of selected merchandise.
3. Consider how you will encourage
USE THE following start-up and operating
potential customers to buy. Selfstrategies to help you expand into retailing.
service stores can encourage people to
buy with easy to follow layouts,
Retail Business
attractive displays, signs and
Exterior signs
Start-up Strategies
clearly marked prices as well as
give customers
1. Choose a good location.
loss leaders and markdowns to
a reason to
Don’t open a retail outlet unless
clear old stock. Other retail
come into your
you first find a killer location with
stores can enhance these techstore.
substantial sales potential. Like
niques with personal selling.
a tree, a store has to draw nour4. Consider what kind of valueishment from the area around it.
2. Choose effective signage. Exterior
signs give customers a reason to come
into your store. They should be colorful
and professionally prepared. Interior
8
added services you will provide
for your customers. The services
you provide your customers may be
free to them, but remember you pay for
them. For example, if you provide free
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4 2 Starting & Operating a Retail Business
parking, you have to pay or rent the
parking lot, and in the least share the
rent with other retailers.
5. Learn how to display
your products effectively. Merchandise dis-
trée can wet the appetite and switch
the saliva glands into overdrive, so can
a properly displayed clothing item
richly displayed in an imaginative surrounding.
Increased consumer
Remember, the display
awareness has gradually
played on a brightly lit,
and presentation of your
lead to a clear cut division
well-organized shelf or dismerchandise throughout
between high-end retail
play counter says, “Stop.
your store is one of the
stores that sell quality
Look at me. That’s right . . .
principle ways you commumerchandise and offer
now come on inside.” Hownicate with your customers.
superior service, and disever, the same merchancount stores that offer
It is also important when
dise haphazardly thrown
merchandise without frills
displaying your merchanonto a dusty or dimly lit taat everyday low prices.
dise to group similar items
ble or perhaps stacked up
POWERPOINT
close together to increase
on a skid gives shoppers
sales volume. For example,
the undesirable impression that your
if you operate a grocery store it is a
store is dirty and junky and that they
good idea to stock chips, dips, sodas
should just keep on moving. In fact,
and other party snacks side by side to
just like an imaginatively displayed en9
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4 2 Starting & Operating a Retail Business
encourage people to buy more than
they might really need.
with your regular in-store work
and space. In a retail store, behind-
the-scenes work includes receiving inNOTE Properly displayed merchandise is
ventory, preparing it for displays, and
essential to successful restocking shelves. Normally,
tailing. However, don’t go
Statistics Canada offers
this kind of work is done duroverboard and display your
statistics that could assist
ing the slack sales times of
merchandise like it belongs
with locational and other
the day. Behind-the-scenes
in a museum. This also disretail problems. Retailers
work also includes keeping
courages people from comare encouraged to obtain a
the store clean and attractive
ing in and looking around.
copy of the handbook
to customers. When planning
Also, be careful when using
“How a Retailer Can Profit
for this kind of work, you will
Don’t Touch signs. These
from Facts” by contacting
need to address problems
signs really say: “Don’t
Statistics Canada, User
like when the carpets should
come in.” “Go shop someAdvisory Services.
be vacuumed so as to not inwhere else.” “If you break it
FUNFACT
terfere with customer shopyou pay for it.” “It’s not very
ping?
durable anyway.”
7. Recruit people who can sell. Al6. Plan your “behind-the-scenes”
though a well thought out display can
work and space not to interfere
go a long way to getting people to look
10
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4 2 Starting & Operating a Retail Business
at a new product or special promotion,
sensitive non-aggressive sales personnel can go a long way to closing a
sale, and most importantly, getting
people to come back.
will become your place of residence or
an apartment you rent.
NOTE When you set up your house as a
retail residence, you can write-off your
basement and main floor exWhen you set up
8. Think about purchasing
penses, as well as two-thirds of
your house as a retail your building cost including intera centrally located tworesidence, you can
story house with a
est payments. However, make
write-off
your
basebasement and turn it into
sure you check local and state
ment
and
main
floor
a retail outlet. Find a propregulations. Some expenses are
expenses,
as
well
as
erly zoned downtown locaonly deductible if your company
tion if possible, on a lot with two-thirds of your
makes a profit. Also check to see,
building cost includ25 to 50 feet of street frontwhen it comes time to selling this
ing interest payage and 60 to 100 feet of
type of residence, whether or not
depth. You will need a house ments.
