Hot dog! Great article on sound business management on Business Week from Tom Shay

September 14, 2008

The Hot Dog Professor

Practical business tips from Mark Reitman, the founder of Hot Dog University in Milwaukee, include choosing the right soundtrack

by Francesca Di Meglio of Business Week

Do you need a degree to run a hot dog cart? Mark Reitman, the founder of Hot Dog University in Milwaukee, thinks so. For $300, the former elementary school teacher and guidance counselor with a fondness for Chicago-style dogs, offers aspiring vendors a hands-on, two-day course on the ins and outs of the mobile food business. Six to eight students at a time participate in a course, and Reitman, who launched the business in June, 2006, says it is profitable and plans to expand it.

On the first day of the program, participants learn the basics in a classroom setting—from getting the right licenses to finding a prime location. On the second day, Reitman brings the class into the field to run a cart and sell dogs themselves. He bases his coursework on his three years of experience moonlighting as a vendor at a mall in Wisconsin. (The opening of the mall’s food court prompted him to try his hand at instruction.)

The beauty of the course, say graduates, resides in its affordability, lessons in the basics of the hot dog business, and tips that are applicable to other food businesses. Former students such as Dan Council, who plans to forgo traditional retirement to sell hot dogs to fishermen from his boat on Lake Wisconsin, credit Reitman with helping them build a foundation for a successful business.

A few tips from Reitman, the self-proclaimed PhD and professor of hot dogs, follow:

Find a prime location.. Pick a spot with few competitors, plenty of foot traffic, and zoning that allows you to sell your products without cumbersome restrictions.

Keep your menu simple. Whether you are running a food business or a store, you want to avoid bringing in a large inventory that may not sell. The simpler your offerings, the less complicated and less costly it will be to run your business. For example, Brad Bailey and Paul Frautschi, both recent HDU graduates, originally offered dozens of items on their menu, but say customers were overwhelmed by the choices. Now the duo, which runs Mad Dogs in Madison, Wis., offers only the basics and expects to make a profit in 2008.

Find ways to advertise for free. A proponent of providing authentic, high-quality products, Reitman wants his students to make sure clients know how good the hot dogs they’re selling really are. One way he suggests doing that is by using free materials from vendors. For example, if you’re selling Nathan’s dogs, then you could put a Nathan’s umbrella and sign on your cart. This way, customers will associate your cart with an already established brand’s hot dogs.

Put on a good show. Having a hot dog cart or stand is not the same as owning a gourmet restaurant. But it is still a service business. “You’re on stage when you’re running a hot dog stand,” says Bailey. “You have to have a personality or people won’t come back.” He adds that if you’re generally unhappy, then the food service industry is not for you.

Appeal to the senses. A major focus of Hot Dog University is having students pick up marketing tricks. Reitman covers how hot dog vendors must. The logos and brand colors on the cart’s signage draw attention through sight. To appeal to one’s sense of smell, Reitman suggests grilling onions on the cart. For sound, he has students play what he calls “happy-feet music,” anything that gets toes tapping and makes waiting in line seem more pleasurable. This, in turn, helps lure people again with sight. “It’s a mob mentality,” says Reitman. “If you see a lot of people in line, you think it must be good.”

Of course, a customer’s sense of taste is also crucial. One trick Council used to introduce those in his small town of Lodi, Wis., to Chicago-style dogs was to give them away at first. He was confident if they tasted the product, they would be hooked and would return as paying customers.

Pay attention to industry trends. Even if you’re launching or maintaining a side business, you can still uncover new revenue streams. Reitman notes that there is a demand for carts at seemingly unlikely events such as weddings.

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‘What fewer markdowns means to independents’ from Tom Shay

September 9, 2008

As you read this, remember what I have said about inventory control; ‘get in and then get out’. There is no need for your store to have inventory all the way through the season. When the mass merchant is starting their markdowns, you should be out of merchandise – you do not want to compete with others when they are selling stuff for half price.

This article explains how the mass merchants are planning their inventory much closer this year. I see this as a plus for independents as you will have fewer markdowns to compete against.

cincinnati.com
September 7, 2008

Stores scale back for Christmas

Expect fewer big sales and markdowns

By John Eckberg
jeckberg@enquirer.com

Even though tinsel and toys are still months away, the gift zone under the Christmas tree may already be shrinking thanks to a sputtering U.S. economy and high gasoline prices.

An early look at holiday cargo delivered at the nation’s top ports shows that this year’s volume is running about 4 percent behind 2007 levels.

Because retailers are ordering less, stores are going to be carrying fewer items. It also means shoppers will need to buy hot gifts quickly and should expect to see fewer sales throughout the season.

“Retailers are being tighter from an inventory perspective,” said Mirko Martich, who is based in Chicago and is a partner specializing in inventory management for A.T. Kearney, a London-based management consulting firm.

“We’re seeing a trend that people are going to be trading down a little more. We’re seeing increases in Wal-Mart comparable store sales. It wouldn’t surprise me to see lot more holiday spending on basics or core items.

