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Retail Veteran Shares Savvy Biz Tips

Monday, June 1, 2009

Retail Veteran Shares Savvy Biz Tips(GIFTBEAT)

Ready to hear from someone who bears better news about the gift sector? Tom Ungrodt works both sides of the industry fence - he's president/CEO of Michigan-based Ideation, Inc. gift catalog company, a firm that also operates three gift stores in the Ann Arbor area. Here, Ungrodt talks to contributing editor Sharon Bopp about the state of the gift industry, tips for 2009 Christmas buys, how to trim operating costs and more.

Q. From your perspective as a 31-year industry veteran, how would you describe the state of the gift industry?

A. I think today's gift industry is soft and fragile. But I believe it has an inherent energy to recover very quickly. Because of the type of product we sell, gift retailers are the last to go into a recession and the first to come out. What we sell is affordable, emotional and inspirational. All these things make our type of store one where recession is moderate, as opposed to being in the auto business here in Michigan.

Customers don't forget birthdays, anniversaries and Christmas. Those are times when we benefit from foot traffic. I see no difference come this fall. I am eternally optimistic. I project that fourth-quarter 2009 will be fairly decent for all of us, and much better than 2008. [But] retailers have been in survival mode since the bottom fell out in mid-October 2008. We've been over-retailed forever. There has been a shakeout and the industry will continue to lose people for one reason or another.

Q. How do you see the industry's future?

A. Today it's hard to put a strategic plan together for three to five months, let alone the traditional three to five years. Everything is one day at a time, or a week at a time. It's difficult to say where we're going to be. Anytime in this sequence we could get into a category [like Beanie Babies, Vera Bradley and Webkinz] that could grow everybody's bottom line.

Gift businesses are still viable, we can make them grow and make a living. It takes the right combination of location and proper marketing, merchandise and personnel. I won't go so far as to predict that stores will see huge increases, but those who are here in December 2009 will be here in 2010 and 2011. They're tightening down their businesses and streamlining them. That will make them a lot stronger when we come out of the recession.

Q. How can store owners reduce operating costs?

A. Retailers need to stay lean and mean right now by cutting back on expenses. That means going to landlords and asking for help because cash is tight. Landlords see their vacancies and know that retail business is difficult. They also know a tenant is better than empty space. Even if you think you have a fair rent, don't hesitate to negotiate it. Why wouldn't you take time to ask about one of your largest expenses?

Find the final decision maker, whether it's the mall manager or local landlord, build a relationship and educate him or her about your business. When you feel comfortable, meet for coffee and say "You really have to help me out. You gotta step up to the plate." If you're paying $5,000 in monthly rent, you might say you need to save $12,000 per year and ask the landlord or manager to take $1,000 per month off the rent for one year. If you have two years left on your lease, ask for that same concession for the balance of the lease.

A rent concession can put you on your feet and let you put extra money in the bank to ease you through your current problems. Remember not to go overboard in asking for rent concessions. [For example,] don't say you want free rent for six months. On the other hand, don't be bashful. Remind the landlord that you have paid rent on a timely basis for several years. In most cases, the landlord will come through with some relief.

Q. What advice do you have for buying at this summer's trade shows?

A. Be prepared by understanding your store's buying history. Have the facts and figures available so you can buy in control. Before you get to a show, identify your top vendors and prioritize them. You only have a certain amount of dollars to spend. Spend your money with your good, stable lines. Then see what you have left to get into new products or categories.

Interview customers and sales staff about merchandise requests. You'll come up with some pretty good ideas that can help in your decision-making process. Identify opportunities in your marketplace. Network with business neighbors and associations to find out about strong-selling lines. Check with the vendors or sales reps for those lines to see if they're available in your area. You may be able to make those buying decisions before you get to the show and seal the deal while you're there.

Q. In your opinion, how should retailers be buying for Christmas 2009?

A. What's happening is that retailers are waiting too long to make seasonal commitments. They need to commit right away. If they wait too long, they won't have what they need to generate good sales in the fourth quarter.

One mistake retailers are making is approaching Christmas 2009 with almost too much caution. I always say, "If you buy for a decrease, you will get a decrease." Many retailers will predicate their numbers based on Christmas 2008. Throw out 2008, and look at 2007 and 2006 numbers. Those are more indicative of the type of holiday we will have in 2009.

Remember that it's all about finding and capturing top items from particular vendors, as well as inventory and merchandise. It goes back to basics every single time. Retailers who don't commit will lose out. Vendors are holding inventories tight to the vest, too. Most merchandise comes from overseas and takes time to arrive here. Vendors are being squeezed by banks and other lending institutions. Some vendors will go out of business.

Q. What can vendors do to help retailers in today's tough market?

A. Most astute vendors will stand up and have a little "stimulus package" of their own. Some are stepping up to the plate, but not as many as I hoped. A vendor needs to help retailers when they really need it. That time is now, like never before.

Showrooms open and expect everyone to come. Well, you know what? That's old business. Vendors should take a proactive role in contacting their customers two to three times before a trade show. [As a retailer,] I would expect to receive pre-show emails from vendors. If vendors don't communicate, they won't have retailers at the shows.

Your reps might consider surveying retailers about what they're looking for in their stores, then tell them about your top lines and the incentives you'll have in your showroom. Use the term "stimulus" in your [pre-show emails and] calls. Take the best of the best in your lines and offer retailers 10% off if they spend $300 to $400 at the show. Invite retailers to your showroom and reward them with an incentive like a free gift, free merchandise, free freight or a dinner certificate when they place orders.

Q. What proactive steps can store owners take when shops near them close?

A. It's always sad to see a local store go out of business. We know the impact that this has on a community. However, we should not take these store closures lightly when planning for your store's future. You're the one who is surviving and building your business. If you hear that a store is going out of business, you might be interested in their personnel and store fixtures. Introduce yourself to that store's manager, and ask if there are key people in the organization who would like a job. Those employees bring invaluable [work experience].

As soon as possible, be proactive and market to that store's customer base. I'm a firm believer that you have to seek out customers; don't assume that they will come to you today. Allocate marketing money to areas where [competitive] stores have closed. Do whatever marketing you can afford. Send mailings and email contacts.

If you own or run a Hallmark store, remember that collectors of Hallmark ornaments [will travel to purchase them] because ornaments are annuals and are collectible. I feel that 1%-2% of our retail business growth in 2006, 2007 and 2008 came from customers of other stores that had gone out of business. In 2008, our retail [division] was down 5%, but it could have been down by 7%-8% without those new customers.

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Categories we're tracking
In This Month's

  • Summer/Seasonal
  • Message Gifts
  • Stationery Accessories
  • Non-Jar Candles
  • T-shirts
  • Fashion Accessories
  • Reorders
  • Personal Care

While coloring books and related products were all the rage in Stationery Accessories last year, this year it's back to basics: note cards, journals and planners.

* Every month Giftbeat tracks sales in a a variety of product categories (more than 50 categories throughout the year). SIGN UP NOW to receive this vital information on which gift items are moving off store shelves.