There appears to be evidence of retail rebounding all over.  However, the evidence is weak.  This recent report says shoppers are “tiptoeing back though they haven’t dramatically changed their shopping patterns.”  We quickly compiled some interesting statistics on retailing and the money in people’s pockets:

• The International Council of Shopping Centers reported a 3% increase in retailer sales compared to January of 09.
• Nordstrom reported a 14.0 percent increase in same-store sales for the four-week period ended January 30, 2010 compared with the four-week period ended January 31, 2009.
• Unemployment rate dropped to 9.7% from 10%.
• Personal savings rate is slightly up for Q4 2009.
• Real disposable income rose .4% in December 2009.

All of the above seem to indicate the corner has turned on the economy and therefore the retail sector should follow suit.  Are you seeing an increase in the last two months?  Is this a glimmer of hope?

Some of the things I noticed at this restaurant caused me to write this blog entry.  Here is how they implemented price lowering:

• As already mentioned, a loosely draped banner was hung over the storefront
• Throughout the menu, almost every menu item had a piece of tape placed over the old price and a new price handwritten in
• A couple of handwritten signs were taped in the interior

They implemented price lowering all wrong.  They should have followed the below 5 steps.

Step 1:  Don’t lower prices Ha!  I bet that was ironic!  Of course, people like prices to go down.  However, subconsciously, we know when prices are lowering merchants are in (or near) trouble.  Instead of using phrases like ‘lower prices’ use phrases like ’specials’ ‘discounts’ or ‘promotions’.  These words accomplish the same task of lowering prices but don’t smack of desperation.

Step 2:  Do some competitive analysis When having a promotion, make sure your pricing is competitive.  You won’t want to lower prices too much, you also don’t want to lower them too little.  Do some undercover work.  What pricing are your competitors offering?  Can you beat them?  If not, can you at least beat them on a couple of teaser products?  Are your competitors in the same boat as you?

Step 3:  Limit the promotion You want people to take action.  You want people to take action NOW.  You also want to be able to increase prices in the future.  To accomplish all these goals you need to place a time limit on the promotion and make that time limit apparent.

Step 4:  Get the word out Merely putting up a banner in front of your store barely lets anyone know about your promotion.  You need to take advantage of what is available on the internet (like StoreCatch’s free sale listing service) to get the word out.  If you have massive funds, you can advertise in local newspapers and magazines.

Step 5:  Don’t look desperate Common signs of desperation are: handwritten signs, tape over prices, no customers during typical busy times and many others.  Stay away from these tell-tale signs.  Take the time and effort to at least pretend this sale was just a normal course of business. Signs should look professional, order forms unified and they all should tie together.

The Chinese restaurant went about their price lowering strategy all wrong.  I felt like I was in a place which wouldn’t be around in three months.  If they had completed the above steps, it would have felt like a normal course of business instead of gasps of air from the dying.

Got any other strategies?  Let us know!

crowd happily shopping

Trend One – People increasing look to the internet to learn about and compare products

According to internet retailer, 50% of broadband users say the internet influenced a recent purchase.  When you look around, how many people do you know that consume beyond the basic necessities yet don’t have a broadband connection to the internet?  I would guess not many, and the number is dwindling rapidly.  Follow me here – lets say you need a new winter coat.  How will your search begin?  If you are like me, you will pull up your trusty browser, go to a search engine and type in ‘winter coat’. You will find two or three that look good and attempt to find them locally. Once found, you go try them on and eventually buy. Researching products online are now a way of life.

Trend Two – Reviews Rule

More and more, people are searching for reviews before purchasing a product.  In fact, according to Rubicon, the second largest influencer in purchasing decisions is online reviews.  It is easy (albeit not necessarily safe) to trust product reviews.  The more colorful the review, the more trustworthy. It seems, the ‘5 star’ system is the standard. How many reviews does it take to make the ratings trustworthy? I think that number is around 4.

Trend Three – Price is King

Has price ever not been king?  I suppose not,  but in these current economic doldrums, price is increasingly the paramount aspect to a successful sale.  With (unemployment around 9.5% as of Oct 09), consumers have less to spend.  That would suggest they are more price sensitive than in the past.  The lowest price is winning a greater number of customers than in the past.  You must focus (almost singlemindedly) on price and how to lower it.

The question now becomes, as a retailer, how are you reacting to these trends? Tell us what changes you have made recently!

While this is mildly exciting for our neck of the woods, I can’t help but wonder, what is the big deal? Don’t these guys just sell burgers? In fact, I often hear questions from friends and family ‘what is so great about them?’.  I decided I would try and find what they are doing right.  Talk about a crowded market space – McDonalds, Burger King, Carl’s Jr, A&W and various local competitors!  They seem to be competing strong with much more established players.

