5 Main Ways To Make More Money In Your Fashion Business!

So many fashion store owners get caught up in a lot of staff and stock management "activities" and forget this one simple principle. There are only five ways to grow your fashion business:

Fashion retail store success

  1. Get more store traffic (get more).
  2. Have more browsers become paying customers (convert more).
  3. Get customers to buy more items or purchase higher priced ticket items on each visit (spend more).
  4. Get your regular or existing customers come back more often (visit more).
  5. Make more money out of each product line, improve your margins and minimise unnecessary expenses. (make more)

We call these the 5 Profit Centres in a retail store!

Yes, absolutely ‘Stock Management’ is very important to fashion retail store success, but it cannot be the only focus. Here’s how you can MAKE MORE MONEY using the 5 Profit Centres…

Profit Centre #1) Get more people into your store (thats store browsers) – preferably at a lower cost. Even if your conversion to a paying customer remained exactly the same, more store traffic equals more sales. The ‘challenge’ is to find low cost methods to increase store traffic.

Good strategies include advertising, mailbox flyers, fashion shows, referral programs, special events, signage and so on. Look in the ‘new customer marketing’ section in this member’s area for more information and examples.

Profit Centre #2) Get more people to buy. Again, if you improved nothing else but had more store browsers convert to paying customers, you’ll increase the total sales. Good strategies include improvements to store layout, staff training, product placement, signage, pricing and so on.

Profit Centre #3) Get customers to spend more on each visit (this is called the average sale or average cheque). There are literally dozens of strategies to get customers to spend more… up-sells, cross-sells, point-of-sale displays and so on.

Profit Centre #4) Get customers back more often. Utilise our customer marketing services at Kinetic Media & Marketing – we use post, SMS and email to communicate to your customers.

Profit Centre #5) Improve your margins. What’s your gross margin? Your mark-up? Your cost of goods? What’s the relationship between your turnover to staff wages? What are you best selling items? What items have the largest profit margin? How can you sell more of them? What’s the break-down of expenses? Is there a blow-out in one area? How much old stock are you carrying? How well does your store perform again the Australian statistics for retailing?

These are some of the many sub-areas you can look at to improve your margins.

By taking time to improve those 5 Profit Centres, you’ll see an almost INSTANT improvement to your bottom-line store profit!

About the author: I’m Mark Fregnan, founder of Smart Fashion Marketing (Kinetic Media & Marketing) – an Australian consulting business that assists fashion retailers to increase sales and improve business value. Because we have a passion for marketing, our retail business clients enjoy better store and label brand exposure, greater cash-flow and more time off to enjoy the finer things in life!

Retail Shopping Centre Fashion Advertising

Shopping Centre fashion retail advertising

Do you have a retail store located in a shopping centre? If so, I’m sure you’re familiar with the extremely high rent and outgoings bill you receive every month.

Besides the building and services component – a portion of your monthly fee to the shopping centre company also covers centre promotion and advertising. It’s the shopping centre’s role to bring in people so they can charge the retailer a fee for the space. Nothing new with that.

However, it’s actually a good idea to know how much of your annual rent is attributed to receiving store traffic (browsers and customers).

Let say you have a 30m2 store. Figure 1 : Your current shopping centre rent (let’s use $50,000 per annum for simpicity). Figure 2 : The cost of renting a 30m2 office in a street in the back lots of an industrial area (let’s say it costs $15,000 per annum). The difference $35,000, is the annual cost paid for the ‘better’ location (shopping centre v.s. back lots).

Some retailers choose to have a store located in a quieter street location and not in a shopping centre, but in order to create the same revenue, much more money needs to be spent on fashion advertising.

i.e. Shopping Centre = high rent, lower individual store fashion advertising expenses.

Quiet location = lower rent, higher individual store fashion advertising expenses (in order to produce a similar annual revenue).

There is aways that trade-off. Whether one option is better or not for your store really comes down to your level of experience in fashion retailing, your brand and sales system.

About the author: I’m Mark Fregnan, founder of Smart Fashion Marketing (Kinetic Media & Marketing) – an Australian consulting business that assists fashion retailers to increase sales and improve business value. Because we have a passion for marketing, our retail business clients enjoy better store and label brand exposure, greater cash-flow and more time off to enjoy the finer things in life!

