Retail in Detail_Excerpt by entpress



Part 1: Introduction                                   1
1.   What to Expect from This Book                     3
     How We Learned the Hard Way                       3
     How Information Is Organized in This Book         7

2.   History and Current State of Retailing            9
     History of Retailing                              9
     Current State of Retailing                       10

3.   The Future of Retailing in the Electronic Age    13
     What’s in Store (Pun Intended) for the Future?   13
     Meeting Consumer Needs vs. Selling a Product     14

Part 2: Decisions Must Be Made!                       17
4.   Is Retailing Really for You?                     19
     Assessing the Realities                          19
     Psychological Demands of Retail                  21
     The Good, the Bad, and the Ugly                  22
     Get Informed                                     23
     Research Available Resources                     24
     Check Out the Competition                        26

5.   Planning for Your Business                       29
     Develop a Business Plan                          30
     Monitor Your Progress                            31
     Keep Up with Changing Trends                     33
     Continuing Education                             33
     Seven Planning Do’s and Don’ts                   36
iv                            Contents

6.   What Will You Sell?                    37
     The Selection Process                  37
     Consumer Demand                        38
     Selling “Green”                        42
     Compatibility with Your Lifestyle      44
     Can You Make a Profit?                 44

7.   What Venue Will You Use?               47
     Traditional Fixed Locations            48
     Cooperative Markets                    48
     Catalog Selling                        49
     Internet Selling                       49
     Should You Become an E-Tailer?         50
     Starting Out                           52
     Domain Names                           54
     Website Design and Hosting             55
     Credit Card Processing                 56
     Reaching Potential Buyers              56
     Shipping and Receiving                 56
     Sales Tax                              57
     Evaluate Your Options                  57

8.   How Will You Choose a Location?        59
     Selecting a General Location           60
     Personal and Family Lifestyle Issues   61
     Narrowing the Field                    62
     Zeroing In                             64
     Zoning Compatibility                   65
     Merchants                              65
     Special Atmosphere Requirements        67
     Space Needs                            67
     Costs and Landlord Rules               69
     Customer Traffic                       71
     Final Evaluation                       72

9.   Closing on Your Location               73
     Buying vs. Leasing                     73
     Negotiating the Lease                  74
     Basic Lease Elements                   75
                           Contents                 v

Part 3: Starting Up!                                79

10. Money, Money, Money!                            81
    How Much Do You Need?                           81
    One-Time Costs                                  82
    Recurring Expenses                              84
    Sales Estimates                                 85
    Where Will It Come From?                        88

11. Legal and Regulatory Issues                     95
    Business Organization Options                   95
    Naming Your Business                            97
    Registration and Licenses                       99
    Insurance                                       99

12. Purchasing Your Inventory                      103
    Merchandise Markets                            103
    Planning Your Buying                           105
    Surviving the Market Environment               107
    Buying Strategies                              109
    Other Buying Options                           111
    Online Buying                                  113

13. Preparing for Your Grand Opening               115
    Finishing Touches                              115
    Staff Training                                 116
    Advertising Your Opening                       117

Part 4: Daily Operations                           119

14. Displaying Your Merchandise                    121
    Display Strategies                             121
    Deciding on a Theme or “Look” for Your Store   122
    Permanent vs. Moveable Displays                125
    Keeping Displays Fresh                         126
    Store Layout Strategies                        127
    Window Displays                                127
    Seasonal Displays                              128
    Display Talents                                129
vi                           Contents

15. Pricing Your Products                    131
     Pricing Policies and Procedures         131
     Exceptions to Standard Pricing          133

16. Customer Relations                       137
     Establish Policies Ahead of Time        138
     Credit                                  138
     Layaway                                 138
     Special Orders                          139
     Damage Recovery                         139
     Hours of Operation                      140
     Credit and Debit Cards                  141
     Gift Wrapping                           142
     Gift Registry                           143
     Business Ethics                         143
     Questionable Business Practices         143
     Continuous “Sale” Prices                144
     Advertising Very Low Prices for Items
          When You Have Only One or Two      144
     Sensational or Misleading Advertising   145
     Other People’s Ethics                   145
     Customer Relations in a Nutshell        145

