Know Your Strengths and Weaknesses!?!

One key to success is “Know Your Strengths and Weaknesses”. The idea being to focus on what you do best and find strategic partners or hired help that excel in the areas of your weaknesses. I can tell you from seeing it and LIVING it – this is pure wisdom at work.

I am focused on this at the moment, because I am about to do what we ALL still do…ignore my own advice! When it comes to mountain biking – I LOVE the sport – but I am usually good for 5-10 miles…TOPS…before my old body starts cursing me. So what am I preparing to do this beautiful sunny morning up in the Adirondacks??

I am heading out on a grueling 28.5 mile route

I will have no cell service to call in the rescue team – but I will have experienced riding mates to “coach”me through the pain!

The Lesson: If you KNOW your going to do something stupid – make sure someone is there to document it for future RIDICULE!!

Financial Health – Part 1: Inventory Turnover Ratio

Most business owners I meet have a glazed look wash over their faces when I start asking questions about “financial ratios”.  The most common response is something like: “Well…I can’t be sure…things move so fast around here.  My book-keeper gives me a P & L every month – and as long as it looks good, I don’t waste time on analysis…I just keep doing more of what I do best”.

Does this sound like something you may have heard – or something you may have SAID lately??

Every business goes through cycles of peaks and valleys.  Do not fool yourself into thinking a downturn will never happen in your business.  Sometimes even the smallest market shifts can create tremendous upheaval to your business.  Being prepared to address these “shifts” will not only help you navigate the rough water, but quite possibly could position you for competitive market dominance.  That being said – let’s dive into PART 1 in a series of posts on Financial Health – “Getting to Know Your INVENTORY TURNOVER RATIO”.

Your inventory turnover ratio is one of the most important financial ratios to monitor and manage. Of all the asset management ratios, it gives you, the business owner, some of the most important financial information.  The inventory turnover ratio measures the efficiency of the business in managing and selling (turning) its inventory. This ratio  measures the liquidity of your inventory. It also helps determine how you can increase your sales through inventory control…more on that later. Make note of this – the calculation for the inventory turnover ratio:

  Net Sales $ / Inventory $ = # Times (ITR)

In order to calculate this ratio, you can use the net sales dollars from your company’s income statement and your inventory valuation dollars off your balance sheet. If you use a cloud-based inventory management tool, like ChannelAdvisor Premium, you could just do a quick look up / export from your sales and inventory views to get this data at a moments notice – this is VERY powerful when you need to make quick decisions on Buying or Selling strategies!

Ok – so you have your turn ratio – now what?  – Let’s do some basic interpretation.

Generally, a high inventory ratio means that your company is efficiently managing and selling its inventory. The faster the inventory sells, the less cash the company has tied up. However – if you are selling closeouts or using drop ship services – high inventory turnover can present a danger in that it can often lead to stock oversells.

If your company has a low inventory turnover ratio, then there is a high probability that you are holding obsolete inventory which may be difficult to sell. This often erodes your company’s profit – creating the oft cited phrase, “…where is it all going??!”. Keep in mind – you may be holding bulk inventory for legitimate reasons. This is often the case for retailers who are preparing for the holiday season, among other valid reasons.

It is important for you to understand *why* the inventory turnover ratio is high or low. In order to do that, you need to look at the company’s investment in inventory and determine what inventory is being most productive. This brings us back to the question of how analysis like this can help increase sales. Here is a real-life example:

If you have the ability to create a spreadsheet that lists all of your SKU’s, with unit cost basis, qty in stock, qty sold and net sales – you have absolute GOLD at your fingertips!  A couple of quick formulas will give you total inventory value in dollars and total sales in dollars – thus your basis for your Inventory Turnover Ratio.  Let’s say it produces a ratio of 4.27.  Now what?

* Once you have recorded this ratio, keep it charted so you can use it for comparison  later…How does 4.27 ITR stack up against:

• how I was doing last month?
• last year at this time?
• against industry averages?

