Today's Gift Retailer

The annual Gifts & Decorative Accessories Retailer Comparison Survey is designed to provide you, the gifts and decorative accessories retailer, with an industry standard by which you can measure your own business. The survey was mailed to specialty retailers during the month of January 2001. Respondents were asked more than 30 questions about the operation of their stores during 2000. The topics covered included merchandise mix and prices, sourcing and selling, advertising and promotion, employee practices, and retailing technology.

In detailing the survey results, we've pointed out notable changes since last year. New areas that we looked at this year include the average number of inventory turns, the number of lines carried, the percentage of sales that are paid for by cash or by credit card, and the number of trade shows the retailers attend annually.

First, a look at the retailers who responded:

• 12 percent have been in business 25 years or more.
• 23 percent opened their doors in the last four years.
• 98 percent own their own store.
• 83 percent operate only one store.
• 72 percent have annual gross sales of between $100,000 and $1,000,000.
• 18 percent have annual gross sales of less than $100,000.
• 10 percent have gross sales of more than $1,000,000.
• 50 percent own stores that are 2,000 square feet or smaller
• 45 percent draw on a trading area of less than 50,000 people.
• 65 percent of their business comes from repeat customers.

Product Categories: Gift and decorative accessories stores reported a merchandise mix that is both broad and varied, just as they did last year. Only one product category — collectibles — captured an average of more than 10 percent of total sales volume. Only five more — candles and candle accessories, stationery and greeting cards, holiday products, plush, and jewelry — clocked in at an average of more than 5 percent each.

Only nine product categories were carried by more than half of the retailers responding to the survey this year. In the 2000 survey, 13 product categories were carried by more than half of the retailers.

Five product categories were the most frequently carried across both years. More than three-quarters of the retailers carried candles and candle accessories. Other categories in the top five both years were stationery and greeting cards, photo frames, collectibles, and holiday products.

This year, the survey asked retailers what their inventory turns were for their most popular products. It also asked how many lines they carried in each category. The largest number of inventory turns came from candles and candle accessories, stationery and greeting cards, personal care and aromatherapy products, gourmet foods, and permanent florals. These five product categories had the highest average number of annual stock turns: a median of four. The average number of stock turns reported for other product categories ranged from two to three.

The median number of lines carried in any particular product category ranged from two to seven. For most product categories, the median number was two or three lines. In candles and candle accessories, gourmet foods, and tabletop wares, the median number of lines was four, and for housewares and collectibles, the median number of lines was five. Retailers carry the largest number of lines in holiday products (a median of seven).

Price Points: The wide range of products carried by today's gift retailer translates into an equally wide range of price points. The price point distribution reported for 2000 was similar to that reported for 1999. Within each of the product categories carried, the retailers reported offering a broad array of price points.

When reporting the price points that sell best in each category, retailers placed stationery and greeting cards, gourmet foods, partyware, and memory products at the lower end of the price spectrum (less than $10 for each item). At the high end of the price spectrum (with best-selling price points of $35 or more), were area rugs, permanent florals, and wall art. The majority of the product categories (19 out of 27) have best-selling prices of between $10 and $20. Wall art had the widest span of best-selling price points: from $3 to $1,000. However, most retailers reported that their best-selling price point for wall art was $100.

For most retailers, the best-selling price point for candles and candle accessories and for CDs and music was closer to the product category high. For gourmet foods, memory products, partyware, and stationery and greeting cards, the best-selling price point was closer to the product category low.

Resources: More than half of the survey respondents said that they attend two to three trade shows a year; a third go to four or five shows a year. They also play host to sales reps, with nearly a quarter of the retailers seeing more than 20 sales reps each year. In addition, almost three-fifths of the retailers surveyed said that they use the Internet to research manufacturers' products.

Payment Methods: On average, customers paid cash (or wrote a check or used a debit card) for almost three-fifths of sales. A little over a third of the purchases were paid for with a credit card. Generally, the credit card sales were for higher amounts (a median of $45) than were the cash sales (a median of $30).

Selling Online: Although more than three-fourths of the gift and decorative accessories retailers said that they don't sell online, the Internet played a bigger role in 2000 than it did in 1999. More than 20 percent of the retailers said that they sold products online last year, whereas only 13 percent reported selling online in 1999. The percentage of sales derived from the Internet

also increased. For those selling online in 2000, a median of 5 percent of sales came from the Net. In 1999, the median was 2 percent.

Ad Budgets: The retailers' ad budgets remained stable from 1999 to 2000. In both years, they reported spending a median of 5 percent of their annual gross sales for advertising and promotion. More than half said that they will maintain the same spending level during 2001. The largest portion of gift retailer ad budgets — more than a third — went to newspaper advertising. Direct mail took the second largest slice — 22 percent — out of the advertising expenditure pie.

Direct Mail: The percentage of retailers who reported using direct mail in 2000 (68 percent) was smaller than the percentage of retailers who used it in 1999 (76 percent). Higher mailing costs probably explain the decrease. The number of retailers who mail every month or every other month increased by 3 percent in 2000 in both cases. In both years, roughly a third said that they send direct mail pieces only once or twice a year, and roughly two-fifths reported sending mail three to four times a year.

Mailing Lists: Retailers reported using a wider range of sources for their mailing lists in 2000. Guest books, and checks and credit cards still topped the list of sources. But in 2000 retailers also used registrations from giveaways and made more use of registrations from collectibles vendors. Other sources for names included Welcome Wagon referrals, Internet registrations, and catalog orders.

Special Events: Open houses and holiday events were the most popular special events held. In 2000, four-fifths of the retailers surveyed said that they hold special events, compared with two-thirds in 1999. On average, about 9 percent of their advertising budget goes to special events.

Payroll: Gift and decorative accessories retailers allocated a median of 12 percent of their annual gross sales to payroll. Part-timers make up about two-thirds of the staff in their stores. Roughly one-quarter of the workforce is comprised of managers, with the rest comprised of salespeople. In slightly more than a third of the stores surveyed, the annual salaries for managers were between $25,000 and $40,000.

Benefits: Gift and decorative accessories retailers allocated a median of 3 percent of their annual gross sales to fringe benefits. Merchandise discounts remain the most frequently offered fringe benefit for employees. For the most part, they are the only fringe benefit given to part-time employees.

Computers/POS Systems: Gift retailers don't yet make great use of computers and point-of-sale systems. Three-fifths use a credit-card authorization system. Only 37 percent reported using a point-of-sale system; however, that was an increase over the 33 percent who used one in 1999. Slightly more than half reported using a computer to manage a customer address list.

The survey findings are based on the responses of 178 gift and decorative accessories retailers operating in 216 locations. The retailers were spread across the country, with 31 percent in the Midwest, 28 percent in the South, 21 percent in the Northeast, and 19 percent in the West.

A majority of the retailers (84 percent) characterized their store as a gift specialty store. Home accessory stores, stationery and greeting card stores, or some other combination comprised the remainder. Only 2 percent of the stores were either franchises or publicly held companies; 98 percent of the stores were independent or family-owned.

Judi Fulbright was lead researcher for the survey, which was conducted by Gifts & Dec's Market Research Department. If you are an independent gift and decorative accessory retailer and would like to take part in future surveys, please send your name, address, and telephone number to Judi Fulbright, Cahners Business Information, P.O. Box 2754, High Point, NC 27261, or fax it to her at (336) 605-1143.