08.15.11 | Groupon Advice for Small Business Retailers
Guest blogger Michael Koploy is an ERP analyst at SoftwareAdvice.com, a company that provides reviews of point of sale system software. He recently published a guide on his blog about Groupon for retailers, titled Retail Software: Your Groupon Advisor.
Many retailers are chomping at the bit to take part in a Groupon promotion. While consumers love the online daily deals site, there have been a number of horror stories this year from retailers that have had their business negatively affected after running a Groupon promotion.
Groupon isn’t all that bad, though. It’s important for retailers to understand how Groupon promotions work before deciding to take the plunge. Here’s a quick guide on the subject, and some tips on how to use retail software to help make your decision easier.
How Groupon Works for Retailers
Groupon offers the following opportunity for retailers:
- They pitch a promotional deal for your business. These deals will vary, but they’re usually in the 50-90 percent-off range.
- If enough consumers don’t purchase the coupon, then you don’t have to pay Groupon anything for the free advertising and promotion.
- But, if enough consumers do decide to purchase a coupon, then Groupon will take about 30-60 percent of the promotion and send the rest back to the retailer in three installments over the span of 90 days.
So in a nutshell, the Groupon promotion will sell your inventory at about 75% of its value, and pay you for it over the span of a couple of months. Doesn’t sound like the best strategy, but Groupon says the idea of its service is to get your brand name out to a new audience, encourage customers to purchase more when they enter your store, and to gain new, repeat customers.
Unfortunately, a report on online social deal sites from Rice University says this doesn’t happen. You can check out the full report here, but the main findings are that most customers don’t purchase anything more than the coupon allows, and they don’t come back because they’re loyal to the coupon site, not your business.
How a Retailer Should Use Groupon
So as a retailer, should you avoid Groupon at all costs? If used correctly, a Groupon promotion can be effective. One such way is to use Groupon to get new customers into your store, but provide extra incentive for them to return. Examples of this include additional coupons for customers, or just letting them know about future events and promotions.
Another great way to use Groupon is to run a deal on inventory that you have a surplus on. The deal will allow you to eliminate your excess inventory at a rate you wouldn’t have been able to before.
Most importantly, though, is to analyze your business and decide what you can afford and handle before even speaking with anyone from the Groupon team. This can be done with the help of retail point of sale software. By using these systems, you can gain a better understanding of your business, and can approach the Groupon team with the exact deal you wish to promote. Within your point of sale system you can use the following applications to help you make your Groupon decision:
- Inventory management. Use this to find what amount of “perishable” inventory you need to sell.
- Retail accounting. Crunch your financials and decide what size of a deal your business can really afford. Do the math, and be firm when working out the Groupon deal on what you will allow. There are many inexpensive standalone systems such as QuickBooks or Peachtree for these very purposes.
- Retail CRM. Do you need something like Groupon to improve your Internet marketing? If have no way to measure this, it’s a very difficult question to answer. CRM software is a great way to analyze how your business’ marketing initiatives are paying off. You can use something like Salesforce.com to look at your marketing if you don’t have a system that offers this. Alternatively, you can use a system with deep CRM functionality, like Microsoft Dynamics RMS.
04.18.11 | Short on Cash? Sales Partnering Can Help
For small businesses, access to working capital is critical to day-to-day operations, business expansion and ultimately long-term success. Sales Partnering is an alternate to having your cash tied up in retail inventory waiting for items to sell to get the cash you need for your business today. You can eliminate the constraints of time and money that limit your business. The benefits of Sales Partnering are many:
- Expand operations
- Invest in your business
- Hire more employees
- Enhance cash flow
- Create a retail operation
As a business owner, you know how important it is to have cash on hand to pay the bills. In the recent downturn, many businesses lost access to bank loans, maxed out on their credit cards and do not have collateral to get other funding. For your retail operations, it may take 90-days or more to get back the money you invested in the inventory and you still need to have cash on hand to constantly restock the inventory.
Sales Partnering is a strategic way to free up cash for what you need to do to make your business a success while at the same time still receive profits from selling retail products. The process works like this:
- Your Sales Partner buys and stocks the mutually agreed retail inventory in your establishment
- Your Sales Partner buys your existing retail inventory for an instant cash infusion
- Your Sales Partner works with you to create retail marketing campaigns to increase sales at no additional cost
- Your Sales Partner trains and develops staff to increase retail sales at no additional cost
- Once a month, you provide your Sales Partner a detailed sales report and pay them the wholesale cost for the product that sold plus a percentage-based fee on the product sold
- Your Sales Partner restocks your sold inventory and adds new mutually agreed products
For example, your Sales Partner stocks $10,000 of retail inventory ($5,000 wholesale value) at your business. You were able to sell $3,000 in retail product ($1,500 wholesale) in January. You would pay your sales partner $1,500 reimbursement for the product that sold and to be restocked plus $525 fee (based on a 35% fee rate). So in the end, you received $975 in January without investing a single dime into inventory.
