Retail 101: Five P’s of success

People

Qualheim spoke about the importance of scheduling employees to work during the busiest times of the day, rather than by standard shifts. He spoke about hiring according to attitude, rather than expertise. Before being hired, every potential Qualheim True Value employee must undergo an online personality assessment—a good indication of how that person might interact with others, Qualheim said. Prospective employees also go through a background check and, if hired, a 90-day probationary period.

“You can have all the expertise in the world, but if you’re not a people person, how can you help people on the floor?” he said. “You can teach selling skills. Attitude, you cannot teach.”

Qualheim believes strongly in education and training. In addition to vendor training, his employees also attend plumbing and electrical seminars and do online training from True Value University, and, more recently, the Midwest Hardware Association. There are different training curricula for the checkout person versus the sales person versus the manager, and they range in length from 24 weeks to 52 weeks. The topics range from selling skills to sensitivity training.

“A lot of it concerns customer service skills, selling skills and ‘dealing-with-people’ sort of skills,” he said. “In this day and age, I think it’s critical to develop people skills to a much higher level than in the past. A customer can buy stuff anywhere: You have to make them want to come back to your establishment, and that’s done with great customer service.”

Qualheim also encourages his employees to get as much training as possible, because he believes it increases their confidence level on the job. “The more confident that person is, the more he’s going to like the job, which certainly leads to less turnover,” he said.

Promotion

When Shawn Clifford and his family opened a True Value hardware store in Bethel, Conn., a little less than two years ago, he had a lot of work to do to build up a strong customer base. Growing up around the hardware business, Clifford has always believed strongly in promoting the store.

“My father has been in the business for 30 years in different locations in Connecticut, and he learned early that things work differently in different locations. The trick is to try things, because what didn’t work one place may very well work in another.”

For example, after having very little luck with circulars at some of their stores, the Cliffords could have shied away from using them in Bethel. But they didn’t, and some of True Value’s latest programs have worked wonders in building store traffic.

“A lot of people think circulars are just going to bring out the bottom feeders, and there certainly is that element,” Clifford said. “But here, they have driven traffic and sales of nonsale items.”

The Cliffords have worked hard to build up their True Value Rewards member base, signing up more than 7,700 people since the store opened in August 2007. In fact, 64% of transactions in 2008 were on True Value Rewards cards. This makes it easier to customize the marketing plan, Clifford said.

To the top-spending 20%—a group that spends at least $30 per visit—the store offers a $10 off $40 coupon. The next 30% receive a $5 off $25 coupon.

“We also send ‘$10 off any purchase’ birthday coupons to our top 50%, and people get really excited to bring those in,” he said. “Even if it’s a wash, it gets people in the store.”

Clifford is also going to do True Value’s “buy one gallon, get one gallon free” paint promotion over Memorial Day weekend. Although the 8,300-sq.-ft. store does a decent paint business with consumers, he believes they might be able to attract some professionals with this offer. But that remains to be seen.

“We don’t expect everything to work, but you can’t know until you try,” he said.

Finally, Clifford spoke about the importance of having some flexibility in a store’s marketing plan, as you never know what type of opportunities might come up. For example, he didn’t have a cable TV ad built into his store’s strategy at the beginning of the year but switched gears when some cheap air space became available.

“We don’t believe in having a totally rigid marketing budget,” Clifford said. “Of course, you have a good idea of where you’re going to go for the year, but it’s always a good idea to have a little liquidity built in to take advantage of opportunities.”

Product

Steve Bachmeier, owner of Belgrade True Value, a 25,000-sq.-ft. store in Belgrade, Mont., believes the challenge for every store is to carry the right mix of products in the right amounts, while minimizing carrying costs. To accomplish that, he makes inventory planning a priority and tries to maximize inventory productivity.

Part of this is analyzing and understanding the sales data, which means measuring A, B, C, D and X items as a percent of inventory, and then looking at key performance indicators such as gross margin and inventory turns.

“So what do you learn from analyzing sales data? Just about everything you need to know,” Bachmeier said. “What your A and B items are, what departments or categories draw people in to your store and changes in customer purchase patterns.”

