Michael: Now I was reading in some of my research that the Dollar Store industry is one of the largest and fastest growing segments of the retail industry?
Marc: Well Retail Fords which is a company out of Columbus, Ohio that does predictions, says that there’s going to be another 9,000 more Dollar Stores in the US by the year 2009. When you think about that, 9,000 dollars.
Michael: Has the concept taken off internationally?
Marc: Yes. Interesting you say that, I was the key note speaker at the Dollar Store Expo last month and I was approached by this company India, they had just started in India. They had 36 stores and they were going to turn their chain into the National Dollar Store in India. Well it is happening all over the world.
Michael: What do you think makes this concept work so well, The Dollar Store, 99 cent Store?
Marc: Several different reasons. Number one it’s easy to understand, it’s very easy for the customer. When I was running Everything’s a Dollar store out of Milwaukee we had 420 of them, whenever a customer walked in and they said, “How much is it?” We yelled, “Everything’s a dollar!” So when you think about it from a customer’s standpoint they don’t have to take a look at everything, “I wonder does this got real value or not?” They look at everything on the shelf and they say, “Well it’s a buck, I know it because that’s what everything sells for.” So first of all it’s very easy for the customer to under stand. Second of al the reason that you’ve got this rush of people going into the Dollar Store business is that the average $250 dollars a square a foot, and the return on investment is 55%, which is very high in the retail industry. So it’s a way to very quickly turn over a lot of money. The third reason that people into the Dollar Store business is it’s very easy to play off the chain stores traffic. In other words you’ve got major grocery stores, you’ve got major drug stores, you got major discount stores doing heavy advertising to drive people into their shopping center. So all you need to do is locate near one of those kinds of stores and you can go ahead and start to really play off the traffic of these stores without having to go out and spend a lot of money in advertising because you’ve got different products and you got a better price point. Another reason that these Dollar Stores have really started to take off is the quality of imported goods has increased dramatically. I mean when this whole concept started back in the late 80’s it was just putting a bunch of product together that was worth a dollar. What happens is the merchants in this industry realize is if they’re going to have any kind of sustainability in a kind of concept that they’ve got to show real value. So what has evolved over the last 15 years is that the quality of goods has improved dramatically so that when you buy something for a buck it’s showing much more value. So when these people are over seas building product and finding product, its better quality then it was 15 years ago.
Michael: That’s probably the first impression people get is what can you get for a dollar? And I think a lot of people have had experience, they go to the dollar store and the products are just imported from China and stuff, it’s got that reputation of cheap un-quality item. So how have you seen the industry increase the quality? And, has it increased the price on the item?
Marc: Well what’s happened is because there’s more and more volume coming out of this industry, they’re able to get the prices down on a lot of the products they’re having made. Another reason is private label brands are starting to pop up in different stores, and obviously private label brands create customer loyalty if they’re good quality, and for the store it helps create higher margins so that you make more money on that. So a lot of focus has been done in the Dollar Store industry to create a brand that is recognizable in their customer so they come back, that has more value. For instance in shampoo it may have another 12 ounces then the regular Dollar Store product, so it’ll create the value of the private label. The interesting thing, and this is just a new phenomena over the last few years, is that national brands are now supplying this new channel of distribution. What happened is initially when the dollar store business started, national brands said, “Oh that’s just another concept, it’ll die.” But, because of the volume that is coming through this new channel distribution form, they can’t ignore it. So what’s happening is when you walk now into the better quality Dollar Stores they have national brands on the shelf. Now it may be a little bit different then what’s sitting in Wal-Mart or Target, maybe a different ounce size, maybe a different package size and so forth, but the national brands are realizing, “Yea this is a billions of dollar industry, I’m not going to give up on this, I need to participate too.” So you now have your main stream vendors starting to participate in the Dollar Store business.
Michael: What kind of volume can the Dollar Store industry in the United States produce? I mean how much volume is the Dollar industry producing currently?
Marc: Well each store if it’s run correctly can do a million dollars. So you take the amount of stores that are out there and it’s probably a 30 to 40 billion dollar industry, currently.
Michael: What’s the success rate on a retail Dollar Store? Of course we know that the business is as good as the owner and its run. What have you seen through your experience? How large or small of a salary rate is there for someone who attempts this, if they follow directions?
Marc: We are seeing from our standpoint, and our standpoint is Validate.com where we supply a little over 30,000 different products to independent businesses who are competing against chain stores. We are seeing a lower failure rate in the Dollar Store business then we are in the apparel business and the drug store business and the gift shop business because I think the formula is so simple to follow in that you know what you’re going to sell the goods for. You know you’re going to sell them for a dollar for it’s a true just One Dollar Store. You know what you have to pay for the goods and so the formula is very easy to understand. So that’s why there’s a smaller failure rate plus the traffic is much higher in these stores because if you have the right assortment it creates a weekly business repeat.
