Recession Lessons

Pet-specialty retailers can learn a lot from the failures and successes of their counterparts in other industries.


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Economists may have declared the end of the recession, but retailers know that the economic malaise that fell over the nation a couple of years ago is still hanging insidiously over everyone’s head. Many still see the proof glaring back at them from their ledgers. While economists talk recovery, the almighty bottom line is telling a different story for a number of retailers.

Some industries have been affected more than others. While some managed to stay afloat through the storm, others that may have been vulnerable for any number of reasons, capsized and sunk. Pet specialty retailers, though a somewhat sturdy bunch, can glean a great deal from the failures and successes of businesses in other industries. As economists warn of the risk of a double-dip recession, retailers would be wise to stay current on the best strategies to stay solvent and learn how to avoid the biggest pitfalls.
 

Problems at Home
In the darkest days of the recession, retail businesses of every ilk were reporting bankruptcies and store closures one after the other. The home furnishings industry, for example, found itself in a particularly unfavorable position as the economy tanked. “The home business is one the industries that has been hardest hit by the slowdown in the housing market,” says Warren Shoulberg, editor and associate publisher of HFN [Home Furnishings News] magazine.

According to some estimates, the furniture industry, alone, may be off 20 to 30 percent because of this dip in the housing market.

Shoulberg notes that the more expensive the product category, the greater the impact of the recession on its sales (a phenomenon that was also seen in the boutique segment of the retail pet industry). Categories, such as furniture, major appliances and mattresses, for example, took huge hits over the past couple of years.

“Big-ticket specialty stores like independent furniture stores are doing terribly,” Shoulberg says. “We’ve had an enormous amount of casualties in the ranks of independent one-to-three unit furniture stores and not because they are highly leveraged, but because they aren’t selling any furniture and they can’t survive.”

Of course, the home furnishings industry isn’t the only retail segment that’s being hit hard by slow sales. Consumer spending habits have clearly changed in most, if not all, retail channels. “People were spending like drunken sailors,” says Pam Danziger, founder of consulting firm Unity Marketing. That high level of spending dropped off a proverbial cliff over the past two years.

According to Danziger, even as the economy improves, retailers shouldn’t expect consumers to regress to old spending habits any time soon. “I believe the shopper has truly changed,” she says. “The recession has brought us back to reality, back to a more pragmatic approach to shopping with a new sense of value.”

With this dramatic drop-off in consumer spending, many businesses can hardly be blamed for the beating they’ve taken during the recession. Still, experts say there are things struggling retailers can and should consider doing to stop the bleeding and move into the black. It’s time, they say, to drop bad habits that can drain the life out of a business.

 
Safe or Sorry
One questionable habit retailers–including pet store operators–have, is the tendency to “play it safe” with their purchases, meaning they avoid investing in new products to offer customers. Experts may sympathize with retailers’ impulse to save the cash and stick with a safe and familiar assortment in order to avoid risk, but they warn that it may do more harm than good.

“They are not really giving the consumer a reason to come into the store,” Shoulberg says. “They’re being very conservative in what they are buying and they are not buying a lot. That’s understandable from a financial standpoint, but from a merchandising and marketing standpoint, it becomes a self-fulfilling prophecy–if you don’t have anything to sell people, they won’t come in, because they’ve seen the old stuff already.”

Danziger, author of three books including Shopping: Why We Love It and How Retailers Can Create the Ultimate Customer Experience, concurs and says driving foot traffic into your store is largely a function of making people curious enough to walk through the front door. Some stores, even successful, well-known ones, tend to lack that curiosity factor. “I walk by a Gap far more often than I turn into a Gap,” she says. “I like it, it’s a fine brand and I shop there, but the only way I turn into the Gap is if I want that Gap experience. Nine times out of 10, I don’t want the Gap experience.”

Danziger says that notable retailers­–or what she calls, “shops that pop”–need to continually transform themselves and offer something new to customers to keep them coming in. It’s a skill that Shoulberg says not enough furniture stores have mastered. It doesn’t help that because furniture is purchased so infrequently, furniture stores don’t inspire browsers, putting them at a great disadvantage. “The so-called lifestyle stores, like Crate and Barrel and Pottery Barn, give people reasons to come in more frequently because they have smaller things to purchase,” he says.

The lesson here for pet retailers may be to make sure that the store features a healthy selection of lower price point items that will inspire browsing and impulse sales, as opposed to big-ticket items that are more likely to collect dust than customer interest in today’s tough economy.


Silence is Deadly
Another common mistake furniture stores make, and pet specialty retailers can learn from, is that they are often slow to take advantage of the latest marketing tools available, and that’s not to mention their seeming reluctance to utilize even conventional or traditional forms of advertising consistently. “They certainly have cut back on their advertising, at least some of them have,” he adds. “The more aggressive ones have not, and I think they’re doing better for it.”

Not every segment of the home industry, however, is stuck in such a rut. For many small retailers–particularly those that offer accent-type items, decorative accessories and gifts–the recession has actually offered an opportunity to shine, and shine they did.

The owners of The Silver Barn, a home furnishings and antique store in Columbus, Texas, took a chance a couple of years ago when they opened right as the economy nose-dived. “If someone told me two years ago we’d have a gas price hike beyond anything we’ve seen before, and face an economic impact in an election year that was questionable, I probably wouldn’t have opened the store; but in retrospect, it was the right thing to do at the right time,” says co-owner Cynthia Sutton-Stolle.

In a short period of time, The Silver Barn was able to generate tons of buzz, connecting in several ways with prospective customers in the local community. Sutton-Stolle attributes much of this early success to traditional advertising. “My background is in public relations and marketing, and I know the value of that,” she says. “No matter what is going on with our budget we keep advertising.”

The Silver Barn uses direct mail, and advertises in the local paper, the regional magazine and on television daily. But it’s a relatively new fangled way of reaching consumers that has really paid off for the fledgling shop. The Silver Barn’s use of the Internet and social media catapulted the store into the spotlight right off the bat. Sutton-Stolle’s blog is a great success, she says, and has become a better sales generator than her website–which at press time was undergoing a renovation.

“Social media is really important to us,” she explains. “I think it’s because of the personal relationship that people get to build with us. Social media gives us a face.”

It also gives the store–situated 45 minutes outside of Houston–access to a broader customer base than would have been possible otherwise. “We’ve had people stop in just because they follow us on Twitter,” adds Sutton-Stolle. “They just want to say hello. It’s one of the best tools.”

Amy Rutherford, owner of the Red Barn Mercantile, a furniture and gift store in Alexandria, Va., took a similar approach. As the economy floundered, she ramped up the store’s marketing and advertising, a strategy that successfully got people curious enough to visit. A mix of traditional advertising, direct mailing and a strong social media campaign have gotten people talking. Once in her shop, customers find a mix of antique and new merchandise with price tags ranging from just a few dollars to a few thousand dollars.

“What [the marketing] did for us was introduced new people to the store in abundance,” Rutherford says. “Even if they spent $20 on a candle, rather than $2,000 on a sofa, they still came in and saw us. That has been helping tremendously. The last thing you want to do is cut back on marketing, otherwise no one will know you’re there.”

For pet stores, getting the word out is perhaps the first step in developing what Danziger says is another important trait in “shops that pop”–the ability to become a community destination.

“Barnes and Noble is an example of a store that does a good job of creating that community feel, and any store can become part of the community,” she says. “It’s really a matter of thinking creatively about how to become part of the community, not just be a place to go buy stuff, but to really contribute and create experiences for people that they will want to participate in.”

Those experiences may or may not be directly related to the product the store is selling. Circle Furniture, a Boston-based store specializing in domestically manufactured product, hosts events that generate interest and traffic, but not necessarily sales–at least not immediately. For example, co-owner Richard Tubman recalls a recent fundraiser for breast cancer research and support that the store hosted. “The events may not have anything to do with the furniture business specifically,” he says, “but if the event appeals to the audience that we sell to, then we do it.”

Events like those hosted by Circle Furniture can easily be tailored for the pet store environment. Whether it’s an adoption event or fundraising drives, there are a multitude of charitable efforts that will go a long way in casting a pet product retailer in a great light with the local community.


Survival of the Fittest
Getting customers into the store is just half the battle. For all types of retailers, getting the assortment right on the sales floor is equally important, if you want those customers to come back. Just as the tough economic picture has sifted out some retailers that were poorly equipped to survive the rigors of the market, experts suggest that storeowners and operators should take a closer look at their inventory–here, too, only the strong should survive.

Nicole Leinbach Reyhle, founder of Retail Minded, a consulting company specializing in independent and small business, says one tactic that has helped many of her retailer clients survive in a challenging market is the elimination of a slow-moving, unprofitable category within a store.

“I advise a lot of my retail clients to evaluate the categories in their inventory–look at actual sales being brought in and what’s being spent on each category, and look for opportunities to eliminate in order to open space for others that bring in more revenue,” she says.

A pet store with a spot-on product assortment, however, may only need to make a few minor adjustments to stimulate additional sales. And a store doesn’t necessarily have to invest in shelves-worth of brand new or untested products to generate sales–sometimes all it takes is a little rearranging.

Sutton-Stolle, co-owner of Silver Barn, says that if there isn’t new merchandise coming in any particular week, she’ll just shift some things around. “I change the store around almost weekly–maybe not every single table or every section, but every week at least one display is changed,” she says. “Sometimes it’s a matter of just moving merchandise to a new spot where someone will see it differently. I cannot tell you how many times someone has said, ‘When did you get that?’ and I’ll laugh because we’ve had it.”

Leinbach Reyhle suggests double-merchandising and cross-promoting items where feasible, allowing customers to notice items they may have walked by many times before. “Double-merchandising is key,” she says. “Whether it’s new or old, show it in more than one light throughout the store, to be seen by a variety of customers.”

The concept of double-merchandising and rearranging planograms ties back to Danziger’s assertion that stimulating curiosity is a sure way to drive both traffic and sales, and she agrees that stocking new merchandise is not the only way to offer something “new” to shoppers.

“It can be just as effective to change context,” she says. “You can have old merchandise, but if you change the context of that merchandise, it can look brand new to the customer. It’s old stuff presented in new ways, giving people a reason to shop every time.”

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