Tighter Controls Mean Higher
Profits for Your Gallery

oo much inventory. Not enough inventory. Slim margins. Slow turnover. Employee theft. According to Geoff Knapp, CEO of CAM Commerce Solutions, which provides software and consulting to independent retailers, these are the most common business woes among independent retailers. He adds, though, that these complaints are just symptoms of the core problem: lack of effective business controls.

“ Everything else falls out of that,” says Knapp, “whether you use a manual system or one that is computerized, creating and implementing good business controls is key.”

Zyzyx! Gallery, with locations in Pikesville and Bethesda, Md., is living proof that you can run a successful retail operation without computerized inventory management, but owner Marla Rishty and operations manager Barbara Douglas understand the long-term value of automation. They feel it will lead to tighter controls and therefore, significant profit increases.

Rishty assumed all responsibility for running Zyzyx! in January 2003 after her husband, Martin, was killed in an automobile accident. She hired Douglas and the two have been working to maintain Martin Rishty’s legacy, while bringing the business into the 21st century.

At this point, Zyzyx!’s staff does all of its transactions manually. Everything is hand-written, including sales tags, tickets for credits and lay-aways, and recording merchandise transfers from one store to another.

“ There is a lot of wasted effort and redundancy in the workload,” says Douglas, who brought 14 years of gallery retail experience to Zyzyx!.“Plus, we could maximize sales opportunities, like wedding and gift registries. It’s not uncommon for galleries to do this manually, but I know we lose some sales from couples who have the option of going to some national chain that can accommodate [relatives and friends] from around the country.”

Douglas and Rishty say Zyzyx! is looking for software that can integrate sales and data from its two locations, plus sales from its Web site. Systems like this aren’t cheap, but they estimate that the time and cost savings gained by automation will increase profits by at least 10 percent, if not more. It will also help create an effective open-to-buy plan for shopping the craft markets, adds Douglas. At this point, buying decisions are based on general sales figures, and a healthy dose of instinct.

Instinct also plays a big part in gallery buying for Tom and Connie Quilter who run Clarksville Pottery and Galleries at three locations in Austin, Texas. But the couple says being able to compare their purchase plan to actual sales helps tremendously. After purchasing the business five years ago, the Quilters set about designing their own integrated software program, using Microsoft Excel.

The Quilters are able to read daily sales reports from their three galleries, which show what merchandise is moving in what store. This information allows them to make better buying decisions and account for items moved from one location to another.

The Cost Factor

Retail consultant Paul Erickson of Retail Merchandising Service Association (RMSA) says that for any independent retailer, no matter how small, computerized tracking is fundamental. RMSA helps independent retailers with merchandising, planning and forecasting. But in order to plan, you need information, says Erickson. And in order to get the information, you need automation. Many small retailers who operate on narrow margins and take small salaries for themselves find the hardware and software costs prohibitive.

For Zyzyx, deciding on a system that works for a business looking to future growth has been complicated. “While you can find a good system for under $5,000, it won’t have nearly the amount of ‘bells and whistles’ as some of the pricier systems,” Douglas says. “Financing is always an option, but in the long term, you could wind up paying $30,000 for a system that lists at $15,000. So we’re working on the budget for this.”

Any System is Only as Good as Its User

Almost as important as the computerized tracking system, is having the commitment and discipline it takes to make that system work for you. Knapp estimates that of CAM’s roughly 10,000 customers who purchase multifunctional POS (point of sale) systems, only about one-third use them to maximum capacity. “To some customers, the system becomes little more than a glorified cash register,” he says. “It takes commitment and consistency to enter the right information into the system, in order for it to work properly.”

Here’s a simple, but common example of how an inventory tracking system is only as good as the people using it: If a customer wants to exchange one decorative porcelain platter, done in white, for the same platter by the same artist, but done in blue, it’s no longer as easy as just swapping the item. The two items are the same price, but the sales report will still show that a white platter was sold. It won’t show that the white platter came back into inventory and a blue one was removed. The system will think it needs to reorder a white decorative platter. In the end, the retailer will have more white platters than needed, and not enough blue platters.

What’s Best for Your Business?

If setting up your own system on an Excel system seems akin to scaling Mount Everest, there are many low-cost POS solutions that can at least get you started. But you’ll need to do some research, so set aside some time to talk with salespeople, try some demos and compare programs.

Knapp says that any small, independent retailer should be able to purchase, or lease, a system for between $2,500 and $4,000. CAM even offers a free version of its POS software for single-store, single-user retailers called “Retail ICE.” CAM markets it as an “end to end” point-of-sale product that can help small retailers manage inventory, process sales orders, manage customer relationships and can be fully integrated into the retailers’ accounting system.The free software can be ordered online at www.camcommerce.com.

The Web site also offers a full explanation of what the software can do, and an informative FAQ section, which answers the question, “Why is this software free?” CAM is hoping your business will grow, and when it does, that you will order its more sophisticated multi-user software, hardware, support and other services, which are not free.

Run.It is another POS system that caters to independent retailers, providing a wide array of software and support services designed to help retailers collect, store and analyze data about sales, customers, inventory, etc. The company’s Web site, at www.Runit.com, features a detailed and easy-access demo of its software, giving you a chance to see what different transactions would look like in action.

Run.It also offers a Web-based system called “Run.It Real Time.” For a monthly subscription fee of $129 per user, independent retailers can have all the amenities of a traditional POS system without having to upgrade their hardware. “This system offers all the functionality of traditional POS systems,” says Ben Egyes, senior account manager. “But it can work on an older computer because the DSL line is doing all the work. In addition, store owners can access sales information from anywhere in the world through a secure server.”

Erickson says most independent craft retailers lack retail experience when they enter the business. “They get into the business because they love the product, then they have to learn how to sell the product and manage the business,” says Erickson.

But experts agree that in an environment where gallery owners are competing with national chains, it takes constant analysis and fine-tuning of your operating plan to remain successful.

Bernadette Finnerty is a contributing editor to The Crafts Report.