Michael: What’s the nature of the Dollar Store shopper? They come in consistently for toothpaste of mouthwash, or the consumable goods. Has the industry established what the average purchase for a shopper in a Dollar retail store is?
Marc: It used to be seven dollars. In other words you would come into a Dollar Store and you’d buy seven items, again very simple to understand. Over the last couple of years it’s inched it’s way up to around 12 dollars. So all the sudden now even if you have the same amount of traffic you have an increase in your average sale. So they’re coming in for 12 dollars worth of goods versus seven dollars, the reason being that the dollar store industry and the owners obviously in that industry, realize that if they carry more and more kind of basic items, basic items would be health and beauty care, would be cleaning supplies. A lot of them are starting to put in the refrigerators so they carry milk, so people come buy every week and so forth. But, if you have that right assortment you can get that average sale up. Interesting thing about Dollar Stores in general is where to locate them. Initially most Dollar Stores were located in low income neighborhoods because they figured, “Well I’ve got the price and so forth and we’ll get the low income coming in.” But, what’s happened is because the Dollar Store business has turned into more of a treasure hunt for middle and upper income people that more and more Dollar Stores are locating themselves at the boarder, or in middle class neighborhoods. Reason being is that if you’re located in low end neighborhoods, middle class doesn’t come in to buy, but if they’re located in middle class neighborhoods, you have the middle class neighbors who are very comfortable buying there, but the low incomes to the middle class to buy.
Michael: Have you seen some big jumps in volume compared to, lower class compared to middle class?
Marc: Absolutely. Because what happens is the lower class buys at the Dollar Store because of their needs, they need the milk for the week, they need the shampoo, they have to have that kind of stuff, and they can survive buying it for a dollar. Where as the middle class buys some for needs, but most of it buys for wants. So that they come in, “Ah it’s Christmas time we need some Christmas things. Halloween, isn’t that a cute gift? Let’s pass it out to the neighbors.” So it’s a combination of people that need product and people that want product, and that’s why the more successful Dollar Stores are located in the middle class or in the middle class right on the edge of where low income areas are.
Michael: Well I found your book on Amazon called The Secrets of Retailing, Or, How to Beat Wal-Mart, and that brings me up to a point, Wal-Marts are moving into communities and they’re really hurting the small retail business. Tell me why did you write this book? Can you really show me how to compete with Wal-Mart if I’m a small retailer, even though I’m not a Dollar Store?
Marc: Those are lots of questions, so let me try to answer one of them at a time. The reason that I wrote the book is at DollarDays.com we were getting 300 phone calls a month by people who said, “I want to go into the retail business, but I’m not really sure how to do it, can you help me?” So we spent a lot of time on trying to explain how to go into business. So I said, “I’ll write a book.” So I set down and I started writing a book, it’s a step by step book on really how to go into business, but as I was writing it it really became apparent to me that the book is written for people already in business. It was gut check to make sure that you’ve got all your I’s dotted and your T’s crossed, that you’re in the right location, you’re finding the right vendors, you’re doing the right marketing to drive customers and traffic and repeat business into your stores. So that’s really what the book turned out to be, a book for people already in business to make sure that they haven’t forgotten a lot of the things that we all think about when we start, but we forget after time.
Michael: Shall we talk about a couple things before we move on to the next, about retailing?
Michael: Okay let me ask you this, isn’t it too late to open up a retail store? I mean you’ve got internet, you’ve got Wal-Mart there, you’ve got Target, are people going to small retail stores? Or are the large retailers like Target and Wal-Mart making it very difficult for retailers to compete?
Marc: Let me answer that by going back to a survey we did on DollarDays.com this spring, we asked our customers, “Did you go into business before or after a chain store opened in your area?” Interestingly enough 34% said before and 66% said after. So a third were in business, and I think our customers are kind of the idea of what’s going on in America.
Michael: Now are your customers just Dollar Stores or all kinds of retailers?