Improving Retail Store Traffic : How Many Browsers & Customers?

When it comes to finding out how effective your fashion advertising is (and even the advertising of the shopping centre management – if this applies to you) in bringing people into your store, you’ll need to have a system to measure STORE TRAFFIC.

Even if you don’t advertise – you’ll need to understand which days of the week and which months are your quiet times and which are your busy times.

Simply looking at your retail store sales figures only tells you half the story – how many people made purchases, not how many people came in.

The best way to find out how many people came in is to install a store traffic counter across the entry (or entries to your store). Armed with this information, you can create a more effective marketing calendar and fashion business strategy.

Here’s a small list of some of the benefits of having an automated store traffic counter…

  • Be able to monitor how effective your advertising and marketing promotions are.
  • To be able determine your sales conversion.
  • Know whether you are generating enough store traffic to ensure target sales revenue.
  • Ensure you have enough staff during peak times and be able to reduce staff at quiet times.

Fashion retail traffic counter example

Closely monitoring your store traffic will allow you to refine your marketing and even reduce money wasted on ineffective marketing campaigns!

IMPLEMENTATION : You can get electronic store counters from ‘Total Count’ in Melbourne. This is their web site address :
www.totalcount.com.au

They have inexpensive counters and all the way up to advanced models. And before you ask. No, I don’t get a commission by recommending them. Our clients have been using the counters from Total Count and they have been reliable.

THE KEY POINT : You can’t improve what you don’t measure. Automated systems work best because they don’t rely on humans – if you don’t have a store traffic counter – now is a great time to get one!

About the author: I’m Mark Fregnan, founder of Smart Fashion Marketing (Kinetic Media & Marketing) – an Australian consulting business that assists fashion retailers to increase sales and improve business value. Because we have a passion for marketing, our retail business clients enjoy better store and label brand exposure, greater cash-flow and more time off to enjoy the finer things in life!

Fashion Industry Contacts – Associations

Australian Retailers Association

I recently received an email request for assistance with finding fashion industry contacts. My advice was to visit a number of Australian association web sites. After sending the reply email, I thought other people may benefit from a list of Australian associations involved with fashion. So here they are.

P.S. If you come across any others or have updated information please make a comment on this page and we’ll update our list.

Fashion Industry Association List. Dated (23rd April 2010).

Australian Fashion Council (AFC)
www.australianfashioncouncil.com

Council of Textile and Fashion Industries of Australia Limited (TFIA)
www.tfia.com.au

National Retail Association (NRA)
www.nra.net.au
NRA has a lot of fashion retailers

The Retailers Association (TRA) – now called United Retail Federation

United Retail Federation
www.unitedretailfederation.com.au
Membership Australia-wide.

Australian Retailers Association (ARA)
www.retail.org.au

Fashion Technicians Association of Australia (FTAA)
www.ftaa.com.au

About the author: I’m Mark Fregnan, founder of Smart Fashion Marketing (Kinetic Media & Marketing) – an Australian consulting business that assists fashion retailers to increase sales and improve business value. Because we have a passion for marketing, our retail business clients enjoy better store and label brand exposure, greater cash-flow and more time off to enjoy the finer things in life!

Will A Web Site Make You More Money For Your Fashion Business?

I’m sure every fashion retailer would be in favour of having a web site for their business – but not every retailer actually has one. Why is that?

Fashion Advertising on the internet

As always, I believe the question comes down to cost and return-on-investment (ROI). Websites aren’t cheap. There is a cost to designing an unique site and the hours of graphic and web programming involved.

In order to figure out the return-on-investment for a fashion retailer, let’s look at the some of the benefits of having a good website :

  • 24 / 7 convenience : A customer or a potential new customer can browse your website to look at the latest styles and fashions you have available.
  • Customer assistance : A customer or a potential new customer can look up your contact or location details. They could view the outside of your store, it’s location on a Google map, or find what your opening hours are.
  • Mailing list : A customer or a potential new customer can sign up for your fashion eNewsletter which is a great strategy for increasing sales.
  • Web search : A potential new customer who has never heard about your retail store before comes across your website after a search for a particular brand.
  • Recommendation :A friend of a potential new customer recommends your store and that person visits your web site to find out more.
  • Branding : If you are seeking to build your brand, a good web site will assist in the brand-awareness process.
  • Publicity : Someone browsing the internet, comes across some news or information about your store on another site and then visits your website.
  • Credibility : A good retail web site lends credibility to the business.
  • Online Advertising option : A web site is a requirement for online fashion advertising. Online advertising is an effective way to bring more customers to your business.
  • Online sales : Generate sales 24 hours a day, 7 days a week. People visit your site and make a purchase. Generally speaking, online sales are better suited to fashion items like jewellery, footwear and accessories. But, clothing can be sold too.