you can claim a capital gains exwith 1,500 to 2,000 feet of
emption (normally, if you depreciworking space. The basement will beate your building you will likely not be able
come your warehouse. The main floor
to get the full principle residence capital
will become your retail-outlet and your
gains exemption).
chief working space. The second floor
11
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11. Endeavor to operate at maximum
efficiency. Owners of small retail enterprises need to decide what to buy,
9. Avoid trying to become a Sears or
when to buy, where to buy, and how to
Montgomery Ward. Large store
sell it. Thus, improving operating
chains that sell a bit of everyThe more value
efficiency depends primarily on
thing may prove to be the new
for the money
improvements made to buying,
dinosaurs of the 21st century.
your customers
merchandising and promoting.
10. Become a member of your
think they are
12. Endeavor to create a high
local Chamber of Comgetting when
perceived value for your mermerce. Your local chamber of
buying from you,
chandise. The more value for
commerce will have lists and
the more loyal
the money your customers think
trade publications of all manuthey will become
they are getting when buying
facturers in your area. Trade
and the more
from you, the more loyal they
publications are a prime source you can charge
will become and the more you
of contact. They also carry clas- them.
can charge them.
sified listings and advertisements of other manufacturers and sup13. Foster repeat business. Repeat
pliers who you may need to do busicustomers are the backbone of every
ness with.
business. And this is no exception in
Retail Business
Operating Strategies
12
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retail. Consider followup procedures that encourage customers to
come back. Make a
genuine effort to treat
second time customers
extra special. Remember, customers will
usually return if they:
#$get what they want and
need with the least
amount of frustration
(they find your location
and store layout
convenient)
#$believe they have
received good value for
their money (they feel
they have received high
13
Changes in Number of Stores 1972 to 1987
Type of Store
1972
1987
Gift, novelty, and souvenir stores
Hobby, toy and game shops
Book stores
Sporting goods stores & bicycle shops
Florists
Jewelry stores
Auto-and home-supply stores
Retail bakeries
Eating places
Shoe stores
Family clothing stores
Drug and proprietary stores
Liquor stores
Hardware stores
Grocery stores
Variety stores
Household appliance stores
Drinking places (alcoholic beverages)
25
10
8
22
24
25
37
19
253
27
18
51
42
26
194
22
20
106
79
28
19
50
50
50
67
31
402
43
27
56
45
27
197
21
17
88
% Change
+216
+180
+137
+127
+106
+100
+81
+63
+59
+59
+50
+10
+7
+4
+2
-5
-15
-17
Source: U.S. Department of Commerce, Census of Business, 1972 &
1992 Statistical Abstract of the U.S. (number of stores in thousands)
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4 2 Starting & Operating a Retail Business
quality at a good price)
Christmastime
Pre-Spring Sale
#$have positive feeling about the sales
staff that served them (sales staff are
courteous and friendly)
Columbus Day
Pre-Thanksgiving
Eastertime
Presidents’ Day
Father’s Day
Remembrance Day
Fun in the Sun
Secretaries’ Week
14. Get help with your advertising.
Retailers, who have little or no experience with advertising copy and media
selection, should be wary of falling into
the trap of thinking they can go it
alone. Seek expert advice on what kind
and how much advertising your establishment really needs.
Going Out of Business
Spring Cleanup
Graduation
Spring Clearance
Halloween
Springtime
Happy Holidays
Summer Preview
Happy New Year
Summertime
Independence Day
Thanksgiving
January in June
Travel
June in January
Vacation Fun
Just Married
Valentine’s Day
Manager’s Sale
Veterans’ Day
Midnight Madness
Year End Clearance
Mother’s Day
48-Hour Madness
15. Gives your sales event or special
promotion a “them.” Below is a list
of ideas and themes for naming special
sales and promotion events:
14
At the Beach Sale
Open House
Back-to School
Paris in the Spring
Bargain Days
Pre-Christmas
16. Keep a notebook near the cash
register. Customers can be a great
and inexpensive source of information.
