Common Mistakes made by Retailers

Through my years of working with the retail industry, I have learned a great deal through observation and experimentation. Mistakes made by my customers as well as their successes have provided me with an insight that I feel compelled to share. I have seen many retail establishments open and close and have observed those that have succeeded as well as those that have failed miserable. Through those experiences I have been able to come up with a list of typical mistakes made and can provide guidance as to how to avoid and overcome them.

Some of these mistakes might seem trivial and common in nature; however, they are seen again and again.

I saw a great store pull numbers in their peek season only to close a few months after there incredible sales. First, let me explain how they pulled numbers that were simply outstanding. The store opened up in the August season. They were well stocked and had a great opening. They keep in line with reorders and were rotating inventory adequately through their initial months. As the money began to come in, the owners continued reinvesting in their venture. Suddenly, they experienced the success of their Christmas season. Sales quadrupled! There are actually several lessons that can be learned from the mistake that this owner was about to make:

• Lesson 1: Never get overconfident with sales made in December. Expect that those sales will only be pulled in that month. If you can get other months to resemble December, then great. But do not expect that. Usually, it does not happen.
• Lesson 2: Take advantage of the good months to balance off bad months. This is especially true for the holiday season. After the holidays, sales go down for the next few months. Let the holidays balance out the slow months.

Once December passed, this business owner stopped reordering. This leads to the next lesson:

• Lesson 3: Never leave your store under stocked. Never ignore your Inventory Alert reports or Sales Analysis Reports. Your Point of Sale System is there for a reason. Use it wisely. You will be amazed at how many retail owners make this mistake. After investing so much energy, money, and time into getting customer to like the store and the products, you leave your customers with a sour taste in their mouths by leaving the store empty with old products that do not rotate and nothing new to look at. Once customers return twice to the store and see empty shelves, they will not come back a third time.

The business owner, after the holiday season, decided to invest the capital achieved into a separate venture. Translation: he invested elsewhere instead of restocking.

• Lesson 4: Do not lose your focus. This owner made several mistakes, but this one cost him his business. He allowed his store to empty out and did not restock because he lost his focus. He stopped working for the store and tried to do too many things at the same time. Do not misinterpret this. I do not mean that one should not diversify and invest in other ventures. If you have the proper funds to allocate and the proper time to invest and it will not derail your efforts from your current store, then by all means invest. However, a line needs to be drawn. If you are going to take an action that will force you to lose focus on your initial or main goal, then you seriously need to reaffirm your priorities.

That was it for this customer. A few months later he was forced to close the store. The worst part is that the other venture that initiated failed.

The next observation is on a more positive note. It is an example of how combining statistics, reports, and customer observation can help you make good decisions. This customer started a relatively small store in a small town. His sales were good and he was happy. However, like any good entrepreneur, he wanted to know how to increase his sales by making strategic changes in the placement of his merchandise. These are strategies used by the big guys such as Wal-Mart and Sears using data warehouses and statistical analysis. It's probably pretty safe to assume that you probably would not invest the kind of capital required for obtaining the equipment and resources need for that type of data, however our Point of Sale System can give you very powerful information that can probably provide the same type of results in a scale more directed to your store size. What this business owner did was reposition specific merchandise and then observe the results (whether positive or negative). He pulled a Worst 20 products reports and a Best 20 products report. Afterwards he pulled Sales History reports on all 40 products and observed sales trends for a month. He recorded the position of those products and started repositioning those that rotated quicker with those that lagged. He observed for a few weeks and reran the reports to look for changes. He was able to observe that products placed in a specific place (right side of the entrance) moved quicker regardless of what they were. He then decided that when products were lagging, he would place then either on that wall or on a bin next to the wall on special.

• Lesson 5: Do not be afraid to experiment with your store. History is proof some of the most successful achievements were based on accidental findings.

I hope you have learned something from these two business owners. The next newsletter will be focused on tips on how to improve sales.