by Karen Alberg Grossman

At another terrific seminar at Project Las Vegas, Management One’s Paul Erickson maintains that customers today want three things: a liberal return policy, limited choices, and fresh product.

Establishing a liberal return policy, he insists, is counterintuitive: studies have proven that instead of returns going up, they actually decline. “When customers have all the time in the world to return something, there’s no sense of urgency to they let it sit,” Erickson explains. “The longer it’s sits in their closet, the less likely that they’ll return it.”

He alludes to analogous situation with shrinkage: you can lock up everything to reduce shrinkage but then sales will decrease a good 50 percent. Better to take a Nordstrom-like approach with your customers and create a reciprocal contract based on mutual respect. Erickson also praised Nordstrom for launching martini bars on their second floors, confirming the theory that people buy more when they’re drunk. “It recalls the old saying that all girls look prettier at closing time in the bar: when your options are fewer, everything looks better. Which is why scarcity is so important in retail, but it must be scarcity of unique items. It’s the reason for the success of the TV show The Bachelor: why are all these beautiful women after this one guy? It’s all about scarcity…”

The bottom line on scarcity: having too many choices is debilitating. Erickson cited a study of home-made jams at an open market: when 24 choices were offered, 60 percent of the traffic stopped, the average shopper tasted two flavors, and 3 percent of the shoppers made a purchase. When six different jams were offered, only 40 percent stopped but the average shopper still tasted only two types and 30 percent made a purchase. Ten times the people purchasing with the more limited assortment!

Maintaining that turnover is all important in retailing, Erickson advised retailers to always have something new on their selling floors. His example here is Costco, a chain carrying only 5000 skus vs. 100,000+ at competitors like Sam’s Club. “Not only has Costco created a voyage of discovery but they don’t own any inventory: they turn so quickly that they get money back before they have to pay.”

A few other great suggestions:

*Offer GWP’s instead of markdowns; better still, offer free gifts! ‘Free’ has proven to be more powerful than discounts in creating customer loyalty.

*Use your website to tell stories—about you, your customers, what your sneakers mean to you, anything and everything!

*Control your inventory: most retailers carry twice as much as they need so their turn is 2.5-3x when it should be 5-6x.

*Small quantities (a 10-week supply) of new product should be in stock at all times. Ninety percent of all sales come from inventory less than 10 weeks old.


  1. Hi, that all sounds great for womenswear, but men don’t shop as often and it becomes important to grab them while they’re in the mood, a 5 to 6 turn in menswear seems hi, especially in clothing where you need a wide assortment of sizes, fits, and pricepoints.

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