Marc: Our customers are all kinds of retailers. Our number one kind of customer are apparel stores, we sell into men’s, women’s and kid’s apparel stores. Our number two customer base are gift shops, and then it’s drug stores, convenience stores, and so forth. About 20% of our business is involved with the Dollar Store business, but everything else is based on any kind of retail store there is America. So we do a lot of Pet Shops and so forth. I think our customer base is pretty relevant as to what’s going on in America today. So a third of our customers were in business before the chain store came into their town, and two thirds went into business afterwards, so that kinda says, “Okay well going into business against chain stores is not dying, it seems to be picking up.” So then we asked them, “If you were open after the big bucks came into your community, what made you do that? What made you confident to say “I’m ready to open my store”?” Fifty percent said that they did this because they had unique items. What happens is that when a chain store opens up in your area it creates all kinds of different nitches, so they can’t carry everything. They are mass production, they have to have certain things, so it opens up for unique items. So 50% said that they opened up because they felt they could carry some very unique items. 27% said they could compete on price. You always think well a chain store is going to kill you on price, so 27% designed to beat these guys on price. Interestingly enough only 14% said that they can compete on customer service, and you always think of those small stores is oh wow they’re going to beat them on customer service, but that wasn’t the intent when these opened up their businesses. 14% said that, “Customer service, we’re going to do a much better job then the big guy.” Then we asked them the question, “If you were open before the retail giant came to town, has your business suffered?” 32% said yes, a third of them said, “Yeah I’m still in business but it suffered a little bit.” 25% said no, and 34% said that it stayed the same, so that kind of gives you an idea of what’s going on with the people already in business. Then we asked the question, “If you were open before, did you have to change your approach to doing business?” 34%, a third of them said, “Yes they changed their merchandise.” So the chain stores came in they had their assortment and then you went back out and said, “Well okay here’s where I’m going to change my merchandise assortment.” 23% said that they increased their marketing spend, that they went out there and they went out and told more people about who they are. But, 41% said they stayed the same, they didn’t do anything, “I’ve got my concept, this is what I believe in, and I’m going to take on the big guy.” So then we asked them, “Why do people shop in your stores versus the retail giants?” 16% said selection, 41% said price. “They come to because I’m cheaper then the big guy.” 34% said, “They come to me because my customer service is much better.” Other nine percent said that it was convenient. So then we said to them, “Who do you consider your competition?” These are independent stores located in the same towns that chain stores are. 52% said chain stores, but interestingly enough 48% said, “Other small businesses, that’s who I compete against.” So to answer your question in a long way is we and I, and DollarDays.com feel that this is absolutely the best time to go into business if you’re an entrepreneur, for a couple of reasons, one is the technology of today is so much more efficient then it was ten years ago and so much cheaper. Ten years ago the chain stores had all the sophisticated technology, they could tell you who was coming in and who was buying and where the inventory and so forth. Now with the price of technology coming down independent stores can have that same type of technology, but on a smaller scale. They know who their customers are, they know what the wants are, they know what the sales are, they know how to control their inventory. So you’ve got this whole technology thing that makes it competitive for independents to go against chain stores. But, the other thing I think you touched upon a little earlier is the internet. The internet now has leveled the playing field so that you as an independent business sitting in a small town, if you’ve got the right product and the right nitch and the right goods, you can sell it on the internet and because the playing field is level, you can sell now not only across town, across the state, but across the world. The internet has opened up for independent businesses a whole new channel of distribution that if they got the product at the right price and the right time, that they can really do a lot of business. So that’s why this is absolutely the best time to go into business.
Michael: Great. You also talk about in chapter two “The Psychology of Buying, or Why You Want, What You Want, When You Want.” What is this about? What is the psychology of buying and what have you learned through your experience in your work with retail about that?
Marc: Well it’s very interesting and this is a generalization so, it was just reinforced on an interview I heard the other week about men versus women and the psychology of buying is that the two distinct customers, again I’m not offending men or women, this is just a generalization, but as you’re approaching a women buyer versus the male buyer you’re going to have a whole different mind set. Interestingly enough the male buyer goes in there, in the back of their mind they know exactly what they want, they don’t ask any questions, they go right to the place they want it, they buy it and they move on. Where as the female buyer in general is much more shopping is an experience, they spend more time, they think through the whole thing, they enjoy it a lot more than men. Now this is changing a little bit obviously with divorces and single parents and things like that where the men have to assume more of a role that they weren’t to before. But in general there’s a whole big difference between men and women and shopping. So depending on what kind of store you have and what kind of customer base you have, that’s how you end up marketing your store. For instance, men don’t like to ask questions, I’m one myself, I know that, but women do. I heard last week in a survey that women speak 7,000 words a day, men speak 4,000 words a day. So what that tells us is is that your whole customer service structure, how you put things on your shelf, what are you featuring, what do you wanna sell, is based on what kind of traffic you’re getting in through your stores.
Michael: Can you take me a back to a little bit of your history in retail. Why should we listen to you? What has been some of your history and experience in all of this?
Marc: The reason you should listen to me is that I’ve been in this industry for a little over 30 years. I was in the department store industry with Federated Department Stores for 13 years, that’s where I really learned the basics of retailing back in the 70’s when department stores were the kings, and they spent all this money on training and making sure all the people knew what was going on.
Michael: What were you doing with them?
Marc: I started off as an assistant buyer, was a buyer, a senior buyer and a merchandise manager, and I was a divisional merchandise manager, and I ran stores and so forth. So I had the whole gamut from soup to nuts, from merchandising operations for the department store. And then I went into, department stores were the kings in the 70’s and early 80’s, then I went into the discount business. I went into a chain of stores called Bills out of Jackson Mississippi. When I joined them as a general merchandise manager we had 200 stores and when I left we had 541. So we were the Wal-Marts of the smaller towns when Bills opened up. We carried everything, all the categories and so forth that Wal-Mart carried, except we went into a little bit smaller towns because our stores were any where from 5,000 to 10,000 square feet. So that was a discount business. Then the Dollar Store business emerged and I went with Everything’s a Dollar Store general merchandise manager, started when they had 60 stores and I left when we had 420 stores.
