Surviving in a down market to thriving in a recession.
As we move through the summer of 2022 we begin reaching the point in time where "I told you so" becomes a reality. I take no pride in stating I have been calling warnings about the entire nation's economic state since 2020, which has gotten us to where we are. I further take no pride in stating that I believe we are not near the bottom of the dip. We still have an increase in fuel costs coming, an increase in food costs coming and an increase in life costs coming. Heavier inflation IS on the way. This will put a tighter hold on the individual wallets of many customers within the recreational world skateboarding lives in. Let's be honest, as much as we love to say skateboarding is a "way of life" it will eventually come second to food, groceries and family.
So, how do we, the dealers and producers of skateboarding goods, survive with a downturn in the industry? Well, we can not only survive but we can also thrive!
We first need to understand in today's world of bad policies and bad politics by world "leaders" that recessions are a very real thing. In 2008 - 2011, the US went through what is now called "the great recession". During that time, fuel hit all time highs (lower levels than today's costs), banks began to fail and the US government took over car companies and began forcibly closing doors to multi billion dollar private corporations. After some hardship, the nation's economy began to circle back around and grow until late 2019 when we saw our strongest economic standing the United States had ever seen. In 2020, Covid hit and through what many are now finally coming the the agreement of, bad policies were made which shut down world economies and "fake" money was printed by the US Bank which triggered the beginnings of extreme inflation. We are now in 2022 and a new administration is in office who has since made equally bad financial decisions, tumbling us further into the hole.
I say all of this but also want to press that IT IS NOT THE END! IT WILL GET BETTER! We just have to ride out the "storm" if you will.
So, how do we ride it out? Well, there are some basic strategies to keep things motivated and moving within your own economic world and community.
REFERRALS
Word of mouth is one of the oldest and most successful ways to gain advertisement for your business. The best part too is that it is ABSOLUTELY FREE! You do not pay a single penny to live "rent free" - as they say - in someone's brain.
I shouldn't have to say that providing good customer service is a fantastic way to make a new customer out of the stranger who just walked into your store. But once you have him sold with solid advice, friendly conversation and a great experience, ask for a referral.
According to Mckinsey Research , word of mouth is the primary factor for 20-50% of purchase decisions. But, most companies, for some reason, tend to shy away from asking for referrals. Don't be scared. THIS IS YOUR LIVELYHOOD!
After you have spoken with a customer and provided him/her with the best experience your store can give, ask them for a referral. Simply state "Hey, thanks so much for coming in to see us today, please let your friends know to check us out!". Even if that customer did not buy anything that day, the solid foundation to a good relationship you just built can let him turn around and tell two or three friends about your store. People are up to FOUR TIMES more likely to buy from you when referred from a friend. Imagine how many sales you can make if you simply followed this one rule.
At Schlaudie, we began a Skateshop Sponsorship program in early 2022. In collaboration with local skateshops, we take a sponsored rider of the local skateshop and hook them up with Schlaudie product. By doing so, it has increased the sales of Schlaudie within those individual markets and in turn, assisted in turning sales for those local skateshops. When the correct local rider is supported, it is a solid way to bring in referrals. We are always looking for more shop riders to support and in collaboration with local shops nationwide, help build stronger communities and help shops survive this short economic drag.
RETENTION
Many companies focus so much on how to bring in new customers that they completely forget about the customers and friends they just earned. This allows that customer to get pushed out the back. Much like we all saw in the early 2000s with cell phone carriers, "Get a new cell phone when you switch from the other brand" but the old loyal customers are paying hundreds for phones while paying full price for monthly service. What do your loyal customers get? Don't let those who already know you get away!
During a peak height when sales are good, much like we saw in 2020 and 2021, brands and stores can get away with letting a few customers sneak away but during an economic downturn, we need to keep everyone we have. Keep them happy and keep them returning. A happy customer will not only shop with you again but they will send out referrals and tell their friends to come see you!