Bias disclosure: I should mention any biases I may be subject to before I continue… 1. I like burgers, I probably eat one every 7-10 days. 2. I have been to In-N-Out in the past, one in San Diego, one in Las Vegas and one in St. George. All were ok experiences, not memorable. 3. I seem to have a general favorable impression about them, I am not entirely sure when or how that got generated.

So, I decided to trek down to the new In-N-Out in Draper, Utah.  My intent was to pay attention to everything and see if I could pull out what makes In-N-Out highly successful.

The Scene

Upon arrival, on a Saturday evening,  I was greeted with a line out the door.  Parking nearby had been hard to find.  The line moved fairly quickly.  As you have no doubt heard, In-N-Out’s menu is quite lean.  You have a choice of 3 combo meals.  No kids meals.  You can choose to have a shake instead of a drink.  You may also customize the burger (vegetables and condiments).

The decor is cohesive – red and white and sparse.  It reminds you of a 50’s diner.  The employee uniforms reinforce the diner theme.  All are dressed in red and white and have on exactly the same hats, shirts, pants and aprons.   Besides the menu, and exits, there is a sole sign which reads “Quality you can taste”.

The Experience

Once the food was ordered, we were forced to stand to wait for our food.  All seats were taken.  I mean every single sittable area was occupied.  We waited at least 10 minutes for our order.  I rarely wait that long for ‘fast’ food.  Then, it came time to find a seat.  As you can imagine, with such demand for seating, it was cutthroat.   We were vultures circling for vacancy.  My wife ended up sitting next to a stranger to ‘claim’ the rest of their table once they were done.

The restaurant was quite clean.  Incredibly clean considering the traffic flying through it.  It appeared there were two employees whose sole job it was to clean.  Tables were cleaned the moment people got up to leave.

The prices were great!  The price for a cheeseburger combo in Utah was $4.82.  I didn’t think it could be beat.  However, I checked a local McDonalds, and their quarter pounder combo meal is $4.79, beat by 3 cents!  When comparing In-N-Out’s combo to McDonalds, I felt like the former was a much healthier and fuller meal.

Finally we settled into our meal.  The hamburger looked appealing but nothing special.  Lots of thick vegetables with the meat.  The fries came with salt on the side (nice touch).  The Fries quantity was generous although my shake was rather small (12 oz).   The burger was good, but nothing better than what I get at Carl’s Jr.  Certainly better than McDonalds.  The fries seemed slightly healthier and tastier than traditional fast food fare.  When they were mostly consumed I noticed there weren’t oil stains on the bottom of the carton.  Nice!

During the entire meal, I felt like I was being watched.  The coyotes were howling for my table.  It wasn’t comfortable.  However, an employee came up and asked how our meal was, that helped ease our comfort.  We ate quickly as we felt bad for the standers.  I didn’t even finish all my fries (which is rare).  We tossed our trash and left (although it looked like an employee there was perfectly willing to do it for us).

What In-N-Out is Doing Right

So, with that experience in mind, here is what In-N-Out is doing right:

• Quality food -  whether perception or reality I felt like the burger was done just about as well as possible (for fast food).  The quality stemmed from the lack of grease, fresh vegetables, great taste, nice packaging and a reinforcing yellow-bulbed sign.  The food preparation was also nicely done.  Lots of packaging on the burger so you don’t slop on yourself.  Since Carl’s Jr. is the pinnacle of fast food burgers (in my mind), this would be just slightly below them 9.5 out of 10.
• Pricing -  The prices were fantastic.  I couldn’t get as much food for the same price anywhere in town (based on my current awareness).  They are at or near the bottom of the pricing range for burgers.
• Customer service – Employees were helpful (they held the door open for us), cheerful, friendly and incredibly clean looking.  They treated customers well and seemed to be getting good treatment themselves.
• Laser focus – In-N-Out focuses solely on hamburgers.  That is all you can get there.  This means the three above qualities can be honed around just burgers.  They don’t cater to everyone and don’t seem to care.  They emulate the old adage ‘do one thing and do it well’.

Final Thoughts

I am starting to see why In-N-Out is so popular.  I enjoyed their food and prices.  If  I (and everyone else with me) want a burger, they are now on or near the top of the list.  Strangely, while standing or eating, I overheard at least 3 people exclaim how much they love the food.  I don’t hear that at other fast food restaurants.

To be fair, my experience there wasn’t fully awesome.  Frankly, I don’t want the stress of finding a location to sit and being rushed so others can sit.  When you find me at an In-N-Out it will be at the drive through, not the interior.  Also, there must have been 25 or more employees working that evening.  I would guess at least 1/3 of them didn’t have enough things to do – there was plenty of standing around staring at walls.  Maybe that was just new-restaurant inefficiencies.

What does this mean for retailers?  Well,  you just follow In-N-Out’s pattern.  Focus on doing one thing incredibly well.  Make sure quality, pricing and customer service are all tuned to the one thing.  Beat everyone else at that one thing.

Any thoughts? Tell me!