Case Study: When You Need to Rebalance Sales Channels

Where it Began

A small business owner operates a physical store in one of the largest cities in the southern USA. She’s sold clothing in her store for over a decade but her business faces three large problems.

Problem 1: Seasonal Sales

First, her sales are very seasonal. Being in the south, her sales drop off tremendously each summer as most of her regular clients leave the city to escape the heat. Her in-store sales between May and August aren’t always high enough to cover all business expenses.

Problem 2: Pending Construction Project

Second, she received a notice from the city that a large construction project will disrupt traffic on her store’s street in about 17 months. The project will last up to four years and is certain to make it difficult for customers to reach her store.

Problem 3: Too Much inventory

The business resells vintage designer items and newly created items. Over the years, the amount of vintage inventory has increased so much that rental of additional storage space was required.

The Analysis

The sales channels for this business were reviewed at it was found that 65% of store sales came from the physical location. Other channels included attending retail shows, distribution (wholesale) and online sales through the company’s web site. To address the problems of seasonal sales and the pending construction project, it was recommended that the owner reduce her reliance on the physical store by increasing the percentage of sales from other channels.

An evaluation of the excess vintage inventory was performed at it was found that none of the items that had been in storage were available anywhere for customers to find them. Since they were neither in the store nor listed online, it was virtually impossible to sell these items. The business possessed nearly 500 items in this category.

The Action

Part 1: Shifting the Balance of Sales Channels

To address the issues of seasonal sales and the potential impact of the upcoming construction project, the company needed to take action to increase sales from events, distribution and its own web site. By increasing the percentage of sales that these channels represent, the percentage of sales from the store would become lower. That’s not to say that the overall sales from the store will be lower, but rather the in-store sales as a percentage of total sales would be lower.

The company’s online store had been underutilized over the years. Online sales amounted to only 3% of total sales. After a two-month focus of listing additional inventory items online, the proportion of online sales increased to 6% of the year-to-date sales. Online sales in a recent summer month, where in-store sales are traditionally low, amounted to 27% of the month’s sales. At the time of writing this case study, the online sales channel remains a key strategic project and the balance of sales from this channel is being monitored.

Part 2: Reducing Excess Inventory

Making all inventory items available on the company e-commerce site was a time-consuming process and it remains an ongoing project to add all remaining items. These additions have resulted in additional online sales to partially reduce excess inventory. The company also held a one-time, in-store sale to further reduce inventory. The company is enjoying a cost reduction of $200/month after eliminating the need for renting additional storage. While all excess inventory has not yet sold, the company continues to focus on selling down this inventory before adding any more.

Part 3: Leveraging Technology

The company uses Shopify as its ecommerce solution and many of its capabilities were not being leveraged. This tool has built-in email list and email marketing capabilities, but the company was using an email marketing tool outside of Shopify. This means that some of the marketing audience was stored in Shopify and the remainder of the audience was in the third-party tool. The Shopify audience had, therefore, never received any marketing from the company.

The email list from the third-party tool was combined with the existing list inside Shopify and the need for the third-party email marketing tool was eliminated (a cost saving of $79/month). Regular email campaigns are now sent from within Shopify and has resulted in additional sales.

It was also discovered that the company was paying for apps inside Shopify that it would never use. These apps were deleted and a cost saving of about $50/month was obtained.

The final optimization was related to Shopify’s integration with Facebook and Instagram stores and the ability for products to be found within Google search results. These synchronization features were turned on and the additional fields of data required to optimize these listings were filled in. It takes some time to provide all of the data needed but, in the end, it gives customers the ability to shop directly within Instagram and Facebook stores and removes some of the reasons why Google demotes product listings.

Summary

If you are having some of the same challenges in your own company, consider similar actions to those mentioned above to perform a do-it-yourself (DIY) approach to improving your business. If you dedicate the time, you just might increase sales, balance your sales to reduce the risk of impact to any one channel and enjoy additional cost savings like the company described here.