17. Risk Management                          147
     Insurance                               147
     Workers’ Compensation Insurance         147
     Unemployment Insurance                  148
     Casualty and Property Insurance         148
     Liability Insurance                     149
     Life and Disability Insurance           149
     Employee Theft                          149
     Shoplifting                             150
     Store Security                          152

18. Day-to-Day Cash Management               153
     The Daily Grind                         153
     Managing the Cash Drawer                154
     Cash                                    154
     Checks                                  156
                            Contents       vii

    Credit and Debit Cards                 157
    Traveler’s Checks                      157
    Reconciling Daily Receipts and Sales   157
    Cash Management Systems                159
    Instructions for Figure 18-1           160

19. Financial Management and Bookkeeping   163
    Paying Your Suppliers                  163
    Paying the Government                  165
    Preventing Cash Crunches               165
    Taking Draws                           166
    Reducing Self-Employment Taxes         167
    Keeping Your Books                     168
    Two Essential Financial Reports        169
    Balance Sheet                          169
    Profit and Loss Statement (P&L)        171
    Using the P&L Statement                171
    Computerizing Your Books               173
    Computers and Software                 174
    Wrapping It Up                         177

20. Managing Inventory                     179
    Establishing an Inventory System       179
    Inventory Management Advantages        180
    Setting Up a System                    181
    Managing Your System                   185
    Physical Inventory                     186
    Summary                                188

21. Family and Employee Relationships      189
    Employee Options                       189
    Employing Your Children                189
    Spouses and Partnerships               191
    First Rule                             192
    Second Rule                            193
    Third Rule                             194
    Fourth Rule                            194
    Fifth Rule                             195
    Sixth Rule                             195
viii                                Contents

       Recruiting Employees                           196
       Training and Communicating with Employees      197
       Complaints about Employees                     198
       Dismissing Employees                           199
       Employment Laws                                200
       Principles of Employee Relations               201

Part 5: Marketing Your Product                        203
22. Marketing Basics                                  205
       Marketing for the Small Retailer               205
       Image and Branding                             205
       Advertising Methods                            206
       The Importance of a Marketing Plan             208

23. Marketing with Email and Websites                 209
       “Snail Mail” vs. Email                         209
       Blogs                                          211
       Online Forums and Message Boards               212

Part 6: Planning for the Future                       215
24. Managing Change in Your Operating Environment     217
       Human Tendencies                               217
       Pull of the Status Quo                         218
       Paradigm Shifts                                219
       Thinking Creatively                            219
       Expecting the Unexpected                       220

25. Protecting Your Store from Internet Competition   223
       Utilitarian or Decorative?                     223
       Size and Personal Fit                          224
       Time Sensitivity                               225
       Price Point                                    225
       Gift or Personal Use?                          226
       Combined Evaluation                            226

26. Selling or Closing Your Business                  229
       Is Your Business Marketable?                   229
       Tips for Closing Your Business                 230
                           Contents            ix

    Setting Up the Sale                        231
    Timing the Sale                            232
    Selling It Yourself                        232
    Listing with a Broker                      234
    Establishing the Price                     235
    Cost Basis                                 235
    Disadvantage of Cost Basis                 236
    Return on Investment Method                236
    Determining Risk vs. Return                237
    Determining an Equivalent Return           238
    A Bitter Pill                              239
    Good News                                  239

Appendix A. Glossary                           241
Appendix B. Resources                          247
Appendix C. Market, Gift, and Design Centers   253
Appendix D. Exhibition Companies
  and Trade Associations                       257
Index                                          261
                 Part 1: Introduction

S         ince Retail in Detail was originally published in 1996, it
          has sold more than 25,000 copies in four editions, and
          established a reputation as a no-nonsense, down-to-earth
guide for small retailers. It contains many specific examples and
case studies, based on my experiences starting and success-
fully operating three retail stores and a bed-and-breakfast over a
20-year period.
    This fifth edition retains the down-to-earth approach that has
received positive reviews from both users and industry review-
ers. It still includes worksheets that can be used by retailers to
plan for and operate their businesses. It continues in the style of
previous editions and makes liberal use of humor and personal
experiences to illustrate important concepts.
     In order to provide the latest up-to-date information, the entire
book has been updated to reflect current conditions. References
have been checked and modified to ensure that they are still cur-
rent and valid.
     In order to ensure that cost data is currently valid, dollar
amounts included in the various worksheets and performance
ratios were checked using Bureau of Labor Statistics cost indi-
ces for a number of items normally sold in small retail stores. The
 2                       Retail in Detail

