Business Blog Roundup

The latest Carnival of Capitalists is online at Crossroad Dispatches. Always an interesting batch of posts about investing, the economy, management, and business in general. Check it out.

Self-Serve Retail: the trouble with Lowes and Home Depot

Huge home improvement retailers Lowes and Home Depot have hit a rough spot with investors and customers. Both had soft second quarter earnings and warn of slow sales. Their stocks are down about 15% for the year, and the housing market slowdown isn't the only cause.

Home Depot is famous for rotten customer service and Lowes isn't much better.

I went to Lowes last night to look for kitchen cabinets for my new house. You may not realize it, but cabinets are a big-ticket item. Decent ones start at about $150 a lineal foot. So I was about to spend some real money. The only problem was that there was nobody manning the large kitchen cabinets section of the store.

I pushed the "call an associate" button and an announcement was made over the loudspeaker asking for customer help at my location. An employee showed up to turn off the blinking call button, but he didn't work in that department so he went to find the right person. I waited ... and waited but nobody appeared. This is no isolated incident -- my sister had the same problem getting help when she bought kitchen cabinets at Lowes a few years ago.

I'm not one to beg a store to take my money, so I picked up some product literature and left. A cabinet shop closer to my home carries some of the same brands so I'll take my business to them, even if they do charge more.

How can Lowes (and Home Depot) fix this customer service problem? Simply admit to themselves that they aren't in the service business. Like all big-box retailers, their strength is stocking a large variety of inventory on the shelves. Customers search through piles of goods to find what they really want. These stores are self-serve all the way ... and shouldn't be afraid to admit it.

But in the kitchen cabinet department, the stores aren't set up to be self-service. They supposedly offer design service and you have to order the cabinets for later delivery. Come on now; who's kidding who? No big box retailer with its cadre of minimum-wage-slave employees is going to provide that level of service. It's beyond them.

My suggestion is to create a self-service kitchen cabinet department. Stock "blank" cabinet cases (without doors) in a variety of shapes and sizes. Let the customer choose from 10 to 20 styles of doors, which should also be in stock. Make it all cash-and-carry. No delays, no broken promises of "service". IKEA already sells kitchens this way -- Lowes and Home Depot should follow suit.

Formalized Services in Retail Stores

Retail stores have always given away advice along with selling products. Now some stores are turning helpful services into a profit center.

Medical services are leading this move into retail stores. Medical clinics are popping up in pharmacies across the nation, and thousands of new clinics are planned to open in stores over the next couple years. No appointment is necessary to get quick, cheap fixed-price treatment for minor illnesses. This is a wonderful development in a nation with runaway health care costs and where fewer and fewer people even have a family doctor. The convenience will obviously draw lots of customers into the stores. Wal-Mart is even testing clinics in some stores.

Are there other services that might be popular in a fixed-price convenient retail setting? How about "instant handy-man" services at the hardware store? The handy-man could have a small workshop for repairing or assembling stuff that people bring in. Or the handy-man could follow you home to install a ceiling fan or wire a new outlet "while you wait". Garden centers could offer the same for tree-planting. Computer repair clinics would be great too, but computers are designed to be disposable these days and a small part is often too expensive to justify repair. Apple could set itself apart by designing its computers for ease of repair and then offer the services while-you-wait in the Apple brand stores.

Similar services have always been a part of other businesses. Jewelry stores offer repairs and ear-piercing. Photo development kiosks were a big deal before the coming of digital cameras (it's interesting that they were located in drug stores and discount retailers, just like the new clinics). Home centers offer kitchen planning and installation services.

Repair and design services could be added to many retail businesses. You might offer the services already -- to make it a bigger part of your business you'll have to increase awareness. Set aside an area of your store for the service and give it prominent signage. Then include it in your advertising and watch your traffic grow.

Retail Location: Malls and Towns

Malls are scrambling to find new anchor tenants. Department stores are no longer an attraction for many shoppers, so malls are recruiting restaurants and big box discounters like Target to generate traffic. "New" downtowns are cited as the hot retail location.

