There’s been plenty of bad news about the economy and dire predictions of what all this means for retailing in recent months. Hopefully, these may be some of the toughest times many will ever face. Sooner or later things will turn around, and the retail market, with the economy, swing back the other way.
That’s not to make light of the state we’re in; rather to remind that all of this is cyclical. We would have no gauge of good times had we not experienced the other extreme. Of course the challenge for many retailers in such an environment — especially the smaller independents — is mere survival: mounting those strategic measures which will carry you over this hump, and position you to share in the better days inevitably ahead.
Who knows, who can offer better advice than those retailers with proven staying power? Companies which have been around long enough to weather successive storms, fine tuning and reinventing themselves along the way all have a story to tell. For this column I thought it might a good time to speak with proprietors of a couple of family owned stores and see what they’ve learned, what insights they can draw from company history or personal experience, to shine a light on the path ahead.
Collectively, each cited their status as an independent as a compelling advantage. Their size gives them agility not always available to larger chains. This allows them to respond to trends as they emerge, to micro-manage all aspects of their business and take appropriate action when and as needed.
Another perceived advantage is their frontline contact with consumers, at the point of sale. This empowers them with a focused understanding of how their buying public is reacting to the economic challenges of the day, their concerns, what they want or don’t want from imaging right now. That knowledge serves up guiding principles on how to run their business, where to put their emphasis.
One thing they would like to see if more of a “willing partner” relationship with some vendors. In today’s environment, especially, a complaint repeatedly heard about cameras is there seems to be too much of the new simply because it is new. Wary of being stuck with ”old” merchandise when the next wave of new models appears, some are embracing an even more austere approach to inventory. They will be much more selective about the depth and breadth of what they carry until the economy lifts. Such a strategy has implications far up the supply chain, and manufacturers will likely be grappling with this reality until consumer confidence returns to “normal levels.”
But every store is different, and no single plan addresses the needs or concerns of all. Longevity itself provides the proof and assurance that proactive retailers can and will survive, no matter what the economic climate
The Camera Shop in Bryn Mawr, PA has been serving the photography needs of Philadelphia area residents since the 1920. Current owners Michelle and Kathy Bogosian are the third generation at the helm of this family-owned business.
“Because we’re in a affluent area, I haven’t been through times like this the way some retailers have in the years I’ve run the business,” says Kathy Bogosian. This economic crisis has intruded on that sense of immunity, taking its toll on the employment prospects many white collar professionals and managers who live in the area.
“Things have definitely slowed, and we’re trying to stay fairly lean,” she says. “We have a large single store, and I think when you have multiple outlets you’re more exposed when there’s a downtown like this.”
She’s taking steps to minimize the store’s exposure. “We want to go into 2009 with low inventory, and keep it that way,” she says. “We’re going to be watching our inventory levels very closely, and also watching other expenses, cutting wherever we can.”
Bogosian considers a knowledgeable staff one of her best assets, and employee retention as a key to long-term viability. This could mean reapplying that asset if business slows further. The staff might find themselves busy painting the store in months ahead, the kind of project which would have been jobbed out in better times.
Heading into the holiday season, she had also made a strategic decision not to cut costs in other areas. “We’re aggressively advertising, and closely analyzing our advertising dollars and what’s giving us the best results,” she explained. Internet advertising could take some dollars from print, for example.
Competitive discounting seemed too much a risk: “We’re also not cutting prices on cameras, but giving a free case or a memory card with the camera,” so buyers could walk away with the sense they got a better deal.
In Atlanta, Wings Camera and Digital today is a much different business than it was when first launched in 1912. The store started as a downtown photo specialty store in the traditional sense, focused on the needs of amateur and professional photographers. The business is now in its third location, and focused on a much narrower niche of the market.
“We can order any new camera our customers want,” says manager Mike Morrison, now running the family-owned business started by his grandfather. “But we try to keep as little new inventory on hand as possible. The majority of our business is now in used film cameras and equipment.”
The store’s transition has been a response to changes in the market place, and the changing attitudes of equipment vendors. “The advent of the digital camera was the fall for a lot of the smaller stores,” observes Morrison. “A lot of manufactures seemed to have forgotten it was those smaller dealer who helped them build their business…. They make it hard on people, especially if they don’t offer price protection…You just can’t keep up when there’s new cameras available before you’re able to get rid of the old model.”
As an independent, Morrison deftly recast the business where he saw emerging opportunity. The store has always allowed trade-ins, and as his customers made the transition to digital the amount of trade-ins swelled. Consignment sales of film equipment became a bigger part of his business. Then, with the advent of eBay, he could take his local business nationally, both for sales and sourcing additional inventory.
“ We handle a wide variety of stuff, just film stuff, and now sell and ship to people all over the U.S. And there’s two markets for used film equipment,” he says. “There’s the photographers who still prefer to work with film in a darkroom, who want all that hands-on control over what they are doing. They continue to buy film cameras and all the lenses and accessories that they can no longer find everywhere. Then there’s the collectors market for all types of cameras. ”
Because of his willingness to push the business in a new directions, Wings Camera is a survivor. “Film photography is still real good for us,” he says. “We just evolved as the photo business has changed.”
David Sarber literally grew up in the photo store his parents bought in 1961. He’s run Sarber’s Cameras himself for 27 years, and has stores in Oakland and Berkley, CA. He’s steeped in the stores’ numbers, continually monitoring business performance against well established goals, making adjustments when and as needed.
“You’ve got to have some long term goals, but break that down into short term goals that will get you there, and concentrate on achieving those,” he says. “And you’ve got the throw some numbers out there so you know what you’re doing, what you need to do.’
For a photo dealer, he suggests 35 percent gross margin as a good target. “You must have a certain ratio to work with, because when you spend more than you’re making you can easily and quickly get into trouble…If you’re expecting a downturn, take the percentage you expect business will be off and make adjustments in your expenses, based on that.”
For instance, he’s cut back on advertising, and redirecting some of his budget for what he hopes will be more cost-effective Internet advertising. ”Variable expenses are the ones that are most manageable,” he says.
Watching the numbers can also highlight where to reduce fixed costs, as well. When Sarber audited production levels at the photofinishing labs in his stores last summer, he realized one could handle the workflow. He consolidated both labs into one, halved the photofinishing staff from six to three. “Some people may have felt inconvenienced by the longer wait time for their pictures, but the bottom line is staying profitable,” he says.
When times are tight as these, retailers may have unrecognized allies outside the business, he continues. “Some may think of their landlord as the enemy, but the fact is most landlords do not want that space back, they’d much rather have it occupied, ” he advises. That’s leverage which can be used in negotiations to spread the rental payments for slow periods out over several months when business improves.
Tough times often call for such creative measures. Stores with a history, and future, are driven by pro-active managers, motivated to succeed, whatever the economic climate. “Sometimes survival comes down to the things you can do day to day just to keep the business going,” he sums up.
“Get though this month, then worry about next month.”