Archives for March 2007

Yesterday, in his New York Times column – and on his blog – David Pogue wrote about the gutting of CompUSA.  They are closing half of their stores.  Pogue's article caught my attention for several reasons:

1) I advise several retail clients in the music products industry.  And if an established store operation like CompUSA can fall to the rise in competition – or its own irrelevance – what does that bode for for the future success of my clients?

2) Pogue speculated that the main reason CompUSA was forced into this severe downsizing was low-ball Internet pricing.  Actually, CompUSA's  pricing policy was not even competitive with other retail stores – e.g. Circuit City or even Target.  Even now, as they close the stores, they are only offering a token 10% discount on a “no returns / final sale” basis.  Big deal!  Or rather ,,, not a big enough deal to attract anyone's attention or dollar bills.  Many of my potential clients are scared and clueless when it comes to setting  – and sticking with – competitive prices.  This development is not giving them encouragement.

3) Later in the article, Pogue lamented the disappearance of the the “local” computer store at a time when many people find themselves crying out for help – because they feel so “technologically helpless.”  The complexity of setting up home networks, integrating computers and home theater systems, changing operating systems, fighting viruses and spam – you name it – it is all so complex (for a time-pressed population.)  What lessons can my music products industry clients take away from the (partial) demise of CompUSA?

PLENTY!

Let's start with pricing, service, selection and then move on to building relationships with your customers.

Pricing:  Your pricing must must not only be competitive – it must be “dynamic” – you must have the ability to both raise and lower your prices to meet the ever-changing demands of your customers.  Some of the products that you sell are truly commodities and therefore they are extremely “price-sensitive.”  You should not try to “beat” Internet pricing but you can not afford to be “out of line” either.

Other product lines can be priced higher.  These are not commodities.  They are “desirables.”  They either have a certain “cache” or they are not available everywhere else or … they require more sales assistance in making the sale or more service opportunities (installation, check-up, etc.) after the sale.  These products deserve and can command a higher price.

Service:  Pogue's article was right on target when he described the shopping experience in a CompUSA store.  (Click here to read it yourself.)  Here is what Pogue said about the CompUSA staff:

“The company’s corporate spokesperson at the time acknowledged, 'Getting staff is a problem across the board. We need specialized talent; finding it can be a challenge.'

Between her lines, you could read the truth: technology experts are in demand everywhere. At $6.50 an hour (what CompUSA was paying at the time), you’re not going to attract many people who, ahem, excel in both personal and technical skills.”

Perhaps a better model to follow (if you are a retailer) is Best Buy stores and their crack service and systems installation team – “The Geek Squad.”

The dilemma for many music products (and electronics) dealers is: 

1) A significant part of my sales come from prices that are considered “commodities.”  I can't afford to pay good wages to my staff and remain competitive with Internet pricing on these “commodities.”

Hint:  You don't sell these “commodities” – competitive pricing sells them.  You don't need skilled and higher paid staff to sell these products.  Just price them right and let them sell themselves.

2) I can't train my staff to acquire the skills (product knowledge and people-skills) necessary to sell higher-end products.  I am also having a hard time retaining the staff that I have – there is a high turnover ratio.

Hint:  Take a close look at what Best Buy does with their electronics.  The higher-end products are in their own retail space – sometimes in their own store (Magnolia)   The sales staff is not a Best Buy clerk.  These are sales professionals.  They know the product.  But they are really trained to understand the needs, desires and the requirements of this customer.  And … they have the services of “The Geek Squad” to ensure customer satisfaction – i.e. “No wires showing!”

3) Selection:  You can't be all things to all people!  You can't possibly stock and sell every brand available.  Leave that to Amazon.com and other “Long Tail” retailers.

Hint: Offer your customers a choice – but make it limited and focused.  A proven strategy is offering a “Good, Better, Best” product line-up.  Do not confuse the customer with too many choices – the result … no choice!

4) Relational vs. Transactional Sales:  You can concentrate on the “transaction” – the customers who know what they want and they demand the lowest price or else …  If you choose to remain in this rut – well, just read the CompUSA story once more and this time insert your own store's name.  Or … you can focus your energy on building a strong relationship with your “core customers.”  Don't just make one sale.  Sell yourself and your interest in earning the next sale to that customer and … sales to the friends, family and neighbors of that one “satisfied” customer.

It can be done.  Local dealers can learn to thrive and survive.  Learn from the mistakes that CompUSA made.  Find your niche.  Grow your market.  Be different!