Archive for April, 2011

Groupon – business saviour or killer?

Wednesday, April 13th, 2011

UK retail sales suffer the biggest fall for at least 16 years according to the Retail Consortium and KPMG. UK retail sales figures for March 2011 fell by 3.5% on a like-for-like basis compare to March 2010. It is the worst drop recorded since the Retail Sales Monitor was launched in 1995.

So you may be thinking to sign up with Groupon or one of their clones to boost sales. A word of advice – DON’T!

Groupon and their ilk, for those not familiar with the concept, sign up members to offer them their daily ‘deals’, usually at a local or city level. Their members buy the deals and are given the vouchers to redeem at the retailer, restaurant or local business. Groupon will then pay the retailer less their commission (often as high as 50% + c.c. costs) usually in 3 tranches over the lifetime of the offer.

What’s wrong with that you may think? You get a lot of new customers and sell a lot more of your products/services.

Well lets consider what you actually get.

Firstly, many groupon members will only buy when they get a discount or a voucher. They believe that if you can offer a discount of 30% then you were making too much in the first place and will never contemplate returning unless they get another coupon. They will not spend more than necessary. For example if they bought a £25 voucher for £10, don’t expect them to use it against a £50 purchase. They will spend £25 to the penny.

Secondly, you will upset your existing loyal customers who are prepared to pay the full price or worse still, some of your customers are Groupon members and end up getting discounts on what they were prepared to pay full price for (and may consider you a discount store in future).

Thirdly, you may not be able to cope with redeeming the vouchers causing trouble with the purchasers and Groupon. For example Groupon sold over 1000 1/2 price massages and the parlour  would need to work flat out for 3 months redeeming them and would not even be able to service their regular full paying customers.

Let’s take me as an example. I am and have always been a Gap customer. They’ve always been good for jeans and the basics etc. However, over the last year or so they’ve had 30% off 2 week promotions every 3 months or so. I’m not daft, so I wait for the next promotion to do my shopping (and looking at the queues at the tills, so do many others)

Never forget that if you drop your margins from 50% to 40% you need to increase your sales by 25% just to stand still! Even more if you need to take on additional staff to deal with it.

Once you start on the slippery slope of promotions/vouchers outside normal sale periods it’s very difficult to get back your credibility.

OK, you weighed it all up and you still want to go ahead and give Groupon a try? Then, think carefully about the terms and conditions you will offer.

1. Set expiry date
2. Redeem in quiet periods?  Monday to Thursday – not available Bank Holidays?
3. New customers only? Good for new business but alienate existing customers?
4. Limited number of vouchers? – First 400 only for example.
5. Only 1 or unlimited vouchers per customer? Do you want regular customers buying a years supply?
6. What can it include? Does 1/2 price meal include drinks or just food?
7. Can it be redeemed against anything or do you want to exclude gift vouchers for example?
8. Can it be tailored to be used against slow moving lines and exclude fast sellers?
9. If you have more than one outlet can you offer it for the poorer performing outlets only?
10. Refer to paragraph 2 – DON’T

Tony Heywood – Gilcrest Services Ltd
Retail Troubleshooter
Business Turnaround and Recovery

5 Steps to safeguard your business

Friday, April 1st, 2011

With the wave of UK Retail bad news coming in of dropping sales and business closures it’s perhaps time to remind ourselves of some areas to focus on.

1. Concentrate on what is within our control

We can’t do anything about the economy, high unemployment or the weather so focus your energies on what is within your control. What can be done to increase your sales and/or margins? How can you reduce your buying costs or overheads?

2. Revisit and, if necessary, revise your Business Plan

Hopefully we all have a business plan but circumstances change and they often need to be ‘tweaked’. Do you have an ultimate goal and a route  to get there? Is the strategy still valid given the 2011 trading conditions? Do you have a friend, mentor or business expert who can look over your plan and challenge you on each and every aspect of it to make sure your expectations are realistic?

3. Look hard at the selling prices

We all want to make sure the prices are competitive but some prices could be increased to compensate for the ‘loss leaders’. For example, there is very little margin to be made selling Apple products but the money is made on the accessories. The consumer that wants the latest iPhone/iPod with will spend  £14.99 a on cover which costs only £1-2 to buy in. Are they any add-ons that you sell where you can boost your margins?

4.  Improve your Staff Training

You need to maximise the sales from your customer footfall so make sure your staff are the best. Instigate on-going  product knowledge training to ensure your staff are ready and able to offer the customer the full information required for them to make the correct purchase. Train the staff to not only have the ability to maximise sales but to minimise losses. Let them be constantly aware of potential threats to stock losses and damages. A polite good morning to customers who enter will show potential thieves (let’s not pussy foot around calling them shop lifters etc.) that you are aware of their presence and it may be better for them to visit an outlet where the staff don’t appear to be in control of their surroundings.

5. Maximise your marketing

Yes, money is tight and nobody likes to spend money on advertising but marketing can take many forms and, with the internet, can be done  cheaply but effectively. It costs nothing except time to access your database and send emails when new ranges are in or there are special promotions. Have you got a Facebook page and Twitter account alongside your website? Put on events in the shop to create a buzz. Last Saturday a sports shop client had the cricketer Mark Ramprakash attend, paid for by the supplier who sponsors him. He reckoned that he made new customers not just from the cricketing fans but 50% were from fans of Strictly Come Dancing.

Let’s take the time to take a good hard look at your business to ensure it’s in great shape for 2011 and beyond.