Essential retail strategies for the festive season

by Tamanna Bhasin | October 7, 2024 11:17 am

By Brian Land

During my 10-year tenure as vice president of sales and operations for a major Canadian jewellery chain, I was responsible for up to 280 stores. Each year, as the time for the annual budget approached, I was asked to devise strategies and tactics to meet and hopefully exceed my operating income target, a number set by the CEO and the board of directors. Traditionally, there are two ways for an operator to generate incremental income “ceteris paribus” (all things being equal):

1) Cutting costs

This is the easiest to execute and a favourite of finance-driven companies. The problem is that this becomes a “one trick pony.” You can only do this effectively once, and it often has unintended consequences. As a former CEO used to say, “You can’t slash your way to greatness”—cutting inputs or costs will invariably reduce outputs or sales. Imagine the potentially disastrous results of reducing hourly coverage in your store, changing your packaging to a much cheaper brand, the effect of reducing employee remuneration and/or benefit programs or slashing marketing initiatives.

2) Increase gross margin dollars

This method is characteristic of a product-driven enterprise. Here are the actions you could use to improve your gross margin dollars:

Implementing GBB

Where possible, employ “good, better, best (GBB)” assortments. To execute GBB:

• Your regular product becomes your “better” offering.
• Your “good” offering is a similar product in style at a discernably lower value (e.g. a lower karat metal and/or a lower quality stone) at a correspondingly lower price.
• The “best” item would reflect greater value at a higher price because of better-quality components.

GBB provides a selling methodology whereby you start your sales presentation with the “best selection,” explaining the features and benefits that justify the higher price. Psychologists tell us that shoppers have an “implicit bias” to higher quality especially when given a choice. If the customer likes the style but not the price, you drop to the “better” product, once again explaining the value story. Finally, if your customer still finds the price too high, you drop to the “good” option. This allows you to provide an alternative to the discount shopper other than a reduction in price as you can provide a similar product at a lower price.

Studies indicate that when you give a shopper a GBB choice, overall sales increase. There is noteworthy evidence that supports this claim. In the Harvard Business Review, Rafi Mohammed referred to this phenomenon as the “Goldilocks Effect” as most people select the “better” product—the one that’s just right. However, the “good and best” categories provide incremental sales because the shoppers from these demographics now find they have choices to satisfy their needs or desires that were previously unavailable to them in your store.

Focus on best selling SKUs

A typical structure for large mid-market chains is to organize their product assortments under three nomenclatures: Core, assortment and promotional SKUs (stock keeping units).

• The fastest turn rate applies to promotional products or seasonal items purchased in quantity and used to drive the marketing efforts.
• Core products have the next fastest turn and contains your traditional best sellers in each category.
• Assortment products usually have the slowest turn rate but are important as they support the best sellers by providing a shopper with choice. For example, why Baskin-Robbins advertises 31 flavours even though they only have a handful of best sellers. Choice is important and an ice cream store featuring just two flavours would not stay in business very long.

Here are a couple of thoughts to help you manage your category product selection:

• Identify the few best sellers in your core product categories.
• The next step is to set a recommended stock level (RSL) based on reorder frequency and delivery time, which would allow you to maintain an in-stock position in these few SKUs. For example, you might want to reorder karat gold hoop earrings (a jewellery wardrobe staple) on a bi-monthly basis and set a RSL of three to ensure you are always in stock. Also, you might want to adjust your RSL and reorder frequency seasonally, higher in the fall and lower in the spring.
• As assortment products typically have low turnover rates—which can be problematic from a “return-on-asset’’ perspective—you can include a purchase date on your products with a view to liquidate older, non-productive inventory and convert those inventory dollars into future best sellers. When visiting stores, I often see non-core inventory that is shopworn and sometimes priced significantly below what current replacement values might require. To maximize your assortment category sales, it is essential that all product, regardless of age, always appears to your customer as if they were a new arrival in your store.

