Stats Don’t Lie

One of the statistics from our retailing book that I found interesting was the one about how much a retailer is hurt by hiring a drug user. It says, “a retailer incurs an additional $7,000 to $10,000 of expenses in medical costs, absences, turnover, and lost productivity when it hires a drug user.”

That one surprised me, because I had never thought about it that way before. I always knew that regular drug users would cost the company some lost productivity, but I had no idea it was such a large amount of money. But now that I think about it I can understand the absences, turnover, and even medical costs as well.

Another statistic that I thought was crazy was the one about a company replacing an employee. It says, “The U.S. Department of Labor estimates that it costs a company one-third of a new hire’s annual compensation to replace an employee.” I really thought that this was outrageous. That isn’t so bad when we’re talking a McDonald’s employee, but when we’re talking an employee who makes $60,000 a year would cost $20,000 to replace! This shows that it really does pay for companies to keep their employees if they have good ones. They will try to keep you as long as you are doing good work.

EDLP vs. High/Low Pricing

There are two pricing strategies that dominate today’s retail market, and they are EDLP and High/Low. Many retailers use an everyday low pricing strategy (EDLP). This strategy sets the retail prices at a level between the regular nonsale price and the deep-discount sale price of the retailer’s competitors. Although they may not always be the absolute lowest price, they have consistently low prices. A wholesale club or a sale price at a competing store may have a lower price on an item. Wal-Mart, Home Depot, Save-a-Lot and Aldi all use everyday low pricing as their strategy. Many of the eBay online stores have adopted this strategy as well.

High/Low pricing is the second most common type of pricing strategy. With this strategy, the retailers have prices that are sometimes above their competitors who use EDLP. However, they use advertising to promote frequent sales. The sales from these retailers have become more intense as time goes by. In the past, retailers only marked items down at the end of the season or when items were overstocked, or their vendors offered them special deals. Today, retailers deal with increased competition and value-conscious customers by having more regular sales. Examples of high/low pricing strategy use would be Khol’s, Meijer, Family Fare, D&W, and many others.

I personally like Wal-Mart’s use of EDLP. It has helped them to become the market leader in every market that they enter, and become the largest retailer in the world. It’s nice to know that on almost everything I need, I can find it at a good price at Wal-Mart. Sometimes I just don’t have the time or energy to shop around and watch all of the sales out there. To deal with this, I just shop at Wal-Mart to avoid the hassle of going from store to store. I am still selective about what I buy there. Usually I stick to the basics such as toiletries, since it is hard to beat their prices on those everyday use items. It seems like some of their produce and other foods are not always as fresh as Family Fare’s or D&W’s.

I like to shop at stores where my money goes a long way. I used to shop at Family Fare for almost everything that I needed, but then I decided to try Aldi for my groceries. I found that I like some of Aldi’s products better than the name brand ones. In addition, I saved a lot of money on my grocery bills. When you consider how often you shop for these items, you are talking a lot of money in the long-run. Anything I didn’t like at Aldi I would go to Family Fare or some other store for.

When I’m at a store that uses high/low pricing, I usually always go for the sales or clearance items anyway. For example, when I shop for clothes I go straight to the clearance racks of my favorite stores. If I don’t see anything I like, I don’t buy anything. I basically have all of the clothes I need, and only buy new things to update my wardrobe. Since I don’t buy trendy clothes, they last me a long time. I don’t pay the full-price for the items I see in the front of the store, I just wait a few months and pay 1/3 of the price later!

All-in-all, I’m a big fan of EDLP since I can always count on a low price.

Sears Through the Years

Thinking back to the video that we watched about Sears in class, I recall several things mentioned. Sears began in 1886 as Sears Roebuck. They originally sold products to farmers through their magazine. Since then they began to emphasize several things. One thing is to treat their customers fairly at all times. A second emphasis is customer service. Third is to remember that the Sears culture is family. Fourth is to continually build relationships with new and existing customers. Finally, they stress remembering that they are usually serving families, and want to continue to do so.

