A Tale of Two Retailers
A recent trip to the East coast found me in a mid-sized, somewhat economically depressed city that’s undergoing quite a revival in its downtown core. I had the chance to walk the downtown with one of the people intimately involved in that development as he explained the vision and showed me the construction.
Part of what he does is talk with local retailers to explain to them what’s happening and how it impacts them. One of those retailers has what I’ll characterize as an urban clothing store, and I got a chance to meet and talk with him. He’s doing a major upgrade in expectation of the impact of the development.
The shoes were all Nike and Vans (maybe there were a couple of pairs of Adidas). The clothing brands were mostly ones I hadn’t heard of. The prices and, I’d say, the quality tended to be towards the lower side. He had hats and belts, but really nothing else I’d call accessories. No watches, sunglasses, wallets, etc. He seemed trend sensitive, made full use of his point of sale register in managing his inventory, and knew who his customers were. Here’s how he described them. He hit me with this out of the blue, and I didn’t have a way to write it down, so I’m paraphrasing.
“I’ve got the best customers in the world,” he said. “Every dollar they have is available to be spent. Nobody has a mortgage, and nobody is saving for college.”
“I make most of my money the first five days of the month when the government checks come in. When the income tax refunds are received, it’s like Christmas. Nobody pays me with checks or credit cards.”
I can be a little slow sometimes, but when somebody hits me in the head with a two by four I usually notice it. What forms my retail perception? The stores in the mall and the specialty shops I visit that have an internet presence? I am afraid, in this economy, those places may not be completely in touch with reality and the result is that I am not either. Perhaps you have the same problem.
With something like 14% of households getting food stamps, the average wage having gone nowhere to down for at least a decade, and with participation in the labor force at a three decade low (making the reported unemployment rate decline even when things aren’t really improving much) is it any wonder that many of our prominent brands have had to close stores?
This guy has good customers. But they don’t take snowboard trips, buy $200 sunglasses or spend $300 on a pair of jeans.
Are you in touch with this very large customer group with income that is all disposable? Lord knows I’m not, but I’m going to change that. And I expect that I’m going to discover new trends and new brands as a result. There’s a whole new kind of store to be opened here but it’s often not going to fit your image of your brand and customer. Not quite as cool as you once were? This might actually be a chance to change that. I hope you’ve already figured that out even as I’ve remained comfortably clueless in my bubble.
The second retailer was a core skate shop, and I hope those of you with core skate shops have paid attention to what I described above because I think you might do well carrying some of the brands that guy carried.
This shop had recently been opened by a guy (let’s call him Ralph) because it’s what he had always wanted to do. I stumbled into it because we had some time on the way back to the airport and had pulled into a small town with some interesting stores. My wife said, “I’m going to shop.” Those of you who have been married a while understand the sub text there and know that Diane had dismissed me, which was fine.
He was all branded skate product; hard goods (longboards, popsicles, plastic decks, trucks, wheels, bearings) plus shoes and a few t-shirts and stuff. Small shop. He wants to carry Nike and Vans shoes, but isn’t yet. He’s also not doing a shop deck, but expects to. In talking to him, I found there was not another skate shop in the town, which was good.
I just kind of hung out and watched Ralph work with customers. Kids were coming and going and one came back in to introduce Ralph to his friends. A good sign I thought. He spent a while putting grip tape on a deck for a kid who, I think, had just bought the setup.
But then a father who was a skater came in with his young son (9 years old maybe?) to buy him his first deck. That was just great to watch. What was no so great was when the father got concerned about price. Ultimately, Ralph went down to the basement and got a couple of completes he doesn’t display that retailed for $60 to show the guy. The good news is that the kid chose, and his father bought him, a more expensive setup ($80 I think). I probably watched Ralph spend 20 minutes with them after which he sold an $80 product on which he made how much margin?
It felt like Ralph was doing it right in terms of location, product selection, and building community connection. But if he’s got to work that hard to make $80 in revenue, there may not be enough hours in the day.
He needs to take the cred that skate has in the urban market and carry some of the products the first retailer has, but he’ll need a few more square feet to do it in.
Cash economy, from government handouts, right? And that’s “today’s grand opportunity?” Now fully depressed, think I’ll go read a little Edgar Allan Poe to round out my day……
Hi Bob,
“Words have no power to impress the mind without the exquisite horror of their reality.”
Thanks,
J.
Always enjoy reading your analyses, Jeff. And hope we both land a step or two short of “exquisite horror!”