today’s second biz ladies post comes from pamela stanmire of pillows and throws. pamela is focusing on retail today, and providing tips for keeping your retail business alive and thriving. she’s touching on topics like payroll, rent, overhead and inventory with tips to keep all of them under control in tough times. if you’ve ever thought of expanding your online business into the realm of brick and mortar stores, this is a great primer for getting your shop started in the recession. thanks to pam for her great advice!
CLICK HERE for Pam’s full post after the jump!
Hi everyone. My name is Pamela Stanmire and I am a longtime retail veteran
and avid Design*Sponge reader. Since I am writing an article about retail, I
suppose a little background is in order. My experience in brick and mortar
retail ranges from my early days as a store manager to my later experience
as a director of operations for a very fashion-forward women’s retailer.
Over the years, I’ve worked for various retail chains large and small. My
gig for the past few years has been running my own online retail business,
PillowsandThrows.com. Even with this lousy economy, we’re in the midst of
launching a second online store and our very first brick and mortar location
here in downtown Savannah, GA. Not easy in these times but we are being as
creative as possible finding ways to get it done.
That is what brings me to the topic of this article. Since we are opening
the brick and mortar store, I have spent an inordinate amount of time over
the past few months visiting neighborhoods bustling with retail
establishments and scouting out a location for our new store. Needless to
say that during the course of this process over the past several months, the
economy has tanked. I have sadly seen some independent stores that were once
very full of shoppers and activity shut their doors for good. It is not
just happening locally either. I have friends all over the US telling me
that stores are shuttering left and right. It truly breaks my heart to see
this happen. With all the retail closings, I started thinking about what
went wrong, besides the obvious lack of sales, and what could have been done
to perhaps prevent the closing.
Not that I want to sound too cliché here but sometimes when you are in a
tough situation, it can be very difficult to see the forest through the
trees. It really does help to have a friend come along and look at the
situation and state the obvious. When I am in a tough spot, I often overlook
the clearly evident solution because I am overwhelmed with the details and
thus miss seeing that proverbial forest. My goal here today is to toss out a
few helpful ideas that are rather obvious but may be getting overlooked in
the muddle of confusion and worry most struggling shopkeepers are feeling
Retailers are facing challenges that are unprecedented. This is especially
true of the small independent shops and boutiques. Things are extremely
tough and there is no need to sugarcoat the fact that you have to take
action to pull through this and to position yourself to thrive when the
economy recovers. Once you have come to terms with the fact that that is not
going to be a quick or painless recovery and decide that you are going to
face this head on, you have taken the first step towards making the changes
that may save your business. I know that maintaining your positive outlook
is tough with day-to-day sales slumping and it goes without saying that
slumping sales make it even tougher to pay your bills. You’ll need to be
smart and proactive to weather this economic storm and that means a good
hard look at where you are at right now and where the money is going.
Having been faced with declining sales due to this recession, so many
retailers have had a knee-jerk reaction in a misguided attempt to lure in
the reluctant shoppers. Put everything on sale! Let’s move some inventory!
While a sale can be a way to generate some quick cash in a desperate
situation, the lure of the sale has lost its luster in recent weeks. With so
many retailers running deep discounts in an attempt to draw in shoppers,
these same shoppers are now being quite accustomed to, and dare I say almost
immune, to the 50 – 75% off sale signs that are posted in the windows of so
many shops and boutiques. Not to mention the fact that this strategy is
going to kill your business in the long run. Why will anyone ever want to
pay full price ever again for a product that was 75% off for the better part
of 2009? These deep discounts run the risk of damaging a brand’s value or a
retailer’s reputation and that damage may be irreparable in many cases, even
when the economy does bounce back. My best advice is to resist the urge to
put your entire store on sale.
So, other than deep discounts, what else can a retailer do to pull through
this recession and still keep the doors open for business in the future?
Let’s start with the most obvious…
Let’s assume you’ve already looked at and taken action with your payroll
expenses. With slumping sales and as a practical business owner, you have
already reviewed payroll and have had to make the hard choices that no one
ever wants to have to make. You have let all non-essential staff go and you
have taken a close look at what the term “essential staff” even means to
your individual business in this economic environment. You have conducted a
thorough review of what you need to do to keep things rolling along
financially without sacrificing the level of customer service your business
needs in order to continue to generate sales. Each situation is unique. What
was essential to your business even a few months ago may be excess now. You
have made the cuts where you needed to and it broke your heart to see your
beloved employees go. It was painful but you made it through the really hard
part and survived. Now let’s focus on what is left to do because what is
left to do is much easier than saying good-bye to people that so often feel
like an extension of your family.
With payroll trimmed back to bare bones staff, a quick review of the
finances shows that for any retailer, the cost of inventory and
rent/overhead are usually the next two biggest expenses to maintain. With
that in mind, let’s look at how to adapt those costs accordingly and be
creative in our thinking process.