Today they have 860 stores and continue to drive profitable growth. They are customer-centric, and are currently looking for new growth opportunities. Recently Sears has been sold-out, and the company is in different hands now. I wonder how successful they actually are though… In Holland Sears moved from their large space in the Westshore Mall, to a small individual building near the mall. I’m not sure why Sears did this. It was either because of the change in ownership, or because the mall is becoming a ghost town. Either way, Sears doesn’t look like much of anything in Holland. It is smaller than most of the buildings surrounding it, and looks like the oddball. I haven’t bothered to go inside it because I can get everything I need at the other stores. At least when it was in the mall I would casually walk through it sometimes to check out their stuff. Now that I have to go to a separate building I’m not interested in bothering.

Sears is going to need to do something different to get my attention. Possibly I will become more interested in this company when I become older since I do like the Craftsman tools. My perception of Craftsman tools is that they are a good value (quality is good for the price.) In the meantime, I’ll stick with the bigger stores that I already go to. Hopefully Sears can stay afloat in the meantime…

Moving on to Bigger and Better...

The mall in Holland is facing difficulties like the grocery stores in the area. Originally built in the late ‘80s, the Westshore Mall was a huge success. It was built in an area where there was nothing but cornfields previously, alongside US-31 which leads north towards Grand Haven. I was young, but remember this mall being built since it was such a major part of Holland. Growing up I remember begging my mom to take me to the Westshore Mall on Saturdays so that I could walk around and be amazed by the people and busy stores. I played in the arcade Aladdin’s Castle with my friends. I played laser tag at the small arena called Laser Storm. Even in middle school to high school, kids my age hung out at the mall, only to have their parents pick them up later on. Kids would go on “dates” with their young boyfriends and girlfriends in big groups and walk around the mall and eat fries at County Fair Fries.

Then one day, there was news of a new mall being built in Grandville. “What’s Grandville?” many of us asked, wondering why anyone would want a mall in a place like that. Once the mall was built, word didn’t take long to spread. “Go to Grandville, the RiverTown Crossings mall is AWESOME!” and they were right… This new mall became the place to go for us high school students. We found shops that we had only heard about before, and some we never had. The mall was huge, and exciting. This was so wonderful, why would anyone want to shop in Holland anymore? This mall is well-worth the drive!

So, sadly began the demise of the Westshore Mall. Apparently everyone began to think similar thoughts as me when they discovered the RiverTown Crossings mall. It was closer than the Grand Rapids malls, and better. Slowly but surely, stores began closing in the Westshore Mall; and the parking lot became less and less filled. Soon, there wasn’t anyone left besides the older mall-walkers in the mornings. The mall’s anchor stores stayed for the most part, but the little ones really struggled. Sears moved out of their large space, and into a tiny little building near the mall. Chucky Cheese moved in, making the little kids happy and driving away any teenagers that were left.

So now the Westshore Mall has to start making some decisions. I believe that they had trouble paying their bills, and were sold to another company that wanted to try to revive the mall. Since then their never-updated website is mediocre. It now has mall events posted, and has an updated store directory and phone numbers. They are working to have events that coordinate with the season. For example they now have Santa coming in for children to visit, and other events posted.

Will these ideas create new life for the Westshore Mall or is it on a downward spiral? It’s hard to say, but we do know that the situation is not looking good.

The Days of the Traditional Grocery Store Are Over

When Meijer presented their challenges there was no mention of the Spartan Stores such as Family Fare, and no mention of D&W as getting in the way of their progress. This is a little sad for me, because I worked at one of the newer Family Fare stores in Holland for 6 ½ years. I noticed a lot of changes to Family Fare while I was there. It was sold out to Spartan Stores, and expected to grow significantly. However, that didn’t really happen. In many ways the store slowed down, and employees hours were cut. This resulted in many long-term employees becoming frustrated with their job and leaving.

