EXPERT OPINION

Retailers may think the “gift” of the recession was a lesson in keeping inventories lean and mean, but that might be a lesson they’ll want to unlearn – and soon. According to Paul Erickson, senior VP, client services of retail consulting firm RMSA, cutting back too far can be even more dangerous than carrying too much. “We have a very impatient consumer who’s time poor, so if you frustrate her, she’ll desert you and you won’t get her back,” he says. “Every independent retailer, no matter how good they are, loses 15 percent of their customer base each year, and to be too frugal now is to risk alienating the customer. If you have too much inventory, you can run a sale and, while you won’t make much of a profit, you will make customers happy. But if you’ve cut back too far, you’re not going to have the new product that draws people into your store.”

Where retailers should be lean and mean, however, is in targeting what their customer really wants. “It’s more important than ever to know your customer. Buy with a rifle, not a shotgun, because you’ve got to be a marksman. Retailers say sales are down and blame less traffic to their stores, but that’s a knee jerk reaction. Historical sales figures only tell you how much you were able to sell, not what you could have sold. You need to know sales potential, which is a very important buzz word today.”

One way to ruin your sales potential is to cling to old stock. “That’s a prescription for failure. What sells is what’s new. More than ever, you’ve got to clear out old inventory quickly. Every footwear retailer should be able to get three turns a year, and if you’re getting 60 days dating from your vendors, you’re selling half your inventory before you even have to pay for it. You can’t fall in love with your inventory. It’s unrequited love, because it doesn’t love you back. Some buyers take it personally, ‘These darn customers don’t understand me or my shop!’ But what they’re doing is shopping, not buying inventory. You have to look for your customers’ sweet spots, not your own.”

Want a role model from which to learn how to improve your sales potential? “Every shoe retailer can learn from Zappos, because they hang their hat on customer service. Customers today are precious and need to be coddled all the time. The typical retail store in the U.S., if they ranked their customers by gross profit on their computer, they would realize they only have 100 really important customers. They need to learn how to make them happy.”

While it may seem tricky to navigate the changing waters of retail right now, Erickson says retailers have good reason to be optimistic. “I don’t think there’s ever been a better time to be an independent retailer. You can get better deals on space and manufacturers are really wanting to work with retailers and partner with them. This is not a time to play shop, however. You have to be smart.”

Paul Erickson presently serves as senior VP, client services of RMSA. Based out of Minneapolis, Minnesota he has served retail clients throughout the United States, Canada and the Caribbean. He has conducted seminars and workshops to such groups as National Shoe Retailers Association (NSRA), New Balance, International Kids Expo, National Sporting Goods Association and Intuit Software. He has been featured in Fortune magazine and on the CBS Evening News.

  More Expert Opinion Articles