FIND NEW BRANDS AND PRODUCTS
When sales begin to fall and revenue begins to slow, many people tend to try and shy away from exploring outside options for sales. They tend to build a wall and say "I have to sell what I have". In reality, this is a great time to try and find new means for sales. This is a time to get creative and more so, SELL. Many in the retail world have a relaxed sales posture. "Sit back and someone will come buy it" Well, in a down market, you need to become a salesman. Find products to generate new customers while simultaneously working the customers you already have to try something new.
I hear it over and over again from shop owners "My customers only want XXX brand" To a certain extent, your customers are doing exactly as they are told. They typically want major brands with the million dollar advertising budgets and those million dollar ads are feeding them the "my product is better" message, which is what the ad is meant to do. But, look at those major brands from an inside perspective. What is the major brand's profit margin? Is it high? Is it low? Chances are, the margin is extremely low! The average margin in the skateboard industry is around 25-30% for a major brand skateboard sale. That is painfully low. Schlaudie prides ourselves with an average 50% profit margin for our shops. Now, I am not saying to drop all major brands. Not at all. I am saying to try something new to bring in revenue. New brands, maybe new products all together. Something you have never tried. By breaking away from your tunnel vision for survival and utilizing some sales techniques, even if individual sales numbers do not increase, profit margins can! Remember, bills are paid with revenue in, not necessarily with unit numbers out.
PRIORITIZE POSITIVE CASH FLOW
When markets begin to take a turn, you realize profits are the most important part of business. So you need to figure out the best way to produce the best profits. A solid way to do this is to prioritize profitable customers.
I say profitable customers because not all customers actually bring profits. Some want to haggle and in the skateboard world, some just want to hang out. Now, I know I said creating relationships brings customers and once you have a solid group of customers who have broken past that line and become friends, you want to give the love to those friends but, if they are not in the store spending money, they come second! This should be easy enough to understand and doesn't take a rocket magician to figure out but, in my years of visiting skate shops, making friends with owners and just being a typical skate rat, I have seen time and time again shop owners and employees ignoring the customers walking around. That customer is obviously searching for something and being ignored because the friends have taken priority attention. Your friends will and SHOULD understand, this is a business FIRST and a hang out second. Take care of your paying customers and your customers will take care of you.
In addition, when you have different types of paying customers, prioritize those as well. Some customers come in and want to haggle. "That is too much, will you give me a 15% discount?" - "Man, I saw this online for $10 less!". Then you have the customer who pays full price. Prioritize the full pay customer first. Give them the best experience in your shop you can and prioritize the profits. In addition, if you have any customers who you have set up on any type of payment plan, it is not a bad thing to offer a slight discount on a timely pay-off of the account. Let them know that you appreciate them paying their dues in a timely manner and let them know they are rewarded for doing so.
INVEST IN THE FUTURE
Nothing lasts forever and the companies that do the best are the ones who evolve and are capable of snagging the future early. According to research by Bain and Company the organizations who rank at the top are those who were able to capture the opportunities prior to a recession. Bain and Company equates a slow down to a tight turn on a race track. It is the best place to pass competitors but takes more skill than driving in a straight line.
If you invest in products of the future early, you will be more inclined to be ahead of the next trend and the next uptick. This is just another reason to stretch out and hunt for new products during a down market.
TAKE CARE OF THOSE AROUND YOU
As recessions hit, people begin to get worried. This includes not only customers but employees as well. Your employees come in daily and know when sales are low and profits are looking a bit... skinny. Reassure your staff that you will take care of them and keep them motivated. Teach them new sales techniques. Teach them about any new brands you have brought in and new products you have begun to carry. Let them know which products provide the best margins for sales. Let them know which products you want to be moved. Your employees are the ones bringing in the money for you. Make sure they are confident in all aspects of the sale to be capable of doing the job and continue to keep a high level of stoke within your shop so your skateshop can continue to serve and grow your community.
SUMMARY
Recessions are scary times but they are times when companies around the world constantly see massive growth, profits and expansion. With some focus and the right choices, your shop and your community can continue to grow and THRIVE even during a down market.
Stay strong, stay motivated. Your community needs you!
For questions about Schlaudie or what we can do to help your local skate shop and community, please send a DM on Instagram @schlaudie_skateco or email us at schlaudie@outlook.com