Solomon Bruce Consulting Blog

Wednesday, September 22, 2010

Mrs. Carroll-- We have not seen you for a while-- we have meat on sale today!

   This blog title was what my cousin told me the other day when I was at her house!  She was referring to a small, hometown owned grocery store that was trying to compete, unsuccessfully, with a large chain store that had come to her town.
    I asked my cousin why the store manager told her this.  My cousin said that indeed, she had not been in the hometown store for some time.  I asked why?
    Here is what she said-- The store is dark, dingy and most of the refrigeration equipment never seems to be working satisfactorily!  She said that there is always one cooler, if not more, that is broke down, "waiting for parts".  In the meantime, there is no product in that cooler!  Sadly, the same can be said for the rest of the products-- the small, hometown store only had 1 or 2 of any certain product and the size was either too small or too big for my cousin's needs.
    As we talked more, I found out that the lady who is currently running the store is a daughter of the original owner, who has since expired.  The small, hometown store was very, very successful for many years before the arrival of the chain store.  However, once the chain store arrived, the small home town store lost business.  The new store was bigger, brighter, had a much greater product selection and all of the equipment was always operational.  The motivation to patronize the small home town store became less now that other options were available in this small town.
    As business owners, competition from a large "box" store or big grocery chain is something that we must be constantly vigilant about.  As we have discussed many times, you cannot compete on price--you should not even try.  However, what you can compete on is value and service.  People continue to be willing to pay for better value and service-- sometimes at a very substantial premium.
    How does your store compare with the large chain or box stores?  Is the store dark and dimly lit?  Are the displays tired and shop worn appearing?  Is the staff courteous and friendly?  Do you make it "easy" for someone to shop at your store?  Are all of the "coolers" or other product display cabinets in good working order?
    If the answer is no to any of the above questions, then you probably need to think about making some changes.  Given today's shopping environment, when people have choices, they will exercise those choices.  Don't force them to going to a big chain box store or competitor when you can make the necessary changes to provide a rich, rewarding shopping experience in your business.  The cost involved in keeping everything in working order is small compared to trying to retain a long time customer that has left for the big box store.

Tuesday, September 7, 2010

"I Wish We Had a Point of Sale System Instead of the Dart Board"

   I was out shopping the other day looking for some new sporting goods equipment.  The current sporting goods that I own are fine, however, thought about looking at some newer, more technologically advanced products.  I found the manager of the store, told him what I was seeking and asked him to show me what I thought I might want.  He took me to the aisle where the products were that I was interested in, showed me the kind of product that I was interested in and then told me all of the new features and benefits of the product that I was investigating.  Because I am out of the country this week, I told the store manager that I would return to the store after I got back from my overseas trip to further investigate and probably buy some of the products that he showed me.
   As we walked back to the front of the store, I asked the manager how they determined their inventory.  One of his colleagues who overheard our discussion said, "We use a dart board.  We don't have a point of sale system!"
   Well, this too was too good a discussion  to pass on.  I asked the manager and his colleague how they determined inventory stocking levels, kinds and brands of product, etc.  Indeed, the colleague was not kidding, everything is done manually with no automated processes or procedures!  Every sale is written in paper records-- no automated tools are used to track inventory, shrinkage, obsolescence of product, faster selling brands, etc!!  Wow, this was real exciting!  As I explored and asked more questions, both the manager and colleague said that the owner is very comfortable with his paper based system.  I did ask if indeed theft, product obsolescence, too many of one brand were concerns.  Surprisingly, both individuals said NO, the owner was not concerned with that!
   I know another retail business owner who also uses all paper records for his transactions.  I pointed this out when I first became a customer.  The business owner said that his business is small enough, he only has one additional employee and few competing product lines and does not need an automated system.  I pointed out that may not be entirely true, however, what is different between the first store and the second is the number of employees and the number of products that each carries.  The first store sells lots of products, some quite small made by a wide variety of vendors and manufacturers.  The first store also  has over 14 employees while the second store has a varied, but limited product selection and has only one employee besides the owner.
   This is a matter that as a business owner you should carefully consider if you continue to use paper based records.  The sheer amount of time and effort necessary and required to review the records, identify trends of sales, customers, vendors is impossible with a paper based system.  An automated system is able to rapidly identify trends, profit margins, stock out points and re-order points automatically.  Yes, this can be done with a paper based system, however, most business owners today do not either have or are willing to take the time to do the data analysis required.
   The price of automation is very inconsequential when compared with the wide variety of data available to you.  If you are still using a paper based system, give strong consideration to converting to an automated system.  You will be amazed at how much more data you will have, how you can make better purchasing and marketing decisions and how your profits are able to increase.

Friday, September 3, 2010

The Business Owner shopped in town after all!

