Owning
and Operating a Specialty Retail Shop
Each year about 1.8 million-specialty retail shops open.
An estimated 85 percent of new shops close down within five years, only fifteen
percent will be successful. Despite a gradual turnaround in our economy and an
increasing trend in consumer confidence, specialty retail stores face several
challenges to survival in the years ahead ranging from globalization of goods
and services, budget conscious consumers who avoid discretionary spending,
sophisticated marketing schemes and online retailers. However these small stores which focus on a
targeted selection of merchandize and services can thrive if they embrace on a
smaller scale many of the best practices of larger successful competing
retailers. These practices include niche
product and service selection, targeted marketing, customer retention
strategies, cost management techniques, and unique store design among others.
Location is a vital component of retail success. The
biggest decision when starting up a specialty retail store is where it will be
located and who is the target market. The product or service must be relevant
to the consumer needs and in a convenient location. In specialty retail the ideal location is unique,
relevant, and differentiated. There are many different approaches one can take
when analyzing market demographics; consulting the census, creating a SWOT
analysis, and studying the competition.
Retail chains spend thousands of dollars conducting market
research before deciding on a location; often times novice retailers overlook
the importance of location. The first major step a retailer can take is to
consult the census. This information is easily accessible from local libraries
and contains knowledge of the local area that you can use to compare to
different areas. Important information such as economic status, population,
ages, and home ownership are crucial in deciding whether a retail shop will be
appealing to this market. From this information you can move on to the SWOT
analysis; assessing the pros and cons in your area.
SWOT analysis is a planning method used to evaluate Strengths, Weakness, Opportunities,
and Threats in a business venture.
This method identifies the internal and external factors that are helpful and
harmful to achieving the desired outcome. Strengths include characteristics of
the business that provide an advantage over others while weaknesses are
characteristics that provide a disadvantage over others. Opportunities involve
all external possibilities that may benefit a business for example, creating a
website to attract more customers to the business. Finally threats are a change
in the external environment that may present a threat to the business.
Competition is the largest threat to any business, specialty retail shops must
continuously be aware of their competitor’s actions.
Developing competitive advantage is a critical success
factor in an emerging business venture. According to Winer(2004), developing
competitive advantage centers on three components. First competitive advantage
must be able to generate customer value. Winer defines customer value in the
eyes of the consumer as “ lower prices, speedy delivery, and convenience.”
Second, the consumer must perceive the enhanced value of the product or
service. Winer states, “regardless whether your product could be considered
superior to a competitor’s product might not be as important as whether your
customer perceives your product to actually be superior”. For example, Intel
Corporation began a competitive marketing campaign using the phrase “Intel
Inside” to be printed on the outside of IBM and other computer companies.
Finally, competitive advantage requires a business tactic that is challenging
for other competitors to copy. For example, Sea Meadow Gifts and Gardens of
Essex Massachusetts has prospered due to a focus on handcrafted designs
inspired by the natural landscapes of Cape Ann.
Each business owner has a different strategy when it
comes to inventory control management. The key to restocking is knowing what
you’ve sold and replacing the products that make the most profit and sell the
best. An inventory is a list. This list can include items such as the stores
assets and a list of the stores merchandise. Inventory records can be simple
such as a written list of stock or complex as inventory software. For specialty
retail shops a manual system is sufficient. “There are three stages to
inventory management. The first phase is starting inventory: the stock that you
start with. It can be the day you open your store, the first day of the year of
the month, the day you began using the system or any other period.” This phase
is followed by inventory adjustments: “the stock that is purchased from
wholesalers or returned in salable condition by customers less the stock that
is sold.” Finally is the ending inventory: the stock that is left after the end
of a time period.
“Advertising doesn’t cost”, the old saying goes: “it
pays.” In specialty retail shops marketing is the fundamental basis on which
the business prospers. Good advertising raises awareness of the product and
reinforces the stores image. The first step to successful advertising is to
establish an advertising budget. Retailing marketing consultant Jeffrey L. Greene
suggests that four factors be considered in setting the budgets: (1) traffic,
(2) market place awareness, (3) competition, and (4) price sensitivity. Then
you must consider the question: Whom are you trying to reach with your
advertising? This is the first question you must consider in order to determine
the price for your advertising budget. Once a target market is determined, the
type of promotional material must be selected. Effective advertising techniques
include word of mouth, email promotions, Internet marketing, and In-store
promotions
Word of mouth advertising is important to every business.