I’m sure you’re now impressed with some of the major benefits of having a fashion store web site, but in order to maximise those benefits the web site needs to be designed in a certain way. Keep an eye out for my next post…

About the author: I’m Mark Fregnan, founder of Smart Fashion Marketing (Kinetic Media & Marketing) – an Australian consulting business that assists fashion retailers to increase sales and improve business value. Because we have a passion for marketing, our retail business clients enjoy better store and label brand exposure, greater cash-flow and more time off to enjoy the finer things in life!

Should You Let Your Accountant Run Your Fashion Store?

I usually have several conversations a day with fashion retailers… existing clients and people enquiring about our marketing services. One such conversation with a prospect business (not a client) last week (early March 2010) was with an owner of a small fashion store who also managed an accounting firm with his wife. One of first things he said (I won’t mention his real name – but let’s call him Peter) … was "The store isn’t doing well". Peter’s comments weren’t anything new… I’ve been hearing about slow retail sales from mid-January this year (2010).

Fashion Store Accountant

 

When Peter said "The store isn’t doing well", to be honest, I was a little annoyed. Peter and his wife had contacted me in January I had given them one particular strategy to increase sales. Guess what? That’s right, Peter didn’t implement it at all. Two months later he calls to tell me how lousy sales are.

Now this particular strategy had zero cost – yep … zero cost!

Peter’s reason for not implementing the strategy was…. drum roll … "…we were too busy...". Yes, too busy losing money.

Don’t get me wrong, I have good friends who are accountants, but an accountant’s mindset about running a business … is 1) Financial management, and 2) Cost cutting.

Accountants don’t know much about marketing and sales – they foolishly see it as an expense rather than an investment. That’s why big businesses have an accounting department separate to the marketing and sales department. You and I, as entrepreneurs, value accountants for 1) Minimising tax, 2) Preparing accounting statements and keeping the ATO happy, 3) Giving advice about gearing and balance sheets – that’s it – don’t ask an accountant if you should spend more money on marketing!

If you, or anyone else in fashion retailing, is hurting (financially) make fashion marketing and sales your top priority.

About the author. I’m Mark Fregnan, founder of Kinetic Media & Marketing, an Australian consulting business that focuses entirely making our clients MORE PROFIT WITH LESS EFFORT. We understand the financial and time pressures felt by small business owners especially in a competitive marketplace. We rely on our proven marketing and business strategies along with smart systems to produce and maintain a healthy increase in sales and profit for our business clients.

Magazine Fashion Advertising

Once you have thought about your target market and have designed your new advertisement aimed at that target market, you can now find out where to advertise. There are literally thousands of places to advertise your fashion items (clothing, footwear and jewellery).

I will discuss various advertising media in future posts on this web site, but for the moment let’s look at one obvious one, which is Print – magazines. To see which particular publication or publications match your target market, look at the readership demographics and psychographics information. Here are some of the ways to do this…

  1. Pop down to your local newsagency and purchase a half dozen magazines based on your understanding of the market for each publication. Read through each magazine to get a feel for the target audience. Which ones are suitable for your fashion advert?
  2. Borrow a copy of the Margaret Gee’s Australian Media Guide (you can usually find one at your state library).

Fashion advertising media guide

The Media Guide is a comprehensive listing of all newspapers, magazines, TV and radio stations in Australia together with key journalists’ contact details for each.

  • Contact details (address, phone, fax, email) for both individuals and outlets
  • The advertising rates and deadlines for each publication
  • A concise summary of the audience of various media outlets
  • Precise details regarding subscription, circulation and cover price of each publication

Now we’ve covered fashion advertising style, target audience and have chosen suitable magazine media. Go to it!

