Today's Gift Retailer 2005

Running their businesses like they are playing a canny hand in a high-stakes poker game best describes today's gift retailers, as they pick up and discard product categories, shift price points, and constantly look for an advantage in their highly competitive world.

Part 1 of the results from our survey of 170 specialty retail stores appeared in the June issue, and covered product categories carried and best-selling price points. In this issue the survey reports on product sourcing, vendor selection, catalogs and the Internet, and in-store operations.

Retailers not only constantly add and drop product categories, they also add and drop lines within the categories they carry. Survey results show that almost half (49 percent) buy from at least 20 and up to as many as 60 different vendors. Another two-fifths (42 percent) deal with even more manufacturers, saying they buy from over 60 different vendors.

Generally speaking, gift retailers have products from two to four different vendors for each category they carry. For example, a retailer is likely to carry the lines of two or more candle vendors, such as Yankee Candle, Root, Northern Lights, or Shonfeld's. In only two categories, CDs/music and memory/scrapbooking, was the median number of lines carried in 2004 only one. Over the last four years, the median number of scrapbooking lines has climbed as high as three.

The biggest exception to the carrying-two-to-four-lines rule comes in holiday products. In this category, which accounts for about 10 percent of store sales, retailers choose from a median of ten different vendors.

Trade shows continue to figure prominently in retailers' search for new products, as do visits from sales reps. Over half (56 percent) of the retailers surveyed attend two or three shows a year, and more than a third (38 percent) attend four or more shows.

Despite increasing gasoline costs, sales reps frequently cross dealers' doors: more than half of retailers (56 percent) say they get visits from ten or more reps a year.

This year, G&DA asked retailers to rank, in order of importance, qualities or characteristics they look for as they choose vendors and products for their store. Topping the list, not surprisingly, were high quality or value for the price, and good design. These two scored the highest average value — a 5 on a 5-point scale where 1 is “not at all important” and 5 is “very important.”

Slightly more than one-fourth (27 percent) of the retailers surveyed offer a website that allows online ordering. Printed catalogs are used by only 8 percent of retailers surveyed. But retailers selling either online or through a catalog generate less than 5 percent of their overall sales through these alternative channels.

Customers are more frequently using credit cards to pay for purchases, with nearly three-fifths (59 percent) choosing credit over cash, 12 percent higher than last year. Credit card sales continue to average about $10 higher than cash sales with the median cash/check sale at $29 compared with $40 for credit cards. More than four-fifths (86 percent) of retailers offer gift cards or gift certificates with $25 the median amount spent.

After paying for product, a large chunk of retail expenses goes to staffing. Retailers say 16 percent of their total annual sales volume goes to cover payroll costs, with another 5 percent allocated to fringe benefits. In terms of number of employees, a median of six people cover the cash register and sales floor during business hours. Two of these staffers work full-time while four work part-time. Two additional workers may be hired to cover seasonal sales.

For working owners, two staffers are generally family members with one having an ownership stake in the business. Most (91 percent) of the sales staff are non-owners, and most (83 percent) are paid by the hour with only a small number working on a commission basis combined with either an hourly wage or annual salary.

Full-time workers are on hand in the store a median of 40 hours a week. Over a third (36 percent) work more than 40 hours a week. Full-timers receive a median of $20,000 a year, up 5 percent from two years ago when G&DA last collected similar data. Only slightly over a third (36 percent) earn more than $20,000 a year in wages.

As for benefits, more than two-fifths of retailers offer in-store merchandise discounts. Vacation with pay falls next in line, offered by about one-fourth (28 percent) of retailers, and health insurance, provided by about one-fifth. Less than one-fifth of retailers extend any other types of benefits, such as paid sick leave, retirement/pension plans, or dental insurance to their staff.

Obviously, part-time workers work fewer hours in the stores per week, a median of 22.5. However, just over half (51 percent) work more than 20 hours a week. Part-timers earn a median of $7.50 per hour. About half of retailers give their part-time sales staff discounts on merchandise as a fringe benefit.

Seasonal workers receive a merchandise discount from one-fifth of retailers. Less than 10 percent of retailers provide any other types of fringe benefits to part-timers.

For those retailers providing health insurance for either part-time or full-time workers, over half require employees to pay a portion of the premiums for either or both themselves and family members. The median percentage an employee pays is 50 percent. In only about a third (35 percent) of the cases does a company pay 100 percent of the health insurance premium.

Data for this year's survey, collected during March 2005, is based on the mailed, faxed, or online responses of 139 gift and decorative accessories retailers operating 170 stores. A majority of the respondents hail from the Midwest and the South. A fifth claim the Northeast or West as home. Ninety-two percent of the stores are independently or family-owned. Other stores are either franchise operations or publicly held companies.

While some of the larger gift specialty chains are open for business well beyond 40 hours a week, the median number of hours these retailers are open stands at 50. In an average week retailers estimate the median number of customers visiting as over 200. Of those, more than two-thirds (70 percent) actually make a purchase.

Generally small in size, specialty retail stores surveyed have a median of 2,000 total square feet, with a median of 81 percent of the total square footage devoted to sales space.

For more details about the survey respondents, please see the June issue of G&DA, page 123.