Next, you may take a look at some of the individual SKU’s for comparison. What five SKU’s am I carrying the most of? The individual ratios for these SKU’s should be higher than that of your total ITR.  If they are equal or lower – chances are they are MAJOR dead-weight, or represent significant risk should there be a market shift of some sort. This same logic can be broken down and applied by marketplace: What is my ITR specific to my:

• Website sales?
• eBay store vs eBay auctions?
• Amazon sales?
• Buy.com sales?

A concerted effort to tighten your ratios on these will have a long term positive effect on your bottom line!

Unfortunately, I can’t dive deeper here – since every business is going to have nuances that can’t be captured in a little blog space… But feel free to post questions or email me with specifics, and I would be happy to help you take advantage of the data you have to make your business even stronger.  Bet you can’t wait for the next installment in this series…the Quick Test…the Financial Ratio.  If you REALLY ARE excited…then you (like me) just passed the NERD TEST

Relationships, Relationships, Relationships!

In the bricks-and-mortar world of retail, you no-doubt have heard a million times that it is all about location, location, location…right?  Well – in the world of business, and life in general, the path to success is largely about RELATIONSHIPS.

I wasn’t always the smartest kid in class, or the most talented in any particular craft…but in the course of moving 13 times in my first 15 years of life, I found that I learned invaluable lessons about building relationships and “opening new doors”.  And those lessons, as I found over time, could be applied in ANY environment – be it personal or business.  So what exactly does that mean, you say??  Ok – fair question.  Let me give an example from the early days of starting up grapevinehill.com (online discount footwear retailer):

[phone rings] …Uh, hello, grapvinehill.com – this is Mark speaking.

Joe: Yeah, this is Joe from TB Footwear returning your call.

Mark: Oh great – thank you for returning my call, Joe.  I heard you were a hard man to track down, but I wanted to see if maybe you could carve out a few minutes to meet and see if there might be some opportunities for us to work together.  Are you going to be in the office next week?

Joe: Next week? No…but, you’re going to be at “the show”, right?? Why don’t you swing by on Wednesday about 1pm and we can chat.  I heard a little about you from Tony, and your story sounds interesting…

Mark: The show? [panic sets in as I realize I have no idea what he is talking about] Uh…OF COURSE I’LL BE THERE!  Joe – I look forward to seeing you next Wednesday! [click]

Now there I was – sweat dripping off my brow – excited, yet completely baffled at the same time.  “What show is he talking about??!!”, I screamed!  My business partners and I scrambled feverishly to find out what he was referring to.  After a short period of time Google-ing every footwear related show, we found the one that was next week.  It was the WSA Show in Las Vegas…oh boy, VEGAS, here we come.  We immediately booked our flights and found ourselves stumbling into a dirty room at the Flamingo to start our adventure.  To make a long story short – I ended up meeting Joe a few days later.  We had a long talk about business, our families and found that we had some unique ways that we could work together.  The bond was built and then strengthened through business – I helped him by liquidating his slow moving inventory, and he helped me by supplying a strong brand name to my business and consistent/affordable supply.  In the months and years to come, Joe became a strong advocate for my business and was always happy to introduce me to “friends” in the industry.  By cultivating that one relationship – I was able to open doors with a dozen other brand designers that brought in $20+ million in sales for my little .com start up over the first couple of years.  Some general rules:

1. Be persistent.  I had made several follow-ups through email and phone before hearing back from Joe.  I was careful to respect him and his time.  I sought out common interests – and more importantly common business goals that I thought would keep him interested in talking to an “unknown” like myself.
2. Be genuine.  NEVER be disingenuous – you will be exposed faster than a long-tail cat in a room full of rocking chairs!  Take a genuine interest and make a concerted effort to find the win-win recipe for the relationship.
3. Protect the relationship.  Treat the relationship like precious GOLD.  If the person you are dealing with feels like you truly have their best interests in mind, they will go out of their way to give you as much attention (and leads) as possible.

