The Sunday Times
Looking after and keeping hold of customers is the key to surviving in the recession, writes Sandra O’Connell, The Sunday Times
If anybody knows how to cut their cloth to suit their measure, it is celebrity tailor Louis Copeland. This is just as well because that is exactly what he has to do to cope with a 30% slump in sales. “To get through the downturn, we are redoubling our focus on customer service,” said Copeland.
It’s an area he is already strong on, opening out of hours for clients, and providing coffee for the grown-ups and colouring books for the children.
Copeland traditionally invites regulars to sale previews too, allowing them their pick of the stock and generally making them feel looked-after.
“We are trying harder than ever, making a lot more calls, sending out a lot more invitations,” he said. Copeland has also redeployed his staff, taking two off the floor to negotiate with suppliers for better deals and make contributions to advertising campaigns. “We have also introduced weekly brainstorming meetings for all staff to come up with new ways to promote ourselves,” said Copeland, who is sanguine about the future.
“Nobody’s going to make money in the next year, but we’ve had 10 good years and I know if, as a retailer, I can keep the customers I’ve got, I’ll be ready for the upturn when it comes.”
It’s a thought that many retailers might like to bear in mind as they struggle with the unprecedented trading conditions. Figures from Retail Excellence Ireland, a trade association, show first-quarter sales for this year are down on average by 17.7% compared with the same period last year.
“These are the worst figures ever recorded in the retail sector and they indicate that most operators are losing money,” said David Fitzsimons, the chief executive of the association.
To cope with these problems, small retailers must play to their strengths he says. “Where they have the advantage is that they are so close to their customers. They do their market research every day from behind the counter. They need to make the most of this by asking the customers what they like and what they don’t like about the store, and what they can do more of to suit.”
Then lean on suppliers, he says. “Every retailer worth their salt will have gone to suppliers looking to renegotiate deals. Very often, suppliers with empty order books are offering them,” added Fitzsimons.
Be relentless about costs too, he says. “Your key levers are your wage costs, rent costs and supplier costs. If you can shave 10% off any of those you are saving yourself a lot of money.”
Everything should be up for reassessment, including opening times. “It might mean working longer hours or, once you have analysed your sales patterns, shorter hours,” said Fitzsimons.
“I have one member who is in breach of his shopping centre opening-hours agreement by closing his shoe shop at 6pm on a Thursday instead of 9pm, but it saves him €28 per evening.” It might seem a small step but it adds up to about €1,400 a year at a difficult time.
Fitzsimons says anything that helps you to weather the worst of the downturn should be considered. “If you can survive the next 12 months, you’ll be fine,” he said. “In a year’s time, we will be looking at a vastly different retail landscape where the number of failures that will have occurred will present opportunities for those who have survived.”
Battening down the hatches will get you only so far, however. What retailers really want is to get customers spending. Before he set up Davis Business Consultants, Paul Davis managed a 60-strong retail chain across Ireland.
“What the retailer needs to do now is find a way to increase their footfall,” he said. “To do that, you need to look at how you can develop as close a relationship with the customer as possible. People still want to buy, but they are more cautious about spending. So, focus on value.”
Look out for opportunities to up-sell, he adds. “It is the most effective tool that you have to boost sales during a downturn,” he said. “It’s the archetypal McDonald’s tactic – ‘Would you like fries with that?’ – and it does work.”
He advises retailers not to be too quick to discount their prices, however. “If you sell something for €100 one week, and €50 the next, how is your first customer going to feel about you? Equally, you are running the risk of the second purchaser feeling that you were creaming off too much in the first place.”
It is better to reconsider the variety of product lines that you offer and introduce more budget-conscious ones, says Davis. “In a recession, everybody’s income is down. The key is to ensure that the person gets the same retail experience, for less money, from you,” he added.
However, Tom Trainor, the chief executive of The Marking Institute, disagrees about discounting. “People are looking for increased value now but they also want prices to come down and, hard though it may be, retailers may have to give it to them,” he said.
“More than ever you have to give customers a good reason to come to you and while conventional wisdom says don’t mess with the price, the deeper this recession goes the more customers will expect prices to come down. That may be the price of winning this war, which is what recession is.”
Trainor believes a retailer’s best hope is the existing customer base. “It’s very hard to acquire new customers in a downturn so look closely at those you have, who already know and like you, and protect them,” he said. If you haven’t done so already, introduce a customer loyalty scheme, Trainor adds. “Big retailers such as Tesco and Superquinn are in a very powerful position simply because they have so much information about their customers’ likes and dislikes, but even the smallest mom and pop shop can do it and it’s not too late to start.”
Those who can afford it should get customer relationship management software, which allows them to track their customers’ details and habits. Otherwise, a simple card file index under the counter will help you get handle on your customer base, allowing you to offer finely tuned promotions to customers.
“Know, for example, who your most profitable customers are, and put in place a particular strategy for them,” said Trainor. “Capture people’s contact details and offer pre-sale viewing, and phone people to tell them you have new stock that you think they might like. You need to make people feel looked-after, but to be able to do this effectively you have to have identified your customer first.”
Don’t be afraid to be innovative, either. Laura Caffrey co-founded the Irish Design Shop, an online store with a bricks-and-mortar premises in Bow Lane East, Dublin, last year. She opened a temporary “pop-up shop” in the Powerscourt Townhouse Centre in the city centre shortly before Christmas. Not only did the business make a handsome profit, but it also increased its customer base at what was a difficult time.
Caffrey is now looking to create more pop-up shops and reckons the downturn is a good time for retailers who have a canny eye for opportunity.
“We got the store in Powerscourt for just €300 a week. Where previously landlords would not have been interested in short-term leases, now they are,” she said.
“What’s more, we are negotiating more with our suppliers on the basis of sale or returns, so all in all it is an affordable time, certainly to get into retail, and there are still opportunities out there.”
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