Wednesday, October 2, 2013

Maximize Sales

The theme of this entry will be to suggest incentives to increase sales, to suggest that you do this in space that is properly bought for and that you keep everyone interested in both of these concepts by publishing monthly “sales per square foot” as the cool new thing to be interested in improving. 

The goal of the Merchandise Buy Plan Guide that I have written is to help you determine the inventory levels that you need for your shop in order to be well-merchandised but not over inventoried. It advises that you review the plan often and amend as needed, but does not fully address how to quantify the success of your plan.  A valuable and quick way of keeping track of retail performance is to measure “sales per square foot” and while there doesn’t seem to be any golf related comparative data - the National Retail Federation reports that the average for a retail store in a regional shopping center is $341 per square foot. Unless carefully segmented by facility type and volume, the numbers for golf would be all over the board to the extent that averages would be almost meaningless but the important comparison is to same space (your space) last year or last month, etc. When calculating sales per square foot, it is important to only include the actual selling space, do not include back room storage or office space. The calculation: 

Sales per square foot = total net sales divided by the square feet of selling space.

An example would be the shop that is 1500 square feet which has annual sales of $450,000 and thus annual sales per square foot of $300. This means, of course, that your square foot of selling space contributes an average of $300 per foot to your net sales over the course of the year. If you could keep track of your selling space in quadrants there wouldn’t be many surprises but there would probably be inspiration to remerchandise those unproductive corners and weak spots. My suggestion is that you post this number monthly, compare it to same month last year and discuss at staff meetings what we can do to improve this month. This is also the tool that I always suggest when asked what to base retail incentives on, as it most succinctly measures improvement.

Being over-inventoried has been discussed a number of times. I make the point in Over Inventoried – The Killer that it becomes almost impossible to make margin if you either have too much inventory to properly merchandise or inventory that is not working.  It also points out that there are a number of different ways to be over-inventoried. The use of new tools to gauge performance, the problem of too much inventory and the institution of effective incentives may initially seem unrelated but I believe them to be the key components of the package that needs to be in place in order to achieve maximum sales.

Retail Incentives are essential but they are incredibly under-utilized in the golf industry and therefore definitely worthy of discussion. While it is true that I have seen the good, bad and the ugly as far as incentives are concerned and was even involved with one that was incredibly counter-productive, the concept, when properly implemented, can help produce sales and heightened service levels. Experience has convinced me that commission per sales on the golf selling floor at most facilities doesn’t work;  neither does percentage awarded as a bonus on the total dollar volume or net business, or the increase in either.

So what will work? I recently read a discussion of incentives in general (not so much tied to retail) making the point that what inspires one staff member may be meaningless to another and that effective incentives therefore need to be customized and/or changed perhaps on a monthly basis. A recently married assistant may love a dinner for he and his new bride at a local establishment, a starter who is a bird watcher may be thrilled with new binoculars. This individual approach not only rewards salesmanship and service but also the attribute of being a team player and if done properly can be not only effective but also well within any budget.

The team concept can also be valid and productive, but not on something as remote as bonus or commission based on percentages and off-in-the-distant future.  A monthly posting of sales per square foot last month, currently and the coming month’s last year total with an understanding that an increase of (fill in the blank) will allow each member of the team an afternoon of golf with three friends free of charge or an evening out or Red Sox tickets or whatever the club determines will be inspirational but not break the bank. An incentive like this is non-contractual and fun and should promote teamwork as opposed to competition. 

I was working at a club where we wanted to increase shoe sales. We organized a staff dinner and invited the principles from our major footwear vendor where the entire evening’s conversation centered on becoming completely familiar with shoes and how they are made; how they are fitted and how they are sold as well as ideas on how we can better merchandise them to our clientele. We announced a contest where we would post a list of all staff members involved in shoe sales including the fellow who ran the locker room. Everyone’s spot on the list was determined by a drawing and every dozen pair of shoes sold the name at the top of the list got a free pair and went to the bottom of the list. The vendor thought it such a good idea they provided the free shoes. We had a 300% increase in shoe sales that year with each employee able to get two new pairs of shoes of their choice. The point here is that any announcement of incentive without relevant training is a missed opportunity of grand proportion. 

Everyone on staff needs to be well versed in how to discuss the shop’s inventory and understand that those are the expectations. When it is understood that this can result in personal perks there will also be a renewed interest in the inventory mix being appropriate and well-manicured. This is a formula that puts you in the red zone and a first down.