Nurturing Entrepreneurship in an Economic Recession

8/14/2019 Nurturing Entrepreneurship in an Economic Recession

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16 MADISON MARQUETTE

SPECIAL ENTREPRENEURSHIP SECTION

Consumer spending is down and retailer bankrupt-cies dominate the headlines, yet budding retailentrepreneurs may find the business landscape morehospitable than most may assume.

Retail has never been for the faint of heart. Just ask omStemberg, founder of the Staples franchise and a serialretail entrepreneur. In an interview with PLACES, hecautioned aspiring retailers Dont quit your day job.

Hes right, retail is not for everyone, but those unde-terred by such expert warnings are exactly the type ofpeople who are most likely to thrive. Tey are the oneswho walk into a store and cannot stop thinking of waysto do it faster, cheaper, or better. Tey have a vision for adifferent way of serving consumers and have the determi-nation to see their ideas through.

For many entrepreneurs, being fired or laid off wasinstrumental in getting their ideas off the ground. akeBernie Marcus and Arthur Blank, who did not evenknow each other until they were both laid off on thesame day. Tey went on to start Te Home Depot. Stem-

berg too was let go just before founding Staples. Oftenwhen someone gets laid off, they place an increased pre-mium on being able to control their own destiny. Retailentrepreneurship is one way to satisfy that desire.

New retailers will find surprisingly hospitable condi-tions right now. Established retailers are less agile thanever. Tey are generally more diversified, with multiplebrands, numerous customer segments, multiple channelsof operation including online and offl ine. While thisdiversification was intended to reduce the risk, todaysfar-reaching recession has left them distracted by cost-cutting, debt management, and inventory overages.

Upstart retail concepts can be far more agile. Tey canbetter react to evolving customer demands and seizeopportunities as they arise. Niches once dominated by

strong national competitors, such as linens or electronics,suddenly have voids that may need to be filled. Contrac-tors and suppliers are now willing to negotiate lowerprices and accept reduced margins. Landlords, most ofall, are eager to identify and incubate these new entrantslike never before.

By Jonathan Shartar

Nurturing

Entrepreneurship

in an Economic

Recession

Opening for

Business


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17PLACES MAGAZINE


Leases are nothing more than documents outliningmutually acceptable operating conditions. While theassumption may be that landlords are more willingto negotiate terms, that belief is not entirely correct.Rents are clearly down, but recent boom times wit-nessed lease negotiations becoming less about findingagreeable partnership terms than about winning.Now, circumstances have changed.

Te greatest opportunity for new retailers is in vacantspaces where national operators have abandoned fairlynew store build-outs. For nimble local and regionaloperators, these spaces help overcome the lack ofstandardized store designs. Te ability to occupy spaceat reduced costs for both themselves and the landlordis what helps lower rents and increase profits. While

national tenants priced out their competition in thepast, that is no longer an option for landlords and thevalues they placed on creditworthiness now appearsoverstated.

Landlords now place a premium on small retail opera-tors with several successful stores that are looking toexpand. Teir experience and track record make themattractive tenants. For newer operators, landlordsmust evaluate not just the concepts ability to attractconsumers, but the entrepreneurs ability to executesuccessfully.

When landlords believe in a concept they will make

unique trade-offs. If investment capital is required,landlords may be willing to take ownership stakesin the business, equating to higher rents in the longterm. If less capital is required, a new business will bemet with the ability to gain significant bargains onreal estate. In some cases, landlords may be willing toengineer leases to almost entirely remove the risk for anew retailer in a way they never have before.

Since a landlord is, at the end of the day, nothingmore than a diversified investor in retail operations,

they too are interested in new retail concepts. Teywant to support these retailers and help them growinto tomorrows retail giants. Entrepreneurs with apenchant for retail too should realize that t imes willimprove. Now is the perfect time to set up, get backto the basics, not only to best capitalize on todayschanging consumers, but to take full advantage of theupswing when it comes.

New stores generally do not expect profits in thefirst 912 months and it can take up to three yearsfor sales to stabilize. Tat means the downturn can

be an ideal time to set up shop and be uniquely wellpositioned for the economic rebound.

