Blog

How to be smart in a world of dumb retail mistakes

There are no "magic bullets" that will instantly transform your retail store into a customer magnet. But there are steps you can take to avoid sabotaging long-term profitability and growth.

May 9, 2014 by Kristen Gramigna — Chief Marketing Officer, BluePay

The retail space has never been more competitive than it is today. It's no longer enough to factor in rival vendors down the street. With the rise of online shopping and mobile connectivity, you're now competing with merchants all over the globe.

And it's not simply mom & pop stores that are feeling the pinch. Even well-established brick-and-mortar outlets must constantly refine their retail formulas in order to thrive in today's increasingly competitive landscape.

There are no "magic bullets" that will instantly transform your retail store into a customer magnet. But there are steps you can take to avoid sabotaging long-term profitability and growth.

Below are seven of the most common retail mistakes that could be making your store less competitive:

1. Not Having a Business Plan

Many wrongly believe that business plans are just for hot new products or services. But retailers arguably benefit more from planning than any other group (including Silicon Valley start-ups). This is because:

• The majority of retail owners have zero actual retail experience before opening their stores
• Almost by definition, retailers have limited geographic reach (which is why competition is so high)

This helps to explain why fewer than 50 percent of small businesses make it past the two-year mark. They often lack a well-defined plan of attack.

And don't make the mistake of thinking that business plans are only for new stores. Yours should be a living document that you periodically review and update — during good times and bad.

2. Not A/B Testing Everything

Regardless of location, inventory and market segment, there exists an optimal in-store arrangement of all the products you sell. Your job is to find that ideal balance through perpetual A/B testing of pricing, displays and layout.

And much like writing business plans, A/B testing is a process. With seasonal fluctuations and changing consumer tastes, your job is never really done.

3. Ignoring the Sunk Cost Fallacy

You've ordered a new shipment of inventory, only to discover that none of your customers seem to want it. Because you've already spent the money, you decide to keep these poorly converting products on the shelf.

This is a classic case of the sunk cost fallacy.

Remember that in-store real estate is limited. And there's an opportunity cost associated with every product on the shelf. When you maintain underperforming inventory, you're literally shrinking the physical size (and profitability) of your store.

Instead, focus on high converting items — especially those with upsell or cross-promotional potential.

Alternatively, you can use the Pareto Principle to identify the 20 percent of items that generate 80 percent of profits. This same principle can also be used to isolate the least and most profitable customer types as well.

4. Not Having an Online Presence

It's only natural to be fearful of online retailers. With unlimited geographic reach and lower inventory costs, e-commerce stores represent a powerful threat to brick-and-mortar establishments.

But the Internet itself is not your competitor — it is a powerful marketing tool that you should leverage for long-term growth. Having a website and social media presence can help you:

• Capture leads and engage with your customers
• Analyze traffic to identify emerging opportunities
• Better understand how your customers perceive your brand

A well-structured site also presents many more opportunities for A/B testing.

5. Not Listing Prices

If you don't clearly list prices for every item in your store, you're leaving money on the table. Sure, customers can always ask for assistance. Some retailers even place price scanners strategically throughout the store.

But what you're really doing is creating unnecessary resistance. If a customer must invest 15 extra seconds to locate a price scanner or clerk, you've made that sale 15 seconds harder than it needs to be.

6. Failure to Respect the Customer

Respecting your customers goes way beyond training your staff to be courteous and attentive. It requires you understand the demands and expectations of your target market:

• Are your store hours good for your customer (you'd be surprised how often the answer is no)?
• Are you focused on selling what the customer wants — instead of what you have (see the "sunk cost fallacy" up above)?
• Have you selected a location that makes sense for the customer? Most retailers choose their locations based on price and availability, ignoring the countless other factors that actually determine success.

Answering questions like these can sometimes be difficult — especially if you're the owner. This is why savvy retailers often invest in mystery shoppers. Objective, anonymous feedback can uncover opportunities and threats hiding in plain sight.

7. Not Incorporating Basic Marketing & Persuasion

If you're serious about long-term growth, you need to understand the psychological factors that go into the buying process:

• There's a reason why supermarkets place fruits & veggies upfront and milk & bread in the back.
• The music you play in your store has a tremendous influence on consumer behavior.
• Have you ever wondered why nearly every fast food chain uses the color red in its logo?

Read up on persuasion literature so you can understand and incorporate the latest best practices.

Competitive Advantage or Business Necessity?

The above tips won't make your business an instant success. But they can help your business become more successful. They represent an action plan for avoiding failure and removing unnecessary obstacles.

By addressing these seven common pitfalls, you can make your retail venture more profitable in the long term.

(Photo by Terry Whalebone.)

About Kristen Gramigna

---

Kristen Gramigna is Chief Marketing Officer for BluePay, providing retail payment processing solutions for merchants of all sizes. She brings more than 15 years of experience in the bankcard industry in direct sales, sales management, and marketing to the company and also serves on its Board of Directors.

Connect with Kristen: