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Retail 101: Five P’s of success

BY Lisa Girard

Willis Qualheim, owner of Qualheim True Value in Shawano, Wis., was in a local Subway restaurant when he overheard a young, enthusiastic employee saying she wished she could work more hours. Qualheim gave the woman his card and encouraged her to apply for a job at his store.

“You should always be looking at possible associates to come to work for you,” said Qualheim, who employs 45 people at his 50,000-sq.-ft. store. “If I see someone somewhere who’s doing a super job, I will plant the seed with that person that if he or she is ever looking for a new job, come and see me.”

This was one of several tips Qualheim shared with fellow True Value retailers during the Best Practice Conference that kicked off the spring market in New Orleans in March. True Value had a speaker for each of the Five Ps of retailing that CEO Lyle Heidemann has often referred to as a recipe for success: People, Promotion, Price, Product and Place.

People

Qualheim spoke about the importance of scheduling employees to work during the busiest times of the day, rather than by standard shifts. He spoke about hiring according to attitude, rather than expertise. Before being hired, every potential Qualheim True Value employee must undergo an online personality assessment—a good indication of how that person might interact with others, Qualheim said. Prospective employees also go through a background check and, if hired, a 90-day probationary period.

“You can have all the expertise in the world, but if you’re not a people person, how can you help people on the floor?” he said. “You can teach selling skills. Attitude, you cannot teach.”

Qualheim believes strongly in education and training. In addition to vendor training, his employees also attend plumbing and electrical seminars and do online training from True Value University, and, more recently, the Midwest Hardware Association. There are different training curricula for the checkout person versus the sales person versus the manager, and they range in length from 24 weeks to 52 weeks. The topics range from selling skills to sensitivity training.

“A lot of it concerns customer service skills, selling skills and ‘dealing-with-people’ sort of skills,” he said. “In this day and age, I think it’s critical to develop people skills to a much higher level than in the past. A customer can buy stuff anywhere: You have to make them want to come back to your establishment, and that’s done with great customer service.”

Qualheim also encourages his employees to get as much training as possible, because he believes it increases their confidence level on the job. “The more confident that person is, the more he’s going to like the job, which certainly leads to less turnover,” he said.

Promotion

When Shawn Clifford and his family opened a True Value hardware store in Bethel, Conn., a little less than two years ago, he had a lot of work to do to build up a strong customer base. Growing up around the hardware business, Clifford has always believed strongly in promoting the store.

“My father has been in the business for 30 years in different locations in Connecticut, and he learned early that things work differently in different locations. The trick is to try things, because what didn’t work one place may very well work in another.”

For example, after having very little luck with circulars at some of their stores, the Cliffords could have shied away from using them in Bethel. But they didn’t, and some of True Value’s latest programs have worked wonders in building store traffic.

“A lot of people think circulars are just going to bring out the bottom feeders, and there certainly is that element,” Clifford said. “But here, they have driven traffic and sales of nonsale items.”

The Cliffords have worked hard to build up their True Value Rewards member base, signing up more than 7,700 people since the store opened in August 2007. In fact, 64% of transactions in 2008 were on True Value Rewards cards. This makes it easier to customize the marketing plan, Clifford said.

To the top-spending 20%—a group that spends at least $30 per visit—the store offers a $10 off $40 coupon. The next 30% receive a $5 off $25 coupon.

“We also send ‘$10 off any purchase’ birthday coupons to our top 50%, and people get really excited to bring those in,” he said. “Even if it’s a wash, it gets people in the store.”

Clifford is also going to do True Value’s “buy one gallon, get one gallon free” paint promotion over Memorial Day weekend. Although the 8,300-sq.-ft. store does a decent paint business with consumers, he believes they might be able to attract some professionals with this offer. But that remains to be seen.

“We don’t expect everything to work, but you can’t know until you try,” he said.

Finally, Clifford spoke about the importance of having some flexibility in a store’s marketing plan, as you never know what type of opportunities might come up. For example, he didn’t have a cable TV ad built into his store’s strategy at the beginning of the year but switched gears when some cheap air space became available.

“We don’t believe in having a totally rigid marketing budget,” Clifford said. “Of course, you have a good idea of where you’re going to go for the year, but it’s always a good idea to have a little liquidity built in to take advantage of opportunities.”

Product

Steve Bachmeier, owner of Belgrade True Value, a 25,000-sq.-ft. store in Belgrade, Mont., believes the challenge for every store is to carry the right mix of products in the right amounts, while minimizing carrying costs. To accomplish that, he makes inventory planning a priority and tries to maximize inventory productivity.

Part of this is analyzing and understanding the sales data, which means measuring A, B, C, D and X items as a percent of inventory, and then looking at key performance indicators such as gross margin and inventory turns.

“So what do you learn from analyzing sales data? Just about everything you need to know,” Bachmeier said. “What your A and B items are, what departments or categories draw people in to your store and changes in customer purchase patterns.”

He said his store uses sales data to identify growth trends and reallocate space. For example, Belgrade True Value used to devote just 3 ft. of space to pet supplies, but after seeing that this was their fastest-growing category, they upped that to two full aisles. In the same way, when they analyzed sales data and saw that padlocks have a higher gross margin than just about anything else in the store, they expanded the department from 4 ft. to 8 ft.

The company has carried Hallmark cards since 2000, and it was never a huge moneymaker in itself. But when they looked at True Value Rewards data, they discovered that people who bought greeting cards visited the store twice as often, and their average ticket was 40% higher than customers who didn’t buy cards.

SPOTLIGHT ON ALL AMERICAN HOME CENTER: DO IT BEST DEALER MAKES PAINT PROFITABLE

When you walk into All American Home Center’s 175,000-sq.-ft. store in Downey, Calif., the first thing you see is the paint department. Its front-and-center placement on the retail selling floor is no accident.

“We have a very large department right at the front of the store because painting is the No. 1 do-it-yourself activity in our country,” said Henry Angulo, All American Home Center’s merchandise manager.

The 3,500-plus-sq.-ft. department features the Valspar, Glidden and Dutch Boy paint brands as well as specialty products, faux finishes and a large selection of sundries. Valspar is its “category manager,” with the company’s low, mid, upper, and designer price points available. The store recently began carrying the Glidden brand to directly compete with Home Depot’s Behr product line.

In fact, All American Home Center, part of the Do it Best co-op, shares a parking lot with a Home Depot, which makes it all the more important for the single-store retailer to distinguish its paint department with great customer service and selection. “We carry certain products they don’t, like specialty paints for balconies and specialized coatings,” Angulo said. “And we make sure to greet every customer who comes through the department, ask what they’re looking for and guide them through.”

All American also promotes paint in its circulars that break every Tuesday and go out to 230,000 households in a four-mile radius. Some of the recent deals offered were 99-cent tarps and caulk reduced from $2 to 79 cents a tube.

“We believe strongly in promotion, and these have brought in a lot of footsteps,” Angulo said.

“Perhaps the most important thing that sales data can tell you is what your A and B items are,” he said. “These are your best sellers—the products you cannot afford to be out of. You need to have them on hand and priced right. No matter what the economy looks like—you can’t let your standards drop.”

Bachmeier said the goal in inventory planning and productivity is to have enough of every SKU that you don’t run out, but also keep your turns high and your ROI as high as possible. He uses the computer system to track inventory and generate orders, tweaking it constantly.

“I review the suggested order report, and when an item shows as out, I look at how many we sell a year,” he said. “If we sell five a year and it comes in a case pack of 12, I don’t want to order a case, but I should definitely keep two on hand—one to show and one to go—so that item is never empty again.”

By the same token, it’s important to get rid of your X items, which are the slow movers and take up space that could be used for faster-turning items. At least once a year, Bachmeier runs a report on these and systematically gets rid of them.

Belgrade’s results speak for themselves. “Right now we are running about 10% ahead of last year’s first quarter, and certain departments are going gangbusterd,” Bachmeier said.

Price

Mike Moeller, owner of Harpeth True Value in Franklin, Tenn., says today’s consumer is highly price-sensitive, so it’s crucial to be on par with local competitors.

“He is more tuned in to price than he’s ever been because of the economy. People are forced to pinch every penny today,” Moeller said. “That’s why we get out and about, pay attention to the marketplace. Don’t live in a vacuum.”

To keep Harpeth True Value running at an optimum level, he carefully reviews competitors’ sales ads and promotional fliers to make sure his own marketing materials are hitting the mark. In addition, Moeller regularly shops the competition to review pricing and products. “You want to make sure your pricing is in line, look for hot items,” he said.

