34 Lessons in The Art of Retail

A collection of tried-and-true tips, techniques and best practices that can help any retailer

Over the past year, Marijuana Venture has published a number of advice columns from The Retail Owners Institute, bringing effective traditional retail techniques to the burgeoning cannabis industry. This month we look at the greatest hits of those articles:


1. The 80/20 rule of thumb is no doubt at work in your store: 80% of the volume is generated by 20% of the customers (of course, these percentages are not exact, but you see the point).

The more you know about that 20%, the better you will become at focusing your operation — buying, displays, advertising, special events, etc. — on the preferences of your “best customer.”


2. Doing a poor job of developing employees’ potential can result in a high turnover rate, along with a general lack of motivation and bad customer relations habits. Employees will be more interested in coffee breaks, texting their friends and quitting time than taking care of customers. Thus, they will produce far less than they would if they were highly motivated and trained.


3. Treat your best customers as the valuable assets they are to your store. Today, it is not enough to have profitable products. Instead, retailers must find — and nurture — their most profitable customers.


4. Effective inventory management takes planning — not luck. Do not merely consider sales, but also project the figures to find the optimum turnover rate for cash flow and profits as well as sales. It’s the balance you are after.

The importance of planning your inventory needs cannot be emphasized enough. This is why it’s important to implement an open-to-buy system, which enables you to commit yourself to receiving a certain amount of inventory in a given amount of time. These amounts are predetermined based on a carefully calculated sales plan and corresponding inventory level, based on your targeted turnover goals.


5. Music is a great way to create an inviting atmosphere in your store. But be careful — music should always be selected to appeal to the customer, not the staff.


6. The time to do markdowns is just before the sales peak, not just after. All merchandise, particularly seasonal goods, will hit peak value just before hitting peak sales. If you’ve been slow with the markdown pencil, it may be slowing your turnover and tying up your cash.

Past sales records and the wholesale market will be indicators. When your suppliers start offering deals, it’s time to start cutting prices.


7. Investors and lenders are hesitant to deal with retailers who cannot indicate a working knowledge, on paper, of their cash flow. These owners generally haven’t prepared and used a cash-flow budget, which is a plan for forecasting cash balances, cash receipts and cash disbursements.


8. First-time customers have no idea what to expect when they walk into your store.

They are not very familiar with your products, may feel intimidated and certainly will benefit from a staff member who will take the time to discuss their options. What these customers need is education about your products — and your store. They also need help comparing and contrasting products and deciding what is best for them.


9. Your customers will naturally gravitate toward new merchandise. Take advantage of that tendency by pairing older merchandise with new arrivals. Price the older items near cost.


10. GMROI (gross margin return on inventory investment) should be in every retailer’s arsenal. It can be determined by taking a year’s gross margin dollars for a particular line of product and dividing by the average cost value of inventory in that product line. Compare this dollar return with other product lines.


11. Many retailers provide special services but fail to communicate this to their customers. If you provide an extra service, make sure your customers know about it. Make signs and mention these services in your advertising.


12. Here’s a dismal statistic: last year, in the United States alone, on average one retail business failed every 12 minutes. That’s five failures per hour, 24 hours per day, 365 days per year.

Keep this in mind: more than one-third of the retail businesses that fail are actually profitable. They simply run out of cash when their creditors have run out of patience.


13. At a glance, customers should know who the store is intending to attract, whether it’s teenagers, working moms, young families or “empty nesters.”


14. Budgeting, of course, will be your main tool for keeping expenses down. A pro forma (projected) income statement is a necessity. You must forecast expenses and adhere to budget guidelines.


15. A training program can be a tremendous motivator for your employees. When you have a good training program in place, you can expect your salespeople to respond with lower absenteeism, longer tenure and greater productivity on the job.


16. Studies show that 20% of customers are true price hounds and will chase down the lowest price. The other 80% care about price, but also take into consideration what else the store has to offer.

When pricing merchandise, don’t be distracted by the 20% who are price-hounds and lose sight of the 80% who are looking for total value. Keep your prices competitive, but don’t lock yourself into a habit of hasty discounting in order to chase fickle price shoppers.


17. Obviously, the quicker your merchandise hits the floor, the quicker it will move. Look for jams in your processing system that may be unnecessarily tying up merchandise.


18. Consider the expenses that you incur due to purchasing, holding and selling merchandise in your business. These may include freight, storage costs, insurance expenses, external or internal theft, obsolescence, spoilage and taxes.