 results show that, surprisingly, small retailing dollar values of the
’90s are essentially the same, two decades later.
      This verifies my own observations that items similar to the
 ones we sold in 1996 have not risen in price, but have actually
 declined in many cases. This is probably due to the increase in
 the number of items that are imported, and the general flattening
 of inflation in recent years due to monetary policy and the slow
 growth of the U.S. economy since the recession of 2008. While
 this is good news for consumers, it represents yet another chal-
 lenge for small retailers struggling to maintain profit margins with
 flat prices and their own Increasing labor and utility expenses.
      I hope this newly revised edition will prove valuable to you,
 whether you are considering opening a small retail store, or you
 are a new or experienced retailer who needs more information to
 help you operate your business.
      Let the selling begin!
                          Chapter 1

          What to Expect
          from This Book

I    am assuming, since you have purchased or borrowed this
     book (or are surreptitiously reading it at your bookstore. . .
     Look out! The clerk is watching—better buy it now!), that you
or someone you know is interested in becoming a retailer. I’m
also assuming that you are planning on starting small and being
actively involved in the business and that you would like to actu-
ally make a profit. Don’t laugh: Some folks just want to keep busy,
achieve tax deductions, or maintain a favorite hobby through own-
ing a store. I’m also assuming that you are not planning to use this
book to learn how to rise to the top of Walmart or JCPenney’s. It’s
on a much more basic level than that.
     If my assumptions are correct, once upon a time I was in your
shoes. Writing a book about it, however, was the furthest thing
from my mind when, in 1985, my wife, Susie, and I decided to open
our own retail store. If you stick with me, I believe you will find the
information I am about to share useful.

How We Learned the Hard Way
Before starting our store, we sought all available information and
references that would help us navigate the maze of planning and

4                        Retail in Detail

startup. While we were able to obtain a lot of information, most of
it was not directly applicable to small business retailing, nor was it
specific enough to allow us to foresee and plan for the actual costs
and events that materialized.
    The Small Business Administration (SBA), for example, has a lot
of information and many publications available for free. However,
the government definition of “small business” covers companies
with gross sales in the multiple millions of dollars. Many of the free
pamphlets simply assume too large a scale of operation to be of
any real use to a mom-and-pop retailer. Much of it also relates to
manufacturing or service operations, which are also far removed
from the reality of the small retail store we wanted to start.
    We didn’t want to use their retired business executive assis-
tance program (called SCORE), because, frankly, we wanted to do
it ourselves, our way, and really didn’t want an outsider planning
our shop. Ego aside, we also secretly feared that a rational, experi-
enced businessperson might take one look at our plans and imme-
diately fall into a fit of uncontrollable laughter at our ignorance and
naiveté. This is not to minimize this resource; I’m sure these gentle-
men and ladies are actually quite helpful and would never make
fun of rookies such as us, but I guess we were a little apprehensive
and perhaps too stubborn to admit we needed help.
    In any event, we decided to proceed on our own, at our own
pace, and desperately needed a how-to book, perhaps with a plain
brown wrapper, that would give us detailed instructions on how to
set up shop, without having to go public with our intentions. Alas!
With the exception of one simplified accounting and finance hand-
book, we found no such resource.
    We found plenty of books on business management in general,
and others on how to get rich in real estate without investing a cent,
but you can get this kind of information for free on early Sunday
morning television infomercials. This kind of free information is
usually worth exactly what you pay for it!
    So, after finding out virtually everything by trial and error, I
decided to try to fill this void in the information marketplace by
               What to Expect from This Book                      5

