Challenges in store

For many marketers that started out with print catalogs and then artfully mastered the Web channel, opening stores is perhaps the final frontier. But the various challenges of going brick-and-mortar, from stocking and shelving to point-of-purchase displays and managing a retail sales staff, can be daunting. Multichannel Merchant’s Heather Retzlaff caught up with executives at several multichannel firms to get their take on they hows and whys of retail.

BILL WILLIAMS is president/CEO of Medford, OR-based food gifts merchant Harry and David.

How many retail locations do you have? One hundred and thirty.

Which channel did you start in and when? Harry and David Holmes started the direct marketing business in 1934.

When did you add additional channels and why? We expanded from one outlet store near our orchards in Medford, OR, to several outlet stores in Oregon and California in the early 1990s. We added the stores because we saw how favorably out-of-towners reacted to our products, particularly when we sold snack and bakery components of our gift baskets and Towers of Treats separately, for self use rather than gifting.

How consistent are your channels in terms of merchandising? There is some overlap between the catalog and the stores, particularly during the holidays. The overlap is roughly 25%-30% over the course of the year, with the stores selling more items separately and the catalog selling multiple items in one Tower of Treats or gift basket.

Is your inventory separated by channel, and how do you decide how much inventory to have for each channel? We produce about 75% of our products, so when the purchase orders are submitted to production we look for economies of scale whenever possible. In stores we look at item sales productivity on a square- or linear-foot basis, and in catalog sales productivity is evaluated by the space and circulation an item is given.

What differences do you see in paginating a catalog and designing a store layout? We look at the catalog business assortment to be more oriented to individual item selection and the stores to be more sensitive to breadth of assortment.

Is there a difference between hiring for the stores vs. the catalog? The catalog merchant has far more detailed information at their disposal concerning item demand, customer response, and statistically controllable tests of alternative items, prices, and presentation. The store merchant has more editing, assortment building, and delivery schedule decisions to make. Both roles take incredible skill, curiosity, and intellect to achieve the best results. But the skill sets are somewhat different for each channel.

What are some of the challenges you face with retail? We need to make the stores as attractive an alternative for the shopper during the non-gift-giving months as during gifting occasions. People who know us via the catalog generally associate us with fabulous food gifts, not food for self use or entertaining at home. We make a special effort to ensure that our sales associates are friendly, articulate, and excited about our products so that our clientele always feels welcome.

KEVIN CHURCHILL is director of merchandising of Ventura, CA-based Patagonia, a manufacturer/marketer of outdoor apparel.

How many retail locations do you have? In North America 16, Europe 4, and Japan 12.

Which channel did you start in and when? The company started as a cataloger in 1972 with the current owner/founder Yvon Chouinard selling climbing gear out of the trunk of his car and mailing out a price list of his products.

When did you add additional channels and why? Our first retail store opened in Ventura shortly afterward along with our wholesale division. The Website launched in fall of 1997.

How consistent are your channels in terms of merchandising? The Website carries the entire line. Our retail stores and catalog feature about 70% of the offering due to space limitations.

How do you decide what merchandise to carry in each of your stores? It starts with a core assortment, then I work with the marketing department and layer on “benchmark styles” that may not be projected top sellers but best represent the brand. Space and geographic conditions then play a big part of the assortment.

Is your inventory separated by channel, and how do you decide how much inventory to have for each channel? The simple answer is our entire inventory is housed in a central distribution center but separated electronically. Inventory is shifted and allocated based on demand. We use an AS400 system that electronically splits the inventory by sales channel, style, size, and color, but the product can physically live in the same box on the same shelf in our DC. Sales and receipt plans are planned by month in advance, and inventory is shifted between channels monthly due to shortfalls or overachieving sales. During the holidays [if the DC is out of an item ordered by a customer online] we “chase” orders to our retail stores, and if they have the product we will pay for shipping. We won’t guarantee the item will be available, but if it is, the retail store gets the sale, and the customer receives an e-mail confirmation letting them know the item was found.

