feature story

Many challenges face the giftware industry, but an industry expert and three savvy florists share their advice for combatting them.

by Kelsey E. Smith

    
As long as people have personal relationships, there always will be a need for gifts that convey friendship, love, appreciation, congratulations, sympathy and a host of other sentiments. But during recessionary times, consumers have a tendency to scale back their spending to smaller gifts and rethink their “just because” purchases. We recently spoke with Michael Russo, president and owner of Industry Advisors, Inc., and president of the Gift Association of America (GAA), who identified the four greatest challenges facing today’s giftware retailers. Then we asked florists across the country how they are meeting those challenges head-on to keep their giftware lines profitable.

challenge no. 1: promoting profitably

    The No. 1 concern for giftware retailers is how to get the margins they need while still catering to today’s promotion-driven consumers, Mr. Russo says. “A lot of retailers have their inventories at whatever markup they brought them in at, but they’re realizing that the only way they’re going to get traffic into their stores is to offer some sort of special or promotion,” he explains. “And if they fall too far below their margins, they’re not even going to break even. They’re going to be in the red real quick.”

    To combat this problem, Mr. Russo recommends keeping controlled open-to-buy contracts with vendors that are projected three months out as well as negotiating prices with vendors as merchandise is needed. “I suggest that retailers bring the merchandise into their stores at the regular markup, pricing it as if they didn’t get the discount,” he says. “That way, when they take their discounts, they are still making decent margins. No matter what deal you get, you must always pretend you didn’t get it, and price your merchandise accordingly.”

    Mr. Russo adds that it is important to leave merchandise on the selling floor for a period of time to establish the regular retail price before beginning to promote it.
If consumers are accustomed to purchasing particular items at reduced prices, they come to think of them as the everyday prices and may experience “sticker shock” when you “raise” the prices.

    Rather than always relying on discounts, Shirley Lyons, AAF, owner of Dandelions Flowers & Gifts in Eugene, Ore., points out that simply placing merchandise in a different spot in the shop may be all that is needed to move products out the door. “There are hot spots and dead spots in your store,” she relates. “You need to identify them and move things around frequently. You can’t just say, ‘This is a slow mover.’ Move it to a hotter spot, and see if it’s the merchandise or the location. Figure out what’s the barrier to that sale.”

    Lou Lynne Moss, AIFD, AAF, PFCI,
owner of The Flower Shoppe in Pratt, Kan., relates that she displayed baby gifts in a corner in the back of her store for two years, but by moving them to the front and creating a more enticing display, sales of these items have increased tremendously. She also has found that creating themed vignettes by color has sparked more impulse sales. Giftware accounts for between 20 percent and 30 percent of The Flower Shoppe’s annual sales, and the shop carries an array of giftware and home decorative accessories, including lamps and artwork, for all budgets in its approximately 3,000 square feet of display space.

challenge no. 2: embracing advertising

    History tells us that companies that keep their advertising consistent during economic downturns are most likely to be remembered when the economy rebounds.

    "A lot of retailers don’t want to advertise because it costs money, and they can’t really monitor it that carefully,” Mr. Russo says. “If the customer doesn’t buy the sale item, [retailers] consider [their advertising] a bust, but they don’t realize that the customer may have seen the sale item and decided she wanted other items instead, and that ad is what brought her into the store.

    “The key to advertising is to get customers into the store,” he continues. “You always have to keep your name in front of consumers. You might not be able to afford to do it as aggressively as before, but you still need to have the consistency and the continuity because when customers are ready to shop, they may have forgotten you, and they’ll go to companies who put their names in front of them rather frequently.”

    Mr. Russo suggests advertising budgets be 10 percent of planned sales for a new company in its first year of business and about 5 percent of planned sales for an established company. He advises companies to work toward maintaining a budget of 3 percent to 5 percent of annual planned sales.

    Ms. Lyons points out that there are many ways to creatively stretch your advertising dollars. Partnering with a radio station for a giveaway is one way she gets advertising exposure for free. Last Valentine’s Day, she proposed the idea to two radio stations of giving away one dozen roses each day during the work week leading up to the holiday. “They’re looking for ways to have a message, too. They want listeners to have a reason to listen to their station, and if they’re giving away prizes, that gives them an opportunity. We gave away 10 dozen roses, and everyone had to come into the shop to get them. The same could apply to giftware. If you carry a collectible, you could contact a radio station and say, ‘These are a $65 value, and we thought this would be a great way for you to have a contest, and we’d be happy to donate the prize.’”