writing down our experiences, our methods, and our failures so
future entrepreneurs would have some footprints to follow, even
though they may sometimes appear to have been left by a drunken
sailor! Besides, with the eternal optimism of the entrepreneur I
could see burgeoning book sales, huge royalties, autograph par-
ties, talk show appearances. . . Whoa; back to earth! Where were
we? Oh, yes, why I wrote this book!
    So, if you are expecting a scholarly treatise on the science
of retailing, instead of a commonsense, step-by-step instruction
book on how to start a small retail store, you should probably look
    Susie’s and my objective was to combine her talents for deco-
rating and crafts with my skills in business and management into
a tangible enterprise that would also, hopefully, produce some
extra income and provide a nest egg for retirement. Of course, we
also harbored that secret dream of all entrepreneurs that our shop
would prove wildly successful, be franchised nationwide, and
make us millionaires by age 50. OK, so we got started a little late
to fulfill our Horatio Alger fantasy by 30-something! Better late than
never! In fact, retailing has become an attractive option for seniors
who are at or near retirement and wish to keep busy, while earning
supplemental retirement cash.
    After more than 20 years in the retail business, we have yet to
see our store name in lights in shopping centers across the nation,
but we have successfully operated three retail stores and a bed-
and-breakfast in two cities in the United States. We have achieved
a degree of success that gave us some additional financial security
in our “golden years.” (We are now retired—well, almost.)
    We have also gained a lot of experience, met many new and
wonderful people (along with a few grouches), broadened our
range of interests, and strengthened our relationship with each
other and as a family. So we consider the venture a success. And
even though we are not rich and famous yet, the first four edi-
tions of this book have sold more than 25,000 copies and we have
received numerous testimonials from readers about how the book
 6                      Retail in Detail

has helped them in their retail adventures. Neither of us had any
real experience as retailers when we began, but we believed we
had the basic ingredients for a successful store, if we planned
carefully, were fiscally prudent, and executed our plans cautiously
and deliberately.
    Our family situation when we began was such that Susie could
devote full time to the shop and I would be able to assist on a
daily basis, while maintaining full-time outside employment. I also
used vacation time to help during buying trips and at other times
of peak need. The buying trips have proven to be what the Cajun
people call “lagniappe”—something special and extra that is not
expected. We have had many wonderful trips together all over the
United States. We had two sons, one working part time and attend-
ing the local community college and the other in high school when
we started. Both have completed their educations and have now
started families and careers of their own.
    We began serious planning for our first store in spring 1985,
opened it in September, and operated it successfully for 14 years
through a period of changing economic climate. In spring 1991, we
began planning for our second store, which we opened in August
1991, in a shopping center across town from the first. In 1998, we
closed this second store. In 1999, we moved to our eventual retire-
ment location and opened another store, combined with a bed-and-
breakfast. In 2000, we sold our first store and, in 2001, we closed
the last store and B&B. Since then, we have maintained a foothold
in the retailing arena by operating several booths in cooperative
markets, as well as speaking to and advising other retailers.
    Through these experiences, which can best be characterized
as trial and error, we developed a reliable operating philosophy,
established a credible reputation in the community, and achieved
a degree of financial success, which we are attempting to share in
this volume. It is our hope that the book will help you as you chart
your own course into the business of retailing.
                What to Expect from This Book                         7

How Information Is Organized in This Book
Since I was educated as an engineer, my thinking is pretty linear.
Susie has other words to describe it, sometimes, but let’s not get
into name calling! Accordingly, the material is presented generally
in the order in which you are likely to need it, starting with a brief
overview of small retailing and proceeding through research and
planning, opening and managing your store(s), and finally, closing
or selling your business. I’ve also included appendices containing
useful reference materials.
     Interspersed throughout the book are worksheets, tables, and
figures designed to provide actual tools you can use to plan and
manage your retail business. Feel free to photocopy and use them
as needed.
     Having made the point about sequential organization, let me
also note that retailing, as life in general, does not lend itself to neat
chronological sequences. Some subjects pop up unexpectedly
and some issues recur throughout the business cycle. So some
subjects are organized into what I considered the most appropriate
chapter, rather than in strict logical sequence. All this is to say that
you should read the entire book before proceeding with your plans.
     Throughout the book, I have attempted to share our specific
experiences relating to our retailing operations. They are identified
in sidebars captioned “Our Experience.”
     Other than this device, I have tried to avoid the “CNN method”
of presenting information. There are no bottom-line crawls of unre-
lated data on each page. I have not used tired graphics or “fac-
toids” encased in text boxes containing tips and trivia that are, well,
trivial, just to provide eye candy. I am assuming that your attention
span is greater than a turnip’s and that you are capable of follow-
ing a logical sequence of thought for more than a few seconds. If I
am wrong, I am also writing a comic book. . .
     Oh, yes, if you find a term that is unfamiliar, look it up in the
Glossary included as Appendix A.

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