About the author: I’m Mark Fregnan, founder of Smart Fashion Marketing (Kinetic Media & Marketing) – an Australian consulting business that assists fashion retailers to increase sales and improve business value. Because we have a passion for marketing, our retail business clients enjoy better store and label brand exposure, greater cash-flow and more time off to enjoy the finer things in life!

Image and Branding for a Fashion Business

Image and Branding is a strong motivator for fashion retailers but what do these concepts actually mean?

Simply, ‘Image’ is the perception (picture) that consumers have about a particular business at any one point in time. Whereby, ‘Brand’ is the relationship between the business and the consumer’s values. For example, when a consumer looks to purchase a running shoe they may think of Nike because of it’s alignment with winning and achieving.

fashion business marketing brand

Image and branding has everything to do with identifying your target market, identifying the values that are important to your target market and then creating an image and a brand that relates to those values.

Trying to cover all demographics and values is not recommended because it would be very difficult to achieve effective branding economically. The consumer will be disappointed with the product and the business.

For example, promoting luxury airline tickets whilst actually hearding travellers into small seats and delivering poor customer service will upset those consumers and word will get out and damage the ‘Brand’. Conversely, entering the marketplace promoting high levels of service at a cheap price, will hurt margins for the business and will unsustainable in the long-term.

Typically a brand will consist of an unique mix of values for a fashion business, such as :

  • Consumer benefits,
  • Style,
  • Durability (clothes, shoes and jewellry)
  • Quality,
  • Price,
  • Consumer age target (e.g. children, young adults, mature adults, Generation X, etc),
  • Image projection (conservative, hip-hop, professional business, modern, sportswear, etc),
  • Culture,
  • and so on.

Branding can also be broken down into ‘external’ and ‘internal’. External branding is prodominately used to create new customers for the business via mass advertising, such as print, internet, radio and television.

Internal branding is reminding existing customers that you value their business of which the aim is to increase repeat sales from those customers. Internal branding will typically use such media as email, SMS, direct mail and the telephone.

Creating an image and a brand for fashion retailers is not about flashy and slick advertisements. It’s about getting your key customers (target market) to recognise your business as their prefered choice for the products you provide.

About the author. I’m Mark Fregnan, founder of Smart Fashion Marketing (Kinetic Media & Marketing) – an Australian consulting business that assists fashion retailers to increase sales and improve business value. Because we have a passion for marketing, our retail business clients enjoy better store and label brand exposure, greater cash-flow and more time off to enjoy the finer things in life!

27 Questions You Should Ask Before Buying A Fashion Retail Business

I met the husband and wife owners of a small retail shop recently. The business was running at a $65,000 (approx) annual loss. They had purchased the business over 12 months ago and had been steadily losing money. I looked briefly at their books and realised they had paid too much for the business. On top of that, both of them had no retail business experience and they had decided to cut out all of the advertising that the previous business owner had been running – due to cost reasons only.

I asked them how much research and due diligence had they conducted before buying the business. I was shocked by their response…

Don't sign to purchase a fashion retail store without doing your homework

"We asked the solicitor who was performing the business settlement service if the business was a good buy."

In otherwords, they asked after the sale… Talk about throwing money away. Needless to say, they no longer have any available capital to invest in marketing or anything else. The outcome will be to close up shop and accept the loss, and the lesson.

 

This is real important…

I’ve spoken to and met with many business owners who have paid too much for their business (and not just fashion retailers – all types of businesses). It’s like paying $100,000 extra for a house. The problem is that usually the extra capital has been borrowed which puts a strain on the business cashflow. Often it’s very difficult to recover from this situation.

To gain $100,000 in net profit in a fashion retail store may require at least an additional $800,000 in sales revenue (i.e. on a 12.5% net profit margin).

$800k in ‘additional’ (over and above existing) sales revenue which isn’t a very easy thing to achieve in a short-time frame, i.e. 12 months.

So how do you actually avoid this type of business disaster?

Do your homework – Ask yourself these questions…

1. What do I want from being in business?

  • Freedom to do ‘my’ thing?
  • Be an entrepreneur?
  • To make more money than being an employee?
  • Work fewer than 30 hours a week?

2. Why am I going into a fashion retail business?

  • For lifestyle (to work fewer than 40 hours per week, with the freedom to go on holidays whenever you choose)
  • To make a profit by building the business up (increasing sales) and then selling it.
  • To generate more cash-flow than than a 9-to-5 job.