I applied this same approach in opening doors at hundreds of footwear companies as well as marketplaces such as eBay, Overstock, Buy, Amazon, Google, Microsoft and many other partners along the way – each one paying huge dividends by virtue of building relationships as a “go-to” source and partner. You will knock on dozens, if not hundreds, of doors.  Some will not answer.  Most will politely say, “Thanks, but we are not interested right now.”  Sometimes – all it takes is ONE…and then ANOTHER…and ANOTHER…and ANOTHER!  So keep knocking, and then treat each open door as a crop that will reap a huge harvest if you tend to it carefully and thoughtfully each day

Online e-Commerce Fraud Screening Tips for 2011

Recent reports indicate a slight drop in domestic online credit card fraud. In a conversation with my good friends at CyberSource, they had this to say: “While UK merchants saw a slight uptick in fraud rates, online merchants in the United States and Canada remained steady at 0.9% in 2010 for the second straight year.” This may be good news for US e-commerce merchants – but certainly no time to drop your guard.

Here are some practical tips to help identify and reduce fraudulent order fulfillment.  First – create a system whereby your staff can quickly identify and flag orders for “fraud screening”.

1. Flag ALL orders that are set for Overnight or 2-Day shipping.  Usually, the perpetrators of fraud want their items FAST so there is little time for vendors or victims of fraud to react.

2. Flag ALL orders where the “Bill To” State is different than the “Ship To” State.

3. Most businesses find that particular products or product categories are more frequent targets for fraudulent transactions.  For example – in the footwear world – Timberland boot and high-end Nike sneaker orders represented over 30% of all fraudulent orders from 2005-2008.  Have your team keep an eye on trends and compile a product “watch list”. (the TSA may want to take notes on this one!)

Have a physical “checklist” for your team to use so that they can quickly and efficiently pre-screen the orders that have been flagged for review.

• Check for discrepancies in Bill To and Ship To addresses. Most fraudulent orders will use a different bill to than ship to. To prevent this, some merchants require the bill to and ship to to be the same. That way, if the person is using a stolen credit card they are required to at least ship the product to the billing address. This is not practical for all merchants since more and more shoppers have items shipped to work addresses. Therefore, a review process becomes a necessary evil.
• Are the Bill To and Ship To names significantly different?
• Are the Bill To name (“Julia Johnson”) and the email address (“George3456@ aol. com”) totally unrelated?
• Does the contact phone number look legitimate? For example – your item is shipping to CA, but you see a (212) area code (NY) in the phone number field.

Most orders, when reviewed for simple discrepancies, will be deemed good to go and can be inserted back into your normal fulfillment process.  But since the screening process should be a quick step – it is usually well worth it to be more cautious than not.  So…you have a stack of 20 orders that still look suspicous…what next?

1. First things First – CONTACT THE CUSTOMER!  Have an email template ready to roll – add all email addresses to a BCC and send.  The email should be something like: “we appreciate your business very much…as part of our quality control process, your order was flagged for order verification.  We will hold you order for “x” days or until you respond to confirm the order…” (now, whether you really do HOLD or SEND the order is up to you). Most of the time, you will NOT hear back because the email address was totally illegitamate.  Email a followup to the customer in 2-3 days to let them know that the transaction will be cancelled “for their protection” due to fraud screening process.  In the rare cases where the order ends up being legit, the buyer will typically appreciate that you cared about “protecting” them against fraud.

2. Another easy step is to do an online search for the phone number. Did you know you can Google a phone number?  If the Bill To address is Syracuse, NY and the phone number you searched comes back as a cell phone in Reno, NV…it’s a safe bet you have a fraud case on your hands.  So MAKE THE CALL…9 times out of 10, this step will answer the question pretty clearly for you.

3. Check the IP address of the transaction: In most cases, your sales report will tell you the IP the address the order came from. If the order is shipping to Canada but it was placed from an IP in Nigeria, the big RED FLAG should be going up!

4. AVS/CVV Codes: Get familiar with the codes that your gateway or processor uses to verify the credit cards when it comes to matching the CVV2 number and the billing address.  A quick check of the codes for the transaction may show a mismatch, which you may or may not have set to automatically reject. If you review these daily – you WILL see a clear pattern of processing codes associated with suspicious orders.  GET TO KNOW these patterns – it will save you a ton of money on chargebacks!