He said his store uses sales data to identify growth trends and reallocate space. For example, Belgrade True Value used to devote just 3 ft. of space to pet supplies, but after seeing that this was their fastest-growing category, they upped that to two full aisles. In the same way, when they analyzed sales data and saw that padlocks have a higher gross margin than just about anything else in the store, they expanded the department from 4 ft. to 8 ft.

The company has carried Hallmark cards since 2000, and it was never a huge moneymaker in itself. But when they looked at True Value Rewards data, they discovered that people who bought greeting cards visited the store twice as often, and their average ticket was 40% higher than customers who didn’t buy cards.

“Perhaps the most important thing that sales data can tell you is what your A and B items are,” he said. “These are your best sellers—the products you cannot afford to be out of. You need to have them on hand and priced right. No matter what the economy looks like—you can’t let your standards drop.”

Bachmeier said the goal in inventory planning and productivity is to have enough of every SKU that you don’t run out, but also keep your turns high and your ROI as high as possible. He uses the computer system to track inventory and generate orders, tweaking it constantly.

“I review the suggested order report, and when an item shows as out, I look at how many we sell a year,” he said. “If we sell five a year and it comes in a case pack of 12, I don’t want to order a case, but I should definitely keep two on hand—one to show and one to go—so that item is never empty again.”

By the same token, it’s important to get rid of your X items, which are the slow movers and take up space that could be used for faster-turning items. At least once a year, Bachmeier runs a report on these and systematically gets rid of them.

Belgrade’s results speak for themselves. “Right now we are running about 10% ahead of last year’s first quarter, and certain departments are going gangbusterd,” Bachmeier said.

Price

Mike Moeller, owner of Harpeth True Value in Franklin, Tenn., says today’s consumer is highly price-sensitive, so it’s crucial to be on par with local competitors.

“He is more tuned in to price than he’s ever been because of the economy. People are forced to pinch every penny today,” Moeller said. “That’s why we get out and about, pay attention to the marketplace. Don’t live in a vacuum.”

To keep Harpeth True Value running at an optimum level, he carefully reviews competitors’ sales ads and promotional fliers to make sure his own marketing materials are hitting the mark. In addition, Moeller regularly shops the competition to review pricing and products. “You want to make sure your pricing is in line, look for hot items,” he said.

Mostly, Moeller wants to dispel the notion that hardware stores are more expensive than big boxes, which he says is a fallacy in today’s marketplace. “We’ve battled with that perception, but it’s really not the case,” he said. “We’re competitively priced with the boxes, especially on A and B items.

“You have to be particularly careful with price-sensitive items—items people buy every day, like batteries,” he added. “You need to be fairly priced there, or people will really notice.”

Place

True Value’s Heidemann often talks to members about seeing their stores through their customers’ eyes. For Dan Kanis, owner of Nelson True Value in Prairie du Chien, Wis., this is somewhat of a mission statement.

As a second-generation owner, Kanis has had to make some pretty major adjustments to make his store stand out in the crowd.

The Kanis family purchased the Prairie du Chien store in 1998, taking the existing 13,000-sq.-ft. space and adding 5,000 sq. ft. to it. In 2007, they tripled the size of the lawn and garden department, but with the surrounding competition growing rapidly, Kanis knew something more drastic needed to be done.

“Sales were strong, but the store was tired,” he said. “Competition offered a better overall retail experience.”

So when True Value introduced the Destination True Value format, Kanis knew it was the right answer for his business. After much planning and an analysis of 12 months of sales history, a new floor plan was sent to designers in January 2008. It included a narrowed power tool and hand tool assortment, expanded anchors and stainless fasteners, rounded out plumbing and electrical, and an additional line of paint. About 4,800 SKUs were added, 800 taken away.

When the redesign was completed in November, Kanis had a leaner and more marketable operation. Sales in all core departments showed increases in December, January and February, with the latter month seeing the following jumps: 34% in electrical, 19% in hardware, 8% in plumbing and 24% in paint. Meanwhile, sales at Kanis’ other store in Viroqua, Wis., remain flat.

His advice to fellow True Value retailers? “Take a critical look at your store. Is it easy to shop? Is it well lit? Is it well laid out? Is it well signed? Are your shelves well stocked? Does your decor draw women in?” Kanis said. “Look at your store through the eyes of your customer.”