Michael: All company owned stores?
Marc: All company owned stores. All in the major mall areas, so if you went into any major malls in the country Everything’s a Dollar Store was one of the stores in the mall. This was really the beginning of the whole Dollar Store concept. Then I went the other way, I decided to go into the wholesaler close out business, so I became the senior vice president of marketing and merchandising for Action Industry, based out of Pittsburgh, Pen-, Action Industry was the largest supplier to grocery stores and drug stores and discount stores of dollar day kind of merchandise. Let’s say you walk into a Safeway, in the front they would have these boxes of one, two, three, four, five dollar goods, those all came out of Action Industry.
Michael: Even in Target they have that right when you walk into the front.
Marc: Exactly. And at that time Wal-Mart was our biggest customer.
Michael: Wow so all the major retailers are doing a little mini dollar store in their stores?
Marc: Exactly, exactly. They’re not doing a good job at it, but they are doing a little mini Dollar Store. So at that time Wal-Mart was our major customer and so where I was a compete with Wal-Mart when I was with Bills, I was a supplier of Wal-Mart when I was with Action.
Michael: What was it like working with Wal-Mart?
Michael: How many divisions were you supplying?
Marc: I think we were supplying the majority of their divisions at the time. So we were dealing with both the regional and the corporate people.
Michael: Were they easy to work with?
Marc: Obviously they were big orders, it was a much easier thing to do when you’re dealing with one store buying millions of dollars rather than 100’s of stores buying thousands of dollars.
Michael: Did they pay on time?
Marc: Oh yeah. They paid on time. But obviously what they always do to manufactures is price was an issue.
Michael: Did you ever have to go down to Bentonville?
Michael: And you met with the buyers?
Michael: So who determines the price, you or them?
Marc: Well you as a vendor determine what price you’re going to sell it to, they as a retailer, and I encourage all of our customers to do the same thing, is negotiate down to the best price you possibly can. So that’s the way it works.
Michael: You’ve got an item that retails for a dollar is a store, can you break down the cost and pricing structure today since you now have internet and distribution through the internet, and compare that to how the structure worked maybe through wholesalers and jobbers, and why it’s better for the retailer now to do all their buying through the internet rather then the old way and how it can mean more profit for a retailer.
Marc: Well you’ve got to realize that the internet is the next channel of distribution of product.
Michael: Show me the old way, before the internet, and where the profits were going to.
Marc: Ten years ago a vendor could afford to send a salesman to the stores, and you would sit down with the store owner and you’d go over your product, you’d have samples, you may have catalogs and so forth, and you’d pick out the products you need. Well today, ten years later with the cost of gas and expense accounts and salaries and so forth, it’s not worth it for a vendor to send their salespeople into a small store if they’re outside of a major city for five or a thousand dollar order. It’s just not worth it any more, but that’s the way it used to be. Today is the same as it used to be more earlier on is if you’re a business owner you go to trade shows. We’re going to trade show next month in Las Vegas called the ASDS, the Associated Surplus Dealers Show. There’ll be 30, 40, 000 people there, there will be 5, 6,000 vendors there. And you can go to these trade shows and you can buy products walking up and down these isles, but that’s expensive today versus last year or ten years ago, same thing with your flights and your hotel, you’re away from your store for three or four days, whose going to run your store while you’re gone? You’re going to meet 3, 4, 5,000 vendors who do you trust, who don’t you trust? Who’s going to ship you? But that’s a way that you can buy today and you used to be able to buy. You can buy today off of catalogs, every major vendor has a catalog, they send it out two, three times a year, but how do you know when something new comes in? How do you know when something’s sold out until you call and order it. But those are all kinds of ways to buy. What’s happened with the internet being the next channel of distribution of product is it’s a much more efficient way. For instance if they deal with DollarDays.com we carry 30,000 different products, everything we sell is by the case, and we have every kind of category if you walk into a Macy’s or a Target or a Wal-Mart, that they would carry, so customers can come on to our site, they see whatever they want, and their minimum order is just a case of any product. So they can try a lot of things. We’ve got 39 inside sales people who actually talk to our customers and help them through and let them know what the hot sellers are and what’s going on, what they believe in, so they have taken the place of the guy who used to sit across you desk ten years ago and pull out the samples. Our person sits on his side of the desk on the computer and you sit on your side of the computer and together you build your assortment of what you need.
