Monday, July 26, 2010

Cool your Customers

UPDATE: August 31. Now cashiers can no longer just type in the register for the ice purchases - they have to go get a bag from the ice machine, bring it back, wand the price, then bag it. That will solve people stealing ice, won't it!

In retailing, even the most benign rules you give to your employees can go awry.

On my way home today for lunch, I stopped in our local big box store to pick up a bag of ice. I bought a bag of ice and as I was leaving the store, the greeter called me back inside and asked to see my receipt for the bag of ice. The greeter was an older lady in a motorized chair - she had to drive up to me. So I went back in, showed her a receipt and was able to leave. As I did, the man behind me remarked on the absurdity of this situation and laughed.

I am sure this greeter was told to 'check all receipts' for ice. I suppose that occasionally someone walks out with a $2.14 bag of ice that they did not pay for. I doubt they are in business attire on a Monday morning at 11am. And if I had been wanting to steal the ice, I could have easily outdistanced the greeter on the scooter merely by walking away!

When you give your employees a rule and no exceptions you are likely to get results in ways you probably wouldn't want.

I like to buy ice at the big box store as it is cheaper than the local gas station and not too inconvenient. But if I have to worry about checking out with the greeter if I run in for a bag - I will go somewhere else. So a 5 cent bag and a bit of water are sufficient to stalk people as they leave the building?

Nothing cools the enthusiasm of your customers than rules that make them seem like they are a crook. Be sure to balance your need for stock control with their freedom to shop. You might need to allow a bit of ice leave - melt away so to speak - rather than risk losing future sales.

Thursday, July 8, 2010

Retailing: of Chocolate and Frozen Yogurt

My wife and I stopped into a local retail store that sells specialty chocolates. There were many individual chocolates lined up in the display case, much like a doughnut shop. We selected four chocolates in a couple varieties we wanted to buy and after a wait, the employee weighed the chocolates and charged us by weight, not unit. The price was $2.50 per chocolate; our sale totaled $11.49 for four normal sized truffles. We were shocked - it just seemed like that was expensive for chocolate. We probably would not go back, and would be very careful if we did.

A few weeks earlier, we went to a local frozen yogurt shop. You may have seen one of these stores which have 15 soft serve spigots with different flavored yogurt, and then a large selection of toppings. You grab a cardboard bowl and then fill it with yogurt and toppings. The resulting sundae was also weighed and the price set accordingly. The price was a bit higher than we wanted, but we felt like if we returned we would know how much to get.

Two retail stores, both using weight as a method for charging customers.

I would argue the chocolate shop is making a serious error in charging by weight. Since a chocolate is discrete, you wouldn't normally think about it as something whose value is in the weight. Moreover, this particular chocolate is very high quality - but weight is not usually a sign of quality. If your customers are unable to gain a sense of what something will cost going in, they are likely to shy away from the shop. Consider a father with his kids - he certainly does not want to get caught with a large bill for a small amount.

Finally, since there was no signage that the chocolates were going to be weighed, I had no way to know what they would cost. Nor do I have any sense of what a chocolate weighs.

But in the case of the frozen yogurt, I know how big a bowl I eat of ice cream - by going once and creating my sundae, even if it is more expensive than I thought it would be, I can now size future sundaes appropriately. How could I do the same with a single chocolate?

The moral of this is not to go have dessert with me.

Perhaps a more useful moral is that as a retailer, be sure that your pricing model fits with your customer expectations. My example of a doughnut shop above is instructive - we all know that doughnuts are sold per piece. I, as an experienced doughnut eater, also know roughly what a doughnut would cost.

If you are going to break that expectation, you had better make sure right up front that the customer understands what you are doing, and in a way that he can know roughly what it is going to cost him to get out of the store. No matter how good your chocolate.