In Holland, our Wal-Mart was converted into a supercenter, Meijer added another store on the north side of town and expanded their older store, and Target built a new and bigger store. However, D&W upgraded to a newer store several years back, and today is struggling to keep customers in that big store. There was a new Family Fare built in the Zeeland area not long ago that was expected to really get a lot of business, but now the employees sit around waiting for customers. In Holland there are 3 stores, and none of them get the business that they used to. The store that I worked at on Washington Ave. is the newest and biggest of them all, but still doesn’t get many customers compared to a few years ago. The other two Family Fares do very poorly from what I understand. They have remodeled one of the stores, and now have added Family Fare gas stations next to some of them. They expect this to help business, but we’ll see.

I think that the problem is people don’t want to pay the higher prices of Family Fare or D&W, when they can go to Target, Meijer, or Wal-Mart and make one trip to get everything they need and save money in the process. I don’t really know how traditional grocery stores can get themselves out of this mess, because I can’t imagine that things will get better for them. They’re too small to be competitive on price like Wal-Mart is. The only advantage that some of them have is their location. For example, the store that I worked at is the only big store in the area. People come from Saugatuck/Douglas, Hamilton area, and the south side of Holland to this store because it is close for them.

Family Fare and D&W of course are very focused on customer service now. Possibly their new idea of the gas stations next to the stores will be a success for them. I really hope that it is because I was part of this company for such a long time.

Meijer Today

While I couldn’t make it to the Loosemore Auditorium to hear the Meijer speaker, I still found it interesting to hear the summary in class. Meijer is a $10 billion dollar a year business, and they consider themselves a small business in the industry that they are in. This is crazy to me, because that sounds like a very large business, but I suppose it’s who you compare yourself to. The speaker used the examples of the elephant and target as their competition.

Meijer finds it very important to have good vendor/supplier relationships. They have found that today’s customers are less impressed with the big promotions of high/low pricing, and are more interested in EDLP (everyday low pricing).

Some goals that Meijer has are the following:
-Meijer tries to create value, and focuses attention on their signage in their stores.
-They also want to consistently improve customer service at their stores. They say that training their employees correctly is key to making this happen.
-Meijer also feels like they need to become a destination for shoppers. In fact, they want each department to be a destination for that particular specialty.
-They also want to expand into new markets. They are currently looking at the Chicago area, and they feel that they could expand from 35 to 300 stores in that area. Meijer wants to experience a 6% growth rate each year, which would amount to 400 stores.

Some challenges that Meijer is experiencing are the following:
-Updating their older stores.
-They don’t want to have a “cookie cutter” feel to their stores, however they want the stores to be similar so that customers can easily find the items that they want.

Martin + Osa = Success?

Adding to the discussion several weeks ago about American Eagle, I have some new thoughts. In the Grand Rapids Press today I found a small little blurb titled “Eagle Spreads Wings.” This article tells about how American Eagle Outfitters Inc. is planning a chain of stores to market to 25 to 40 year-olds. The new chain is supposed to be named Martin + Osa, named after a Kansas couple who were photographers in the early 20th century. The stores will feature casual clothing, denim, and sportswear.

This may be a good idea for American Eagle, who also has some Bluenotes stores as well. They want to expand their market with this new line of clothing stores. American Eagle clothing was mostly marketed to the high school and college-aged youth. Their advertising, workers, and models all make this apparent. But what happens when this age grows up? Most likely they will completely adjust their clothing styles to more professional clothing for work. However, they will probably still want comfortable clothing for after work, weekends, and for camping/vacations. This is where the new Martin + Osa clothing comes into play.

While I don’t really care for the name, I do think that it can work positively for AE. American Eagle has developed a name for having quality clothing that is comfortable, stylish, and moderately priced. Once people find out that Martin + Osa is an AE brand, I think that they will be attracted to it. No matter how professional a person becomes, they will still want their casual and comfortable clothing for after work. If Martin + Osa can truly market themselves to the target market that they say, they will become successful.