Let’s think about inventory first. There are a couple of avenues here that
may be great options if you are willing to think outside the box and step
away from what may be your comfort level.
Just about everyone that sells consumer goods is hurting right now,
including the vendors that you buy wholesale from. The fact that your cash
flow is very tight and you have little to no Open-to-Buy hurts the vendors
that you purchase from on a routine basis as much as it hurts your business
to not buy new goods to display in your store.
I see this as an opportunity to be creative. With vendors that you have a
strong established relationship with, you may wish to approach the subject
of consignment. The vendor gets the goods off the shelf of their studio or
warehouse and into a retail venue where it is directly accessible to
consumers to purchase. You now have fresh merchandise to fill your store.
This fresh product is in keeping with your store’s identity since it is a
brand that you already have established in your store and it is a brand that
customers expect to find in your establishment.
Of course, as with anything that I am suggesting in this article, you will
want to have all details in writing once both parties have agreed upon terms
of the consignment. Details such as the length of time for the consignment,
the exact quantity of products to be taken for the consignment, terms of
payment after the consignment ends, shipping details and who is covering the
shipping costs should all be outlined in your agreement with the vendor
prior to the merchandise being shipped to your store.
The next idea I am going to suggest may be a bit more painful. So, let’s set
our egos aside here for a moment and look at the big picture and the
ultimate survival of your business, as uncomfortable as it may be. Is you
store just too big to keep adequately stocked with fresh merchandise in this
economic environment? Would you be better off in a smaller space where you
are not locked into carrying so much inventory? It really is basic math. A
smaller space equals less money needed to maintain inventory levels.
I recently saw a local retailer do something that I though was a very smart
move. This retailer moved from a very large multi-level retail space to a
much more modest single story space directly across the street. I took a
good look around the new space and this retailer has also pared down their
inventory to the strongest categories and products that they are able to do
volume with and have sold off the superfluous inventory that required so
much floor space and therefore made for a much higher rent (while not giving
much of a return back in sales volume). The new location is leaner and
meaner and better equipped to handle the downturn due to the smaller
location (which equals less overhead), scaled back staff, and the reduced
amount of inventory. It’s also not necessarily a “forever” thing either.
When things turn around, they can always go back to a larger space if they
so desire at that time. Maybe they won’t. Running leaner and meaner may be
the new business model that they stick to since it has now proved to be
Rent and Overhead
This brings up the subject of the commercial landlord. If you are struggling
to meet the month-to-month rent, don’t be scared or shy to approach the
individual or company you are leasing commercial space from. Speak up if you
are struggling to pay your rent. Landlords are people too and they have
bills to pay themselves. Many landlords would be willing to be flexible and
accommodate you however they can to keep income coming in from their
property. If you default on the lease, it is obviously not good for the
landlord or for you (especially considering that you are legally bound to
the terms of that lease).
Talk to your landlord. How flexible is the lease? Can you get out early if
you absolutely need to and what penalties, if any, would be involved? Does
he have a smaller property nearby that you could move you into instead of
the larger space you are currently struggling with? Now more than ever,
landlords may be willing to work with you based on extenuating economic
circumstances. Once again everything needs to be in writing and you should
also consider consulting with your attorney regarding any changes to your
If all else fails, and moving to a smaller space is not an option, look for
alternatives outside of the box. Remember, other retailers and businesses
are also struggling. Perhaps you can find a way to team up with a
complimentary business and split the rent.
Get creative and use your imagination. Is it possible to share space with
another retailer or business that complements your product? If you sell
decorative home accessories in your store and you have a friend struggling
with a floral design studio, would you be a good match to share retail space
until business bounces back? If you sell aromatherapy products and your
neighbor has a small yoga studio, would it work for her to move her yoga
classes into your retail space in the evenings when your store is typically
closed anyhow? Your sister-in-law has an artisan jewelry studio and you sell
handcrafted clothes. Sounds like a perfect opportunity to team up and share
overhead and expenses. Not only can you share expenses for the immediate
future but who knows? You may find that there are some interesting retail
combinations that can come to light from such parings.
Sharing space and being creative can be a tremendous way to cut back on the
amount of inventory you have to carry in your retail location and give you a
partner to help you with the overhead of rent and utilities during these
tough times. Of course, you will need to check your local zoning laws and
city codes before you make any such changes. You will also need to review
the situation with your landlord to make sure you are not violating your
lease. Last but not least, as I mentioned earlier, you will want to get
every single detail in writing from all parties involved.
I know these are very tough times but I really think that a little
resourceful thinking can go a long way to helping you get through the
downturn. Hopefully, I’ve given you a few ideas that will get your wheels
turning and have you moving in the right direction. And remember, you are
not alone in this. Everyone is struggling right now and sometimes all it
takes to find a solution is to talk to someone about it. Don’t let yourself
get so bogged down with worry and details that you can’t see to find your
way though the forest.