5. Compile a list of “DO NOT SHIP” countries. You will find that there are some countries where fraudulent transactions are rampant.  For example, most online retailer will tell you that if you can help it…do not even offer shipping to Nigeria, Eastern European countries and Russia to name a few.

6. Don’t be afraid to ASK FOR PROOF: you typically won’t need to go this far…but when communicating with the buyer, you can ask them to send in whatever he/she used for proof that he/she is indeed the customer.  Do this ONLY if you are talking to someone, but you still have reason to have a strong suspicion. You can ask for:

• FRONT/BACK of Credit Card Used
• Copy of License/Passport ( if international)
• Verification of address or home phone number

I have used these and a variety of other “Best Practices” and have found them to be very effective. Merchant processors such as Authorize.net, Google Checkout and PayPal or even shopping cart packages from Magento, asp.Net, ChannelAdvisor or UberCart will provide additional tools you can implement to curtail online fraud. While nothing can be 100% fail-proof, following a strict fraud-screening process EVERY DAY will save you a ton of money and lots of heartache in the long run!

Marketplaces Quick Tip: Optimize Your Product Titles

So you want to be a player in the multi-channel online sales world?  It takes WORK.  And you CANNOT be afraid of data management!  Data is your friend – and you should be investing heavily in leveraging as much data as possible.

Ok…so what’s the “Quick Tip”, you ask?

Simple: Don’t try to make life “easy” by creating a single title that you use across multiple marketplaces.  Create and save these (for example) to your database: Store-Title, eBay-Title, eBayStore-Title, AMZ-Title, Buy-Title, OS-Title, Misc-Title.

Each marketplace has:

• different rules and limitations
• a slightly different audience to cater to

And in order to thrive, you MUST take advantage of every possible opportunity.  One example of this is -  Website vs. eBay vs. Amazon titles.  Your own website may have a character length limit for title – usually up to 100 chars.  eBay only allows 55 chars in title…so use EVERY one and make them count!  Amazon allows up to 100 chars.  This may seem like overkill if your title is the one being displayed by Amazon, but be aware regardless that this is a primary search field in AMZ – so use ALL 100 characters wisely to optimize search traffic.
A wise investment is made either with internal or external resources to help you achieve data nirvana – usually by building tools that do the work for you based on business rules and a variety of individual attribute fields.  Look into doing what I have done for my own businesses and client sites alike – build XLS scripts that automate most of these tasks.  Then you can bulk upload data or build API links between your offline and online database.  Many of my clients have taken advantage of these opportunities with use of mySQL or Access offline, and .net / ChannelAdvisor Merchant platforms online. You can do this in a relatively short period of time – don’t get left in the dust!

The Secret Sauce (part 2): SEO – Buyer Search Logic

The Secret Sauce (part 2): SEO – Buyer Search Logic

In part one of my series on SEO “Secret Sauce”, I talked about Grassroots PR, and the methods I use successfully to build tremendous traffic streams.  In this installation, we are jumping into Buyer Search Logic – otherwise known as Shopper Psychology – and how it differs from traditional product marketing.

The most significant SEO oversight I see made (and it is made by virtually everyone – even the BIG BOYS) is that marketing staff tries to apply traditional merchandising practices into the online world.  So the foundation of their marketing effort is corrupt from the get-go. The common approach most often skews toward the ‘product’ itself – instead of what the buyer is actually looking for. Let me give you a specific example:

A web marketing manager (“Rick W”) is charged with getting traffic and ramping up sales on a line of womens boots that were recently worn by Kathryn Morris (from CBS’s Cold Case) while being interviewed by Jay Leno.  Leno casually comments on how great her legs look in her new boots and she says “I just LOVE my new Kors VooDews”.

Rick W says “give me all the product information on this boot” – “this is going to be a HOT seller!”  The box has the following label information: brand = michael kors, color = cappucino, style number = MK23019-101, style name = VooDew, height = 15″ tall, material = nubuck leather.

