It’s the Economy, Stupid! (Or Is It?)
It’s the Economy, Stupid! (Or Is It?) By Stan Pohmer

In many parts of the country this spring, it hasn’t been the lackluster retail economy that’s affected sales as much as it’s been the weather. Some states never even had a spring; it went from winter to cool and wet to summer. That’s not to say that the impact of the challenging economy on consumer spending hasn’t had any influence on your sales. For many of you, it was a double whammy: customers with fewer discretionary dollars to spend and lousy weather, especially on weekends.

From the sound of things, this economy and its continuum of rising prices in the needs of life, including gas and foodstuffs, will be with us at least through the end of 2008. Some pundits, including the Oracle of Omaha, Warren Buffett, say it won’t be until the end of the first half of 2009 that we start seeing a positive recovery in consumer spending and retail sales. This means that, if you subscribe to these predictions, you’ll have to continue to maintain a vigilant focus on inventory, cash flow and operational expenses, as we’ve discussed in previous columns in Lawn & Garden Retailer.

Survey Says…

A report released by Retail Systems Research and written by Paula Rosenblum in April 2008 entitled “The Customer-Centric Store” points out that not all retailers are affected equally by the economic downturn. In this study, they analyzed and classified retailers into three groups: laggards, retailers who were performing below the average of their peers; average performers; and retail winners. My takeaway from this study is that though all retailers are faced with the same business pressures and consumer spending challenges, the core differences between the laggards and the winners are in attitude and approach.

To point, in response to the question on what percentage of retailers believe that the economy is one of their top three business challenges, the responses were:

  • Laggards: 40 percent
  • Average performers: 33 percent
  • Retail winners: 12 percent

Attitude Is Everything

It could very well be said that those retailers who aren’t feeling as much pain in sales would naturally be less concerned with the effects of the economy on their businesses, while those who are hurting the most would point to the economy as the root cause of their problems. But the researchers concluded that the laggards used this as an excuse — a “woe is me” response — ration- alizing that nothing they could do proactively would help change the course of the declining sales. In essence, they’ve given up!

On the flip side, the retail winners recognized and accepted the economic challenges facing their customers and chose to change or modify their business approaches to accommodate their customers’ pressures. By inference, the retail laggards were seriously concerned about their immediate future and became paralyzed in their ability to change their downward sales spiral, while the retail winners focused less on short-term economic conditions as a business driver.

Yes, the combination of weather and a tough retail economy will be forcing some retailers into a survival mode, forcing them into looking at things from a short-term perspective; when the alligator is nipping at your butt, it’s hard to remember that your mission was to drain the swamp.

But here’s where attitude comes into play: If you don’t see a positive future, it will impact everything you do and the actions you take. If you throw in the towel or assume there’s nothing you can do to reverse the slide, your future will become a self-fulfilling prophecy. And this fated outlook is contagious. It quickly becomes apparent to your customers, employees and suppliers. So think and act like a winner, even when you face the toughest odds! Remember that your attitude drives your actions.

Top-Notch Service Is Essential

Another observation from this study is that consumers are still spending money, but they are becoming more selective in determining where they spend it and what they spend it on. And there’s a significant shift in the consumer mindset that we haven’t seen in a long time: “… It appears as though consumers are deciding that, if they have to pay more, they might as well go with quality,” according to the survey.

Product quality is an expected given by the consumer: fresh, well-maintained live goods and on-trend hard goods with color, style and variety. The key differentiator, today more than ever before, is the customer experience. The boxes still have the edge over the IGCs in logistics and lower retail selling points, even for similar items. But the boxes are feeling the economic impact crunch even more than the IGCs because a lot of their store traffic was generated by the home improvement categories inside the store, and this is way down. And because they were already efficient operators, the major expense area they can cut is in store payroll, resulting in reduced staffing and service.

You’ve heard the term “customer-centric” before — meaning that everything revolves around the customer — and this concept is even more compelling today, both now and for your future. If you can satisfy your customers today when they don’t have a lot of discretionary cash to spend, you stand a greater chance of reaping their increased spending power when the economy recovers.

Wal-Mart is benefiting today from increased traffic as customers trade down on commodities from higher-end retailers. At the same time, they are aggressively moving ahead on improving the customer experience through stores design and presentation and upgraded assortments because they want to keep these new customers when the economy improves. They’re taking a longer-term approach to customer-centricity, taking a page out of the retail winners’ playbooks, which was written by independent retailers like you.

In addition to the obvious advantages the IGCs have in product and facilities, your greatest asset in delivering an exceptional customer-centric experience is your employees. To satisfy otherwise frustrated customers in the long term, according to the survey, retail winners empower their employees to create personal relationships and take individual responsibility for customer satisfaction. Empowerment isn’t something that can be talked about — it has to be demonstrated and proven.

Be honest, open, fair and encouraging with your employees, understanding that their approach to people may be different than yours (in other words, don’t expect them to be your clones). Set reasonable expectations, provide the training and tools to allow them to achieve them, and then monitor their results, not their methods. As Jack Mitchell, author and highly successful retailer, would say, hug your customers and hug your employees. They will repay those hugs for years to come, even if you’re selling commodities.

Attitude and approach: two key behaviors that are critical for success in tough times but even more important in setting you up for success in the long term…

Stan Pohmer

Stan Pohmer is president of Pohmer Consulting Group in Minnetonka, Minn. He can be reached at [email protected] or 612.605.8799.