Mostly, Moeller wants to dispel the notion that hardware stores are more expensive than big boxes, which he says is a fallacy in today’s marketplace. “We’ve battled with that perception, but it’s really not the case,” he said. “We’re competitively priced with the boxes, especially on A and B items.

“You have to be particularly careful with price-sensitive items—items people buy every day, like batteries,” he added. “You need to be fairly priced there, or people will really notice.”

Place

True Value’s Heidemann often talks to members about seeing their stores through their customers’ eyes. For Dan Kanis, owner of Nelson True Value in Prairie du Chien, Wis., this is somewhat of a mission statement.

As a second-generation owner, Kanis has had to make some pretty major adjustments to make his store stand out in the crowd.

The Kanis family purchased the Prairie du Chien store in 1998, taking the existing 13,000-sq.-ft. space and adding 5,000 sq. ft. to it. In 2007, they tripled the size of the lawn and garden department, but with the surrounding competition growing rapidly, Kanis knew something more drastic needed to be done.

“Sales were strong, but the store was tired,” he said. “Competition offered a better overall retail experience.”

So when True Value introduced the Destination True Value format, Kanis knew it was the right answer for his business. After much planning and an analysis of 12 months of sales history, a new floor plan was sent to designers in January 2008. It included a narrowed power tool and hand tool assortment, expanded anchors and stainless fasteners, rounded out plumbing and electrical, and an additional line of paint. About 4,800 SKUs were added, 800 taken away.

When the redesign was completed in November, Kanis had a leaner and more marketable operation. Sales in all core departments showed increases in December, January and February, with the latter month seeing the following jumps: 34% in electrical, 19% in hardware, 8% in plumbing and 24% in paint. Meanwhile, sales at Kanis’ other store in Viroqua, Wis., remain flat.

His advice to fellow True Value retailers? “Take a critical look at your store. Is it easy to shop? Is it well lit? Is it well laid out? Is it well signed? Are your shelves well stocked? Does your decor draw women in?” Kanis said. “Look at your store through the eyes of your customer.”

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Indiana hardware store turns 65

BY HBSDEALER Staff

Umber’s Do It Best Hardware, which has stores in Waynedale, Ind., and Georgetown North, Ind., is celebrating its 65th anniversary May 1 to 3, the News Sentinel reported.

The fourth-generation family-owned business held a drawing for a $1,000 shopping spree, door prizes, events and more.

Umber’s opened in 1944 in Waynedale. After closing a third store in early 2006, Umber’s changed co-op affiliations from Ace — which it had been with for 55 years — to Do it Best in October 2008.

The Waynedale and Georgetown North stores have 30 full- and part-time employees. 

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Sun shines on Scotts Miracle-Gro

BY HBSDEALER Staff

Scotts Miracle-Gro, the industry’s largest supplier of lawn and garden products, reported sales of $960.1 million for its second fiscal quarter, a 0.2% rise over sales of $958 million in the same period last year. Net income for the quarter, which ended on March 28, was $77.4 million, compared with $58 million in the second quarter of 2008.

Reported sales in the North American consumer business increased by 10% in the quarter. Consumer sell-through of the company’s products — as measured by available point of sale data from U.S. retailers — improved 18%, led by strong growth in both lawn fertilizer and growing media, according to Scotts.

The European consumer business did not fare as well. The company posted a 25% decrease in sales on a reported basis and a 7% decline, as measured in local currency, primarily due to delayed purchases by several key retailers.

Scotts LawnService reported a 3% increase in sales to $32.8 million from $32 million. The division recorded a $16.2 million loss for the second quarter of 2009, compared to an $18.5 million loss in the corresponding period of 2008.

Smith & Hawken reported $19.3 million in sales for the quarter, compared with $24.8 million last year, a 22.23% decline driven by a decline in both retail and trade sales, according to Scotts.

“We are extremely pleased with the improvement in gross margin rates,” said Dave Evans, the company’s chief financial officer, in a prepared statement. “We established a goal of restoring gross margin rates to historic levels in order to continue investing in key initiatives to drive future growth. This is a step in the right direction.”

Based in Marysville, Ohio, Scotts Miracle-Gro recorded nearly $3 billion in worldwide sales last year.

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