Obviously the "location location location" for retail changes over time, so what's a smart retailer to do? Work toward making your business a destination in itself. That way you won't rely on other magnets to draw traffic. Build the very best inventory of products in your niche, update it constantly, and you'll be on your way.

Retail Store Success: Blinds.com

Jay Steinfeld has grown his business from a single bricks-and-mortar store to a thriving online retail store success story. Blinds.com generates $45 million in annual sales and is the 10th fastest growing ecommerce site. Steinfeld opened a drapery store with his wife in 1987, and the online store started in 1994 and has grown in sophistication and sales since then.

His ecommerce business grew enough to acquire a major competitor in 2001. Read more about this retailing success. There's still plenty of opportunity for the small business in online retail -- just make sure you stake out a niche, exactly as you would with a traditional store.

Selling Overcomes Fear

Seth Godin tells a short story about effective retail selling at a farmers market. He reminds us that good selling overcomes the buyer's fear -- in this case the fear of eggplant.

If you sell products that you're genuinely enthusiastic about, you can often pass that enthusiasm on to a shopper. It's not about giving a "hard sell" ... it's about retailing good stuff with passion. If you can't wholeheartedly endorse your products then it's time to upgrade your store's inventory.

Stock Photography for Ads

Okay, you accept my argument that professional photography is critical to marketing success for retailers and other businesses. But hiring a photographer to create custom photos is expensive and time-consuming. Is there another way? Yes. You can often use stock photos in your advertising.

Stock photography can be downloaded in an instant, and might be as cheap as $1. Yes, at online stock photo sites like IStockPhoto.com, you can license the use of pics for as little as a buck a piece for low-resolution shots. Those sites have thousands of photos to choose from.

Retailers can usually get product photos from the manufacturer, free of charge. You might get some good stuff that way, but it's surprising how often the manufacturer's photos are boring or just plain bad.

To get photography that really expresses your retail store's personality, you'll have to bite the bullet and hire a professional photographer to take custom shots. Until you're ready to take that step, use the finest stock photos that you can find.

The Marketing Power of Good Photography

Professional photography is worth a fortune to a retailer or other marketers. Consider the famous retail catalog and ecommerce website of the Pottery Barn. Would the products be as sought-after if the photography wasn't so good?



The Pottery Barn catalog and website are like a home design magazine -- full of decorating ideas that inspire the purchase of the products. The Quality of the photography is a huge part of their success with this concept.

Or consider the marketing power of these photos of a Royal Caribbean cruise from Boston.



With just 3 photos, you can see that these cruises from Boston are active, indulgent, and fun for the whole family. Maybe not the image you had of cruising? That's the marketing power of good photography.

Don't skimp on photography when you're marketing. A talented professional can make or break your promotional campaign.

That's why you use models instead of athletes in ads

The dismal showing of the American team at the World Cup is just the latest example of why you should use models in your ads instead of athletes. Athletes can embarass themselves with crappy play on the world stage. Imagine if you'd signed a U.S. soccer player to represent your company - and then the team only scores one goal in 3 games and is (mercifully) eliminated in the first round. Yikes! Total waste of money.

Models don't bring such risks. If they have a bad hair day you just throw out those photos try again. Nobody ever sees the mistakes. Pick one of the popular Internet models (or 2 or 3) to create a new "face" for your company. Let the athletes to represent your competition -- you'll be glad you did.

$1,400 a Day from a Simple Website

A month ago, I wrote about the opportunities for making money from sharing your knowledge on the Internet. I also pointed out that retailers can make money from websites without selling anything. But how much money can you make just by presenting what you know on a website?

Tim Carter makes more than $30,000 a month from his website. Tim is a syndicated newspaper columnist who writes about home improvement. He created AsktheBuilder.com in 1995 to share what he knows. In 2004 he learned about Google Adsense, an easy way to generate advertising revenue from a website. After just two years, his Adsense revenues now average an amazing $1,400 a day.

Do you think that Carter made $1,400 a day from his job as a newspaper columnist? Neither do I -- which indicates that publishing your own website can be significantly more profitable than writing for traditional media. You don't need a publisher to effectively get your word out -- you only need a website.