What differences do you see in paginating a catalog and designing a store layout? We line up our stores to tell the same primary and secondary merchandise story as our catalog, but the stores must reflect their own rationality and customer base. We try to tell a consistent merchandise story through window displays, push tables, and lead department stories. Last November we dropped our Edge/Ski book the first week of the month. Store windows and lead stories lined up with the catalog. An e-mail was sent out at the same time, and our top shop page online was Skiing/Edge.

Is there a difference between hiring for the retail stores vs. the catalog? We look for the same quality individual with our company’s shared core values: product users, balance of life, strong environmental beliefs.

KATHLEEN KELLEY is managing partner of Kevin’s Fine Outdoor Gear & Apparel, a Thomasville, GA-based cataloger/retailer of outdoor clothing and equipment.

How many retail locations do you have? We have two stores: Kevin’s Guns & Sporting Goods in Tallahassee, FL, and Kevin’s of Thomasville in Thomasville.

When did you add additional channels and why? Kevin Kelly, my husband, opened his first store in 1979, in Tallahassee — a local and destination store. We were shipping merchandise from our store all over the country and decided that testing a mail order catalog was the next step. We started a small flier/catalog about eight years ago with one mailing of 18,000. After a couple of years we started mailing a full-size catalog with a fall and holiday mailing, and we started our first Website. In the summer of 2003, we moved the catalog into a separate facility.

Is your inventory separated by channel, and how do you decide how much inventory to have for each channel? The catalog inventory is managed on one type of software, and the stores’ inventory is managed on another. We are investigating opportunities for incorporating the inventory of the three locations. This is a priority for Kevin’s, since all three locations stock catalog merchandise. We forecast for all three locations separately. Each location has items that are more popular, and our customer base varies somewhat.

What differences do you see in paginating a catalog and designing a store layout? Not having catalog experience, we initially found doing the layout a real challenge. We are constantly learning from our experiences, consultants, friends, etc. We are getting more experienced and comfortable with catalog layout now that we have sound results, more customers, and more employees. But the deadlines of catalog production are never-ending! In retail, there are a lot fewer deadlines.

What are some of the challenges you face with retail? We face the challenge of discounters, both retail and Internet, and also the challenge of finding qualified employees who will provide the service our customer expects.

CHARLIE WHITE is marketing manager of HGH Hardware, a Birmingham, AL-based wholesaler/retailer of cabinet hardware and accessories.

Which channel did you start in and when? Our owner/founder had a cabinet shop in the early ’60s and was tired of dealing with the suppliers. So he started out [selling supplies] mainly using outside sales and personal calls, then started a sales flier. The catalog has really developed over the past 10 years.

When did you open your first retail/showroom? The first showroom would have been about 20 years ago. We have two showrooms [in Birmingham and Atlanta] and are going to open a third in Nashville.

How do you decide how much inventory to have on your Website, in your catalog, or in your showroom? We’ve got a really good mechanized system we’ve been using for about 15 years now, and it’s a total inventory system. I can go into it and see real-time what’s on the shelves, and as it’s sold the numbers change immediately. It predicts what our patterns have been in the past and what we’re going to need.

Is it an off-the-shelf program or something developed inhouse? Our owner found this system [Eclipse; Intuit bought it two years ago], and it was actually for people in the plumbing business, and it was a great way of keeping track of their inventory.

What differences do you see in paginating a catalog and designing a store layout? The sales flier is really targeted to our shopkeepers — they want to see what’s new, and they want to see the pricing. They understand the products pretty well. When you get into the showroom, you’ve got people who just don’t have a clue — they know that they want something nice for their home.

Is it different hiring for the showrooms vs. for taking orders over the phone? It’s a different skill set, actually working face to face with people rather than on the telephone. You’ve got to have better interpersonal skills when working in the showroom.

What are your showroom-specific challenges? You’ve got to keep it fresh all the time. When people come in they’ve got to always feel that there’s a new offering in there. Sometimes you’ve got to restack it, you’ve got to move it, you’ve got to put another sign on it, you’ve got to change the price. We’ve had things that people were skeptical about: “It can’t be good because it’s too cheap.” So to fix that, we raised the price. We’ve had a few things that we’ve been able to sell more of: As the price went up, it was perceived as a quality product, and they bought more of it.

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