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They can tell you facts, not only about
telling customers that their business is
your business, but about your competiappreciated and worth the extra effort.
tors as well. They can also tell you
19. Keep parking areas and walkways
much about their buying habits and
clean and lighted at all
help you detect trends.
times. If your regional cliGoods should not be
Make it a habit of asking
mate brings harsh winter
placed out of reach
them what they like, need,
weather, be sure snow and
or out of sight, to
and read. Jot down their reice is removed whenever a
near the floor or too
quests and suggestions for
problem to ensure customer
far above the avernew products and services.
safety. Dirty and unsafe areas
age person’s line of
create an unfavorable impresvision. The best sell17. Keep advertising camsion, and worse, can lead to
paigns lean and focused. ing space is located
litigation.
When advertising dollars are from waist to eye
limited, it is vital that your ef- level.
20. Make good purchasing
SUPERTIP
decisions. Purchasing merforts be on target.
chandise to be resold repre18. Keep facilities and mersents a large portion of the total
chandise clean. Making certain that
operating expenses for a retailer – the
your store and its merchandise are
cost of goods sold is between 70 to 74
clean is an effective nonverbal way of
percent of sales. In light of this
15
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4 2 Starting & Operating a Retail Business
cent of sales. In light of this information, the important of intelligent purchasing should be clear to every small
business owner.
Below are various strategies and
methods you can adopt to help make
good purchasing decisions.
#$Analyze trends when selecting
merchandise. Any method that can
accurately determine buying trends can
greatly aid your inventory choices.
#$Analyze sales patterns to improve your
ability to forecast sales. Forecasting
sales allows you to make better
inventory purchases.
#$Buy directly from manufacturer. To
avoid paying distributor mark-ups, buy
from manufacturers. Manufacturers
16
often provide advanced dating of
invoices, special allowances,
information about market conditions,
Retail Establishments
Year
Total Retail Sales
(in billion of dollars)
1973
$511.9
1975
588.1
1977
722.5
1979
896.8
1981
1,038.7
1983
1,170.8
1985
1,375.7
1987
1,542.1
1989
1,741.7
1991
1,821.5
Source: U.S. Bureau of the Census, Statistical
Abstract of the United States: 1992 112th ed.
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advice on new items, new sources,
special promotion and the like; place
orders for you; keep you abreast of
#$Contract the services of
changing consumer
an independent buying
The largest dollar volume is
preferences, fashion and so
house. Large retailing
rung up by supermarkets.
forth; provide you with desk
chains have buying
About 30,000 of them do an
space and a telephone
offices strictly dedicated
annual business well over
when you do come into
to finding good deals.
$200 billion – with an average
town; and notify suppliers of
However, small retailers
of $11 million per store. Even
your impending arrival.
who cannot afford to
department stores, the former
The customary charge
set-up such a branch,
number-one category in
for their services runs about
can instead contract out
American retailing, averaging
.5 to 1 percent of your
the services of a
only $10 million each for an
stores’ annual sales, most
independent buying
industry total of about half that
house. These firms
often payable in monthly
of supermarkets.
installments. However, if
consist of experienced
FUNFACT
your sales are too low, they
buyers – and support
may request a minimum fee and
staff – working on your behalf. They
will search the marketplace for good
payment each month. Usually they’ll
require a signed agreement for the term
deals; provide a steady stream of
special POP displays, pre-ticketing of
merchandise and free delivery.
17
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4 2 Starting & Operating a Retail Business
of one year, cancelable by either party.
extent keep you informed of the latest
market information. There’s no charge
To locate a buying office suited to
whatsoever to the retailer. The
your needs, check with your trade
merchandise broker earns commission
association, local SBA office, or
from the manufacturers who
the National Retail Merchants
A resident
receive the orders (commissions
Association in Manhattan. You
buyer’s job is to
run generally from 2 to 5
might consult the yellow pages in
locate new
percent).
telephone directories of such
products for his
major metropolitan areas as New
Some retailers are attracted to
or her customYork City, Chicago, Dallas, and
the merchandise broker because
ers who are
San Francisco.
the services are free. However,
generally large
the services provided are far
department
#$Contract out the services of a
fewer than those offered by
merchandise broker. Though far stores or chain
independent buying offices. The
store operafewer in number than
broker’s primary responsibility is
tions.
independent buying offices, a
to sell goods for the companies
second type of buying service
that he or she represents.