Jonathan Shartar (jonathan.shartar@madi-

sonmarquette.com) is an Investment Associ-

ate in our Washington, D.C. office. P

om Stemberg founded Staples in 1986 after being letgo by a supermarket chain. He saw how offi ce supplyneeds were being filled by mom-and-pop stores and

thought there had to be a better way. After buildingStaples into a $19 billion company, he now serves asManaging General Partner of the Highland Con-sumer Fund which focuses on investing in retail andconsumer services companies. He currently serves onthe boards of CarMax, Inc., Guitar Center, lululemonathletica, PetSmart, Inc., and Pharmaca.

om recently took t ime to answer questions aboutentrepreneurship from PLACES.

Q: What personal attributes makes

someone a good retail entrepreneur?

TS: he biggest difference between entrepreneurs,especially retail entrepreneurs, is that we viewevery challenge as an opportunity, as well as abarrier others will have difficulty surmounting.

And we can always see the light at the end of thetunnel, even if it is a train coming the other way!

Q: How is retail entrepreneurshipdifferent from starting other types ofbusinesses?

TS: he challenge one has starting a retail business

is that it consumes a great deal more capitalthan a software or medical device start-up. Youneed inventory, fixtures, systems, not to speakof a considerable amount of overhead to get astore off the ground. You then need countlessmore stores that have reached profitability to

cover your overhead. he other businesses oftenrequire little more than an office and a few PCs.

Q: What advice would you give tosomeone who does not have retailexperience but has an idea for a retailbusiness?

TS: Keep your day job: retail is way tougher than itlooks.

Q: What should landlords do to helpstart-up retailers succeed?

TS: his magazine is not long enough for my an-

swer, tsk. reat them with respect. It is the excit-ing innovators who can make your developmentspecial. Do the landlords who took credit risk tosign up lululemon and Pinkberry in their earlydays regret it today?

Q: What are the biggest challenges whenexpanding from one store to multiplestores?

TS: he toughest challenge and there are many to building a retail business from one to

many stores is attracting and retaining greatpeople. When we look at investing in these com-panies, which we do for a living at the HighlandConsumer Fund, this is a primary focus. Onecan hire a new CEO but it is much tougher toreplace a dozen store managers and store teams!

Q: In your view, what types of retailconcepts have the greatest growthpotential right now?

TS:In the short term, economic challenges willfavor deep discount concepts like dollar storesand grocery hard discounters; this will rapidlychange as the economy recovers. America andthe world are becoming more fragmented bothin terms of demographics and taste. he winnerswill be concepts that serve the needs of par-ticular segments very well. hat is why we areexcited about investments like Pharmaca anintegrative pharmacy that offers both traditionaland holistic remedies and City Sports, whichoffers the city-dwelling athlete everything he or

she needs in apparel and gear.

Tom Stemberg

on RetailEntrepreneurship TOM STEMBERGFounder, Staples

Staples, Bayfair Center, San Leandro, Ca.

When landlordsbelieve in a conceptthey will make

unique trade-offs.


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18 MADISON MARQUETTE


In April 2009 Madison Marquette launched an online community for retail tenants in the companys nationwide prop-erty portfolio. Te first-of-its-kind community brings tenants together with each other and with Madison Marquettesin-house experts and consultants in retail operations.

Te success of any property relies on the success of its tenants. Tis online community is aimed at aggregating and archiving the best resources to helptenants succeed.

Te community leverages the LinkedIn platform which has over 35 million registered users and is considered the leading social network for profes-sionals. Te group, Te Madison Marquette Retailer Network, features expert support in all areas of retailing, including store design, merchandising,human resources, marketing, and accounting.

Included in this section are several examples of the resources available on the companys retailer network.

The 3 Ps of MerchandisingBy Michael Walker

In tough economic times, getting the fundamentalsof merchandising correct is more important thanever. Te essential components of successful opera-

tions are people, presentation, and product. Eachof these elements is intertwined and each requiresdedicated focus and attention.

People

In-store staff must be educated about the productsthey are selling. Customers expect to be told whereproducts are made, what they are made of, and whythey are a good value. But thats not all. Sales staffalso need to know what products make the highestmargin and which products need to move quickly.

oo often owners are reluctant to involve theirfrontline employees in this level of detail, but it isabsolutely essential to do so.

