Retailers who survive learn lots of lessons. Many of them come in the school of hard-knocks where the tuition is highest. Fortunately we get some of the others by comparing notes with other retailers, saving ourselves the personal pain and expense.
During 38 years of musical instrument retailing I wrote down over 500 of the lessons I so painfully learned, mostly in an effort to keep from repeating a grade or flunking out. Here are seven that I found particularly useful:
1. Low wages aren’t a bargain, good people are.
At one time I thought almost anyone could guide customers to the accessories or sheet music and ring up the sale. Too bad it took me so long to figure out a really good person could turn an accessory sale into an instrument sale.
Low payroll is virtually always more than offset by low production, inefficiencies, mistakes, lack of motivation, and poor retention.
Retail has no jobs for which the quality of the employee is unimportant. Top sales people sell multiples of those at the bottom. Buyers stock items that sell, or that accumulate as dead stock. Back-office people provide timely and accurate information, or make mistakes that require hours to unravel and render information useless. Managers develop long term employees, or run them off. Even a parking lot guard must be dependable, vigilant, and honest—hardly universal traits.
The bargain isn’t in paying less than competitive wages, but in employing better people.
2. Two stores don’t make twice as much.
Opening more stores is apparently in the DNA of retailers. It’s irresistibly logical that a successful store—a proven retail concept—could be easily replicated. The same products, methods, and operating systems should yield similar results in another location, only with improved economies of scale.
It makes so much apparent sense that the question “How many stores do you have?” is almost equivalent to “How successful is your company?” or even “How profitable is your company?”
Ironically they often have the opposite meaning. Added stores are seldom as profitable as the original and often they’re losers.
Some of my friends often jokingly advise others in their sharing group, “You’re making too much money. You need to open another store.”
3. Good people don’t produce 20-30% more; it’s 200-300% more.
A dedicated employee doesn’t just get his work done—he finds ways to do it faster and better. A disinterested employee doesn’t just do a little less—he often doesn’t get started.
This is true for all employees, but it’s most noticeable with sales people because their sales are easily and commonly tracked. The best salespeople often sell 2-3 times the average, and even higher multiples of the low producers.
Even after significantly higher pay, better employees are virtually always more profitable.
4. Accounting isn’t just a tax project.
For many of us accounting is the dreaded annual chore of determining the taxman’s bite. And until the accountant finishes the form (and we adjust the results to better suit our tastes and budget), the outcome is more suspenseful than an Agatha Christie mystery.
Income tax is the most required of accounting’s uses, but it’s by no means the most important. Accounting is supposed to serve three parties—management, creditors, and the tax collector—and they belong in that order. Only when the first does a good job are the other two happy.
Accounting is management’s map. Would you drive a whole year before you look where you’ve been and where you’re headed? (Yogi was right: If you don’t know where you’re going, you’ll probably end up someplace else.)
5. Managers don’t create motivation—employees bring it.
New employees are excited about their jobs. They’re eager to learn their parts, hone their knowledge and skills, make their contributions, and become valuable team members.
We don’t create that motivation; employees have it on their first day. Our role is simply to explain the objectives to them, assure they get the necessary training and tools, provide ongoing information and feedback, and recognize and respect their efforts and contributions.
When we do that well, their enthusiasm and commitment build with their abilities, and they’re able to play increasingly important roles.
6. Good people management is an attitude, not a technique.
There’s a wide gulf between good and bad managers, and it really comes down to one simple perception—good managers understand that people are not only willing to work, but want to be on the team and contribute to the company’s goals.
That attitude more than any other characteristic or ability defines the most inspirational and effective managers in our industry. They treat their people like willing, capable, and valuable team members, and they help them get involved and contribute.
7. Doing a lot of things makes you busy; doing the right things makes you profitable.
We have an irresistible tendency to assume our profits are proportionate to our sales of each product and activity.
In truth a few things we do make large profits while the many other things make only losses. (If there is a business somewhere that makes a net profit on every product and activity, it’s surely the result of exceptional analysis and careful selection—and not happy accident.)
It’s almost always more profitable to choose our products, activities, segments, and customers thoughtfully, and to narrow our focus and dominate carefully selected (profitable) markets.
Author Resource:
Chip Averwater, Hopeless Seeker of Retail Truths, created a community providing information and insight combined with an irresistible enthusiasm for the world's most engrossing, gratifying, challenging, and sometimes rewarding, profession. http://retailtruths.com
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