that may be available to retailers is the
merchandise broker. They’ll place
#$Hire a resident buyer. A resident
orders on your behalf and to a limited
buyer’s job is to locate new products for
18
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his or her customers who are generally
While you may not be able to do too
large department stores or chain store
much about the wholesale prices of
operations. Resident buyers are located
merchandise offered to you for resale,
in most large cites, and you’ll find a list
you can frequently do better in areas
of them under the heading, Resident
such as quantity discounts, special
Buyers in your local yellow pages. A
allowances, terms, and so forth.
book listing of “Resident Buyers
21. Make sure your employees
Make sure your
of the United States,” plus the
understand that everyone
employees unstores they represent may be
contributes to successful
purchased from Phelon, Sheldon derstand that
marketing. All employees and
everyone conand Marsar, Inc., 32 Union
departments contribute to the
tributes to sucSquare, New York, NY 10003.
marketing of your company, ulcessful market#$Regularly rate your suppliers.
timately providing service to the
ing.
Rate the quality of goods
customer – including the night
suppliers offer, variety carried,
janitor. If the floors of your establishdependability of service, prices,
ment are not clean, customers notice.
production capacity, and special
#$Observe the effectiveness of your sales
services offered.
people. Many lost customers complain
#$Strive to lower your “cost of goods.”
of rude, discourteous or poorly informed
19
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salespeople. And being that one upset
discover hot selling spots. This can be
customer complains to an average of
advantageous in planning future disabout 10 other people, its makes sense
plays in the hopes of increasing sales.
to monitor your
One way of finding out
The most prolific retail businesses
customer’s
this information is to
are restaurants; there are at least
reactions to your
look at your rug or tile
125,000.
Fast-food
restaurants
come
sales personnel.
for signs of wear. As
next, with about 110,000 establishwell, keep track of which
#$Train your sales
ments, followed surprisingly, by clothcustomer trashcans
staff. Your sales
ing stores, numbering nearly
need to be emptied the
staff should be well
100,000. Among fast-food eateries,
most.
trained in the art of
pizza restaurants are the most proselling. If you’re not
NOTE Most people turn to
lific. Nearly 40,000 of them exist nasure how to train
the right after entering a
tionwide and about 10 percent of
your staff, find out.
building.
them operate under the Domino
Pizza sign.
22. Monitor cus23. Monitor the seasons
FUNFACT
tomer traffic
of the years and repatterns. Knowsulting sales patterns. Retailers must plan for the swell
ing how customers move past displays
and through your store can help you
and fall of sales during different times
20
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4 2 Starting & Operating a Retail Business
of the year. To help give you an idea of
gross margins and rates of turnover
how significant these variations are,
may find it more informative and effistudy the chart on page 38. This chart
cient to organize his or her records by
shows monthly variations in annual
department. For example, a men’s
sales patterns for most retail outlets.
wear business could departmentalize
An average retail jewelry store, for exby dividing shirts, suits, and accessoample, can expect 23 percent of its
ries into three different departments.
annual sales volume in December. On
Money coming in and going out may be
the other hand, a lumberyard
entered in a departmental purThe
sign
brings
can expect only 8 percent of its
chases and sales record as the
customers.
annual sales during the same
basis of monthly departmental
LA FONTAINE
month.
operating statements.
NOTE The figures in the chart on
page 38 represent average figures from
stores of all sizes and from all parts of the
United States.
24. Organize your records into departments. A retailer that sells different types of merchandise with varying
21
This above strategy help you
determine which departments are the
most profitable, as well as give you
better control over purchasing, inventory, and emphasis on merchandising.
Retail consultants suggest that departmentalizing a store for control purposes is one of the most important
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moves a merchant can make.
pensive children’s cereals and candy – at
their eye level.
25. Periodically rearrange the merchandise on your shelves. This
27. Recruit new staff carefully. Small
strategy, especially useful for clothing
retail outlets generally enjoy a good
and specialty food retailers can be
reputation for employer/employee relaused to pique interest in new
tionships. Nevertheless, obtainproducts and revitalize interest
ing and keeping good employPut top-quality
in old products. This strategy
ees has to be one of the more
more expensive
helps get customers who like to
crucial elements of any retail esitems at eye
browse back inside your store
tablishment. Good employees
level and lowerfor a second look.
can be a firm’s greatest asset.
quality less ex26. Put top-quality more expen- pensive items
In a small retail business,
below.
sive items at eye level and
sales are directly related to how
lower-quality less expenwell customers get along with
sive items below. This is a technique
employees, and how well employees
many stores use to encourage customanticipate and serve customers’ needs.
ers to buy more expensive items or to
Employee attitudes, appearance and
help clear out old stock.
ability can make or break a retail business. Furthermore, considering that
NOTE Grocery stores will often stock ex22
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4 2 Starting & Operating a Retail Business
they can be the biggest single expense of doing business, they deserve careful attention.
