Question: Is Retail The Answer?
A Distributor Asks: We have been in business for four years, operating from a home office with three employees. Sales have doubled year over year and we have the opportunity to move into a 900-square-foot retail space with great visibility on a busy street with a good anchor. We want to grow our apparel, signage, print and award business lines. Any advice?
You need to ponder what a retail—open—space is going to do for you. And what it is going to cost you, not just in rent, but in time.
You now have a home office. You have the luxury of choosing who you do business with. Retail? They walk in your door when they want to walk in your door. It’s a dynamic change. Now, you choose who you sell to and what you sell to them. They walk in the door of a retail space and ask about caps, then they want 12—whoopee! You tell them it’s $15 to $18 each, they smile and leave, go home, get on the internet and find the same or similar cap for $10 and never come back to you. The small retail customer is going away—sorry, this is just my opinion—because they are pounded with offers from the internet and Instagram, Facebook, Snapchat and 10 other touchy-feely, non-human-bit codes.
It’s stuff to think about. However, after having a beautiful retail establishment from 1999 to 2003, I would rather go to the garage, get my biggest hammer and smash my fingers for an hour than pay lease payments to Mr. Landlord—and distract my business to retail and lose focus on exactly what I’m doing.
Who wants to be tied to opening at 9 am and closing at 5 pm or whatever? I like working in my pajamas. I don’t want the people who want 12 t-shirts, etc. It’s not worth my time. Keep doing what you are doing now—and good luck with it.
I moved out of the house about 18 years ago. I bought an office condo, spent about $20,000 in fix-up, bookcases, etc., for a showroom. For 15-plus years, I’d always gone to the customer and was very efficient with my time. A potential new customer called and wanted to discuss a project. Boy, was I excited! She came over a couple of days later, and guess what? She wanted 100 of something cheap, couldn’t make a decision and wasted about two hours of my time. I decided then and there that it was the last time I’d have a potential customer or customers come to me. Retail office space is expensive and if one does that, they need to capitalize that cost into lease term projections. In many cases, smaller businesses are working for the landlord. In hindsight, what I needed was flex space. Non-retail business space that you can buy and triple-net lease to your company is an excellent idea. I still have my office condo and it’s been paid for years. Now the rent flows to me as unearned income. My only thought for someone contemplating this is to really think it through, fully, and consider your strengths and weaknesses. Work your strengths.
Calibre Sales & Marketing
Raleigh, North Carolina
I used to work for a uniform company that had a retail location in Manhattan. My former boss can’t wait until the lease is up, because once it is, he’s closing the store once and for all. Mind you, they’ve been in business since 1938, but the retail market sucks. The best way to go, in my opinion, is some warehouse attached to an office that you can use for a showroom.
Fired Up Promotions
It’s not just tire kickers who will waste your time, it’s local organizations who are looking for product donations. (Some of them have great causes that are hard to say “no” to.) It’s salespeople who are selling paper, printers, advertising space—you name it. Sometimes it’s the other tenants who stop by “just to chat” when business is slow for them. If you need space, a back office in an industrial type of building may be better. I had one and there were fewer time-wasters. You can still divide the space to create a small office for client meetings that you schedule.
We’ve done small office spaces and large retail spaces and my feedback is as follows: the question you ask yourself is whether you are prepared to do one-offs and small-quantity orders, and how much it costs you to do business with one-offs as a result of foot traffic. This is a key metric you need to know.
It costs my company a lot more to do one-offs and small orders than it does to do large orders. The ratio of cost per square foot for office space for small orders versus large orders becomes very apparent, very quickly. I, too, had a retail space, but after a few months, we installed a doorbell to keep the foot traffic out. I have a specific type of client and they don’t come to see us unless it’s a social call. We were in downtown Los Angeles in a commercial district and constantly had questionable people walk through the door, and I didn’t want my employees to feel unsafe. In hindsight, I wouldn’t have leased the retail space. I would have kept our original smaller office space, reconfigured it to keep up with our growth and I would have retained a more profitable bottom line. My ultimate advice? Keep your expenses low, because our industry is tied to the current economy and you never know when stuff happens. Remember 2011? It’s tempting to grow your office space because times are good, but if you can be innovative about your growth without increasing expenses, you, my friend, will have hit the jackpot.
P.S. That’s not to say you shouldn’t move out of your home office. By all means, move to a space that makes sense for your company—just make sure you can forecast for the term of the lease what your profitability will be and whether your company can sustain the expense, even if your revenue decreases.
AB Unlimited Worldwide
Las Vegas, Nevada
I can only advise you of my experience in my 60 years in the industry. Once you have a street operation, you will find that you get a lot of foot traffic, which will take away from your main promotional product sales. Remember where your real business comes from. Don’t lose sight of that. Build your business with your own sales. It’s more profitable.
Marvin Baida, MAS
Do You Have An Answer?
A Distributor Asks: I recently worked with a vendor who printed my client’s logo in the wrong location on a bag. The bags had been shipped to this vendor for printing. The vendor admitted to their mistake and will not charge us for their time or printing, but the client can’t use the bags and we are on the hook for paying for them. Who should be responsible for paying for the bags?
What’s Your Answer? Email answers along with your name, title and company name by April 15 to Question@ppai.org for possible inclusion in an upcoming issue of PPB magazine.
Danielle Renda is associate editor of PPB