Retail Management: Are You Thinking Like A Customer Or Merchant?

By Bob Phibbs
May 2013

Whenever I look at a business that is not making money, it's usually because the owners or managers are thinking like a customer or employee rather than a merchant.

It starts with not pricing correctly.

”Oh, I wouldn’t pay that much for this item,” they say. Knowing how much a product costs somehow devalues its worth in their eyes. Since most owners or managers have never taken a course on pricing or examined their financials, they may mark it up less than keystone.

One guy I met at a recent speech sheepishly admitted he purchased an item at $10 and priced it at $15. But merch should be marked up keystone (that’s double) + a few bucks so the business is profitable.

That’s what merchants do.

You may not be able to do this on every item, but you have to consciously choose items that need to be priced-competitively, and others on which you can make up lost

Otherwise, you'll end up dumping money into the business, rather than cashing it out.

This fuzzy thinking continues with employee flexibility. Instead of implementing a set schedule that a manager can knock out in an hour or so, the manger lets employees give them their availability week by week, and then tries to plug that into a schedule. This results in hours and hours of wasted time, and store coverage is compromised.

Merchants come up with a set schedule based on demand, then fill it based on ability to sell the merch. That allows the managers much more time to train, monitor and sell on the floor. That tight ship also helps them let go of bad new hires more quickly.

Thinking like a customer shows up in marketing and promotions featuring endless freebies, 2-4-1s, or discounts. One local gift store offered free gift wrapping on Feb. 14. The busiest day of the year for them, when people would have paid anything to have someone wrap their gift, and they just gave it away.

How did they come to that decision? They thought about how great it would feel for a customer.

As a customer, imagine a florist giving away free same-day delivery on Mother’s Day, or a wine store offering 30% off champagne December 31. Wouldn’t that be great?

But that mindset of getting a great deal like a customer can make it so that you don't profit as a merchant.

Thinking like an employee cripples managers from doing their job as a merchant when they don’t write people up for being late, rudeness or their inability to perform the job. Those managers' judgement is fuzzy because they want to be nice, liked and popular.

I had a boss who once said, “You’re only as good as your last sale.” Brutal. He was a merchant.

Understanding the clear mindset of a merchant versus the fuzzy one of a customer or employee should help you when a tough decision needs to be made. Ask: Am I thinking like a merchant looking to profitability, or like a customer or employee looking to be nice?

Be profitable. Be a merchant.