A General Store Evaluation

A friend of mine asked "Why can't I get the foot traffic to come into my store?".  

Well I said lets evaluate your store.  The one thing we want to do is compare your store to the competition.  Why do they go in their stores?  The Store in question is a small general merchandise store.  About one third is clothing.  He sells at competitive prices, but doesn't specialize in any one area.

His competition in the same shopping center:

1.  Major Supermarket
2. Dollar Tree
3. Card and gift shop
4. Food Shops 
5. Post Office

Down the road (less than half mile)

1. Staples
2. CVS
3. Rite Aid
4. Another Supermarket
5. Marshalls
6. Toys R Us Express
7. Varies clothing and other stores

So I said first rule of retail is Location, Location, Location. 

 What makes this the right location for your General Merchandise Retail Store?

Are people going to come into your store for a specific reason. Or, are you just hoping that they will just come in to see what you have?   In a city this store might do well.  Somewhere where people have to walk and carry every thing they need.  In that case the closest store gets the business.  But given a choice, people will drive down the block or around the corner for a specific item.  Because he doesn't specialize in any one thing.  The customer can get the same merchandise while in another store.  

Example 

I can buy cleaning supplies in the supermarket.  I can get cheap items in Dollar Tree.  Get greeting cards at CVS.  By the time I do my other shopping I already bought everything sold in the general store except clothing.  But, because there is a wide range of clothing stores nearby, I'm less likely to shop in a small general store.  

So my answer is this is not the right location for a small general merchandise store.  Either move the store or change what you sell.   If the rent is so good, the foot traffic is there.  Then Change what you sell to something that people aren't going to get nearby.

What items sell the best?

His answer was gadgets, small impulse items, toys, small electronics.  I said well that your answer.  Specialize on those items.  Sell off the rest of your stock and slowly turn your store into a gadget selling store.

Keep your price range better than a dollar but not too high.   You want items they cant buy in the supermarket and better quality than the Dollar store.   Now if people want a decent charger for their phone, either they come into your for it or have to drive down the block.   By changing what he sells he will cut down on the local competition.

People too often open a retail store selling what they want to buy. And then think its what everyone else will want.   Sam Walton the founder of Walmart said that if you want to compete with Walmart you have to specialize.  General merchandise stores sell a little of everything.  Your choices are limited.   If your want model cars, your only going to find a few choices in a general store.  Where as a hobby shop may have dozens of choices.

If your set on owning a general merchandise retail store, I suggest you find the right location.  Somewhere where people don't have a local store.  If People have to drive a half hour to get to your competitor than that's the right spot

.

Why has higher sales become more important than higher profits?

Answer is easy, bonuses.   When companies give higher and higher bonuses for higher sales,  they forgot you have to make a profit to pay for the bonus.  Many companies have gone out of business all because they forgot the golden rule.  You have to make a profit.   There are people spending too much in expenses just to help them make higher sales and get a bonus.  Problem is the sales aren't always high enough to cover the added costs.

Bonuses should be based on increase in profits and not sales.   There are a lot of badly run businesses out there that could increase their profits while actually decreasing their sales.

Control expenses and you control your business.  Payroll is one of the biggest expenses any business can have.  A lot of managers cut payroll first because it is the easiest thing to do.  Cutting payroll gives you big cuts fast.  It also can ruin a store.  No employees no sales.  

I suggest before you cut payroll you take a good look at how your spending it..   Do you have the right ratio of sales to man hour.  Do you have the man hours evenly scheduled.  Or do you have more sales associates on on busy times and less when its slow.   Are people standing around with nothing to do?

You need to Question your business all the time.  Plan Plan and Plan some more. 

Fail to plan and your just planning to fail.

Are your managers following up on their associates.  Are they out on the sales floor or in the office?  Do you know what people are doing or are you just waisting payroll?  Do department managers spend more time in meetings than they do making sure the job gets done?  

In a Retail store Money is made on the sales floor, not on the phone or in the office.  Not at meetings and not at the home office.  It happens in your store on the sales floor with customer service. The bottom line is if your cutting payroll you better know which employee hours are expendable and which aren't. 

On Saturday afternoon you don't need a bookkeeper doing sales reports that can wait to Monday.  You need all hands on deck helping customers. 

Have you ever gone into a supermarket and couldn't find anyone to help you after 5pm except a cashier?  Imagine if you did?  what if someone was there to help you find your favorite items.   I imagine more sales.

Think like a Customer and you will know how your Customers think!