Retail
Equipment
NOTE The excuse, “You can’t get out
to lunch if you’re by yourself” is hardly
sufficient to warrant hiring additional
staff. An employee is much more than
lunch-hour relief.
28. Regularly walk through your
present or prospective location and pretend you are a
customer. Periodically, try and
forget everything you know about
your business from an owner’s
point of view and look at it through
the eyes of your customers. Ask
yourself: Do you like what you
see? Are bits of streamers left over
from Halloween or Christmas?
23
THE FOLLOWING is a list of equipment often
needed to run a retail operation:
back counters
pegboards
baskets
racks
build-ups
register stands
carts
sales counters
counters
self-service stands
display cases
shelving
display shelves
showcases
display tables
stock bins
dumbbells
storage cabinets
easels
tiered tables
floor stands
work tables
island displayers
wrapping desks
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Could the place be cleaner? Is their
wheel chair access?
regular customers extra special, your
suppliers should be willing to do the
same for you.
29. Solicit referrals from suppliers.
Since suppliers depend on you for a
substantial part of their business,
chances are they will feel a
sense of loyalty towards you
treat your own
and your company. In fact, since
regular customyour success can lead to their
ers extra spesuccess, they are often more
cial, your supthan willing to help you find new
pliers should be
customers, and can thus bewilling to do the
come one of the best places to
same for you.
look for new business.
!
Remember the 80/20 rule – twenty
percent of your customers provide
eighty percent of your business. This
rule works both ways. Just as you
should be willing to treat your own
24
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WINDOW DISPLAY
STRATEGIES
impression of quality, style, and distinctiveness you want to project.
Build up a stock of window base ma-
THE MAJORITY of retail firms rely on winterials. Window bases (platforms) are
dow displays to attract the attention of peusually covered with appropriate materials
destrians, to hook their interest, and
which contribute to the overall effect
induce them to enter their store.
Window displays of the display – satins, netting burOnce inside, shoppers are then en- attract people
lap, paper, artificial grass mats, and
couraged to make purchases
inside the store. so forth. The retailer should build up
through effective selling on the part Inside displays
a stock of such materials, over time.
of sales clerks, aided by additional
direct customers
interior displays. While a detailed
to selected mer- Change your window displays
treatment of this important area is
frequently. Whether you engage
chandise.
beyond the scope of this chapter,
the services of a professional winPOWERPOINT
the basics will be touched upon.
dow trimmer or do the displays
yourself, your windows should be changed
Always keep your displays of high
frequently. At least ten to fifteen changes
quality. Shoppers will regard your storeeach year is recommended.
front and show windows as the face of your
NOTE You might be able to hire someone
retail business. Therefore, your window
with display training from a local college.
treatments should always convey the exact
25
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Coordinate displays with special
community projects. Window displays
used for community projects often create
good will. Art galleries or individual collectors may lend interesting objects to help
build a display.
Window Displays
Big Sale
Help Wanted
Coordinate your displays with holidays, special events, special promotions and the seasons of the year.
Coordinate your displays with Christmas,
Valentines Day, Spring Break, Easter,
Mother’s Day, Father’s Day or the beginning of the new school year. Also, coordinate your displays with special year-end
sales, company anniversaries and birthdays. Furthermore, in selecting appropriate
merchandise to put into your window, pay
careful attention to whether it is fall, winter,
spring or summer or the season just
around the corner. Don’t for example, dis26
Can you spot what’s wrong with this
window display?
Answer: Too cluttered & no theme.
Even a junk shop owner should take
the time to properly display his or her
merchandise.
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play bathing suits during the winter and
skis during the summer. However, a spring
fashion display might be a real attention
getter at the end of a long winter.
Design your display window to
suit your image and reflect
your target market’s tastes and
attitudes. Most likely, you will use
your window displays to attract people inside by informing them about
what you sell, advertising good
deals, and creating new product
awareness. However, if you sell
high quality clothing you might use
your display windows chiefly as an
image builder.