Your typical everyday marketing genius looks at this and puts together a title and content that focus the attention on these details – along with some flowery marketing jargon:
Couture Cappucino Nubuck “VooDew” Boots by designer Michael Kors
This is probably followed by more catchy content such as “haute couture”, runway ready, fashion forward, blah, blah, blah…

JoBeth Rath is a savvy Internet shopper who saw them worn by Kathryn and says to herself…”I’ve got to have those boots!”.  JoBeth remembers hearing “KORS”  and “VooDew” – so she has a good idea how to find them.  How does she search for them??

“Kors Brown Voodoo Boots”

How much of the search traffic is Rick W going to get compared to my site?  Not very much. You see, I got inside JoBeth’s head and realized that she doesn’t have the boot-box in her hands…she doesn’t know that Michael Kors decided to call them “Cappucino” instead of Brown…she doesn’t know that Michael Kors decided to be playful and name them “VooDew” instead of VooDoo…there is a lot she may not know – but she knows generally what she is looking for.  So what did I do to make sure she could find them on my site:

1. I created a more search intuitive Title – including this and a host of common terms into my browser <title> tag: such as Michael Kors Cappucino Brown “VooDew” (Voodoo) Knee Boots – as worn by Kathryn Morris on Leno.
2. I put all of those words – along with multiple spelling and gramatical variations into my Meta-Keywords and Meta-Description tags.
3. I made sure my actual text-based item title was consistent in the html itself
4. I made sure my image alt-tags reflected the same consistency of title / keywords
5. I made sure my product description included ALL of that (AND some nice flowery marketing jargon).
6. I probably also have a nice little section in the body that spells out EXACTLY what is listed on the box.
7. I included the UPC / Barcode info in my listing in case JoBeth decided to use an app like “RedLaser” on her iPhone after she comes across it in a retail store.

If you are not “getting inside” your shopper’s heads, you are MISSING THE BOAT.  STOP thinking of selling product – and START thinking of selling based on most common SEARCH!  I have implemented Channel Advisor’s Merchant Premium platform to manage “logic” across several of my own businesses, as well as dozens of client sites – optimizing search and datafeeds to marketplaces such as eBay, Amazon and buy.com (to name a few). Feel free to ask me about the tools you can use to implement these strategies quickly and consistently across your product catalog.

Perspective: Back to the “REAL” World of e-Commerce?

April 25th – Captain’s Log…oops…wrong galaxy!  Coming back from 8 days in Haiti has me reeling.  Most people can relate with how difficult it is to “Get back into the swing of things” after going on vacation, or spending an extended time on the road.  But unless you have traveled abroad to a 3rd world country – where nothing can be taken for granted – and extreme poverty is the norm – you probably won’t understand what I am about to say…

Leaving Leogane, Haiti (again) was one of the hardest things I have ever had to do.  I went with a mission – to help build a 2-room home and to deliver a water filtration system.  You’d think that there would be satisfaction in “accomplishing a mission”.  Call it an entrepreneurs disease… call it classic “Catholic Guilt” syndrome (though I am not Catholic)… call it what you will.  The “What More Can I Do to Fix This” complex is overwhelming – creating tremendous heartache – and a focused desire to go back as soon as possible.  It’s one thing to just want to overcome such poverty and destruction…it’s a whole new ballgame when you invest in the people and they become like FAMILY to you.  Having spent considerable time learning the Haitian Kreyol language, I was able to communicate and bond with many new friends.  They all wanted to know when I would return…  “M’ap tune an Janvie” was my immediate response – “I will return in January!”.

So now I am back in the US – but how does one reconcile that desire and heartache with the NEED to jump back into the fires at home?  Which is the “Real” world?  Is there a distinction?  I know that both worlds are real – and important – so, how do I shift back to THIS world’s priorities?  Should be simple – but it’s not.  Just like any other major challenge life may throw at me, the most important thing to do is literally put one foot in front of the other and know that there is PURPOSE in meeting the the needs of my clients (and my family) here at home.  And ultimately, being EXCELLENT in what I do here will help me achieve the goals and objectives to make an impact-full difference in the lives of my “family” in Haiti.

Thank you to all of those that helped support my most recent trip – with prayers, gifts and financial support – I could not have done it without you. I will be following up with more “stories” shortly – giving a bit more light-hearted look into the trip.  But for now – THANK you all again