    Purple Puddle, a 2,400-square-foot floral and gift store in Chapel Hill, N.C., that specializes in weddings and events and offers an array of stationery, wedding and baby gifts, and general gifts, has another creative way to get your shop’s name out in the community. Owner Kathy Buck developed a promotion approximately six months ago that capitalizes on the popularity of reusable tote bags. Customers who spend at least $50—an amount greater than the store’s $35 to $45 average sale—receive a bag that has an insert on the bottom encouraging them to bring the bag into the shop on Saturdays for a 10 percent discount. “It’s an attractive purple bag with black and white polka dots on the side and our logo on it,” describes Ms. Buck, who shares that her store’s annual sales are more than $500,000. She relates that the bags cost approximately $1.60 each, but she considers them well worth the investment. “People love them, and they take them to the grocery store or put school supplies or other things in them, so I see them as another means of advertising.”

    Mr. Russo says that, in economic downturns, it is critical to advertise not only your products but also the key points that make your customer service stand out, such as free gift wrapping. “Pick the five things you do really well, and focus on those,” he says. “One of the biggest selling points for a floral store is creativity, and that’s what will attract customers with disposable income.”

    Ms. Buck says her customers have come to recognize her shop’s complimentary “Purple Puddle Wrap” as a signature touch. “Our customer service involves the customer leaving here with a gift that’s ready to present,” Ms. Buck explains. “Everything is boxed with a bow or put in a clear bag with tissue and Purple Puddle ribbon. People have told us that when there’s a white box with a big purple bow under the Christmas tree, everybody wants to open that one. It makes us different from any other florist or gift shop in our area.”

challenge no. 3: maintaining image

    Promotional items can be enticing when you are buying from suppliers, but be careful not to fill your shop with them, Mr. Russo cautions. “Being promotional doesn’t mean you have to buy the low-end merchandise and cheapen your image. You will confuse your customers and make them think you’re taking a step backwards. You need to have enough merchandise in your store to maintain the image you want, but within your mix you can offer promotional things that may be a little different than you normally carry—maybe a little lower-grade to get a certain price point—but the overall image of the store should reflect who you are all the time.”

    Purple Puddle recently pared down its lines to focus on its best-selling brands. “When I went to market, I found two other candle lines that I’d love to have, but the one I have right now is selling well, so we are sticking with that,” Ms. Buck says. “Two years ago, I would have done a minimum order with each of the lines, but this is one way of trying to conserve.”


challenge no. 4: maximizing time at market

    If you are thinking about skipping a trip to a gift market to cut expenses, think again. Mr. Russo says the worst thing you can do is stop going to market because there is nowhere else you will be able to see such a huge array of new merchandise firsthand. The key, he relates, is to plan ahead in order to maximize your time at the market and make it a worthwhile investment. Mr. Russo suggests taking the following actions when preparing for and attending gift markets.
 
  • Research vendors, and make appointments. “Go in with an agenda of what you’re going to do each day rather than wandering around,” Mr. Russo advises. “Make appointments before you arrive, and don’t go in to see people you really don’t need to see. For example, a lot of retailers do reorders; why would you waste the time to see that vendor just to hand him or her the purchase order when you can do that from home? If time is tight, use the market to shop for new things and to negotiate deals with either current vendors or new ones you have found.”
        Ms. Moss says she noticed at the Dallas Total Home & Gift Market last January that vendors, for the most part, have become increasingly accommodating, with many calling her to set up appointments before the market. But she also took a more practical approach, utilizing her network of friends in the floral industry. Although she attends the Dallas market each January, this year she called other florists beforehand—those who regularly go to Dallas as well as those who attend other markets—to find out what companies and product lines had caught their eyes as well as what products are best-sellers in their businesses. “I said, ‘Tell me five of your favorites,’ and I went into those five favorites and bought from three of them,” she relates.
  • Consult the markets for ways to reduce expenses. Take advantage of early-bird registration, special hotel rates, free transportation, and even complimentary breakfast or buyer’s lounge amenities.
        Consider markets closer to home as well. Ms. Buck, who, in the 22 years she has owned Purple Puddle, has attended the Atlanta Gift & Home Furnishings Market nearly every January and July as well as the National Stationery Show in New York City every two or three years, takes advantage every spring and fall of her proximity to the High Point Market as well. The market, which is about an hour-long drive away, allows her to see new merchandise while eliminating hotel expenses. “It’s very easy for us to go and do our thing in five or six hours,” she relates.