Keep displays well lit. It takes only two
to four seconds to pass a six or eight-foot
window. Therefore, the display not
As far as winonly has to be eye-catching, but
dow displays are also must be well lighted day and
concerned, it’s
night. Good daytime lighting avoids
not a question of shadows that dull a display.
how artistic they
Make sure sufficient displayed
look, but hot
merchandise is available to sell
well they bring
to customers. There’s no point
people into the
displaying an item you have only a
store.
few in stock, unless you’re trying to
SUPERTIP
clear it out.
Keep displays clean, neat and simple. A crowded display creates clutter and
confusion. Create “breathing space be27
tween merchandise groupings. Less is
more.
Prepare all materials ahead of time.
Merchandise, materials, display stands,
signs or posters, mannequins and any
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other items required, should be carefully
selected and prepared ahead of time so
that the window can be completely trimmed
within a few hours time.
section of your display through the use of a
small electric turntable.
Use themes. Window displays are gener-
ally more effective when built around a
Use color groupings in your displays.
single, unifying theme, such as a Back-to
Color is an essential ingredient of a
School, Mother’s Day, Christmas, or
Use
the
same
display. Color combinations used in
Vacation Fun & Travel.
type
style
on
all
your display window should be atyour in store
!
tractive and harmonious.
signs. This
Use lighting to draw attention
helps create a
to key items. Spot lights or neon
consistency of
signs can be used to highlight speimage.
cial items.
SUPERTIP
Use special effects. Motion, music and sound can be used in connection
with your display to draw attention to your
window e.g., motion can be imparted to a
28
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COMMON MISTAKES OF
SMALL RETAILERS
credit, do not let friendship or the prospects of a good sale blind you to the problems of collection. Follow up quickly when
customers do not make payments as
MANY SMALLER, independent merchants
agreed. Review you accounts periodically
tend to make mistakes that fall into a
to determine their status. Establish a
common pattern. Generally, these mischeque cashing policy.
takes are caused by laxity. Here are
More
than
2
milsome of the major retailing trouble
lion retail estab- Delay in Taking Markdown –
spots identified by Alberta merSmall retailers tend to linger too
lishments of all
chants:
kinds are in op- long before clearance on slow sellNOTE The following list is based on
ers. Earlier clearances bring smaller
eration in the
public domain document “Operating
losses – and new cash with which to
United States.
a Small Retail Business” published
start afresh. Markdowns should be
FUNFACT
by Alberta Economic Development
used as a promotional tool, and not
and Trade.
solely as a clearance device.
29
Bad Credit Verification – The number
Duplication in Buying – Commonly
of businesses that have failed because of
offering credit to customers unwisely is
legendary. Be impersonal when granting
seen is the wasteful overlapping of similar
and competitive lines. This “spread buying”
is an effort to be covered in everything, but
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4 2 Starting & Operating a Retail Business
at the sacrifice of depth in anything. This
leads to costly markdowns.
ally converge upon the local scene and
bear important influence.
Failure to Comparison Shop – Com-
Failure to Recognize the Market – Few
parison shopping is a “must” in planning
stores, usually the largest, can serve eveadvertising as well as merchandising. A
rybody. Small stores are more effective in
store’s reputation for good value is harmed
catering to distinct groups, such as cusif it advertises as a bargain what others are
tomers having special tastes or interests,
selling at a lower price.
nearby householders, nearby busiEvery dollar
ness people. Less inventory is reFailure to Control Operating
added to costs
quired when owner/managers apCosts – Every dollar added to
is a dollar taken peal to select groups. Advertising
costs is a dollar taken from profits.
from profits.
also becomes easier and more efMany smaller merchants fail to keep
fective, and personnel problems regood check of their operating costs.
duced by specialization.
Faillure to Keep Alert to Industry
Trends – All business may be local, but
all local businesses are eventually affected
by national trends. National trends eventu-
30
Failure to Take Discounts or Take
Advantage of Co-Operative Advertising – The losses from failure to take discounts or to cash in on co-operative adver-
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tising can create significant losses from net
profit.
Failure to Use Interior Displays –
Bright and attractive interior display invite
impulse buying. Have merchandise easy to
see and to reach.
downs and shaved profits. It is vital that
merchants use an inventory control system
in disciplined form.