Michael: If I’m a retailer and I come to your site and I’ve got a choice of 30,000 products that’s just over whelming, you’re saying you’ve got the structure and the people in your operation that can guide me as a retailer, showing me what is selling, that’s what I want. I want the products that I’m going to buy that are going to fly off the shelf, and you have the intelligence on what’s working around the country?
Marc: Oh absolutely. We have the intelligence 24 hours a day because when our salesman are sleeping on our site it tells you what the best sellers are, what things are hot, so that’s one of the dealings of the internet. It gives you a chance to update that. If we get a hot item in we can get it up on our site within an hour, in the old days if you wanted to see a hot item you had to send a sample, it took a couple weeks. So we can have items up on our site that are hot right away and our customers can start buying right away. When we sell out they come off the site. You don’t see them any more. Where as if you had a catalog in your store and you went to order it, you don’t know if they’re in or out. So the internet has created a very efficient model to go out and sell close out and whole sale products to people that want to resell them.
Michael: Now am I updated, if I come on to your site and I sign in, am I notified by email about the hot items for my retail store?
Marc: Absolutely. And you have that choice, in other words we don’t email you unless you want to be emailed. So if you want to be emailed about close outs, you want to be emailed about if you’re an apparel store, the hot items in apparel. If you’re a Dollar Store the hot items in dollars, all you need to do is check a box and we’d be glad to do that for you.
Michael: Now how are you able to negotiate such good deals when you’re brining in this stuff from overseas? What expertise does your organization have in bringing in quality and hot merchandise compared to everyone else? Do you have an advantage over your competitors?
Marc: Well keep in mind that we have a little over 600,000 customers who have registered with Dollar Days over the years. We are now averaging a little over 1,200 new customers a day signing up with us. So what’s happened is we ourselves have become a chain store in that the distribution that we have with all these thousands and thousands of customers all over the country has given us the buying power as if we were a Wal-Mart, as if we were a Target, because we got so many outlets to sell or products. So that’s one of the ways that we’re able to keep the prices down, where our customers can really afford to not only survive but thrive against these trade shows.
Michael: Other than offering quality merchandise imports, first of all are all your items imports or some of your close outs from here in the United States?
Marc: It’s a combination of both. Unfortunately for the US industry today 70% of everything sold in the US is not made here. So that’s just the same thing reflected on our site and probably every other wholesaler around the Country. I read in the paper about six months ago that 80% of Wal-Mart’s vendors are overseas. That’s a big number, 80% of their vendors are overseas. So that’s just a fact of life of products here in the US is we get so much from overseas.
Michael: Okay other than great products, mostly from overseas, and you’ve got a great book that teaches retailers to give them a reality check to make sure they’re doing everything right, do you offer any other support for your customers that can help them operate their business more effectively in the ideas of promotion and marketing?
Marc: Yes again going back to the reason I wrote the book was we had so many people that wanted to open up businesses, so what we do on our site, again we’re a merchandising company and we don’t charge anything for this because we want to make sure our customers have the right product in the stores to begin with so they come back and buy more. Our business is based on reorders, so we want to make sure that we help establish these customers the right way first. So from us you can buy all the fixtures you need to run your store, you can buy all the products you need to run your store, all the signing, everything you need to pretty much open up a store. And we’re right there with them. If a customer is thinking about a store, call me, I’ll talk to them, I want to find out if it’s in the right location, I want to know what the neighbors are, what’s going on in that particular area, and we’ll advise them on whether we think it’s a good location or not. Again going back to our business is based on reorders, we’re not here for the one shot order, so one of the beauties of our 39 sales associates is many have been here for years and they’ve established customers who rely on them to help them drive their business. We have become almost like a buying office for independent stores.
Michael: You don’t charge for this advice do you?
Marc: No we’re here in the long run to just build our customer base.
Michael: Right. Well let me ask you this, I would think well it’s going to be very expensive opening up a retail store, even a Dollar Store, and I’ve got the tools to order great products at good margins, but if I don’t have good credit are there ways for me to finance my retail business?
Marc: Oh sure, absolutely, in fact there’s a whole chapter in my book related to how to raise money to finance your business. My one advice though for anybody listening is don’t borrow money from your brother. You don’t really want to get your family too heavily involved in the financing of your business because if for some reason it doesn’t work you gotta live with them the rest of your life. That’s my main key advice is there are plenty of alternative ways to finance your business, but don’t borrow from your brother.
Michael: Can you give me one other way to finance your business that you feel is the best for someone who believes that they can’t afford it?
Marc: Well number one we have found that the best way is to get local financing through banks, through Angles who believe in your business within your own town, within your own neighborhood because these are the people that you deal with and that’ll watch you grow. Obviously the Small Business Association has the loans that they help people with and you can go outside and start raising money with other venture capitalists. We believe very heavily that it should be raising the money locally.