   In the August 29 blog post, I addressed the point of a  local business owner using the internet to buy some products for a project he was working on instead of using local vendors who sell the same, if not similar products.
   The business owner called me today and told me that after reading my blog post, he thought about what we said and indeed did give a local vendor the opportunity to bid on the product before he pushed the "BUY" button the computer!
   In this particular instance, there are several local vendors who sell the product that the business owner needed.  He selected a local vendor whom I have done business with, know the business, his staff and have purchased some of his products for my own use.  I did NOT influence the business owner's thinking in any way, just pointed out that there were several local vendors with whom he could call and get a quote from.
   The business owner told me that the local vendor's price was approximately 40% higher than that of the internet.  The local vendor did identify that he believed that his product was of significantly higher quality than that bought over the internet.  My business owner friend stated that he has not seen the product that he ordered so he would reserve judgment on the quality until after the product arrives from the vendor.
    I asked the business owner if the vendor would install the product.  The business owner said "YES" he would.  Of course, having used this particular vendor before, I knew that.  I did identify to the business owner that obviously there was some additional cost included for installation.  I also pointed out to the business owner that he had paid that cost before, using his own staff to do the particular work necessary to install the product.  The business owner conceded that was true-- the cost for installation was included in his staff's hourly schedule.
   The business owner did tell me that he talked with his wife and did recognize that his business does come from the local community.  The business owner also told me that he recognized the points I made regarding returning to the local community business because his clients also came from the local community.
   Now the fun begins!  I cannot wait to see the product that the local vendor has sold to my business owner friend.  The business owner will be able to compare the quality of the product that he bought.  I pointed out that there is nothing made that someone cannot make or sell cheaper.  Those that focus on price alone will be sadly disappointed when they have to replace a product prematurely.
   Yes, using a local vendor probably costs more-- at least ostensibly.  However, what many people fail to realize is that what you are really paying more for is the SERVICE that the local vendor provides.  Large internet box stores can certainly buy and sell cheaper than a local vendor.  That there is no discussion  with.  HOWEVER, service, quality and knowing that you helped a fellow business owner out is worth more than just price alone.  My business owner friend did concede that he recognized that this local vendor can be used as a great "silent salesman" for his business as well as many other businesses in town.
   Price and cost are just two factors that you need to consider when buying something.  The local vendor will be there when there is a problem, something breaks or an adjustment is required.  That is not the case with the internet company.  In most cases, you are unable to talk to a live human being to explain your problem, let alone get satisfactory resolution.
   I told my business owner friend that he made the right decision!  If you are in the same boat, think long and hard about using the internet vendor when there is a competent, competitive vendor here in town.  Service, quality and the ability to call the local vendor is much more important than the few dollars that you might perceive to save using an internet vendor.
   We are all in business together.  In some  cases, using the internet makes perfectly good sense and you should use it.  However, always shop locally and see what the local folks can do before just thinking that price is the sole determinant in the buying equation. 
   I will report more after this product arrives and is installed at my business owner friend's place of business.

Wednesday, September 1, 2010

"Bring the Nanny-- The Cost is Priceless"

  I was traveling a couple of weeks ago and changed planes in Salt Lake City, Utah.  As I went to my next gate, there was a lady there who had a pair of 2 1/2 year old twins, a 6 year old, Grand-Ma and her.  She was fervently talking with the gate agent, trying to get her seats all together.  For some strange reason, the airline had all 5 people in 5 different seats, all over the airplane!  The more she talked, the more interested it was, as we were all trying to figure out what what going on!
   Finally, I said, "You are a lawyer, right?"  She said, "Yes, how could you tell?"  I said, "Oh, no special reason, I just imagined that perhaps you practiced law."  Well, she said that she had been a prosecuting attorney in the East, however, they now lived in Portland, Oregon where her husband was the CEO of some company.  She commented that she had paid $586 to fly the Nanny from Portland to Salt Lake City, however, had elected to NOT fly the Nanny to the final destination.  As she was working on re-arranging the seats for her family, she discovered, unfortunately, that perhaps paying to have the Nanny fly to the terminal destination was probably a great idea!
   I did volunteer my seat, which was in the row she needed!  She was happy-- all of her party could be together and I got a first class upgrade!
   As I reflected upon her decision not to pay to take the Nanny to the final destination-- I often wonder how many times people make sub optimal decisions?  The decision was sub optimal in this case, for the lady found out that having to manhandle a pair of twins under 3, a 6 year old and Grand-Ma all by herself was much more challenging than she had originally envisioned, irregardless of cost!  Although cost is normally a variable in most decisions we in business make, it is not the only decision variable that should allowed to be controlling.  Time, convenience, and lack of hassle are all factors that also should be included in the decision calculus.
   In the case of this lady, we all arrived at the terminal destination no worse for wear!!!  The kids all travelled well, Grand-Ma did not yet need a nap and Mom did not seem overly stressed out!!  However, when we got into the airport, the lady did thank me for being willing to change seats and did say that retrospectively, she should have bit the bullet and brought the nanny with her!
   When you make decisions, don't sub optimize all of the decision variables.  Price/cost is one key variable, however, there are many other key variables that need to be considered as well.  I talk a lot about cost and price.  That is my job.  However, many times there are reasons that although cost is a key component, there are other components that are equally important!  Think carefully before you dismiss cost as overriding!