If your reasons are not listed above (lifestyle or profit) – don’t buy the business. If you want to be involved in retailing out of interest and passion for fashion – honestly it’s much safer to be an employee.

3. What will be my exit strategy to get out of the business?

  • Sell the business for a profit
  • Sell the business to a major shareholder(s) and become a silent partner
  • Pass the business down to a family member
  • Franchise

4. What skills do I have that will make me successful in this business?

Please don’t think that all that is required to ‘improve’ the business is cosmetic – by changing fashion labels or re-designing the store interior. Unless the store has poor stock and an ugly showroom – these ‘improvements’ won’t double sales.

Only very good marketing, a good sales team and good systems will increase sales significantly. Sorry, I’ve seen many business owners take over an existing fashion retail store – changing labels and interior perhaps at best has increased sales by 30% initially and then nothing after that.

5. What skills will I have to “hire in”?

  • Sales staff/assistants
  • Bookkeeper
  • Fashion buyer/consultant
  • Sales trainer
  • Outsource marketing?

6. What monthly cash-flow do I need?

  • To pay myself a decent wage
  • To cover all the retail business expenses
  • To cover the repayments if I borrow to purchase the business
  • Additional business profit

7. How much working capital do I have access to?

Can I get an overdraft to cover seasonal buying?

8. Will this business suit me i.e. hours, type of operation?

To ask the vendor who is selling the business…

9. How long has the business been operating?

10. How long has the current owner had the business?

11. Why is the current owner selling?

  • Worn out from working long hours for little money?
  • Couldn’t make the business work (perhaps in it’s current location)?
  • Actual legitimate reasons such as retiring, moving to another state or country, or looking for another challenge in another business?

If it’s retiring – also be aware that may business owners in their 50/60s hang on to a unprofitable business (maybe paying themselves a very basic wage) because it was too difficult for them to have sold earlier and got a job.

12. What is the Cash flow and Profit (Gross and Net) for the business?

13. What is the business owner paying him/herself?

14. What do the last 3 years of financial accounts show?

15. How has the business been valued?

16. Who are the key customers, suppliers, staff?

17. What are the terms and length of any leases?

18. Will the current owner stay on and assist for a period of time?

Ask them to put this period in WRITING!

19. What areas of the fashion retail business are systemised?

For example:

  • Point-of-sale (POS)
  • Bookkeeping
  • Marketing / customer marketing systems
  • Website / social media (e.g. Facebook)
  • E-commerce website

20. Is there a business plan?

21. How many hours a week does the current owner work in the business?

22. When was the last time the current owner took a holiday?

23. What is the marketing systems like? Do they make money for the business?

Review all advertising material, the customer database, the POS systems, any loyalty programs, special promotional material, etc.

24. What facts support the "story" of the business?

25. How secure is future income i.e. contracts with customers and suppliers?

26. How dependent is the business on the current owner?

27. What will it take to grow the business so I can sell it for a profit?

Fashion stock

Often this is the BIG ONE – many fashion retailers overcapitalise in stock in relation to the store sales annual turnover. Ask your accountant is there is too much capital tied up in stock on the balance sheet. If there is – don’t buy the business!!! Tell the vendor. You can either wait until they sell down the surplus stock at regular prices, or they can offload it at cost. Don’t let their past buying decisions become your problem!

Before you make an offer

1. Get your accountant to check the financial accounts

Obtain actual lodged tax returns with the government, not the business owner’s printout or handwritten bookkeeping summary.

Your accountant will ensure that the business has cashflow and is not over-capalised.

2. Hire a solicitor who is experienced in buying fashion retail businesses like the one you are looking at.

Your solicitor will ensure that the contracts with suppliers, the landlord, etc don’t have any surprises.

3. If you are spending over $250,000 on the business, or even if you want to be extra careful, pay for a business valuation.

Pay a licenced valuer to come in and audit the business. Even if you have to spend $7,000 for the valuation, it’s still much better than paying $50,000, $100,000 or more than you should have to buy the business.

You may even be able to ‘use’ the valuation to negotiate a better price.

The lesson

Homework always pays off in business. Sure, there is a lot of questions (above) – but, like with real-estate, the profit often is made when you buy the business, not when you sell. Taking shortcuts and buying a business on emotion often lead to regrets. Don’t let this happen to you.

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