Empowering employees with knowledge gives thema greater sense of confidence and helps avoid anger,frustration and a sense of hopelessness that oftencomes with uncertain economic times. If they under-stand what they need to do to keep the store operat-ing, they feel more in control of their own destinyand more motivated to maximize their productivity.

ough economic times also demand that owners andsales staff be actively clienteling maintaining a da-tabase of loyal customers and keeping them engaged.When new shipments arrive, let them know. Whenitems go on sale, make them aware. Tese commu-nications are best done via telephone, but email canalso be effective.

Presentation

Creating a visually appealing store says a lot to cus-

tomers about how passionate the owner is about theirmerchandise. When owners are tired and burned out,it translates into a boring rack of clothes. When theyare engaged and passionate, it translates into vibrantvisual displays and current fresh designs.

Owners also need to understand how merchandisedisplays benefit from their location within a store.Research shows that customers instinctively look to

the right side of the entrance first. Tis area needs tofeature the fastest moving and most engaging mer-chandise. At every turn thereafter, shoppers need tobe met with compelling displays. Owners also need tounderstand how much income each turn is produc-ing. If a display does not sell, remerchandise it.

Consumers are shopping with less money and areincreasingly concerned with where they spend theirdollars. In boom times, a few blown light bulbs andstale store displays may not have mattered. But today,if the store is not immaculate and products not dis-

played with care, it shows, and consumers will chooseto go elsewhere.

Product

Having the products that people want to buy is fun-damental, but being successful requires proper inven-tory management, good timing, and smart pricing.

odays environment is all about value. In many ways,customers are pulling back from big ticket items and

yet are not ready to sacrifice luxury. Tis trend trans-lates into higher demand for accessories and basics;for instance, instead of buying six high priced leatherjackets, buy 40 designer t-shirts. Te lower priceditems are far less risky in this economy.

Owners need to be smart about pricing complemen-tary items. Consider selling one piece of an outfit atsteep discount perhaps even at a loss. Shopperswill be compelled to buy the entire outfit becauseof the value they perceive they are getting with thediscount on the one component. In todays climate,

shoppers also expect a sale rack. If none exist, theymay suspect that the products in the store are allover-priced.

Helping Retail Entrepreneurs Succeed

Recently, the 3 Ps were applied to M odern Times inUniversity Mall (Chapel Hill, N.C.). Over two days, the store

was completely remerchandised, repainted, and refreshed.

The response from shoppers has been great.


4/519PLACES MAGAZINE


NINE IDEAS TO KICK START SALES (FOR UNDER $100 EACH)

In todays economy, people need a good excuse to shop. Sales people need a reason to pick up the phone, call them, and give them that

compelling reason that makes shopping feel good again.

Below are some great summer-themed special event ideas that cost less than $100 each but will get the cash registers ringing again. In order

to maximize success, keep the promotions and gift card redemption periods short to foster a sense of urgency. Make sure you capture as much

client information as they are willing to share so that you can include participants in upcoming events.

25 Weddings and Nothing to Wear

Throw a wine and cheese cocktail reception and

showcase great dresses to wear to all types of

weddings formal, informal, day or evening.

Have a drawing that night for a $50 gift card

towards a dress that weekend.

Queen for a Day

Invite the prom queen nominees from your local

high school to a special prom fashion show

party in the store. Use student models, iPod

music, and snacks to keep their attention. Give

the girls a $25 gift card towards a purchase.

Free Manicures with Purchase

What girl doesnt love a free manicure? Invite

your local manicurists to meet with your clients,

set up in front of your store and offer free

manicures with any $50 purchase.

Hot Summer Nights

Invite store patrons to register to win a $100

gift card for a great Fourth of July party outfit.

No purchase necessary, but limit the length of

time to enter. Make sure to keep and use the

contact information for all who registered.

Naughty or Nice?

Invite a local tattoo artist to offer temporary

tattoos, serve cocktails, play music, and create

a shopping frenzy. Have participants invite their

significant others for a fashion show and tattoo

reveal.

Get Ready for Swimsuit Season

Create an event around beach season. Offer

personalized fittings and give away inexpensive

beach items such as totes, sunglasses, novels,

and towels and arrange them in a great display.

One Shoe, Two Shoe, Three Shoe Score!

Have your local cobbler set up shop in your

store. Invite your 15 best customers to bring in

three pairs for complimentary repair. Return

the shoes the following weekend so your best

customers have visited two consecutive weeks!