Studies have shown that the annual additional cost of holding excess inventory can be 25% to 32%.


19. Graphics and signage should never detract from or compete with the merchandise. Their goal should simply be to draw attention to various products, discounts and special offers. Make sure your signage communicates its message immediately. Customers won’t read a sign if they have to take the time to figure out its message.


20. Emotional and qualitative rewards frequently rank highest for contributing to employee satisfaction. Money is behind emotional rewards, but still near the top of the list.

Here’s how these studies would rank the top 10 priorities for employees: expressed appreciation from employer for work well done; knowledge of what’s going on in the business and the owner’s goals for the business; management’s understanding of employees’ personal needs; job security; good wages and benefits; interesting, challenging work; opportunities for growth in responsibilities and compensation; management’s loyalty to employees; good working conditions; tactful discipline.


21. For these (frequent) customers, it is essential the merchandise in your store is organized so they can quickly and easily find what they are looking for. They want to be able to walk in and immediately narrow down their search. Similarly, “price and item” advertising can be very useful to these shoppers.


22. Displays from manufacturers are convenient ways to convey these persuasive messages to occasional customers.


23. Conducting an effective sales analysis can be very revealing. Looking at sales from a variety of productivity measures can provide new insights. Consider information such as total sales volume, total number of transactions (this is very important!), volume and transactions by category and items per transaction.

By displaying this information on a spreadsheet month by month, you can quickly see your store’s seasonality and how those seasons might not be the same for all product categories.

The sales analysis helps you pinpoint opportunities and weaknesses.


24. If you want your employees to grow with your business, train them carefully and treat them right. No matter how well you watch cash flow, manage inventory or make your store attractive to customers, you will lose business if you don’t develop your employees.

In a service industry like specialty retail, the contact between the salesperson and the shopper can make or break the bond between your business and your customers. Many retail owners, however, fail to recognize how important that connection is.


25. Watch customer traffic patterns for a couple of days. If you find one section of your store being visited more frequently than another, do some rearranging. Shift your high-draw merchandise to another part of the store.

Also, check your lighting and signage to make sure you haven’t created barriers to traffic flow with dark, foreboding corners.


26. You need to make it as easy as possible for shoppers to get to your store. If your store is in an odd location, publish directions in your advertising and make sure your staff is prepared to provide clear directions over the phone.


27. The merchandise retailers sell doesn’t change much each year, even in cannabis. Sure, there are fads and technological advances, but retailers must still sell to meet customer needs and desires, making it essential that every dollar invested in inventory be as productive as possible at producing gross margin dollars. The GMROI calculation helps retailers quickly see where to get more bang for the buck.


28. Use your logo both in advertising and as a consistent presence in your shop. Spotlight the items featured in your ad with special displays or signage. Be consistent with your advertising, so customers will come to recognize your advertising style.


29. The cash/wrap is your customers’ last impression of your store. Keep it neat and representative of your store’s dedication to service and organization.


30. Don’t underestimate the importance of regular correspondence with customers. It’s not enough just to have a mailing list — you must continually use this resource and update it, providing your customers with meaningful information.


31. If a display seems to be turning slowly and not generating a lot of interest, consider making some changes. Use creative signage to add interest, replace it with another display, couple it with faster-turning products or move it to a different part of the store.


32 .It’s important to focus your product selection around customer needs — but many stores have a selection that’s far too broad. These retailers try too hard to be all things to all people and don’t concentrate enough on the customers they may really want or need to attract.


33. If your store’s name itself doesn’t identify your retail segment, consider adding a tagline. When customers hear your store’s name, you want them to immediately think of what you’re selling.


34. We live in an age when there is really no excuse for retail owners to operate without a program of regular training and development for their employees. Hundreds of private companies devote themselves entirely to producing sales training and motivation packages.

If you find you are constantly delaying actions or decisions related to the development program, look for someone on staff who can take over the job for you.


Patricia M. Johnson and Richard F. Outcalt are certified management consultants and co-founders of The Retail Owners Institute. They are strategists for retailers, workshop presenters and publishers of a free and popular newsletter for store owners and managers. Sign up for The ROI News for free at RetailOwner.com. They can be reached at 206-623-3973. They will also be speaking at the Retail and Dispensary Expo in Portland, Oregon on Oct. 23-24. For more information or to register, visit www.TheRADExpo.com or call 425-656-3621.



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