Franchising Rubio's

The other day in class we watched a video about the popular Mexican fast-food restaurant chain called Rubio’s. Rubio’s has been around for 18 years in Southern California, marketing specifically to the youth. Today they have 128 restaurants, and have recently become a franchise. Their restaurants really promote product turnover. They frequently look at their cost of inventory and take that into consideration. They also emphasize fresh products, rather than using leftovers.

I think that Rubio’s idea of a franchise for expansion is smart. Franchising is an excellent way for a retailer to expand beyond their normal trade area, or budget. One person or group of people can only do so much, but when they start franchising they can really expand their market quickly. For example, McDonald’s would NEVER have made it as far as they did without franchising. But since they chose to do that there are over 30,000 McDonald’s all over the world!

I had never heard of Rubio’s before I watched this video, but now I’m kind of excited about it. We may see a Rubio’s in the western Michigan area before we know it, and we’ll have the power of franchising to thank for it. I love Mexican food, and I’ll be one of the first ones to visit a Rubio’s if I hear of them coming to the area.

Just Can't Contain the SAS

In class today we watch two videos about companies that really stood out in my mind. The first company is The Container Store, and the second is SAS.

The Container Store is a unique employer. They take a look at the history of the different views of productivity/motivation and blend them together and customize them for an optimal working experience. Included in this list is Maslow’s Hierarchy of Needs.

At the Container Store communication is an important part of motivation. They have a very humanistic approach, which is greatly treasured by the employees. They understand that employees are an asset to the company, and pay them 50-100% more than their competition does because of that reason. They train all of their employees a little in every position so that they all have a basic understanding of each department. This results in employees who feel much happier and much more motivated about their job. They take jobs that would generally bring low morale and poor quality employees, and convert them into prestigious jobs.

The second company is called SAS. It began in 1976, and today is the largest privately held software company around. At SAS they emphasize quality rather than quantity from their employees.

They have full health care coverage, onsite daycare, and onsite health facility for their employees and their families to utilize. They, like The Container Store, also greatly value their employees and consider them assets. They have a very small turnover rate, and also have a great crew of employees. They will spend the time to make sure that they hire a quality employee, and not just someone to fill in. They expect that if their employees are satisfied, then they will stay at the company for a long time.

I think that these programs are working great for these companies. It pays off for the employer and employees. Why can’t more employers look to these companies as examples?

Genuine Customer Service

Today I stopped at Best Buy in Holland, and I was impressed once again. I have consistently had good experiences there with customer service. To start, a man welcomes me every time that I walk thru the door. Then, as I walk around looking lost, employees ask if they can help me. They lead me to the DVD players, and a man gives me his personal advice about my current broken DVD player- without pressuring me to buy a new one.

After I talked to that man for a while, I walked over to the software department. I was interested in buying a quality, easy-to-use program for video editing. I didn’t know which one to choose, so I talked to another employee. While that employee didn’t know the best program to use, she referred me to a Geek Squad employee. That man spent some time with me, discussing the positives and negatives of each program. Finally he gave me his recommendation, and I agreed with his decision. Later at the checkout, he gave me advice on how to complete the rebate.

Customer service really makes a difference for me. I know that I can go to a place like Best Buy and get quality advice on subjects that I don’t know much about. I trust their advice, and best of all they don’t pressure me to buy since they are non-commissioned. They help me find answers to my problems, which is much more valuable than trying to convince me to buy something that I don’t want.

Places like ABC Warehouse should consider being non-commissioned as well. If they could lower the pressure that they put on people, and put their efforts into quality advice then people might be more willing to shop there. I know plenty of people who wouldn’t even consider going there because of the high-pressure salespeople. I know that they are this way so I don’t ever let them talk me into anything, but I talk them down to a low price instead. It’s sad that the only good thing that I can think about ABC Warehouse are the low prices, but maybe they can shift their image by concentrating more on customer service like their competitors.