“Instead of buying a pair of red corduroy pants that are purely holiday, maybe people are going to buy two pair of Wrangler basic blue jeans.”

The lower cargo volume may not mean much to consumers now. But all that changes in a month or two as retailers, including Cincinnati-based Macy’s, work to keep inventory tight to avoid January shelves of unsold merchandise, which almost always leads to markdowns and pinched profits.

The nation’s slow economy is to blame for the decline in cargo, according to the monthly Port Tracker report released in August by the National Retail Federation and Global Insight.

Macy’s is continuing to take a cautious approach to Christmas spending. The company with 850 department stores projects that same-store sales in the second half of the year will be flat to down 1 percent. Same-store sales are a measure of retail health because they compare shopping patterns from year to year.

Yet Macy’s expects the fourth quarter to be stronger than the third, executives told Wall Street analysts last month.

“Our inventory levels are adjusted for planned sales because customers are buying less,” Macy’s spokesman Jim Sluzewski said. “If you buy more than you sell, there’s more merchandize to clear, and that’s not good for the bottom line.”

According to the company’s second-quarter earnings released in August, inventories as of Aug. 2 were down 3.7 percent from the same period in 2007.

The decline in cargo shipments to the United States also means that consumers are not as likely to get early deals during the shopping season, and experts predict markdowns for last-minute shoppers may not be as steep as in years past.

Shoppers go online

Not all retailers are bracing for a down year.

The price sensitivity created by the economic climate “is driving more visits to the Web sites of online retailers, coupons and comparison shopping tools,” wrote Heather Dougherty, director of research of Hitwise Intelligence, in a report issued in mid-August as shoppers increasingly research purchases online. Overall, the number of visits to online shopping sites was up 19 percent in July compared with the same month in 2007.

Florence-based Ty’s Tox Box is among those that prospered from higher gasoline prices because they tend to drive shoppers online to avoid driving from store to store.

Founded in the basement of Ty Simpson’shome in the Plantation Point subdivision in 2003 as an eBay storefront, today the company is one of the nation’s largest online toy providers.

“We are opening up new channels and sales,” said Simpson, 35. “We are expecting sales to be up significantly. It’s the biggest year so far with lots of momentum.”

The 65,000-square-foot warehouse is filling up quickly with toys, costumes and other child-oriented items. Operations this year are different, too, because Ty’s Toy Box has signed up for joint ventures with manufacturers to “drop-ship” items directly to consumers, thereby skipping shipment to the Ty’s Toy Box warehouse and fuel costs, too.

About 20 percent of the orders will be drop-shipped, he said, and many are customized with names of the child who will receive the gift.

The new strategy means cash is not needed for inventory because Ty’s Toy Box is not billed until 15 days after the item is sold.

Risk to Ty’s Toy Box is moderated because the company does not have to commit cash up front to fill up a warehouse with toys that may or may not be popular when the holiday season finally rolls around.

Clearly, he said, online shopping is growing in popularity.

“Last year we had 12 million unique visitors. This year we project 17 million,” Simpson said.

Meanwhile, in brick-and-mortar stores, popular Christmas gifts are going out on the display floor earlier each year, according to Keith Jelinek, director at Alix Partners, a Southfield, Mich.-based logistics consulting company that focuses on operational improvements.

“Retailers are putting popular products out on the floor and not discounting until they absolutely must slash prices to get items sold,” he said. “That’s telling consumers, gee, we better get it now because it may not be here in 30 days.”

Minding the store

Macy’s has a complex inventory management system called 20/20. The process identifies the slowest-selling 20 percent of goods and clears them out of department store shelves with aisle displays and reduced prices.

“The philosophy is that if it doesn’t sell in a certain number of days or weeks, it’s not going to get any better,” Sluzewski said.

The approach also frees up cash to purchase and replenish merchandise in the top-selling 20 percent.

Macy’s branded products, which deliver about 19 percent of the company’s $26.3 billion in annual revenues, are not immune from the 20/20 process.

“That merchandise is treated like any other brand,” Sluzewski said.

Moving inventory quickly is vital for most companies but critical for retailers such as department stores that depend on being fashionable, current and appealing.

In a growing economy, those three moving targets are easy to hit. Not so when consumers are struggling with a flat housing market, high gasoline prices and fears of a loved one losing a job.

“There is no question that the economy has taken its toll on what people are buying,” said Gareb Shamus, the New York City publisher of Toy Wishes, the leading magazine and event producer in the toy industry.

“The flip side is that retailers are being pretty strong about making sure they don’t have over-inventory.”

That means consumers can expect fewer markdowns and less discounting this year than they saw in past years.

But toy buyers don’t behave the same as, say, apparel buyers.

“There’s going to be a tremendous demand for toys this holiday,” Shamus predicted. “People may have to sacrifice. But kids will generally get what they want, no matter the state of the economy.”

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