Saturday, July 11, 2009

Recession Store Planning

There are a few things I've picked up from the larger stores as strategies to survive the recession. As unemployment rises in Contra Costa County (supposedly a lagging indicator of economic health), our sales also have begun to flag across the board. Here are few strategies the bigger stores use that we're starting to employ:

Reduced Variety. We carry six lines of paint brushes and four types of primer. None sell bad enough to drop using my usual metrics, but too much breadth ties up inventory dollars when they're scarce. There's also a concept called bounded rationality, in which too many choices actually impedes sales. At the same time, someone wants those items and you have to be careful not to annoy customers enough to shop elsewhere. For example, we have five lines of paint and dropping any one of them would highly annoy those customers who buy them. Sometimes you can't put the djini back in the bottle.

Fewer Chances. It goes without saying that we take fewer chances on "fringe" or marginal products now. We'll try a hopeful new game, but we won't buy things based on the "cool factor" or wishful thinking. Now more than ever, there needs to be some data to back up purchasing decisions. A game company that's ready for success in this kind of economy, according to an ICV2 article I read this week, has entrenched themselves with solid releases for exisitng popular games. It's not a time for experimentation or big chances.

Quicker Clearance Threshhold. Items that once sat on the shelf for six months or got a free pass for up to a year before they sold are now getting dumped much faster to improve cash flow. You see this at many stores now, and clearance tables are often moved from the back of the store up to the front. Our buckets are full. It used to be a mark of shame, while now it's smart business and an opportunity. It's a dangerous practice because it encourages people to wait and see, but it's now too dangerous to let a product grow stale if there's even a tiny bit of interest in it. You can no longer find people willing to buy dead product, just because it's cheap. At the same time, we've got a new breed of scavenger customer that only shop the sale. They follow the blog and regularly check the clearance shelves and buckets. For some, it's all they buy from us. I hold no animosity towards these customers, as in nature, they provide an important retail function in removing our carrion.

Less Depth. Just-in-Time inventory used to be how we had less depth in the past, but we now have restrictions on this due to increased freight costs. Still, I would rather pay more for a product if it means I can stock lighter. Again, the key here is to avoid annoying customers with product outages. Hopefully they''ll understand the times we're in, at least a bit. Pre-orders are now more important than ever for stores like ours. If we can determine product demand and guarantee product for our solid customers, everyone wins.

Marketing Re-Alignment. Advertising is this nebulous thing that has little proven return. Everyone does it. What if you didn't? Anything that targets the general public, a group that has stopped buying, is now out of our equation. Anything that targets our known base gets priority. Yellow Pages is now dead to us, while Constant Contact to inform our known customers is a top priority. Our TV ads have been scaled back 50% from the first half of the year; 75% from a year ago. The advertisers pleaded with us early in various news stories not to make cuts; that way leads madness they cautioned. However, it's one of the few discretionary budgets left before touching employee hours and more draconian decisions.