If you feel like your business is sliding into the same place as the economy – the doldrums – do what other smart small businesses are doing. Take a good look at your operation and go ahead, make some changes. You’ll feel better, save money, maybe make more money, and be better positioned when the economy comes out of its slump.
Here are some examples of commonsense solutions to help your business operate more efficiently, increase sales and differentiate yourself from your competitors.
Maximize efficiencies
Patrick Meyer from American Science and Surplus based in Niles, Illinois, told us he shortened his stores’ hours of operation to save money. “Two of our retail locations are in Illinois, and when the state increased the minimum wage last year from $6.25 to $7.50 an hour, we were forced to take a long look at our hours.”
By shaving an hour off the end of the day Monday through Friday, Meyer felt he wasn’t inconveniencing customers or sacrificing valuable selling time. The stores still stay open to 7 or 8 o’clock each night compared to 8 or 9. Sunday’s hours remained the same, 11 to 5, and Saturday hours were adjusted, not reduced.
“We didn’t decrease the hours we are open on Saturday, we just shifted them to be more productive, 10 a.m. to 6 p.m. instead of 9 to 5,” said Meyer. “The goal was to trim hours, but still give working parents and families time to get to us after work. We’ve had no decline in sales, and actually both of our Illinois stores saw sales increases last year and into this year.”
According to an ABC News article by Joyce Rosenberg, a business writer for the Associated Press, Meyer is doing the same things businesses across the country are doing as they step up to the challenges of higher operating costs. Companies that need to gas up vehicles, heat and cool their premises and run machinery, in particular, are feeling the pinch. Florists, for example, have been reducing the number of delivery runs they make each day, developing shorter routes, and making sure the cargo of their vans and trucks are as close to capacity as possible on every run, reported Rosenberg.
“Rising energy costs are forcing some companies to shorten their operating hours, a sacrifice in particular for restaurants that pride themselves on being open 24/7,” she said, citing the Huddle House restaurant chain based in Atlanta. The chain advertises that it’s “always open, always fresh, 24 hours a day” but has allowed less-profitable franchisees to close at midnight. Today, those restaurants are more profitable.
American Science and Surplus and many other small businesses look for ways to reduce operating costs rather than raising their prices, but Rosenfeld notes that more and more companies are ultimately forced to pass some of the rising costs of doing business on to their customers. “Delivery charges are going up, manufacturers are repricing their goods and restaurants are raising their menu prices,” she wrote. “Generally, small-business owners say their customers understand energy prices are going up for them as well.”
Cross-sell
When Debbie Polise, the retail coordinator for Delaware State Parks based in Dover, displays merchandise next to the books in her gift stores, both sell better. “With the display of the title Horseshoe Crabs and Shorebirds, I included a few plush horseshoe crabs,” she told us. “With Pirateology, I display various pirate coins, maps and games. It makes for interesting displays and helps tell the stories of the books.”
Her merchandising method, which we all know as cross-selling, is a tried and true retail sales technique. Cross-selling is why you see the shirt displayed with the tie and the sweater in men’s stores, or the brushes with the paint at the hardware store. Internet Retailer magazine notes that catalogers have discovered the value of cross-selling and train their inbound telesales reps to close every order with an offer for something else.
Many economists suggest that increasing your revenue per customer is a more efficient way to grow your business than increasing your customer base and your market share. You’ve probably heard of the Pareto Principle, also known as the 80-20 rule: 80 percent of your sales come from 20 percent of your customers. Developed by Italian economist Vilfredo Pareto, who observed that 80 percent of the income in Italy went to 20 percent of the population, the principle has become a rule of thumb in business.
Experts suggest that most retailers ignore the advantages of the 80-20 rule, so make sure you are cross-selling and upselling at every opportunity. While cross-selling allows you to offer products or services in addition to those already being purchased, upselling is the method of offering items of a higher value and level compared to those being purchased or used by customers.
Many retailers understand cross-selling perfectly. They see how it can improve the customer shopping experience by presenting exciting and new products, hard-to-find products (pirate coins, possibly), and additional products that customers consider useful. Many shoppers appreciate cross-selling. In their minds, it increases the value of the store that does it.
Differentiate
School supply retailer Lesley Perry wants the teachers and bookkeepers in the local school systems to remember her store, Teaching Carolina in Port Royal, South Carolina, when they order supplies. That’s why she presents a special custom-made gift bag to each teacher who bought from her store via a purchase order.
“I try to make them grade specific and cater to each teacher’s interest,” she told us. “I’ll include items such as pencils, pencil toppers, small novelty toys, stickers and posters. Sometimes I’ll even throw in a Webkinz for the teacher to use as a ‘class pet.’ I always try to include things the teacher will use and enjoy. I use the teacher’s order to give me ideas, then I’ll put it all in a white craft bag and decorate it.”
Perry calls on each bookkeeper to let her know that she’s received her order and to tell her when it will be complete. “I also give each one a box of truffles at the beginning of the school year along with a copy of my new catalog,” she said.
Perry believes that letting the teachers know she appreciates their business keeps them coming back to Teaching Carolina instead of shopping someplace else that may have lower prices. Being different in terms of product, merchandising, shopping experience, customer rewards, and service, among other things, allows small businesses to compete against Internet retailers and big box merchants.
A look at the highly competitive food and grocery market illustrates how stores often have to up the differentiation ante to remain successful. Whole Foods Market, founded in 1980 as one small store in Austin, Texas, became the world’s leading retailer of natural and organic foods with 270 stores in the U.S. and United Kingdom. Shoppers go there for things like sprouted oatmeal, almond milk and organic apples. But when conventional grocery store chains also began to offer organic food, Whole Foods had to go to the next level to remain “different.” According to a recent article in U.S. News & World Report, that meant more exotic products, locally grown produce, meat from humanely treated animals and a more enjoyable shopping experience.
The article reports that the strategy is working so far, but as traditional grocery stores keep raising the bar, specialty food stores will have to continue to find the next big thing. As market researcher Laurie Demeritt pointed out in the story, “Consumers are always aspirational and trying to get to the next layer of quality.”
