Friday, October 31, 2008

Avoiding Marginal

I blame the media for much of our economic troubles. The economy runs on consumer confidence, and the media has done a stellar job of absolutely destroying confidence in the run up to the election. Every anecdotal micro problem with the economy is magnified and reinforced by a legion of reporters and bloggers who can tell you how the presidential candidate they don't support is likely to make it worse. Forget making things better, this is all about despair. Those of us on the retail front line are hoping this subsides after the election next week. Oh yeah, and if you're a reporter, take a closer look at the retail front lines; this might be your next job with all the newspaper layoffs.

The truth is that many retailers won't be around next year, with some of the larger ones closing before Christmas, rather than taking their big profits in December and bowing out in January. This is a big company phenomena related mostly to credit. These companies were already in trouble and were probably unable to acquire the credit they needed to build up their inventories for the holidays. Small retailers like us don't have this problem, as we're a year round retail destination. We rely on the holiday season, which for us is about five weeks, to make a tidy profit for the year and to get us through a long, cold Winter. I expect this Winter to be especially cold, so I know any profits we make in December will be hoarded rather than used to pay off debt or expanding. That's just my little contribution towards screwing up the economy.

Despite talk of game stores being counter-cyclical, some are likely to go out of business. There is a culling taking place of the marginal game stores. Marginal tends to refer to those with poor planning and even poorer execution. However, with such retail pressure out there, who knows if there's marginal creep. What if the bar has been raised? What if my store is now marginal? What if these desperate retail times call for desperate measures? I think a lot of game store owners need to get off their well cushioned butts and promote themselves better this season. For some, this means promoting themselves for the first time. The key for me is to budget this. When I was a new, inexperienced store owner, it was easy to throw money at problems without any idea if the results were plausible. Advertising is the biggest black hole in business, if you aren't careful.

Having a budget is the first step. I reduced my advertising media budget for the holidays to fund my guerrilla marketing efforts. The second step is focusing on the short term. A lot of marketing is about building your customer base over time. You spend $50 to snag a new customer who might only spend $25 this month, but might spend $500 over his lifetime as your customer. This is a good, long term investment. In temporary downturns like these, we need short term investments. Marketing to existing customers should come first, especially if you haven't been doing it lately. They say you need about 9 impressions on a new prospect before they become your customer. Why not go with the guy whose already with you?

After marketing to the base, work on snagging the muggles, those holiday customers who wouldn't normally visit your store. Spending might be down for the holidays, but they will spend money. The goal is to capture as many of them as possible, even if it's a one-shot just to boost your December sales. It will be especially difficult this holiday season because they're looking for bargains, and there will be many and starting now. Those companies going out of business are not doing it quietly, they're having sales now, and although you're not competing directly with Mervyn's or Shoe Pavilion, dollars spent there are dollars that won't be spent with you.

To get muggles in the door without breaking the bank, you need cheap, inexpensive, guerrilla marketing, none of this $50 to get $25 crap, banking on the long term. Find cheap ways to snag easy dollars and stay on budget. Focus on something quick and easy they can understand. Emphasize the value your games provide over other forms of entertainment. If you've got a section of you store that you want to get rid of, bargain hunting is the new retail pastime; let them know and hit that discount as deeply as you can; you won't get a second chance. Finally, don't go nuts. Make a plan, stick with it, adjust as you go, work hard. Accept the plan. The plan is good. If it works, it works. If not, at least you tried. At least you avoided marginal.

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