Michael: And since we’re on this subject, lets talk about some math, give me a little bit of the basics of retail math. You talk about this a little bit in chapter five of your book, how do you crunch the numbers and what do I need to know about math in my retail business? You’re listening to Michael Senoff’s HardToFindSeminars.com
Marc: Well let’s assume and again there’s a whole chapter of the book devoted on charts and what you need to open a business and what you need to run a business and so forth. Or if anybody wants to email me my email is Marc, Marc@dollardays.com If they want to email me that they’re thinking about opening a business I’ll email them back a couple of charts that we use as guidelines in our business. One of the charts talks about what’s the cost to open a store? Here’s just the basics; in merchandise it’s going to cost around $20 a square foot to open the store. So for instance if I’m opening up a 1,000 square foot store in merchandise I’m going to need around $20,000 dollars in merchandise. If I open up a 2,000 square foot store you’re gonna need around $40,000 dollars in merchandise. That’s your biggest expense. Your second biggest expense are fixtures. Now we at Dollar Days, but I highly recommend that you pick up used fixtures in your local market place to open up your store. Reason being is customers don’t really know if fixtures are new or used once you put product on them, and with people going out of business and other stores that are downsizing, you can always pick up used fixtures, and that’s your second biggest expense. Then your third biggest expense obviously is the big sign you want out front because you want everybody to know who you are and what you do. And then all the signing inside, you need to get your register, and then obviously the rent. Most people are looking for first and last month rent and down payment and the security and so forth and obviously turn on the electricity in your stores, you need that. Those are the expenses that you need to put in, again if anybody buys the book they can get that out of the book or if they want to email me I’ll be glad to send them charts on that too. So those are your biggest expenses on opening a store. Then the next biggest expense you have to think through is the running of the store. How much volume you’re going to do, how many people you need to hire. I’ve got charts on that too, I’d be glad to email that to people.
Michael: You always hear location, location, location when it comes to real-estate, would you say this phrase is accurate for your retail business as well?
Marc: Yeah and for several different reasons, in the independent entrepreneurial retailing world there’s plenty of locations that you can move into, number one are under served neighborhoods. For instance there are plenty of areas whether it’s the inner city or whether it’s a remote area that don’t have stores and aren’t big enough for chain stores to go in. So it gives you a chance to get into under served neighborhoods which are great for independent stores. For instance my neighborhood here in Mire Arizona there’s no chain stores there it’s all independents because it’s not big enough to support a chain store. So there’s plenty of places in this country that are still wide open for independent stores. So you kinda want to be where the giants are in that case. At the same time a real opportunity that presents itself when you’re a retailer is to nuzzle up next to a chain store. I mean they’re paying millions of dollars for all kinds of traffic whether it’s a chain grocery store or a chain drug store or a chain discount store, so get close to them and play off their traffic, they’re driving the traffic in. And as long as you have a different concept whether it’s large sized women that you’re selling or dollar store products, then let them pay for the advertising and the traffic, you just play right off of them. So going back to your location, location, location, I agree.
Michael: Can you show me and is it possible for me to get into the retail business where I’m not trapped as an employee of the business, where I can bring in good management to handle and run everything so I can focus on growing new stores? Is this possible today?
Marc: Thirty five years ago Wal-Mart was an independent store who said, “I can beat Sears and I can beat Penney’s. I’ve got a new concept and I can do that.” Sam Walton was an independent guy just like the rest of us a while back. You had mentioned the Zimmerman’s, they were independents until they built their chain store. So there are icons within this business that have been the independent and says, “I’ve got a better mouse trap, I can do more.” So going back to the idea that today is the best time to open up a business, anyone out there can be the next Sam Walton if they’ve got the right idea and the right concept. So initially when you open up your store you want to make sure you’re very hands on, I mean it’s your baby, it’s your concept, it’s your idea. And then as you start to grow your business, then you want to go out and start to hire experts who can help you. You don’t want to hire people just like you, you want to hire someone who has a different idea or expertise. For instance you want to make sure that when you’re talking about your controller that you want to have someone who understands that business much better then you do. And when you hire someone that’s going to run your warehouse whose going to understand that business, because as you build your basics for the people to build your next and the following store you want to surround you with people that are much smarter then yourself so that you can just continue to build the business.
Michael: But can running and hiring employees be a nightmare? Can you give me some tips on how do I find trustworthy employees that aren’t going to steal from me. That are going to show up on time and how can I get them behind me working as a team to make my store successful? And what kind of money should I be expecting to pay them?