Reduce discounting

As you know, every dollar discount is a dollar less in gross margin. One of the benefits of the GBB merchandise plan referenced above was a potential reduction in discounts. Another method of limiting discounts is provided with a membership to the Canadian Jewellers Association (CJA). By employing the services of one of the CJA partners, you may enroll in a consumer financing program that will provide you with a number of options, including deferred payment plans that will ease your customer’s burden and help you close the sale at full price.

Further, keep in mind, if you have to provide a discount to close the sale, never offer dollars off. Instead, offer a gift. For example, suppose someone was interested in a $5,000 anniversary ring. Rather than offer a 20 per cent ($1,000) discount, give the customer a $1,000 pair of diamond earrings, assuming a keystone mark-up for both products. If you do the math, you will find that the $1,000 discount versus the $500 cost of the earrings ends up giving you $500 more in gross margin dollars. The hidden benefit is the impression left with your customer. The gift of the diamond earrings would make the special occasion even better, discounts devalue your merchandise and your brand.

Adopt client-focused sales tactics

This approach revolves around three retail concepts:

• Match-off activity. Sales increases do not just happen, they are made to happen! Building a sales plan to equal or surpass budget begins with a detailed understanding of exactly what activities took place the previous year and the sales results that those activities generated. By way of example, suppose you hosted a Black Friday promotion last year that generated significant sales results. And suppose for your event you executed a dedicated marketing plan, special merchandise selections, extra staff, and topped it off with an exclusive special invitation for a closed store event for your client database. As you might guess, if you did not match-off that activity, you would probably suffer a sales decrease during Black Friday Week the following year.

The match-off process begins with a review of the month and a detailing of all the elements (marketing, merchandising, and operational) that affected your sales results. The next year when you prepare your action plan, your first step is to determine your sales target for the month. Next, you want to replicate those elements that were successful and replace those that underperformed. There are many action plan templates online to assist you in this process.

• Incremental activity. Henry Ford once said, “If you always do what you’ve always done, you’ll always get what you’ve always got.” In my experience, most retailers expect sales results to increase from year-to-year, but what is the source of this optimism? The same inputs will not improve your outputs (ceteris paribus). However, one source for accretive sales is incremental activity. When building your monthly action plan, you want to include additional inputs to generate additional sales. For example, you might host an appraisal clinic, plan a watch trade-in event, or partner with a vendor and feature a special selection of product. It makes sense that if you do something over and above your match-off activities, sales should increase.
• Continuous improvement process (CIP). The notion of CIP is dependent upon goal setting, measurement, and training (motivation). It is the most effective tactic an operator has to grow sales and income. I once challenged my team to improve our carat diamond sales. There were incremental elements to the initiative such as more inventory and advertising, however, the key to success was CIP. We set goals, we measured and reported results, we trained the sales consultants, and provided incentives to reward the desired behaviour. The result? Our unit carat sales increased by almost five times. Carat diamonds became a “key performance indicator (KPI).” On an ongoing basis, we identified other KPIs and developed CIP processes to improve performance. For example, in addition to carat sales, we focused on conversion rates, average ticket, multiple item ratios, and credit sales. At one firm I worked for, we measured sales over $10,000. Setting expectations, measuring against those targets and training your team to deliver is the main task of an owner/manager.

What gets measured, gets done!

Brian Carney Land is a retail jewellery consultant. Formerly the executive director of the Canadian Jewellers Association (CJA), Land has more than 40 years’ experience in the industry and has held executive roles with Peoples Jewellers, Birks Jewellers, and Waterford Wedgwood Royal Doulton. Past clients include retail chains, independents, and supply side businesses. Land is a past-president of Jewellers Vigilance Canada (JVC) and the Canadian Jewellers 24 Karat Club, as well as a long-time member of the Georgian College Jewellery and Metal Arts Program. He can be reached at bland19@bell.net.

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