Inadequate Lighting – This can apply to
windows or interiors or both. The result is a
dismal and drab atmosphere that dulls customer attraction and conveys a
High Employee Turnover – Em- Inadequate reshabby look that reflects upon the
ployee turnover can be an expencord keeping is
store.
sive and harmful ongoing problem
one of the prime
with retailing. Attention needs to be sins of omission Inadequate Record Keeping –
paid to developing and maintaining
of many smaller This is one of the prime sins of
an experienced and satisfied staff
omission of many smaller mermerchants.
that can be depended upon.
chants. Accounting records should
provide a vast fund of valuable guidance
Inadequate Inventory Control – Once
on what is selling, prices, trends, costs,
recorded inventory controls are lost or out
profits, turnovers, etc.
of hand, chaos can and often does set in.
Inconsistency of Advertising – A surThis can lead to doing business with broprising number of smaller merchants operken stock that leads to inevitable mark-
31
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ate with little or no advertising budget or
day selling operations with special promoexpenditure, or when ads do run, they are
tions. A successful promotion is a total
inconsistent, spur-or-the moment, often
package of efforts – ads, displays, mailpoorly executed and ineffectual in results.
ings, gimmicks and fanfare.
This lead to the false conclusion
No sale is really Laxity in Store Modernization –
that advertising does not pay.
Unattractive fronts, dismal interiors
complete until
Infrequency of Window
and careless displays will inevitably
the product is
Changes – With the exception of
point to an unsuccessful operation.
worn out, and
two or three major seasonal openthe customer is No Planned Calendar of Operaing, window changes are erratic an
satisfied.
tions – Very few retailers plan a six
infrequent, despite the fact that win- LEON
month, much less an annual, calendows are the main traffic stopper
LEONWOOD
dar of operations involving promoand the strongest impulse-buying
BEAN
tions, merchandising ideas, invenfactor. It helps to be imaginative in
Founder, L. L.
tory, etc. Rather, the business is redesigning window displays.
Bean, Inc.
duced to a day-by-day and week-by-
Lack of Planned Promotions –
week operation.
The planned promotion is a vital organ of a
successful retail business today. It is advisable to supplement your routine, day-by32
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Poor Sizing Up – The absence of disciplinary system or policy in filling missing
sizes or items quickly and methodically.
Store Image – Too many smaller retailers
regard “store image” as a nebulous idea,
yet these same merchants will accept the concept of “reputation.” Ac- Retailing is
tually there is little difference, extheater.
cept that ‘Store image” is something IRWIN
you deliberately design, develop
GREENBERG
and establish.
President Hess
!
33
Department
Stores
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Sample Financial Ratios* for Select Retailing Businesses
SIC
Number
Type of
Business
Cost of
Sales
Gross
Profit
Operating
Expenses
Operating
Profit
Cost of Sales /
Inventory (median values)
33.9%
2.8%
3.4%
22.8
5531
Auto and home supply stores
63.3%
5411
Convenience food stores
75.9
36.7
%
24.1
1.3
15.0
5411
Groceries and meats
76.6
23.4
21.9
1.5
13.8
5944
Jewelry
53.9
46.1
40.2
5.9
1.4
5921
Liquor
77.4
22.6
21.1
1.5
7.9
5812
Restaurants
41.5
58.5
53.8
4.7
29.4
5331
Variety stores
62.7
37.3
31.7
5.6
3.0
Source: Robert Morris Associates, Annual Statement Studies, 1987 (available at library).
Consult RMA for additional ratios for other retailing businesses such as: books, cut flower and growing
plants, drugs, family clothing, furniture, hardware, hobby & games shops, jewelry, men’s & boy’s clothing,
shoes, stationary, and more.
*Based on statement studies of firms with fiscal year-ends April 1, 1991 through March 31, 1992. All statistics are expressed in terms of percentages of annual sales volume. Only data for firms with from $0 to
$1,000,000 in assets have been shown since this would be characteristic of the beginning business.
NOTE RMA cautions that the studies be regarded only as general guidelines and not as absolute industry
norms. This is due to limited samples within categories.
34
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Checklist for Retailers !
LOCATION
%$Are rent (mortgage payments) and other
costs appropriate?
%$Does your store concept fit the market in
that area?
%$How many direct competitors are located in
%$Do prices and sales cover all your costs?