Marc: Well first of all you sound like a real cynic when you say, “Are they going to steal from me? Are they going to take from me? What am I going to do?” So the whole process is upfront. You want to make sure that you’re hiring correctly. Now the first thing that I always say is always be hiring, whether you have an opening in your store or you don’t, always be looking for good people because great people will justify their pay. Whether it applies in increasing the average sale or running the back room with greater efficiency or expertise to save money, good people will pay for themselves. So when you’re always hiring you want to make sure that no matter where you get great service, that you find out who they are. What they’re doing. You want to make sure you’re always looking for people that can help you. So you want to say to yourself, “Where do I find these people? How do I find the right people?” Well obviously once you started to build this trust with the staff, referrals can be one of the best ways to hire people. You can give them rewards for bringing good people in. Another great way to find people to work for you are customer referrals, if customers like your store, like what you’re doing, you an turn that into a positive, “Listen I’m always looking for good people, who do you know?” Because a good happy customer is going to send you people that they trust.
Michael: That’s true. When people come in the store they’re always asking, “Hey are you hiring?” Or they’re in the store and they like it and they want a job.
Marc: Yeah exactly. Or they may have someone else they know that needs a job. So you want to make sure that you’re networking with other community organizations that you have, whether it’s a senior citizens group, a Job Corp group, or churches and things like that, there’s always ways to find people. Obviously you can always, now with the new internet and ways to drive people to you through the internet, if you have a part time job with the students in the high school or the community college or the college near by, there’s all kinds of ways to find quality people without having to really spend a lot of money to do that. Now there’s all kinds of characteristics that you need to when you’re looking for the ideal recruit. First of all because we’re in the service industry you want to make sure that they are service minded. You can find that out by their past accomplishments, their positive attitude, reliability, you can find that out very quickly. Second thing you want to make sure that they are motivated, you want to make sure that they’re in retailing for the right reasons ad not for wrong reasons just because they need a job. Then you want to find out if they’re self directed because even though you’re going to teach them, they’ve got to be able to go out there and make decisions and help customers and work through problems when you’re not there. So you have to make sure they’ll self directed. You gotta also make sure they’re relationship oriented, that they can interact with people. They gotta seem naturally warm and have a polite smile and those kinds of things. So you want to make sure that those are the kind of people that you hire. Retail is detail and don’t let anybody kid ya. Every time you open up your store it’s like a grand opening and the curtain rises for a new performance, so you want to make sure that your people have attention to detail. The small stuff, can they not sweat it? Make sure that they can get that done during their day. You wanna make sure that who ever you hire is a team player in the store or any organization, you gotta rely on each other. You gotta make sure that they’re not under cutting people that they’ll all out for the same thing. In our world today you gotta make sure that they’re technically adapt. Can you use the register? Can they understand how to track inventory and things like that? And you gotta make sure that they’re approachable, they’re confident, because that’s the same way that your customers are going to see them. They have to have lots of energy, they always want to improve, they want to continuously get better. So those are the kinds of things that you need when you’re thinking about who you’re gonna hire and how you’re gonna staff because you can never loose site that your store is a direct reflection of your own personality and everybody sees that and feels comfortable with it.
Michael: What should be a good strategy in reason to get into retail? And how should I plan my exit strategy in let’s say I want to build up a series of stores and then sell them. How much can I expect to get when I sell them?
Marc: Even before you open up your first store you need to know what do I really want to do with this? And that’s why we call it the Exit Strategy. A lot of people want to just keep it for the rest of their lives. And that’s great there’s nothing wrong with starting a concept if it’s your passion to open a store, that’s what you want to do, you want to pass it on. You want to build this for your family. That’s a great strategy. But the Exit Strategy there that you gotta be very careful of is, “Okay if I’m going to kept his store, how am I going to pass it on to my family? How are my kids going to get involved? What am I going to have to do? How’s the wife, the husband, what are we going to do to make sure that if something happens to me, it’s a smooth transition.” So the Exit Strategy there is how do you pass the store on? But that’s one way, a lot of families stay in business for generation after generation, that’s a great way to have an exit strategy is I’m passing it down, that’s my exist strategy, I’m going to retire. Another exit strategy would be to build your store up so that it’s attractive to a bigger entity. In other words you got a great little nitch, there’s a guy who owns ten stores in other town, he’s the one that should buy you, why not sell it if you can make some money on it? So you can have an exit strategy, “Well I’m going to build this store up to be gobbled up by a bigger guy.” I mean that happens in the financial news every single day, a bigger guy buys a smaller guy. So that’s an exit strategy. A third exit strategy would be to build it into more then one store, into a chain of stores and go public. Now that has it’s own set of headaches, but at the same time it can be very rewarding if you go public you become very rich, why not? That’s what the American Dream is all about. But you know you have to build your company specifically for that, with the accounting the way it’s set up, all the things that need to be done and so forth. So there are all kinds of Exit Strategies and you should think through all this before you even open your door.
Michael: What are a couple alternatives to the traditional retail store? Like kiosks or convenient stores or mini markets? Do you have some experience in that?
