Boost your retail sales

The outlook for retailers is uncertain as interest rates rise and consumers begin to close their wallets. It’s time to re-focus on marketing and selling strategies. Successful retailers tell EMILY ROSS how they do it.

By Emily Ross

The outlook for retailers is uncertain as interest rates rise and consumers begin to close their wallets. It’s time to re-focus on selling. Successful retailers tell how they do it.

Margot Spalding, co-founder of furniture retailer Jimmy Possum thinks Australian retailers are killing themselves. She comes home from most shopping trips these days wanting to throttle someone. “The level of service is so bad, every window screams 60% off, it’s all dirt cheap with 500 years interest free.”

According to Spalding, a shopping climate where consumers are only interested in what they can get for the cheapest price is not the right way forward for Australian retailing.

After Australia’s record retail boom, the outlook for retailers is sobering. Retail sales flatlined in January, wage costs are up 4.2% on last year, job vacancies are at record highs, interest rates keep rising and the Reserve Bank has commented on a “dearth” of workers.

It all adds up to uncertain times for Australia’s 77,000 retailers and 200,000 retail outlets, competing for a slice of the $200 billion annual retail spend.

Listed retailers are being pummelled by fearful investors – even those companies performing well. JB Hi-Fi announced a record half-year profit of $41.9 million with sales up 50%. This stellar performance comes as JB Hi-Fi’s share price has fallen to $10.06 (at close March 3, 2008), down from more than $17.00 in December 2007.

JB Hi-Fi’s chief executive officer Richard Uechtritz says the company has never been in better shape. “Go figure,” he says. Interest rates are a clear negative, but Uechtritz believes there are still many positives on the ledger for the company, including Australia’s insatiable appetite for technology. “Technology has become a bit like food. People don’t want to go without televisions, computers and even game consoles,” he says.

Uechtritz is not pressing the panic button. On the contrary, JB Hi-Fi plans to open around 15 stores this year. “We will look at any opportunity that presents itself,” he says. JB Hi-Fi’s competitor Harvey Norman has big plans 50 new stores in 2008. And it is not just the big retailers who aren’t too concerned about a retail slump; many leading specialty retailers question whether any retail slump will have an impact on their businesses at all.

David Wittner, the chairman of Wittner Shoes, has clocked up 57 years in retail and he likes to call himself an eternal optimist. He has read all the current reports that warn of a drop in discretionary spending, however Wittner is planning to open four new stores this year.

“We are not lacking in confidence about the future,” he says. The 95-year-old business has 400 staff, 40 shops around Australia and an online store. “We are not factoring in a drop in sales, although we are being more conservative,” he says.

Stick to your knitting

Wittner’s strategy centers on making sure customers keep finding the right shoe in store. “We are very conscious of quality, pricing and product improvement,” he says. Rather than slashing shoe prices, Wittner’s approach is to boost the resources of the buying department, bring in design consultants for the stores and continuously develop advertising, promotion and merchandising for the brand. “Instead of how do you get it cheaper, we think, how do get it better,” he says.

David Wittner sees his role as “lion tamer” to the third generation of Wittners; Michael, Peter (joint chief executives) and Debra (marketing and PR). Michael and Debra travel extensively around the world, bringing back plenty of retail ideas to keep the stores and the products fresh.

Director of Connect Marketing Professionals Carolyn Stafford, runs workshops for troubled small businesses. She regularly has to pass the tissues to retailers who feel like they have got it all wrong. “Marketing is a huge missing link for SMEs,” she says. “They get confused and think that marketing and selling are the same things. When they realise they need marketing, they slap it on the offering as an afterthought.”

Marketing-led businesses such as Boost, Roses Only and Fernwood have powered ahead of competitors because of a strong emphasis on marketing.

Stafford also cites innovative stationary retailer Smiggle (which sold to the Just Group in 2007 for $29 million) as a prime example of a retailer that understands its core appeal to its customers, its special value.

Smiggle’s “egg” highlighters and “yum yum” rubbers may not appeal to the Officeworks customers, but they send Smiggle’s ‘tween girl customers into raptures. “Many businesses miss the mark, offer too many services and aren’t differentiating themselves,” says Stafford who has a background in sales, training and marketing roles at Merrill Lynch and Westpac.

To discount or not to discount

According to Jimmy Possom’s Spalding, there are substantial pockets of consumers that want something different and are prepared to pay a premium for locally made, quality timber furniture. The business had turnover in 2007 of $27 million and employs 160.

Bendigo-based Jimmy Possum has gone national with its strategy to be as different from other furniture retailers as possible – no discounts, no sales and no airheads on the shop floor. The company’s inhouse training team provides regular training for all staff – floor staff receive training every six weeks, even Jimmy Possum’s manufacturing staff spend days on the shop floor to better understand customer needs.

Spalding is not anticipating a turndown in the furniture market for her customer demographic. Jimmy Possum is opening a new store in Bendigo in central Victoria and the company is looking for sites in Canberra, the Gold Coast and potentially in Geelong and Adelaide.

The key for specialist retailers is to forget about trying to compete with the big retailers on price, and instead focus on creating a niche. “A common trait between successful entrepreneurs is a passion for what they do and passion for the niche customers they are delivering too,” says Stafford at Smiggles. And Spalding agrees: “If you try and be all things to all people, as a retail you end up being nothing to anyone.”

Surviving the retail slump

• Think head down, tail up.
• Keep a hawk eye on costs and encourage a low-cost culture.
• Beware hysterical discounting.
• Retain staff with relevant, practical training.
• Enhance the customer experience instore.
• Understand marketing and selling are two different, critical aspects of retail strategy.
• Keep abreast of merchandising, advertising and promotional best-practice.
• You cannot be all things to all people.
• Commit to continuous product improvement.
• Do everything in your power not to waste your customers’ time.
• Don’t try and compete on price with the giants, create value in other ways.