Today's Gift Retailer 2003
Gifts & Decorative Accessories' fourth annual look at how specialty retailers are running their businesses.
By Gifts & Decorative Accessories Market Research Department -- Gifts and Dec, 6/1/2003 12:00:00 AM
At the time of our first Retailer Comparison Survey in 2000, the prime challenge to most gift and decorative accessories retailers was how they would manage the Y2K threat. How simple that challenge seems by today's standards. Since that first survey, the end of the dot-com era, terrorist attacks, war, and the continuing weak economy have really tested the mettle of retailers. The best have survived by closely watching their expenses, concentrating on promotions and marketing rather than store expansion, and juggling their merchandise mix to suit consumers' desires.
Here's a look at the gift and decorative accessories retailers featured in the survey:
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99 percent own their own store.
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13 percent have two or more locations.
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The median store size is 2,400 square feet.
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50 percent keep their stores open 50 or more hours a week.
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They estimate that a median of 180 shoppers visit their store in a week, and about 67 percent of those visitors make a purchase.
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72 percent report annual gross sales of between $100,000 and $1 million.
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2003 survey Highlights
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Half the retailers carry at least 12 different product categories.
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Retail prices between $10 and $20 continue to be the best selling price points for most product categories.
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Gourmet foods posted the highest average stock turns — a median of 5.5 per year.
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Plush, which posted a median of four stock turns last year, was joined this year by candles/candle accessories and tabletop as categories yielding an average of four stock turns per year.
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Most purchases are paid for in cash, but credit card purchases are about 40 percent larger.
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Advertising and promotion expenditures have remained stable at 5 percent of gross sales for the last four years.
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The median number of employees is five, including the owner.
Merchandise mix
This year, only one category — holiday products — captured more than 10 percent of the stores' total sales volume. Last year two other product categories, stationery/greeting cards and collectibles, each racked up more than 10 percent of sales volume. Greeting cards, treated as a separate product category this year, candles/candle accessories, collectibles, plush, and jewelry each continue to account for between 5 and 10 percent of sales, maintaining a position in the merchandise lineup they've held for at least the last two years.
Like great chefs experimenting with new ingredients to entice the palette, retailers continually experiment with their merchandise mix — expanding on old favorites and adding spice with new offerings. This year, retailers seem to be expanding the number of product categories they carry. At least half of retailers carry 12 different product categories. Last year, only ten categories were carried by more than half of retailers. Newcomers to the most-carried list are CDs/music and gift books.
Fashion accents and social/business stationery, new to the product list this year as separate categories, had a strong showing, with nearly two-fifths of the retailers carrying them.
A fifth or more of retailers carried 27 categories, up from the 23 carried by a fifth or more last year.
Six product categories experienced a significant increase (at least 10 percent increase between the two years) in the percentage of retailers that carry them. Licensed products had the largest increase, followed closely by holiday products. Toys/games/puzzles, collectibles, CDs/music, and home textiles rounded out the group.
Five categories have been among the most frequently carried for the last four years — candles/candle accessories, holiday products, stationery, and greeting cards, with collectibles and photo frames sharing the final spot this year. Plush entered the most-carried list last year and maintains a strong foothold this year.
At the other end of the merchandise lineup, only two product categories were carried by less than a fifth of retailers polled — writing instruments and memory products. In contrast, last year there were six; desk accessories, gift baskets, gifts, home office products, memory products, and all other miscellaneous products.
Inventory turns
Profitability is measured in a variety of ways. One frequently used measure is stock turns. For gift retailers, the most profitable category — using average stock turns as the measure — is gourmet foods, with a median of 5.5 turns per year. However, gourmet foods are carried by less than half the retailers surveyed. Among the most-carried categories, retailers report a median of 4 turns for both candles/candle accessories and plush. Also producing a median of four turns a year is tabletop, carried by 47 percent of retailers.
Pricing practices
Over half (54 percent) of the surveyed retailers indicated that their average markup was calculated by multiplying the product cost by two. Almost two-fifths use two and a half times the product cost as their markup.
Best selling price points are shifting very slightly. Of the 29 product categories covered by the survey, 13 showed a slight decrease in best selling price points when compared to last year, while five categories stayed at the same level. Among the five categories at the top end of the price spectrum (best selling price points of $25 or more), best selling wall art and gift baskets price points remained steady between this year and last, while the best selling price points for collectibles and tabletop increased. Best selling price points for accent rugs dipped. At the other end, product categories with best selling price points under $10, all either stayed the same or increased slightly. For more than half of all the product categories, the best selling price points continue to fall between $10 and $20. Here, the best selling price points declined slightly for 12 of 15 categories.
Buying habits
Diversity of product stems from diversity of vendors. More than half of the retailers surveyed buy from more than 60 different vendors; almost another two-fifths make purchases from between 20 and 60. As for the number of lines carried in any particular product category, the median number ranges from one to ten. Holiday products registered the highest number of lines carried with a median of ten. Retailers offer a median of five lines for collectibles, tabletop, handcrafted items, and gourmet foods. For more than half the product categories, the median number of lines carried is either two or three.
Retailers expend considerable time and effort to fill their stores with products consumers want to buy. Attending trade shows, visits from sales reps, and, increasingly, scoping out manufacturers' Web sites are all time consuming pursuits. When it comes to show attendance, well over half of retailers (56 percent) say they attend two to three trade shows each year and another quarter go to four or five shows.
Between-market visits from sales reps are also important. Nearly four-fifths say they work with more than ten reps each year.
Increasingly, retailers are looking to manufacturers' Web sites to research products. This year, nearly two-thirds (63 percent) say they use the Internet to research manufacturers' products; up from just over half (54 percent) that visited manufacturer's Web sites last year. Retailers are also going to the Web for information more often. Last year, less than one-fifth of those who researched on the Web went to a manufacturer's site four or more times a month; this year, nearly a third (30 percent) go to manufacturers' sites that often.
Customer payment methods
On average, customers pay cash, write a check, or use a debit card for more than half their purchases (56 percent) in gift and decorative accessories stores, about the same as last year. A little over two-fifths (44 percent) of sales were paid for with credit. Generally, credit card sales rang up slightly higher tickets (a median of $35) than cash sales (a median of $25). Whether cash or credit, the size of the sale slipped during 2002. In 2001 the median credit card sale was $45 while the median cash sale was $32.
Clearance sales
Markdowns for sales events came in at a median of 39 percent. Only a fifth of retailers hold an annual sale. Slightly more than two-fifths (43 percent) have sales twice yearly; nearly another fifth (17 percent) hold a sale four times a year. A fifth conduct a sale more than four times a year.
Internet and catalog selling
The Internet is making inroads as a source for sales, as retailers have continued to make their products available for online purchase. The number of retailers experimenting with taking online orders inched up from 13 percent in 1999 to 20 percent in 2002. Online sales continue to be a very small portion of these retailers' total sales volume — a median of 2 percent.
Only 11 percent of reporting retailers sell through a catalog, accounting for a median of 15 percent of their sales.
Part 2 of the survey results, covering employee practices, can be found at Gifts & Decorative Accessories' Web site, www.GiftsandDec.com.
Judi Fulbright was the lead researcher for the survey conducted by Gifts & Decorative Accessories' market research department.
If you are an independent gift and decorative accessories retailer, and would like to take part in future surveys, please send your name, address, and telephone number to Judi Fulbright, Reed Business Information, P.O. Box 2754, High Point, NC 27261, or fax it to her at (336) 605-1143.
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