Take a good look at AsktheBuilder.com. It's certainly not fancy or technologically advanced. It's just useful information presented in a simple way. Retailers and service businesses are in a great position to create something similar. Tell the world what you know about your products. Give tips and examples of how your services are effectively used. Help people solve problems and answer their questions.

Cash in on what you know. It may be more lucrative than selling products and services.

Retail Store Success: Staples

Office supplies retailer Staples has become a retail success story with memorable marketing and an improved shopping experience. Their "easy button" is a wonderful iconic object that helps spread the company's message. I was tempted to buy one when I was recently in a Staples store. About a million have been sold for $5 a piece.

The easy button icon is also available on a downloadable toolbar for your internet browser -- it enables easy access to the Staples online store. The retailer backs up its marketing with redesigned stores and more training for employees.

4 Cheap Ways to Get Into Retail

You don't need an expensive store or thousands of dollars of inventory to become a retailer. Entrepreneur magazine has this article on 4 cheap ways to break into retail.

The 4 ways:
1. eBay - begin by selling unwanted stuff from around your house and then build your own niche
2. Amazon - sell your products alongside the ecommerce leader
3. Direct sales - demonstrations at home parties sell cookware, cleaning products, makeup and more
4. Kiosks - tiny stores right in the middle of the customer traffic at your local mall.

Hooters: an American success story

Hooters succeeds by catering to the tastes of men. For more than 20 years, the famous restaurants have provided girls, finger food, and beer for millions of happy customers. Like Wal-Mart, Hooters appeals to the common man (if not the common woman) with a simple strategy well carried out.

The original Hooters restaurant was opened in Clearwater, Florida by 6 partners. Beer, chicken wings, and girls (not necessarily in that order) proved to be a winning formula. The "delightfully tacky yet unrefined" business was born, and the Hooters Girls became a phenomenon.

According to Restaurants and Institutions trade magazine, Hooters is the 43rd largest restaurant chain in the nation. 2004 sales were $834 million from 388 outlets. You can read more about the company history in this article from Fortune.

SELLING HOOTERS

Hooters' promotions certainly aren't limited to the usual ads and a website. No, this is a business that uses every avenue to raise awareness. It has its own Hooters Magazine, featuring photos of the girls. There are local events at the restaurants, an Ultimate Bachelor Party Give-Away, and a Hooters MasterCard.

The Hooters International Swimsuit Pageant is a natural promotion for this company. It's been held every year since 1997. Winners of local contests across the nation feed into the international finale in Las Vegas. The events are even used to recruit new Hooters Girls to work at the restaurants.

Hooters' sexy promotional vehicles sell the business, not the models. Only the girls' first names are used in the magazine and on the website. The message is that it's not about a specific woman -- the Hooters Girls are generic examples of what you can see at the business.

Hooters does sports too. It's the national title sponsor of the NGA Hooters Pro Golf Tour. Alumni of the successful development tour include successful golfers Lee Janzen, John Daly, Jim Furyk, Tom Lehman, David Toms, and Scott McCarron. Media coverage of the tour includes local television, tournament scores in USA Today and other major newspapers, and in golf magazines.

In auto racing there's the Hooters Pro Cup Series (great name). The series consists of 30 stock car races on paved oval tracks.

GROWING HOOTERS

Hooters Air stopped flying in March, but the company continues to explore opportunities outside the restaurant business. A much more sensible fit is the new Hooters Casino in Las Vegas, which opened February 2, 2006. The 696-room casino hotel with nine restaurants is a complete renovation of the former San Remo Casino. The company hopes to draw from 61 million annual loyal customers at its locations around the world. Almost every inch of the casino has been rebranded.

The Hooters Casino is sure to appeal to blue collar men who aren't comfortable in the expensive, fancy hotels and casinos that have sprouted in Las Vegas. They're the same guys that have always liked Hooters.