It is an unpaid form of promotion in which satisfied customers tell other
people how satisfied they are with a business, product or service. One happy
customer can steer dozens of new ones your way. According to the 2011 Global
trust in Advertising Survey which surveyed more than 28,000 Internet respondents in 56
countries, 92 percent of consumers say they trust recommendations from friends
and family above all other forms of advertising – an increase of 18 percent
since 2007. Word of mouth is valuable because at little or no cost it can
supplement your primary promotional efforts. However, word of mouth promotion
should not be used in replace of retail advertising. The store will not succeed
relying on positive reviews; advertising is a tool you need to make a business
grow.
Email blasts are a great way to inform customers about
special events, offers, new merchandise, and other information pertaining to
your business. It is a free form of advertising however; it is challenging to
build up the list of email addresses. You need to convince the customer of the
benefits of joining your email list such as: coupons, special events, sales,
and detailed information about products. Once a customer has requested to be a
part of the email group you can engage in permission-based emailing. This type
of marketing allows you to send out email blasts to a targeted market that has
been segmented by interest. Carol Schroeder of Orange Tree Imports states,
“Messages sent early in the week usually have the highest rate of readership”.
Many customers read their email at work; an email sent over the weekend is less
likely to be opened. In addition, it is important to include a line in each
message stating, “If you no longer wish to receive an email from us, please
send a reply with the word unsubscribe in the title”. Once or twice a month
should be the maximum amount of times an email blast is sent out, you don’t
want it to become redundant.
Every specialty retail shop should have a Website, even
if it just provides simple information such as your address, telephone number,
and hours. Edgar A. Falk states, “Web sites, if used properly, can add prestige
to your business, be helpful in communicating with your customers, and for
reaching potential customers”. The information you want to include on your site
is location, hours of operation, email address, telephone number, and events.
Most importantly, you want to include products that will appeal the most to
your target market.
"U.S. small businesses see incredible value and
opportunity in digital marketing and
are clearly increasing their presence as a way to gain access to new customers," Cathy Martine, AT&T's
executive vice president of small business solutions, said in a statement. "With a variety of digital
tools such as email, websites and
social media, coupled with the ability to both deliver and access them from mobile devices, small
businesses are building new connections without borders."
Facebook, Twitter, and Instagram have become important
marketing tools for small businesses. The
majority (66 percent) of small businesses plan to invest as much or more in
digital marketing, such as Websites, social media and online advertisements, as
they did last year, according to the 2013 AT&T Small Business Technology
Poll, which surveyed 1,000 small businesses nationwide. Small business can
engage in online marketing by creating a Facebook Business Page. Having a
Facebook page gives you direct feedback about your target market. You can learn
a lot about your Facebook fans through their interactions, comments, and
feedback.
Twitter
allows small business to connect with existing and new customers. Through it’s
targeting system a small business can easily “Target
just the right slice of the 200 million active users on Twitter”. Advertisers can target their tweets by keywords in timeline,
interest, geography, gender, and similarity to existing followers. Keyword
targeting allows you to reach Twitter users based on the keywords in their
recent Tweets and the Tweets with which users recently engaged. Twitter also
offers ways for businesses to promote themselves and measure their success. By
promoting your tweets you are placing your message in front of the right
audience. You can then track the impressions and click rate to measure the
success. However, the one disadvantage of twitter is that promotional tweets
come with a fee.
Generating nearly 40 million images per day, the
possibilities for marketing on Instagram are endless. Rachel Sprung of the
Social Media Examiner composes a list of 5 ways marketers can use Instagram.
(1) Use Instagram profiles to reach a wider market, (2) create engagement with
contests, (3) reward follows with promotional codes, (4) feature your
customers, and (5) Get more interest in your events. Customers want a personal
experience with a brand that is engaging and easily accessible. Instagram
allows businesses to reach an audience in a creative way using visuals and
short messages.
In store promotions are special events in your shop that
will bring in repeat and new customers into your store. The event should relate
to your niche. For example, if you sell beauty products, offer a free makeup
class. According to Jason Dirks of Meylah there are six things to consider when
creating promotion for your store: (1) Identify your business goals, (2)
Provide customer value, (3) Have an end date, (4) Confirm your execution, (5)
Track your progress, and (6) Promote your promotion. Some promotion ideas
include freebies, holiday promotions, buy 1 get 1 free, raffles, and free
shipping. Any promotion you do should provide value to the customer while still
benefiting the business.
Exceptional customer service is an area where every
specialty retail store must excel in order to succeed. It starts with all the basics around a
greeting, a supportive shopping experience and an acknowledgement of gratitude
at the end of the customer experience. Stores
with a reputation for excellent customer service will always exceed competitors
even based on selection, and price.