Not only does your business generate much needed revenue without having to invest in inventory you also have other benefits:
- Frees up time from inventory management to do other things
- Retail marketing is now done by marketing experts resulting in increased sales at no additional cost
- Only a one year commitment which is up to you to renew or not
Sales Partnering is best suited for service businesses where their main business is not retail store operations such as salons, spas and wellness centers.
Loftis Consulting offers Sales Partnering services through its affiliation with Feltis Investments LLC. To find out more contact Loftis Consulting at email@example.com or check out retail management program details.
Many salons and spas only stock retail related to the services they provide such as shampoos or facial products. This is a mistake. Your clientele come to your establishment on a regular basis and have needs beyond self-care products. If you know your customers very well meaning you have defined your current customer such as age range and type of profession such as 25-40 professional women then you should be able to stock lifestyle products that meet your customers needs and expand your retail revenue base.
Additional products beyond self-care may include jewelry, inexpensive handbags and scarves. You should also take into account the individual needs of your customers and the season. For example, during rainy season it would be good to sell umbrellas and hair scarves for the unprepared client. You could sell flip flops during the summer for clients who had pedicures but not the proper shoes to leave in. Let your imagination take you and I am sure you have lots of surefire sellers if you take the time to think about it in the context of your clients needs.
As a spa consultant, I believe by incorporating other products you will take your profitability to the next level.
02.09.11 | Our Retail Management Program
My company, Loftis Consulting and Financial Management, offers a Retail Management Program for spas and salons through its Spa/Salon division. If you are looking to increase or establish retail sales for your business, this is for you at virtually no upfront costs.
Through Loftis Consulting’s close partnership with Feltis Investments, we offer an option to stock and sell inventory with virtually no upfront costs. This way, you can invest in your business’ day-to-day needs or respond to an unexpected expense without breaking the bank.
Benefits of the Program
* Monthly retail sales revenue
* No inventory carrying costs
* Third-party management of retail inventory and promotions resulting in increased sales
* Sales training and sales incentives for staff resulting in increased sales
Plus, by taking advantage of this program, you won’t use up your existing funding sources, like a home equity line of credit, credit card or bank account. They will still be available to you for other things when you need them.
How It Works
Your authorized consultant, in conjunction with Feltis Investments, manages your retail inventory program.
* Feltis Investments purchases retail inventory up to the agreed deposit amount
* Feltis Investments earns a share of the profits from the monthly retail sales
* Loftis Consulting actively designs and manages retail promotions, staff sales incentives and staff training
* Loftis Consulting will restock inventory for replenishment
Term of agreement will be for one year. Your option to renew or not. Your cost – – reimbursement for prior month’s retail sales at cost plus Feltis’ share of the profits for the products sold in the prior month. No cost until product is sold.
To see an example of how this program works click here.
09.07.10 | Make More Salon Revenue With Little Effort
As a business consultant, I see so many businesses not taking the small steps necessary to take their business to the next level of profitability. For example, most salons and spas can easily earn at least 10-15% more in revenue by offering retail products to its customers. With a really good retail sales process, revenue could increase by as much as 60%. In these tough economic times, many consumers are not getting services done as often but want to maintain the look or feel when they get home. The right retail product is the perfect solution.
Selling retail does not have to be a hard sale. You are recommending a product based on your client’s needs. The client is usually happy to have recommendations from their stylist or technician. Staff involvement is key to achieving retail sales. The clients usually have a relationship with a person not the business. Some retail promotions will entice customers to buy retail but it will be more successful if staff is involved. In order to get staff involved, you must overcome their misconceptions. The three most common misconceptions are:
- I’m not a salesperson. I am an expert in my field.
- I don’t want to pressure my client into buying something.
- My client cannot afford it.
These excuses are from people not comfortable with selling. You can get them comfortable by providing sales training and explaining why selling retail is a good thing.
- You are an expert in your field and that is why the customer is paying you. They expect not only a great service but professional advice on how to maintain their look at home. As an expert, you are in the best position to recommend maintenance products to your clients.
- Again, clients want to know how to maintain their look between appointments. It is not sales pressure it is expert advice.
- If a client can afford your service they can afford the product. Don’t make assumptions on other peoples pocketbooks.
In addition, you want to make your customers retail experience an inviting one. This can be achieved by following these steps:
- Offering products you and your staff believe in. Selling retail is about serving the customer better which in turn helps you become more profitable.
- Providing visually appealing displays of accessible products so that customers feel comfortable browsing your retail area. In addition, it lets customers know what products you have to offer.
- Staff should be explaining to clients what products are being used and why. This will make clients comfortable and excited to try it at home. Don’t feel intimidated that a customer wants to try it at home. Remember, you are the professional and have expert training. You are helping them maintain, not teaching them to become experts.
Execute these steps and you will be well on your way to increasing profits. Just think, if you sold just $100 a week per employee in retail products, your revenue would increase $4,800 per year per employee. If serving the customer better is not incentive enough, then your bottom line should be.
Loftis Consulting is a Chicago-based boutique firm that helps spas and salons increase their profits and customer base. Visit our spa page to learn more.