Founding, owning, and operating a boutique or clothing company during this economic downturn is not something for the faint of heart for sure. It’s not just about pretty clothes it’s about business and adapting your strategy based on what works and what doesn’t. We have indentified two basic categories that lead to success and failure and thought we’d share these with you.
Things you can control
Expenses: If you boil the business down, it comes out to be Revenue – Expenses = profit. Expenses are the fastest easiest way to control that equation and our favorite point to start for everybody is the real estate game. Negotiate the rents until there is nothing left to negotiate then be ready to leave if that is an option for you if you can’t get the rent where you need it to be. Some landlords are now even willing to tie your rent to a percentage of your sales. Anything less then 12% is considered a pretty great deal and under 10% is stellar! There are other expenses to review from labor costs and conversions to simple things such as getting the best deal on hangtag printing. The lower the expenses, the greater the profit!
Promotions/Marketing: In the above equation, promotions and marketing efforts should help increase your revenue. However, beware of common mistakes that are made in marketing such as forgetting to put a phone number or address on a piece of collateral. Click here for a great list of three examples of poormarketing.
Training a great staff: A great staff is easier said then done. We found these great tips to help with some ideas.
Vendor relationships: The importance of finding both a great product and a great vendor can never be overvalued. The WallStreet Journal had some great points on the importance of the relationship between a vendor and their merchant.
Product mix: If you are a specialty boutique, product mix is easily the number one differentiator from your competitors. Once you get the staff and vendor relationships down, your expenses, product mix, and promotions/marketing need to be constantly reviewed and worked on in order to have the best business possible.
Things you can’t control:
Losing customers – Although your marketing and promotions, having a great staff, and having the best mix of product possible greatly improve your chances, there still might be the possibility of loosing a customer along the way. We like to bring this up because this is a different thought process then usual
How to determine the cost of one lost customer. We estimate that up to 20% of ales are lost on a weekly basis and that’s just sales! What if you lost a first time customer’s sale? Do you know how much that would be worth to you? Let’s do a little back of the envelope math, shall we?
1. What is your average sale? example: $75
2. How many times/yr does your average customer buy? ex: 3
3. What is the average lifetime of your customers (how many years)? ex: 3
So now, let’s multiply #1x#2 then take the answer and multiply again by your 3rd response. Total=$675
Total is pretty high, right? Well the other thing to consider is that in the age of social media, that one customer is most likely going to tell their friends about their experience. So let’s pretend they tell 5 friends that are actively listening and 3 of them were thinking about shopping in your store but now are not. The actual total of that 1 lost customer is really $2700 (675x3 + 675). Pretty important!
This leads us to the secret and deadly player that isn’t mentioned in our simple equation but is eluded to = INVENTORY. How to you handle Inventory? It’s all about the inventory turn, having the right product mix, and having access to the inventory that your suppliers have on hand to reduce the amount of lost transactions that occur due to insufficient inventory. The Stock Flock offers a solution to the last piece of the puzzle and will help you better manage your inventory and capture more customers.
“There are many ways to succeed, but there’s only way to fail—financial.”