DSL Customer Service

Verizon and the other phone companies catch a lot of flack for their customer service, but I recently had an excellent experience with Verizon DSL. My laptop computer self-destructed and I bought a new desktop to replace it. The new machine didn't have the correct settings to use my DSL modem, and I hadn't saved the documentation from when I'd installed it on my laptop.

So I called Verizon DSL's customer service. The tech person quickly and easily led me through the setup process. It took maybe 5 minutes. The customer service guy was polite and seemed very knowledgeable (or was working from a sophisticated script).

That's the way customer service should be, whether it's in person or over the phone. Quick, simple and personable. Kudos to Verizon DSL.

How retailers can make money from websites without selling anything

Last week I wrote about my Internet home business and how I make money from website publishing. Can retailers take advantage of the web in the same way? Yes they can.

Retailers are in a great position to make money from websites without selling anything. All you have to do is share your expertise about your products on your website. You know what questions your customers ask. Answer them online for all to see. Write product reviews. Give tips on how to use that gadget. It should come naturally for a retailer and will be very useful for people on the web.

Share your product knowledge and you'll build your reputation as an expert. That should help your retail sales. But you will also make money from the website if you put ads from the Google Adsense program on your site. Every click on an ad is money for you, and without selling any inventory!

Give this type of Internet business a try. After 3 months or so you should begin to see results. If you're not inclined to create a website yourself, it would be a good project for your teenage kid or one of your employees. Let them keep the website profits and you'll still benefit from the publicity for your store.

Internet Home Business & Life

A year ago I started a little home-based business in my spare time. It's a good thing I did -- my regular job was eliminated a few months later. Instead of finding another job, I decided to commit my time and energy to my fledgling business, which was showing great promise. It's the best decision I've ever made.

Now my little website-publishing business makes enough money to cover all my expenses, and revenues are growing quickly. I'll never work for anyone else ever again.

The business began with a travel guide to cruises from Norfolk, offering information about the ships, their sailing schedule, the cruise terminal, and the port city. Now I have several websites about a variety of topics. A work at home Internet business can be about anything! Are you an expert at something? Do you have a hobby? Turn your interest into a website, share your knowledge with the world, and start making money.

I make money from advertisements on the sites, mostly from Google's excellent Adsense program. The low-overhead of an Internet home business means that almost all my revenues are profit (the main expense is website hosting, which is cheap). My business is still in the early stages and growing fast. There's really no limit to how much money I could eventually make, given the Web's ability to reach people around the world and the multitude of possible subjects for sites.

I'm making enough to live on, but I'm truly rich in time. My business has given me the freedom to tackle a project that I've wanted to do for years -- build my own home. That would be nearly impossible to do while holding down a 9-to-5 job, but it's easy to work on the house during the day and tend to my Internet home business at night. Yes, I've created a website about the homebuilding process; I can make some money from what I learn.

I've gained control of my life with an Internet home business, and millions of other people around the world have too. From the Ebay sellers to businesses that are a lot more sophisticated than mine, we're using the web revolution to power our dreams of success.

Franchises

Franchises are a short-cut to small business success. The franchise buyer spends money upfront to buy into a successful business and reduce the risk of failure. The heart of this business model is the franchise system, which spells out every little detail of how to successfully run the business.

A good franchise is based on concepts proven in one or more prototypes. There the system has been tried and refined to a high level. It's the proving ground that demonstrates the value of that particular franchise business. It's a model of a business that works. That's what you're paying for if you buy a franchise.

What a typical franchise won't do is give you the freedom to run the business your way. All the decisions are made for you. These are turn-key business operations that must be run according to all the details spelled out in the franchise manual.

The Great Harvest Bread Company is a "freedom franchise" that allows franchise owners to create their stores as they please. But they aren't on their own. They have the support of the company and all the other franchises. It's an interesting business model that you might want to explore.

The Fair Tax

Once a year we're all reminded how crazy our system of taxation is. There is an alternative: support the FairTax. The FairTax is a national retail sales tax that would replace federal income and payroll taxes (including personal, gift, estate, capital gains, alternative minimum, Social Security/Medicare, self-employment, and corporate taxes).

