In a spring when pink slips are popping up with the yellow daffodils, what can you do to help ensure that your store stays in the black?
Analyze your buying strategies.
We spoke to four industry veterans who suggested the following tips for buying during a downtown.
Janie Hazelton, vice president of Veria body care manufacturer and retailer in Arlington, Texas
Zedrick Clark, industry consultant and owner of Nature's Food Market in Berlin, Ohio, who spent years as a broker and manufacturer's representative
Jennifer Carriere-Spock, natural living merchandiser for Colorado, Utah and Nevada Sunflower Farmers Market
Bill Crawford, director of retail publishing programs at New Hope Natural Media with decades of experience working to help improve retailers' purchasing, marketing and overall business strategy
Boot your back stock
Review your shelf levels before you buy. "Be sure they're set according to sales volume," Hazelton says. "For example, you don't want to have 12 bottles of something on the shelf if you're selling six a year."
"There's an overstock epidemic," Clark says. "People carry more inventory than they need in their back room. There's no reason a store should be sitting on product. Let the manufacturers and distributors keep it."
Keep it short
Don't buy long "unless it's a proven home run," Crawford says. "Negotiate multiple buy-ins. For example, ask your suppliers, ‘instead of buying five shippers now, can I buy two, then buy two or three more if I need them over the next 60 days?' Remember, the answer is always ‘no' until you ask."
You've got to move it, move it
Evaluate your turns vs. earns. "Look at the movement of the product rather than the margin," Clark says. "If somebody is making a higher percent on a product but has to sit on it for a longer period of time, they're really not making as much. They're sitting on back stock, essentially warehousing. And that ties up cash flow." Pay attention to your inventory movement report (available via your point-of-sale system, electronic ordering system or through vendors).
In tough times, buy just in time
Having tighter control of your inventory will allow you to order more products with the "just-in-time" method, Hazelton says. That way, new orders arrive just as space opens up on the shelves.
Lose your losers
If something's not selling, don't buy more. In fact, consider removing it from the store and freeing up valuable shelf space. Look at your inventory reports, starting with the bottom 25 percent of the list, and "start chopping from the bottom up," Clark says. "Say my bottom seller sells 10 a year. Is it worth it to even stock that? Better to just special order it for the customers who buy it. Take a slow mover off the shelves; increase your facings of a better-moving product." In these times, agrees Crawford, it's critical that every linear foot of shelf space is producing as much as possible.
Start in your vitamin department, where a lot of high-priced products take up space, Clark suggests.
Swap the slowpokes
If you have a large inventory of a product that's not selling, talk to your vendor and see if you can trade the products in for something more profitable. "Remember, if you're not selling product, they're not making money off reorders," Clark says.
Prod vendors about promos
Ask distributors and manufacturers if they can do a promo unique to your store. New, different and more creative promotions are critical. "Everybody's hurting in this economy, but manufacturers generally have margins that would allow them to do, maybe not every month, but one really special promotion for retailers each year," Hazelton says.
Recognize a "great deal"
A lot of buyers may be under pressure from the boss to "Get a good deal! Get a good deal!" says Crawford. You might find something with a great margin, but "if customers weren't buying it in good times, they're sure not going to start now." It's only a good deal if it will sell in your store.
Whether you're searching for skin crème or creamed corn, work together with your suppliers to find a sale that could work for both of you. "Look at negotiation as an open-ended discussion," says Crawford, "not like two people in a corner throwing numbers back and forth at each other like used car dealers. There's a lot of respect built among people in our industry, goodwill built up over the years. This might be the time when you can see some of that pay off as you work together to find a symbiotic solution."
Consider private label
"Customers are migrating to lower-cost private label in all divisions—food, supplements and body care," Carriere-Spock says. Now may be a good time to think about expanding your private label offerings.
Ask for offers
Customers are more coupon savvy these days and are on the lookout for coupons and rebates. Ask your vendors and their reps for coupons or rebate offers that you can affix to the products, Carriere-Spock says. "Also, be sure to ask for samples that will draw customers to your department or specific display."
Do pilates (strengthen your core)
There are two types of naturals customers, Clark says. There are core customers, who have made naturals a part of their lifestyle and who will change their spending elsewhere to enable them to continue buying quality food and supplements. Then there are fringe customers, who are trying naturals because of marketing or perhaps peer pressure, but who are not yet committed to the lifestyle. "If you're a small-to-medium-sized store, the fringe customers are going to be OK to lose," he says. "If they're going to become core customers, they're going to eventually find your store because they won't find the selection or knowledge if they shop with conventional retailers. Buy with your core customers in mind."
Save transportation costs. "Often when you stock local products, there are fewer costs associated with the product," Carriere-Spock says. "These items are often made with simple, low-cost ingredients and require less manufacturing."
Be sure to include larger, value-size products in your orders. "If a customer likes Bronner's castille soap, for example, they can buy a gallon size, which usually sells for less per unit than a smaller bottle, not to mention that this is a more eco-friendly option," Carriere-Spock says.
Don't be afraid of new products
Don't just stick to the staples. Buyers of organic products are 105 percent more open to new experience than the general population, according to a study released last year by publishing company MediaPost. "Other studies have shown that in our industry, 45 percent of sales are from products that have been on the market two years or less," Crawford says. While those studies might not have been conducted during a downturn, the principles hold, he says. "People are looking for new flavors and functions. They're looking to enjoy what they're buying, to enhance their lives and health. If you just stay with the staples, you're taking a lot of the character of the industry off our shelves … and losing one of the differentiators of what makes our stores unique."
One size doesn't always fit all. But sometimes, one soap can. Include all-purpose products in your order, suggests Carriere-Spock. When money's tight, multitasking items, like soaps that can be used for your laundry and your dishes, appeal to customers.
Know your customers
When the economy's as iffy as a carton of organic milk with an old "use by" date, experts agree that it's even more critical to know your customers and your marketplace. "There are an awful lot of people doing well in spite of the economy," says Crawford, "and there are certain pockets around the country hit especially hard." Keeping track of the economic ebb and flow in your store's community can help you decide whether or not to stock more bulk beans rather than prepackaged gourmet garbanzos.
"Value" doesn't mean "cheaper"
Should you buy more high-end items—for example, bath salts and face masks for customers who have traded down from a spa outing and are looking for do-it-yourself luxury? Or should you stock more lower-end home spa kits for those who were already pampering themselves at home and now have less to spend?
Knowing your customers will help answer those questions, Crawford says. But often "the key is education and merchandising, not necessarily buying habits," Clark says. "If people only cared about price, they wouldn't be in our stores in the first place. They care about the value of the products," he says. "They want to buy quality. They believe it's going to make them healthier, help them feel better." Now is an important time to make sure your staff is educated enough to teach customers about the value of each product, as well as how to skillfully cross-sell and up-sell.