“There are four basic
components to having employees who provide exceptional service: hiring people
with a positive attitude; training them thoroughly so they know all about the
store, its merchandise, and its policies, giving them the authority to do what
is necessary to make the customer happy; and rewarding them when they do well.”
Unique customer service is another area to differentiate
a niche retail store. Although it starts
with the customer attendant, other key attributes include loyalty programs,
promotions, food and beverages as well as individualized customer service. One of the most important aspects of
customer service in a specialty store is a service the customer can get nowhere
else.
“Services you offer customers can be every bit as
creative as your displays and promotions. Specialty stores that offer services beyond
the usual and expected show an eagerness
to please customers that sets them apart from the crowd. A unique
service will also be something customers talk about, and that positive word-of-mouth is worth more than any
paid advertising.”
The brand forms the identity of the business and
permeates through logos, signage, and is foundational within the specialty
store theme. It will guide the design of
the store and influence the overall ambience of the experience. The brand must stand out from competitors,
reflect the personality of the business, and be memorialized by the
customer.
“Your brand is more than just a crafty logo, a catchy
slogan, and a great name – although
all of those elements are important.
Your brand is basically your identity. It is the essence of who you are and what
you’re selling. It is everything about you and your product.”
The business signage is often the first encounter the
customer has with the brand. The signs
must attract customers to come in fitting the theme of the niche retail store
and neighboring environment. The
business sign needs to be:
·
“Clear and easy to read.
·
Eye-catching.
Remember that the effect will gradually wear off and who see the sign
regularly, it will eventually fade into the background so it is necessary to
change the signs at suitable intervals.
·
Compliant with your landlord’s requirements,
local council bylaws and both fire and health and safety regulations.”
The design of a specialty retail store is the most
important difficult aspect of creating a successful business in this
category. It starts with a theme defined
within the business plan which is expressed through a professional creation of
brand, signage, product placement, traffic flow and overall ambience. The store owner is best served by seeking
professional support to create the themed ambience though the best possible
creation of all of these facets of store ambience.
“Ambience, interior and exterior décor, merchandise
display and display windows are
all intricately intertwined and cannot be separated. Think of ambience as a combination of all that your customers
see, hear, feel, and smell when they visit your
shop: from the exterior landscaping, decorating, and signage, to your display windows, to the interior of your shop –
including the look and feel of the color scheme,
paint, woods or other materials, display cases, shelving and merchandise displays.
All of these elements reflect your personality and the personality of your shop.”
Windows bring customers into the specialty store and set
the scene for what the customer will find inside. Some considerations are the types and density
of the products displayed. Price tags
may or may not be visible depending on the type of product. Also movements inside the window or unique
lighting are other techniques to attract attention. When properly used, windows are the least expensive
and most effective form of advertising that provides store traffic.
Windows help to motivate local traffic into the store and
leave the customer with an initial impression on the store.
Here are some simple tips on
how to accomplish this:
·
Use your windows to tell what is going on inside
the store. Always feature your sales,
special events, and thematic promotions in them.
·
Be ingenious on how you display your products.
Sometimes use props instead of mannequins and fixtures.
·
Develop a daily feature so that passerby will be
enticed to look at them each day. A
product of the day, joke of the day, trivia question of the day, or special
password of the day for a surprise gift.
Other key aspects include
changing your windows frequently, and always maintaining a clean, appealing
presentation.
Once inside the store, the layout must be visually
appealing, promote traffic flow, tell the story of the theme and also provide
security. The front door and transition
area must be a continuation of the windows.
“Behind the transition area, the first third of the shop
is the prime selling zone. This is where people will see price tickets
for the first time and where they will make
their first impressions about your shop.”
As customers move around the shop they must encounter an
uncomplicated progression of merchandise from one cohesive category to the
next. This requires an easy access flow
of coordinated products which visually appealing uncluttered displays and a simple
flow from area to area.
Even without a designer there
are many steps you can take to make shopping an easier and happier experience:
·
Your merchandise should be organized in such a
way that customers will quickly find what they want.
·
It is important that your products be displayed
so that you can maximize their appeal within the store. Identify those with strong eye appeal and use
them as a focal point.
·
Whenever you have a limited sale, or if you have
a regular sale table, it should be at the rear of the store so that customers
will have to pass all of your other products to get to the bargains.
·
Movement control within a store should be an
important goal for all retailers. While
it is not always easy to achieve, you want to develop a pattern of movement for
your customers so that they will be exposed to key product areas as they move
from Point A to Point B.
·
Lighting is important, especially when fashions,
home furnishings and other color-oriented products are sold.
