10 Ways to Break Through the Profit Ceiling by Grace Butland

(Above) By upgrading its inventory to include more furniture, Robin's Nest Gallery in Dallas, Texas, has seen an increase in the price of its average sale. (Left) The outside look of America House Gallery of Contemporary Craft in Piermont, N.Y., reflects the gallery's focus on home-oriented items. When owner Susan Turino Casal moved the gallery to its current location, she was able to lower its monthly rent while attracting customers from a broader area.

Many craft retail outlets show about the same level of sales and profit year after year after year. They've hit the "profit ceiling." Others enjoy continuous growth. What are they doing differently?

Former marketing consultant David Cravit (now vice president of sales and marketing for Online Direct) has an answer. Based on 25 years of experience in retail marketing and advertising, he identifies the most common problem as the failure to establish a strong enough relationship with the customer.

Cravit points out that today's market is significantly "over-stored." And, he explains, having competitive prices and a wide or unique inventory selection merely gets you in the game. It won't keep you there. The successful stores are those that can carve out a relationship with their customers. If you can do that, you can "own" your customers -- they will come to you rather than going to your competition.

Knowing your customers

There are two basic ways to grow a business: sell more to existing customers, and bring in new customers. To succeed at either, you must identify your most profitable customers, find more like them and create strong relationships with them.

Strong customer relationships begin with knowledge. Your customer base, Cravit emphasizes, is an asset. In order to manage that asset effectively, you should know:

• who they are
• where they live
• what they buy
• when they buy
• how much they spend
• what they want now, and
• what they'll want next.

The next step

Once you've identified your current and potential best customers, go after them.

1.

Provide value-added services, such as gift-wrapping, shipping, special orders, gift registries, birthday or anniversary reminders or personal shopping services.

2.

Market one-to-one, using such tactics as contacting individuals about items of interest; mailing to targeted customer segments; offering frequent-buyer discounts; or holding private sales and private showings.

3.

Enhance your customers' shopping experience by adding events and services that make the visit enjoyable, like the many bookstores that have added comfortable chairs for reading, coffee bars, etc.

The Lawrence Gallery is located on a busy highway between Portland and Lincoln City, a popular tourist destination on the Oregon coast. By leasing space to a restaurant and a wine shop that holds tastings of Oregon wines, the gallery has become a magnet for tourists and locals.

"If you want to grow, you have to make a decision about which direction is best for you." -- Nancy Markoe

4.

Increase inventory selection. Nancy Markoe, owner of Nancy Markoe Fine American Crafts Gallery in St. Pete Beach, Fla., credits her gallery's continued growth to a wide variety of price points. "Everybody should be able to buy something," she says. "We have every price point from $2.50 to as high as you want to go."

5.

Change your inventory mix to reflect emerging trends. Susanne Turino Casal, owner of America House Gallery of Contemporary Crafts in Piermont, N.Y., changes her inventory as customers' buying habits change. "As we moved into the '90s, the market for glass and ceramics changed," she says. "It seemed to divide into a high-end collectors segment and a gift segment." Casal discontinued the high-end pieces to focus on the gift segment. She is now shifting her inventory to include more furniture and home-oriented items. "People need gifts but are also 'feathering their nests,'" she explains.

Lawrence Gallery co-owner Carole Lawrence attributes the gallery's continued growth to constant change. "Gary [Lawrence] (co-owner and metal sculptor) is always out there listening," she says. "He's on the leading edge of trends without trying to be trendy." The gallery added a new dimension in 1990 with the installation of sculpture gardens. Still expanding, the gardens now cover about an acre and feature metal sculptures, fountains and other landscaping accents.

6.

Upgrade your inventory. By adding more furniture lines, Casal has added higher price points, resulting in higher average sales. Robin and Todd Dupey, owners of Robin's Nest Gallery in Dallas, Texas, have also shifted their inventory to include more furniture. "We saw that we could make much higher average sales with furniture," said Todd Dupey. Markoe added higher price points to her inventory by expanding her gold and wood lines. The Lawrence Gallery has evolved from primarily selling small, home-oriented craft items to selling fine bronze and art pieces at prices ranging from $10,000 to $20,000.

7.

Add space. Markoe has expanded her space twice, once in 1992 and again in 1998, while staying in the same location.

RESOURCES

Susanne Turino Casal America House Gallery of Contemporary Crafts Piermont, NY (914) 359-0106 David Cravit former retail consultant e-mail: jdc@pentel.net Robin and Todd Dupey Robin's Nest Gallery Dallas, TX (214) 265-0067 Carole Lawrence Lawrence Gallery Sheridan, OR (503) 843-3633 Nancy Markoe Nancy Markoe Fine American Crafts Gallery St. Pete Beach, FL (727) 360-0729

8.

Increase awareness through advertising, direct mail, newsletters, etc. Markoe started advertising when she made the decision to grow. "We started the gallery on a shoestring and relied on word-of-mouth advertising," she says. "But word of mouth can only go so far."

The Lawrence Gallery in Sheridan, Ore., advertises regularly on billboards and television to attract tourists and new customers.

9.

Change location. Sometimes a move can be profitable. In 1989, Casal moved America House from suburban Tenafly, N.J., to Piermont. The new location attracted customers from a broader area and also resulted in substantially lower rent.

Even though Robin's Nest showed a 40 percent increase in sales in 1998 (its fourth year in business), the owners will relocate the store in August to a higher-traffic strip mall that specializes in furniture and includes such national chains as Crate & Barrel, Pottery Barn and Restoration Hardware.

10.

Add another location. This is the most expensive and most complicated option, and we'll focus on it in the next issue.

Plan before you act

Using any strategy for growth requires careful thought and planning. Not every strategy will work for everybody. As Markoe points out, "If you want to grow, you have to make a decision about which direction is best for you." Then you have to commit to making the necessary changes. And you may discover, as many others have, that the profit ceiling need not be a permanent fixture.

Grace Butland owned and operated Variations American Crafts Gallery in Riverton, Conn., for 10 years. She currently resides in Musquodoboit Harbour, Nova Scotia, Canada.

AUGUST 1999:

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