The FairTax proposal features dollar-for-dollar revenue replacement, and a rebate to ensure that no American pays such federal taxes up to the poverty level. The FairTax allows Americans to keep 100% of their paychecks, eliminates compliance costs hidden in the retail cost of goods and services, and fully funds the federal government while fulfilling the promise of Social Security and Medicare.

Importantly, the FairTax does not burden U.S. exports the way the current income tax system does. It removes the cost of corporate taxes and compliance costs from the cost of U.S. exports, putting U.S. exports on a level playing field with foreign competitors. Lower prices will increase demand for U.S. exports, and increase job creation in U.S. manufacturing sectors. Imports are subject to the same FairTax rate as domestically produced goods. Not only does the FairTax put U.S. products sold here on the same tax footing as foreign imports, but the dramatic lowering of compliance costs in comparison to other countries' value-added taxes also gives U.S. products a definitive pricing advantage which foreign tax systems cannot match.

Our wasteful and corrupt Federal government likes the current tax mess because it hides constant tax increases in many places. The current system also siphons billions of dollars from citizens and companies to tax preparation services, accountants and tax lawyers. The FairTax can end the madness.

Customer Loyalty Rewards Programs

Customer loyalty rewards programs are a fairly common way for retailers to entice repeat business. A small bookstore near me runs a "bakers dozen" program -- if you buy 12 books, a 13th book is free. They keep the records right there in the store so you don't have to remember to bring your punch card (a nice touch).

The kings of customer loyalty programs are casinos. The giant Harrah's casino chain has a "Total Rewards" program that offers free casino rooms, meals and entertainment to members. We're not heavy gamblers, but twice they've given us free 2-night hotel stays at one of their Atlantic City casinos. We earn more "comps" toward meals and gifts while in the casino.

Probably the only business that can afford to offer such big incentives to repeat customers is a casino. Your little retail store doesn't have to go so far -- emulate the bookstore and come up with a simple way to get your best customers to come back more often.

The Best of the Business Blogs

This week's Carnival of Capitalists presents good business blog posts from the last seven days. From "changing the rules in your market" to "5 lessons from a marketing guru" there's lots of interesting posts to read. Enjoy.

The Power of Credit

Credit has the power to drive your business and improve society. It enables companies to build a loyal relationship with customers, and enables people to improve their lives now.

I'm building a small house and over the next several weeks I'll spend tens of thousands of dollars on building materials, fixtures, tools and more. Building supply companies have long recognized that it is worth extending credit to contractors and customers working on large projects because the volume of purchases is so large. My local building supply company is no exception -- they've allowed me to open an account and I'll be billed once a month for purchases. I'll also get the contractor discount. That store is within a mile of my construction site, but there are other stores around so it's in their interest to treat me right.

In The Fortune at the Bottom of the Pyramid, C.K. Prahalad wrote about CEMEX and its innovations in helping the poor build their own housing. CEMEX is the largest manufacturer and seller of cement in Mexico. The do-it-yourself construction market accounts for about 40% of cement consumption in Mexico, and CEMEX wanted more of those sales. Their "Patrimonio Hoy" (savings/property today) program offers access to credit not otherwise available to the poor by providing materials in advance. The program serves families making $5 to $15 a day.

Poor families had a difficult time saving for home construction because the little money they made would be spent on consumables. CEMEX targeted women for their new program because they manage the family expenditures and are the potential drivers of savings in Mexico.

Savings groups are formed and commit to pay CEMEX a fixed weekly payment for at least 70 weeks. Technical advisors help group members design their home and make a materials list. After 5 weeks, Patrimonio Hoy makes the first delivery of building material. The materials have a value equal to 10 weeks of payments, so credit has been extended. Later in the program, deliveries are made after only 2 weeks of payment.

CEMEX helps the Mexican society and economy by providing technical assistance and quality building materials. The credit enables the poor to build a typical room in 1.5 years instead of 4 years. After 10 years the program had 36,000 customers and over $10 million in credit.

Credit is both a powerful small business marketing tool and a way to improve society. It is so widely available in the U.S. that we might overlook its potential in the third world.