TOOLS OF THE TRADE: The five P's of retail

Willis Qualheim, owner of Qualheim True Value in Shawano, Wis., was in a local Subway restaurant when he overheard a young, enthusiastic employee saying she wished she could work more hours. Qualheim gave the woman his card and encouraged her to apply for a job at his store.

“You should always be looking at possible associates to come to work for you,” said Qualheim, who employs 45 people at his 50,000-sq.-ft. store. “If I see someone somewhere who’s doing a super job, I will plant the seed with that person that if he or she is ever looking for a new job, come and see me.”

This was one of several tips Qualheim shared with fellow True Value retailers during the Best Practice Conference that kicked off the spring market in New Orleans. True Value had a speaker for each of the Five Ps of retailing that CEO Lyle Heidemann has often referred to as a recipe for success: People, Promotion, Price, Product and Place.

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.

“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.”

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.

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

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 now until you try,” he said.

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 like 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 into your store and changes in customer purchase patterns.”

He said his store uses sales data to identity growth trends and reallocate space.  For example, Belgrade True Value used to devote just three feet 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 four to eight feet.

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." 

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."

Place

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

His advice to his fellow True Value retailers? “Take a critical look at your store,” he said. “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.”