  • Know your budget, and stick to it. “We’ve done surveys every other year on budgets for shows, and 49 percent of the buyers don’t have a budget, which is staggering to me,” Mr. Russo says. “Don’t go to market not knowing what you can spend because you’ll get wrapped up in the excitement of new trends and displays. Just like the person who goes to a supermarket hungry, you will overspend, and, unfortunately, by the time you realize it, you own the merchandise and the invoices will be due. That’s why, last fall, a lot of buyers got into trouble. They went to market midyear, and they bought, bought, bought, and all of a sudden, the bottom fell, but it didn’t stop the merchandise from coming in, and it didn’t stop the invoices from being due.”

  • Time your buying to fit your budget. “Go into market with an open-to-buy that’s been calculated over three months,” Mr. Russo suggests. “That way, you can take advantage of some special opportunities and bring them in later so that everything doesn’t have to arrive within 10 days of a market visit. It gives you a much better comfort level, and everything isn’t coming in at the same time, creating cash-flow problems.”

cost-management considerations

    Mr. Russo points out that although the aforementioned issues are the most significant facing the giftware industry, there are other ways to reduce expenses and boost profitability, many of which do not require cutting out anything. “In this type of economy, everyone looks at the negative—‘Let’s cut staff, let’s cut hours, let’s cut this and that,’” he says. “But sometimes it’s not a matter of cutting; it’s a matter of looking at the way you do things and whether you are doing them in the most cost-effective manner. For example, a lot of retailers and wholesalers tell me that every time they get their statements [for their credit-card processing services], there’s another charge for this and another charge for that. When you’re looking at expenses, look at that, and maybe it’s time to shop around for another program.” He notes that the same thing can apply to insurance, phone services, utilities and a host of other service providers.

    In addition, Mr. Russo says one of the most important things retailers can do is develop good relationships with their suppliers. “Some retailers tell me that they don’t like to see sales reps in the store a lot because it interrupts their day, but now is the time to rethink that,” Mr. Russo says. “I don’t look at vendors and sales reps as just people I buy merchandise from; I look at them as educators because they’re in the market more than I am. They’re on the road visiting hundreds of stores, and I can learn a lot from them. Maybe they can give me some pointers on my display, or maybe my signage is lousy, and they can give me some ideas on how to clean that up. Buyers need to start using their vendors as a place to get information.”

    Ms. Buck at Purple Puddle says her communication with supplier Packaging Source, which she has used since her business opened, has made it easy to manage the inventory of her business’s reusable totes. “I had to order 1,000 bags, but I didn’t know where to put them, and [my sales rep] said ‘I’ll keep them in my warehouse and send you a case every time you want one,’” she relates. “[The company] was very accommodating and even gave me extended terms when I needed to pay for it.”
 

Entice with e-mail
 
    If you are looking for a way to consistently remind your customers to visit your shop and to promote your giftware, e-mail marketing is, perhaps, the most cost-effective way to do so. Shirley Lyons, AAF, owner of Dandelions Flowers & Gifts in Eugene, Ore., says her shop does a minimum of two e-mail campaigns each month, and for peak holidays such as Valentine’s Day, Mother’s Day and Christmas, the shop sends out approximately five e-mails during the 10 days leading up to the occasion. “And we always include a coupon code or a compelling reason to buy,” she says, pointing out that companies such as Constant Contact, which have e-mail marketing templates, make this form of marketing easy to do.

    Dandelions Flowers & Gifts utilizes several methods for growing its list of e-mail addresses, which currently numbers around 3,500. “We ask customers if they’d like to have an e-mail confirmation of their deliveries, and in the store, we offer a free rose to anyone who signs up for our e-mail list,” Ms. Lyons shares. “We have signs around the shop, and we also have an offer on our Web site where people can sign up for a chance to win something, and that captures e-mail addresses. We started in November, with a chance to win a turkey, and we’ve also done a chance to win a $25 gift certificate.”

    Ms. Lyons says providing prizes to staff who gather the most e-mail addresses is a great incentive for reminding them to ask each customer. “The person who collects the most e-mail addresses in a month might get a gift certificate to somewhere, for example,” she says. “Try to come up with something that engages your whole staff to help them understand how critical gaining the e-mail addresses is to growing your business.”

 
 


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