Today's Gift Retailer 2004

Staying the course best describes gift retailers as they cope with the current, unsettled economy and the changing face of retailing in America. Part 1 of the results from our survey of more than 200 retailers from across the country appeared in the June issue. Topics covered included retailers' mix of merchandise and best selling price points, as well as where and how often they source product. In this issue, the survey reports on how retailers attract and maintain customers, and how they make use of the Internet and catalogs.

Advertising budgets remain about 5 percent of annual gross sales for 2003. Nearly three-fifths of the retailers forecast their ad budget for 2004 to stay the same. Ad budgets have hovered at 5 percent since Gifts & Decorative Accessories first published the Retailer Comparison Survey in 2000.

The biggest part of the advertising dollar goes to newspaper ads and direct mail. Well over half of the retailers use them, and between the two they consume more than half of the retailers' available advertising dollars. The majority of retailers who use newspaper ads report using black and white ads, while only about a third use color ads. More than half the newspaper ads are likely to appear in the home, women's, or lifestyle sections of the paper. And over a quarter of retailers place their ads in some type of supplement to the regular newspaper.

For retailers using direct mail, nearly three-quarters use their direct mail campaign to promote a special sale or announce an event. Nearly two-thirds send out newsletters or flyers of some type. More than a quarter use direct mail to send discount coupons. Perhaps in an effort to save mailing costs, retailers are beginning to use postcards as a way to attract customers' attention. And it's storeowners or someone associated with the store who prepares most direct mail campaigns. Most of the names for mailings come from checks or credit card receipts or an in-store guest book. A few retailers purchase lists of names or use cash register receipts to create their mailing lists.

Special events are held by nearly half of the retailers. Not costly, on average they consume slightly more than 10 percent of the total ad budget. The most frequently held special events are holiday events or open houses. Much less frequently, retailers offer workshops or seminars and demonstrations. Among the more unique events are artist and book signings, participation in local festivals, trunk shows, samplings, sidewalk sales, pajama parties, and girls' night out events.

Retailers are creative when it comes to what they do to advertise beyond the major media players, even if they're not spending much in the way of ad dollars. Retailers told Gifts & Decorative Accessories that they advertise in local or specialty magazines, offer gift certificates or coupons, sponsor charitable activities, distribute store newsletters or brochures, put up billboards, use theater playbills or movie screens, restaurant menus, and even maps to trumpet their wares.

Discount coupons to repeat customers are the favorite means of loyalty building, used by slightly fewer than half of the retailers surveyed. About a third also mentioned giving customers advance notice about upcoming sales and special sales, or special events for selected customers. Gift cards, either single use or those with reloadable value, are used by about a quarter of retailers as a way to create faithful customers.

Retailers frequently use some type of sale to clear their shelves of outdated goods, reporting a median markdown of 40 percent.

• More than two-fifths hold a sale twice a year.
• Less than a fifth have a single annual sale.
• The remaining two-fifths have a sale of markeddown products four or more times a year.

The number of retailers taking online orders continues to grow, increasing from 13 percent in 1999, to 20 percent in 2002, and to 23 percent for 2003. However, online sales still deliver only a very small portion of retailers' total sales volume — a median of 1 percent for 2003. Ten percent of retailers also sell through catalogs. These printed versions of stores seem to be doing a good job of generating additional sales for those who offer them. Catalog sales for 2003 accounted for a median of 20 percent of those retailers' sales volume, up from 15 percent in 2002.

Finally, our survey respondents reported that their customers pay for purchases using cash, checks, or a debit card in slightly more than half of their purchases — about the same as in the last two years. Almost another half all purchases are paid for with a credit card. Credit card sales rang up about $10 higher than cash sales, the same as in 2002. In 2003, the median credit card sale was $40, while the median cash sale was $30.

The results for the 2004 Retailer Comparison Survey are based on the responses of 204 gift and decorative accessories retailers representing 232 stores.

• 73 percent are gift specialty stores.
• 14 percent are home accessories stores.
• 4 percent are stationery/card shops.
• 9 percent represent florists, hospital, or resort gift shops, bookstores, kids' specialty stores, or direct-to-consumer sales.
• 87 percent of the retailer respondents operate just one store.
• Over 90 percent of the stores are independent or family owned.
• The median size of retailers' stores is 2,000 square feet, with 1,500 square feet used as selling space.
• 18 percent have annual sales of less than $100,000.
• 32 percent have sales ranging between $100,000 and $250,000.
• 22 percent have sales between $250,000 and $500,000.
• 28 percent have sales of $500,000 to almost $5 million.