Growing Payroll and Brands

Q: We're trying to keep our payroll costs as low as possible, and are concerned about an increase in the Federal minimum wage. Of course we haven't had an employee at $5.15 for years, so perhaps this change won't make much of a difference to us. What do you think?

A: The impact of an increase in minimum wage will depend on how close your wages are to the current Federal minimum of $5.15, as well as the proposed new rate of $7.25. If some of your employees earn below the new rate, then obviously your payroll costs will go up. However it's quite possible that workers making more than the new minimum rate will also want an increase. If an experienced worker is already making $7.25, for example, he or she might reasonably expect to earn more than the new minimum — especially if that is now the starting rate for new hires.

There is no denying that an increase in the minimum wage will be a hardship for shops operating on a very small profit margin. But that is not to say that an increase is not necessary. The estimated 5.6 million people earning less than $7.25 per hour (according to the Economic Policy Institute) undoubtedly include retail workers. It is easy to see how difficult it would be to pay for rent, food and health insurance on an income of $5.15 an hour — that's less than $900 per month. Granted, many of these jobs are part time and supplement other income, but for some they represent full time employment. As an industry, we need to think about those who often don't have much say in how our stores are run: our hourly sales staff.

Your statement that you want to keep your payroll costs as low as possible concerns me. We all know that customer service is one of the keys to surviving in today's competitive retail market. If we expect our employees to offer the best possible service, it is important that we attract the best candidates for our job openings, and retain good workers. This is not going to happen unless we offer as high an hourly salary as our businesses can realistically afford.

Think of your payroll as an investment in customer service rather than a drain on your bottom line. Happy, motivated employees are likely to generate higher sales for your store, justifying the additional cost.

Q: We hear a lot about building brand awareness these days. I've read that some companies spent $2.5 million for one 30 second Super Bowl ad, just so that consumers will recognize their name and logo. Is there any point in an independent store dedicating any portion of its small promotional budget to this cause?

A: Most shoppers find comfort in familiarity, and show loyalty to well-known businesses because they assume those businesses will always meet their expectations. That's one reason so many consumers buy lattes at Starbucks, even though there is a charming local coffee shop right next door. To promote this sense of familiarity, big businesses use a large portion of their advertising budget on name and logo recognition, rather than specific merchandise or competitive prices.

Independent retailers have an advantage in their local market: they can be remembered and respected by building a great reputation for customer service and merchandise. It may take years of nurturing your name recognition, but even small stores can become known as "the" place to shop in the area. In order to effectively capitalize on your good reputation and turn it into a recognizable brand, you need to create an identity that makes an impression.

The good news is that this type of brand building is mostly done through consistency in your store's image, rather than the expensive marketing done by bigger businesses. You will, however, want to include whatever paid advertising you do in the overall promotional plan.

Branding starts with defining a vision for your store, clearly stated in a few succinct words. You need to translate that identity into all the design elements that make up your store, especially your business name and logo. If you're not artistic, enlist the help of a graphics designer or an art student to turn your ideas into something concrete.

The colors and type style you choose for signage and printed materials should also be appropriate to your store's image. You may be surprised by how many fonts are available on your store computer, and how the same words can have a very different effect when written in a modern, traditional or artsy font. Use your signature font on the signs in front of the store, behind the cash register and on merchandise, as well as in print advertising for your store name and address (and a compatible type style for the body of the ads).

Store design, merchandise selection and even employees' nametags or uniforms should reflect the image that you want consumers to remember. Don't forget to include gift boxes and bags in your branding program: Through these, consumers take the store's logo home and even share it with others.

The key to brand recognition is reinforcement. Be consistent in using your name, logo and vision so your market is exposed to it time and again — even if you can't afford a Super Bowl ad. But also be consistent in service and merchandise, so consumers associate your brand with a superior shopping experience.