Some of the other design considerations include access
convenience for disabled customers, use of scents, music and most importantly
maintenance of cleanliness throughout the themed experience.
Once the customer experience is complete and the product
is selected the delivery is an important part of the overall ambience. As an example Sea Meadow Gift and Garden Shop
custom wraps each gift selection as a free option at checkout. This wrapping uses premium packaging,
decorative bows, and gift cards. It also
allows the customer and attendant to build a relationship in the delivery of a
premium gift. It completes the overall
experience from signage through, visual merchandising, leaving the customer
with a unique offering, tailored experience seldom matched in a larger
retailer. This is a key facet to the
success of specialty retailers.
A critical element of the original business plan is
strategies to protect your business.
Some of these include cost management techniques which balance expense,
cash flow, and investment. Another
important area is legal considerations as well as different insurance services
to safeguard against unforeseen events.
These are key considerations at startup and on-going necessary practices
to guarantee the longevity of a small business which is far less resilient to
cost and cash flow issues as well as legal or catastrophic events.
The basics of cost management are grounded in simple
governance. This is accomplished by
monitoring the expense and revenue plans against the actual results of the
business weekly. The behavior of the
business versus plan goals will determine when financial vehicles are
needed. In general the expense items to
monitor closely are the largest variable costs such as inventory, labor, and
marketing against the business plan. The
fixed costs such as physical plant and general overhead items only become an
issue when the expected payables deviate from the plan. As an aside the fixed costs are simple to
attain targets for cost reduction through lower insurance, savings on heat,
electricity, or telephony services including the Internet through rigorous cost
avoidance. Small niche business owners
benefit immediately through diligent fixed cost purchasing.
Another important aspect of cost and cash flow management
is providing the business with the right level of capitalization to sustain
expenses and balance cash flow during through growth. The most common source of capital is the
banking system.
“Banks are a traditional source of small business loans,
and for years the Small Business
Administration (SBA) has encouraged banks to make loans to entrepreneurs by assuming some of the
risk. You apply for an SBA-guaranteed loan through your local bank, allowing you
to develop a personal relationship with a
banker who may serve as one of your store’s advisors.”
Other financing means are available through the State and
Federal government for minority and women owned businesses as well as economic
development zones. However maintaining a
relationship with a local banking institution is critical for advise, financial
services, and on-going financing for short term needs.
“Even if you don’t turn to a bank for an initial loan,
you will need a bank to handle
your deposits and other transactions. Working closely with the bank will help if you need to turn to it for
financing in the future as your business grows.
Many stores use short-term loans
for specific financing needs.”
The legal aspects of an enterprise are dictated by local,
State and Federal regulations and are dependent on the type of legal business
entity formed. What is critical to the
niche store owner and often more ambiguous is the types and amount of insurance
services required to sustain the business.
Insurance by design is a risk avoidance strategy and if not appropriately
insured can have a catastrophic impact on the business in the event of a
non-insured incident. Many services
exist and can often be procured through a bundling approach known as an
umbrella plan.
Following is a short list of
the primary types of business insurance policies available to small businesses:
·
Property Insurance pays if specified business
property (building, fixtures, inventory) is damaged.
·
Personal Injury Insurance covers the cost of an
injury to people or damage to personal property while on your business
premises.
·
Business Income Insurance pays if the business
loses income due to an uncontrollable event.
·
Employment Practices Insurance covers damages or
settlements based on employment law.
·
Key Insurance protects against the loss (death
or disability) of a key employee.
·
Cyber Liability Insurance pays on the loss of
valuable data due to a computer security breach or catastrophic damage.
These are just a few of the
more common insurance products available to small businesses.
The most common reason specialty niche stores fail is
simply consumers are no longer interested in their products, those items are
available in a different venue at a better offer, or the business runs out of
capital. It is imperative that the owner
monitors closely customer satisfaction, the market dynamic for their products,
and maintain a strict discipline for all the operational aspects of their
business. Specialty retailing can be
personally rewarding, lucrative and competitive to larger retail stores but the
owner must always be diligent to the principles discussed.
The future of a successful
specialty retailer is best summarized by:
“If everything does go well, you need to decide whether
you will stay the same size, expand,
change your product mix, move or open branch stores. Small retail stores
need to change constantly in one way or another to stay alive.”
PAGE
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Shop Retailing: Everything You Need to Know to Run Your Own Store. Hoboken,
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22 Schroeder, Carol L. Specialty Shop Retailing: Everything You Need to Know
to Run Your Own Store. Hoboken, NJ: John Wiley & Sons, 2007. Print.
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