10 Common Mistakes Retailers Make

When “no” means…“maybe.” Your sales staff needs to be fluent in customer-speak. What does she really mean when she says “I have to ask my husband”? or “I’ll be back.” With the right sales skills you can avoid the mistake of taking “no” for an answer. Remember she came in to your store because she wants new flooring-no other reason.

Times are tough and from everything we hear things will get tougher in the months ahead. The building bubble has burst and the fallout is trickling down past the floor covering business to the plumbers, electricians, carpenters and dry-wallers. But let’s keep things in perspective: During the Great Depression unemployment reached 20%. That may be a staggering statistic but it also means that 80% of Americans were still working. Today things are not nearly as bleak. Unemployment may now be creeping up but it is still under 5%. That means people still have disposable income. In fact, today’s market may be a better scenario than I saw as a retailer. Throughout my career from 1962 through 1986, unemployment hovered between 5% and 7%. Although there are many other factors at play (for example, I didn’t have to compete against the internet-only outlets.) it is clear there is still opportunity. We have seen again and again that any single store can outperform the overall economy-and not just by a little.

The biggest difference today is the constant drum beat of negative economic news. Foreclosures, rising gas prices and, increasingly, layoffs are dominating the 24/7 news cycle we have today (another big difference from when I was a retailer). No wonder consumers are more hesitant to spend. What does that mean to the floor covering industry? It means consumers need good reasons to part with their money. If you give them a compelling reason to buy, they will. If you have selling skills and know how to hurdle over any objection they voice, you will be fine. Believe it or not, some flooring stores are having record years. Many are building their business during this down time. Still, overall floor covering residential sales are down significantly.

In past columns, I have offered tips on how to build your business in a down economy. I have made it a point to include specific actions to accomplish this. What is equally important is avoiding blunders that can make tough times even tougher. So instead of tips on what to do, let’s focus on what not to do. Hence ten common mistakes:

1. Forget that “Cash is king!”My friend and colleague, Sam Allman, has reminded you of this many times; there are many businesses that are actually making money but still going out of business because they can’t pay their bills. Watch your inventory and inventory turns as well as accounts receivable. Also, make sure your margins are profitable. (If that sounds simple, remember adding 40% to cost is not the same as a 40% mark-up.) On average, total expenses for a retailer are around 28% of sales, so every sale you make below that mark-up is a loss.

2. Pretend you’re a bank.You are not. If a bank, credit card company, Shaw or Mohawk credit won’t approve a customer or builder, why should you? If you lose the job, it is unlikely you would have gotten your money anyway. Remember, if you take the job and get burned, you lose the materials, your time and the labor.

3. Avoid creditors.This is among the worst fiscal mistakes you can make. Suppliers have learned that it’s much more profitable to help retailers than to “break legs.” Always return their calls. Make an honest assessment of your position and when you can make a payment. Just as important, ask for their help. They are experts in what they do. If things are tough for you, it is just as tough for them. They want to find a way to work with you.

4. Avoid credit (as a sales tool).Waiting until after the sale to say, “Cash or charge,” often means you’ve let half the sale walk away. Offer options beyond standard credit cards (including a store credit card). Explain to shoppers that many people find it convenient to use credit because it greatly expands their options. Remind home owners that flooring is an investment that increases their re-sale value. People who have access to additional credit other than their credit cards will spend three to five times more for the same merchandise. Home furnishings dealers say in-store charges mean at least 20% more business.

5. Miss opportunities.Let’s say the average store had 250-300 opportunities per month, that same store probably now has 150 to 200. To stay even you now must convert more opportunities. What is the answer? Effective regular in-store training. And please don’t tell me “My people are experienced.” In reality only 5% of retail flooring salespeople, no matter how much experience, can sell effectively.

6. Start with the low end.I have trained many people who told me that the one thing that helped build their confidence was the knowledge that there is nothing in the store the average family can’t afford. Many salespeople have doubled their sales by focusing on the best. Also it’s far easier and effective to sell down than up.

7. Accept excuses.If you equip your sales staff with skills and you still hear them tell you a customer in the store “just wants to look around,” maybe its time for new blood. No one “just wants to look around.” They want to buy! If they just want to use the restroom, I’m going to sell them anyway. There is a never-fail method to getting closer to any customer. Do it, and they will want to talk with you. Find out about it and insist your sales staff use it-but first you have to train them.

8. Take ‘No’ for an answer.Your sales staff needs to understand customer - speak. Do they know what a customer means when she says, “This is the first store I’ve shopped,” “I want to think about it.” or “I have to ask my husband”? The true meaning bears no resemblance to the words and if you fail to understand them, the sale is lost! This also applies to the “be-backs,” shoppers who tell you they will come back another day. Why take the time to sell the same customer twice (assuming she does come back)? Sales skills will enable you to comfortably sell her “first time in?” Remember, the sale begins with the word “No.”

9. Run useless ads.You might as well throw your money away. Create ads that are so memorable that the world knows who you are. Print ads should have an event headline. TV and radio spots should have a memorable theme. All should offer a meaningful reason for the sale. Also, make certain your ads run when people are most likely to buy. (People expect sales on Veteran’s Day or President’s Day.) And don’t be afraid to promote loss leaders-getting people in the store is half the battle.

10. Take the evenings off, Sundays too.Closing up shop in the early evening (especially Saturday) and taking Sundays off is an incredible display of retail ineptness that ignores reality. Most customers work from 9 to 5 (or thereabouts). The busiest hours are when customers are off work-Saturday and Sunday afternoons and evenings until 8 or 9 pm. The rationale that you have tried those hours, but no one came in, is bogus (see Excuse No. 7). It will take a few months for your market to recognize you now keep professional retail hours. You should also track peak selling periods on a daily, weekly and annual basis.

Times are not good, but becoming more professional will help you outperform the economy. These are among the most common mistakes. If we had the space, I could have listed a 100 more.