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Staying Alive During Tough Times -Part 1

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Everyone’s a genius in great times. What is your plan to survive, say, a 20% reduction in traffic?

I keep reading in our furniture industry publications forecasts about a slowdown in retail furniture sales. The recent news from some of the key players appears to back up that dismal prediction. Sales have been down for many retailers during recent months, and as the housing market cools, things don’t appear to be too bright for 2007. Of course, these predictions of impending doom have been wrong in the past – like last year, for example, but that’s no reason to doubt that Chicken Little may just have something this time.
Here’s the thing, though. We have some individual salespeople for whom dire economic forecasts, or even catastrophic events, don’t seem to matter. For a long time I’ve asked associates and clients what their plan is to survive bad times – hell, everyone’s a genius in great times. What’s the plan to survive, say, a 20% reduction in traffic? If you are a truly professional retailer, you count all your traffic and keep close tabs on your trends, right? Yeah, right. I can tell you that those few, great salespeople I mentioned have a plan for the bad times. It’s the same plan they have for the good times, and it revolves around developing and maintaining relationships with all of the customers they get to engage.

 

That’s right, all of them. These people don’t go into work thinking that they’ll find one or two good customers every day to add to their personal customer base. Instead, they believe that every prospective customer they engage will become their client. Because of this mindset, they work with and serve every customer in exactly the same way. They believe that the customer they’re with at any given time is the most important one they’ve ever seen or ever will see. And, because of this thinking, it turns out to be true just enough times to keep these people at the top of their class year after year. The problem is that this kind of thinking isn’t intuitive, and most salespeople and retail owners don’t understand it.

These few sales pros remain few among many because owners and managers are completely ineffective in leveraging their behaviors more broadly. Sales trainers and consultants in our industry have, for years, attempted to change this reality through programmed approaches, but the results have too often been short-lived.

Big Guys versus Little Guys
The “Big Box” stores, or regional and national giants who command an ever-growing share of the total home furnishings market can afford to take a different, less personal view of the business. If you have 25 stores in a major metro market and spend $20 million every year in advertising in that market, business becomes a pure numbers game. Just bring lots of people through the door and the typical less-than-20% overall close rate can drive all the sales revenue and profits you need. You can even survive a failing store or two and not die. Here too, a 20% decline in traffic would still have a devastating affect, but might not be deadly if it were short-lived.

But for smaller independent retailers in these highly competitive markets, the drive-more-traffic concept is not economically feasible, and these “little-guys” are far more strongly affected by downturns in overall traffic due to broad economic issues.

As the housing market has cooled in some regions, changes in retail home furnishings shopping patterns occur, but are not always obvious. In some regions, when people can’t buy a new home, they fix up the one they have. But their needs will be adjusted as opposed to the “new home, new stuff” thinking that accompanies new home ownership. Retailers and retail salespeople should be attuned to these issues and have strategies to deal with all different types of customers. Most retail strategies, however, are merchandise strategies concerned with what we sell, instead of how we see it. For those rare few truly professional salespeople, the how of selling is the thing that sets them apart from the rest of the pack and helps them survive, or even thrive in all kinds of economic conditions.

For independent retailers with up to about $50 million in revenues (having multiple, smaller volume stores) the survival strategy is played out at the customer-by-customer level. When you consider that all of your revenue, every dollar of revenue you generate passes through your sales staff, you may shudder with fear for your future. If you don’t, you should. Everything that goes into your financial planning, your operating budget (of course you have one, right?) is dependent on the result of an interaction between one salesperson and one customer. And, this interaction usually takes place out of your sight, with no accountability for the result of that interaction on the part of the salesperson. In other words, you give them a customer opportunity and if nothing happens, you get no feedback – no accounting. Further, you allow this to happen dozens or even hundreds of times a day depending on your size and number of stores.
To make matters more obvious, in most stores there is some kind of system for dolling out customer opportunities to salespeople. It’s kind of a social security system that insures that they all get an equal number of opportunities. Do you get equal results? I’ll bet that even though the variance between your top performer and your worst is over 40% in sales revenue dollars generated, you gave them equal opportunities. In fact, I’ll wager that you gave your worst performer more customer opportunities than your best.

To see this in a more financially sound way, because you track your traffic-by-salesperson closely (right?), you simply have to divide each individual’s total sales revenue for any period by their total number of opportunities for the same period to see how many sales revenue dollars were returned per UP by your top person as opposed to your bottom person. When you see this variance in money generated per customer you might very well ask yourself, “Why am I allowing this to happen? Am I nuts?”

When everything comes down to individual one-on-one, customer-to-salesperson relationships, don’t you think you have a responsibility and right to demand equal returns from your salespeople for equal opportunities provided? Wouldn’t that be the capitalistic way to think? I believe that it is un-American not to make a profit. So why wouldn’t I want to take actions to, at the very best control, and at the very least influence, the point of contact? Influencing what happens at the point of contact (and beyond) has been the center-point of my career in home furnishings. Even so, there are two sides to this life-or-death issue for furniture retailers to consider: First, there’s the matter of establishing customer engagement methods that effectively connect salespeople and customers early on in the game. These methods serve to keep salespeople connected to customers through their first visit on a project to the far more important second visit. Second, there’s the coaching side of the equation; the management systems and methods that support, drive and demand that the selling strategies are actually implemented by salespeople. There is absolutely no hope of achieving success in the first part of the equation without success in the second. It is this fact of life that has caused so many sales training initiatives to fail to achieve their goal of improving individual and overall store performance.

Over the next few issues, I’ll visit these issues in more detail to offer some thoughts on how to succeed in the best of times and the worst of times.


Joe Capillo is a furniture industry veteran with 35 years combined experience as a retail consultant and retail industry executive. He is a contributing editor to FURNITURE WORLD and a frequent speaker at industry functions. Joe makes himself available for private consultations on any aspect of retail sales management and sales education. He can be reached at joecapillo@furninfo.com. See many more articles by Joe Capillo on the FURNITURE WORLD website furninfo.com.

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