%$Do you listen to your customer’s questions
and ask yourself “Why are they asking
them?”
%$Do you ask for customer feedback on how
you can provide better service?
the trading area? What are they? What do
they offer to customers?
%$How many people walk or drive past your
store?
%$Is there easy access to your store using
bus routes?
%$List the advantages and disadvantages of
the building and location: Good window
footage? Appropriate size? Visibility? Parking?
%$What is the growth potential for the area?
%$Will nearby businesses draw customers
into your place of business?
SIGNAGE
%$Can the signage be seen clearly from a
distance? Close up and at eye level?
%$Is your signage uniform in appearance?
Large enough so that it makes a statement?
%$Is your signage professional looking?
%$Does the internal signage show consumers
which departments they are in? Do they
draw them around the store?
%$Is your name displayed inside your business as well as outside?
DISPLAYS
SALES PROCEDURE
%$Is your sales staff well trained?
%$Can you improve staff training?
%$How does your sales staff react to your
customers and non-buyers?
%$Does your sales staff communicate well
with customers? Identify their needs?
%$How do your customers react to your
store?
%$Do you check your business daily by looking at it from the customer’s point of view?
%$Are displays simple, coordinated and
clean?
%$Do they have good lighting?
%$Do they have a good central theme?
%$If you’re displaying small items, do you use
big props to display them?
%$Are the colors complementary?
%$Does your display show where the goods
are available in the department and prices?
Percentage of the Year’s Total Sales Each Month (five year average)
Store Type
J
F
M
A
M
J
J
A
S
O
N
D
YEAR
All retail stores
7.4 7.0 7.9 8.1 8.6 8.6 8.5 8.3 8.2 8.7 8.3 10.4 100%
Department stores
6.3 5.7 7.2 7.6 8.0 7.9 7.6 8.0 8.0 8.7 9.5 15.5 100%
Drug and proprietary stores
8.0 7.5 8.0 7.8 8.2 8.1 8.1 8.2 8.2 8.5 8.2 11.2 100%
Eating and drinking places
7.3 7.0 7.7 8.0 8.8 8.9 9.2 9.3 8.7 8.8 8.1 8.2
Family clothing stores
6.3 5.7 7.8 7.6 8.1 7.7 7.5 8.2 7.6 8.8 9.1 15.6 100%
Furniture stores
7.6 7.2 7.7 8.0 8.3 8.5 8.2 8.4 8.2 8.8 9.0 10.1 100%
Gasoline service Stations
7.8 7.2 8.0 8.2 8.7 8.8 9.2 8.6 8.1 8.5 8.3 8.6
100%
Grocery Stores
8.4 7.5 7.9 8.0 8.6 8.3 8.7 8.4 8.2 8.9 8.0 9.2
100%
Hardware Stores
6.2 5.7 6.3 7.9 9.3 9.8 9.4 8.7 8.3 8.9 8.5 11.0 100%
Household appl., TV & radio Stores
8.2 7.1 7.4 7.7 7.9 8.4 8.6 8.2 8.0 8.6 8.3 11.6 100%
Jewelry stores
6.0 5.0 6.0 6.0 8.0 9.0 6.0 7.0 7.0 8.0 9.0 23.0 100%
Lumber yards, building
5.9 6.3 7.3 8.3 8.7 9.4 9.5 9.6 9.3 9.5 8.3 7.9
Men’s and boy’s wear stores
7.9 6.2 7.1 7.2 8.0 8.1 7.4 7.2 7.5 8.7 9.3 15.4 100%
Passenger car, automotive dealers
7.5 7.8 8.8 9.3 9.4 9.9 9.3 8.2 7.9 8.4 6.7 6.8
Shoe stores
6.6 5.9 8.8 7.5 8.0 8.2 7.3 8.8 9.3 9.3 8.7 11.6 100%
Tire, battery, accessory dealers
6.6 6.0 7.3 8.7 9.0 9.3 9.2 8.6 8.1 8.9 8.7 9.6
Variety stores
5.9 5.8 7.5 7.2 8.3 7.8 7.5 8.0 7.9 8.4 8.9 16.8 100%
Women’s apparel accessory stores
6.8 6.3 7.6 7.6 8.0 7.9 7.3 7.9 8.0 9.0 9.1 14.4 100%
Source: U.S. Department of Commerce
100%
100%
100%
100%