A Surprise for Dad

For Fathers Day, show Dad how much you love

him. Give away 20 $5 gift cards for the purchase

of lingerie. Invite brand representatives to do

proper fittings and offer refreshments.

Private Sale Night

Invite your 10 best customers to a special

private sales night. Give them each $10

gift cards and offer them first crack at new

markdowns or just arrived merchandise.

Contributed by Angela Sweeney ([email protected]).


5/520 MADISON MARQUETTE


1. Demonstrated commitment to the retail

sector

Even if retail sales remains something of a classic sec-ond job for the financially over-extended, your truefloor-leaders should be there because they want to bethere. Tey should understand the merchandise theyare selling and look to the sector as an appropriate place

for a career, whether on the floor, in management, inmerchandising, or as a buyer.

2. Flexibility

Anyone looking for a traditional 9-to-5 opportunityin retail will likely not find it. On the other hand,anyone who craves an alternative to the increasinglyoutdated work routines of the typical corporate offi cewill be able to find a retail schedule to suit just aboutany lifestyle choice or personal situation.

3. Attitude

A successful retail experience for any consumer dependson encountering sales associates who actually want tobe in the store. rying to convince a bored, disinterest-ed, or even actively hostile sales associate to help locatean item, return, or exchange merchandise is as close toa universal experience as most Americans have. A goodattitude is key to ensuring a good customer experience.

4. Know the products or service being sold

Tis is just as obvious in a shoe store as it is in anelectronic store. It is great if a company is able to hirefrom a ready pool of sales associates with experience inthe products or services being sold. If that is not thecase, select associates eager to learn where the productscome from, who typically buys them, the features andoptions, how to upsell, and so forth.

5. Pay attention to communication skills

America is wonderfully diverse and our retail establish-ments should reflect that diversity, but the buying expe-rience will be better for everyone if the sales associateand the buyer can engage in a meaningful conversationon the potential purchase. Even our most upscale retailestablishments hire from a variety of backgrounds andnationalities and while this has the potential to makefor a positive buying experience, it more frequentlydoes not. If it requires special language training or sem-inars in managing cultural differences to improve theexperience, the investment will no doubt pay off in in-creased sales in the future. In fact, retail establishmentscan actually exploit this diversity as an advantage.

Marriott headquarters, located outside Washington,D.C., brings trainees from all over the world to work inits local hotels and identifies their home location on aspecial badge. Celebrating rather than hiding diversitycannot help but broaden the appeal of the store.

6. Understand and hire for the target

customer

A sales staff distinguished mostly by their body pierc-ings will be out of place at a Saks or Nordstrom justas a 30-year veteran of couture sales will likely feeluncomfortable talking compression shorts at an UnderArmour store. Tis seems blindingly obvious, but until

this economic downturn the desirability of positions inthe retail sector was seldom high and purchasers oftenfound a disconcerting mix of skills, capabilities, andexperience levels at many of the stores they frequented.

7. Look for candidates who respond

positively to recognition and rewards,

and dont be afraid to single out the top

performers

Tere is an almost infinite variety of sales base payand incentive plans that retailers can draw upon and

experiment with. Pay matters; when done right allowsa retailer to build a committed, engaged, and long termrelationship with the sales associate and more impor-tantly, consumers.

8. Find creative ways to keep your best sales

associates out of sales management

Success as a sales associate has very little to do withsuccess as a manager and retailers should be prepared tobe creative in keeping the right people on the floor infront of customers.

9. Select for initiative and judgment

A competent, well-trained sales associate should be ableto handle most challenges on his or her own. Te mostirritating and pointless response a purchaser can hearduring any transaction is: Let me talk to my supervi-sor. rusting sales associates with some level of discre-tion can over time make him or her feel like an ownerrather than merely an employee.

10. Select for self-confidence

Te sales floor is no place for the timid, diffi dent, orinsecure (though it is also appropriate to avoid theopposite unless one is selling labor-saving devices onlate-night cable television or timeshares in Aruba).

Reynolds Atkins (reynolds.atkins@madison-

marquette.com) is VP, Human Resources in

our Washington, D.C. office. P

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Ten Traits to Look for WhenHiring Retail WorkersBy Reynolds Atkins

Nurturing Entrepreneurship in an Economic Recession

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