Marc: Well interesting that you should mention kiosks, in the traditional indoor regional mall years ago, there were not kiosks. There were the traditional stores in these regional malls, and all the traffic coming and forth for the stores. What happened was a few years ago kiosks started popping up in these regional stores. You know you’d get a kiosk that would sell one or two products and they wouldn’t be too competitive with some of the other stores. What happened is the regional mall owners said, “Wow in the little piece of space here I can get a lot of rent.” And the kiosk owners said, “Well to have a 100 square feet of space rather then 5,000 square feet of space, I’m spending a lot less money and I’m doing some business.” So what happened was as the traffic started to be reduced in these regional malls because the Targets got stronger, the Wal-Marts got stronger, Bed and Bath was beyond the outside of regional malls, so all these regional malls started to have flat traffic. The owners of the regional mall said, “Well what am I going to do to have more income?” So all of a sudden now when you walk into a regional mall you see these kiosks all over the place. It’s good for the entrepreneur because he can bring in his product, little bit of space, his rent is not too crazy. It’s good for the mall owner because all of the sudden they’ve got another income of rent coming in, and so the only one who looses out are the stores in the mall that may be loosing some business to these kiosks. So interesting business and every regional mall is looking to add more kiosks because it’s just down money for them.
Michael: Do they charge just for the space, or do they want a piece of everything you sell?
Marc: It depends on the regional mall that you’re in. Most of them at this point and time just charge for the space. Years ago it used to be a piece of the action, but from an accounting standpoint it turns into a real headache, you share your books with the regional mall, you gotta account for everything, so most of the regionals said, “Okay I don’t want to go through that, here’s what your rent is and that’s the end of the story.”
Michael: Okay great. Now how important is marketing when I have my retail store? And from your experience can you go over some of the most effective marketing strategies you have seen work for your clients and customers?
Marc: Well marketing really is the key to success in today’s world. Don’t get me wrong you have to have the right product, you have to have the right price, and you have to have the right location, and obviously you need to have what everybody’s looking for. But the marketing really is key to building a business. Now one of the interesting things about marketing especially in smaller towns is you think that all of the other people in town are your competitors but it works well banding together. I’m sure you’ve seen these movements going on where independent stores band together and buy from your independent, buy from your local business and so forth. That is key in today’s world. So I would highly recommend if any of your listeners are independent stores that they look around to the other independent stores in town, don’t think of them as competition, think of them as a way to creating marketing avenues so that everybody wins.
Michael: Yeah they create and form buying groups.
Marc: Exactly. And there’s all kinds of ways to drive traffic in your store, if you’re a bookstore you want to have authors coming in. If you’re a music store you want to have in store performances all the time. If you’re a food store you want to have tasting things going on, clothing stores want to have fashion shows. Toy stores you have demonstrations and things like that. You want to make sure that you got specific events going on in your store that will help you build traffic. The other thing that is very interesting about marketing and it goes more to public relations because more and more small towns and small newspapers and small radio stations, and local ones, are always looking for information, and if you can establish yourself as the expert in your particular area, for instance if you’re in the clothing business and you run a junior clothing shop, you become the fashion expert in your community. And you feed information to newspapers, radio and so forth, so that you become the person that they come to when it’s time to find out what’s the latest trend. And once that happens then that’s free advertising, that’s the best kind of marketing you can.
Michael: I’ve noticed on your site you’ve got some great press releases and I saw some of your media and some of your national publications and the trade journals, and you’ve got some great press releases and I can tell that that has gained you a lot of media attention.
Marc: Yes, and that can happen on a local level. You become the expert in your business, feel free to share that with the media and it works out for everybody. There’s all kinds of things all during the year that you wan to do to market your area, there’s the basic big things, New Years sale and things like that in January. But there’s a lot of interesting other things for instance in January, have a big deal for Elvis Presley’s birthday. Martin Luther King Day, Super Bowl, Chinese New Year. You can go month to month to month there’s all kinds of events that are nationally in the calendar that you as an independent can do that chains, it goes right over their head.
Michael: All right Marc, this has been wonderful, and we’ve covered a lot of ground here in the last hour and I would recommend anyone listening to this to go to DollarDays.com or they can pick up your book, The Secretes of Retailing, Or How to Beat Wal-Mart. Can they get it from your website?
Marc: They can do that, or they can go right to Amazon.com has the book The Secrets of Retailing or Boarders.com, or most major bookstores carry it. Then if they need to buy product in bulk or our minimum order is just a case of any product, they can come to DollarDays.com and we’d be glad to turn them into a customer.
Michael: Wonderful. And let’s say you’ve got a listener here he’s listening, he’s on the edge of opening a retail store, or a chain of retail stores, could he call you personally?
Marc: Oh absolutely. Just call in and ask for me and they’ll put you right in.
Michael: Okay wonderful! Why don’t you give me that phone number?
Marc: It is 877-837-9569. That’s 877-837-9569 and just ask for me, Marc Joseph, and they’ll be glad to put you in and we’ll be glad to talk to you.
Michael: Okay well thank you for sharing all this great information on retailing.