And how to fix it to make more money, market your brand, and build your tribe.
By Randy Howell
Most people think the best advertising in the world is word of mouth. I don’t agree. I’d say it’s second best, because word of mouth doesn’t make you any money. What kind of advertising does? The kind where customers pay you to advertise your beer.
The way that works is simple. You sell gear, emblazoned with your brewery’s logo, online and/or in your brewery, and the folks who love your beer buy it. They wear it. And their friends and family and even strangers (on the street, standing behind them in the coffee shop, working out at the gym — you get the idea) see it.
And just like that, you’ve got your own walking billboard — one that paid you to walk.
If you’re not selling much merchandise, you’re not only missing out on an easy source of revenue but also an easy and ridiculously effective marketing tool.
Here, I share with you the top five mistakes I see brewers make with their merchandise — and the solutions that are proven to pump up their sales and customer base.
Dedicate 65 percent of your inventory to the best-selling/established merchandise.
Dedicate 25 percent of your inventory to purchasing newer merchandise that are potential best-sellers.
Dedicate 10 percent of your inventory to developmental/experimental merchandise.
One warning: Some things get better with age, but not inventory. If you’re feeling great because you have a lot of merchandise on hand, don’t — unless most of it is less than a year old. If you have inventory that’s older than one year, mark it down, run promotions, and move it out. Replace it with a greater assortment of your best-selling merchandise.
This is probably the most common mistake. We know that you’re craft brewer and not a New York City fashion display designer (thank God), so it’s understandable if your displays aren’t totally awe-inspiring.
But they should be — and you wouldn’t believe how many aren’t — readily visible. Fact is, merchandise is usually an unplanned, purely impulsive purchase. If a customer can’t see your merchandise, you surely won’t sell any. Likewise, the more often they see the merchandise, the more likely they are to purchase some.
Depending on your microbrewery floor plan, you want customers to come in contact with your merchandise at several touch-points in their visit: when they arrive and leave, when they go to the restroom, and when their wallet is out, such as at the register, at the bar, and on wait staff.
Keep in mind that a good display of merchandise catches a person’s eye but doesn’t overwhelm the merchandise. An attractive, creative display that’s consistent with your overall brand/image is what you’re striving for — something that showcases and highlights the Microbrewery merchandise for sale.
Whenever possible, make the merchandise touchable. Multiple academic studies have shown that men, even more than women, need to be able to touch/feel merchandise before purchasing. Unfortunately, we’ve seen many displays where the shirts are hanging from the rafters or behind a locked glass cabinet. Is this merchandise for Shaquille O’Neal or a museum? No. So let your customers hold up the shirt to see if it will fit, feel the fabric to ensure it’s soft, and assess its overall quality. (And if merchandise theft is a problem, you have bigger issues.)
eCommerce is the retail distribution channel of the 21st century. While in-store sales are growing in the low single digits, eCommerce sales are humping along at 16 percent per year. In addition, while the average in-store purchase is $25, that bumps up to $40 in the online market. Unless all your customers are over 70 years old, you must have eCommerce as a sales channel.
The drawbacks to eCommerce? It can be difficult to operate your online store well, and without getting distracted from your core business: brewing and selling great beer. The reality is that eCommerce needs to be easy for the customer, and it takes a lot of hard work to make it easy.
But the pros to eCommerce really outweigh its cons: Your store never closes. Customers from around the world can purchase your merchandise. You can sell e-Gift Cards. It provides incremental revenue. It has a long tail. (In other words, you might think you won’t ever sell that blue men’s small shirt that has your logo on the back, but six months after a visit to your microbrewery, a customer can go to the eCommerce site and purchase it.
And, with special promotions, you can do better than you would expect. Special promotions give you good reason to reach out to your customers and eCommerce gives them a reason to click back to you. Use Father’s Day, Mother’s Day, Christmas, birthdays, National Beer Day, and more to promote your merchandise (and your beer) with targeted emails.
Bonus: One of the easiest ways to get local customers back in the taproom is, instead of shipping the product, invite them to pick it up free at the microbrewery.
If your staff doesn’t want to wear your merchandise, do you think your customers will?
Engage your staff. Let them assist in merchandise selections and assortments to enhance your brand and sales. You have final authority, but your staff has a great “feel” for your customers; their opinion is valuable. And if they’re drawn to a particular style or color of gear, chances are good your customers will be too.
Want to see sales soar? Don’t have staff only wear the merchandise they helped select; offer them a small commission for each piece of merchandise they help sell.
Additionally, provide a very generous employee purchase policy to encourage staff to buy and wear multiple merchandise items. This might cost a little money in the short run, but it will pay off.
Remember: The more often customers come into contact with your merchandise, the more likely they are to make that impulse purchase. With your employees working as walking billboards for an assortment of your merchandise, the dividends will pay you back — in both merchandise and beer sales. Remember the Hawthorne effect? If not, look it up in Wikipedia.
If the word “metrics” brings to mind complicated spreadsheets, expensive tracking systems, tedious calculations, and extensive effort on your part, let me reassure you: You don’t need artificial intelligence. You need basic intelligence.
Metrics are critical to taking your merchandise sales from a gamble to a sure bet. They ensure you’re not tossing away your investment. That you’re buying what gear your customers want. And — this is key — that you’re actually realizing profit on your merchandise.
With your inventory organized by SKU/departments/collections/bricks (in-house retail)/clicks (online retail), you should utilize the following metrics:
Highest Gross Margin $$ (That’s the sale price minus your costs.)
Highest Gross Margin Percentage (The sale price, minus costs, divided by sale price.)
GMROI (gross margin $$/inventory $$)
Top sellers by SKU, slow sellers by SKU
Days sales in inventory by SKU
(Note: If you sell a shirt once a year, you don’t really need metrics, because there’s nothing to measure.) But ideally, you should cultivate enough merchandise sales volume to be able to analyze it.
By eliminating these five mistakes, you’ll be able to make smarter buying decisions at the outset. You’ll waste less time, effort, and money on merchandise your customers don’t want to buy. You’ll see both a nice tidy profit on your retail sales and happier customers — who get exactly the gear they want and pay you to wear it.
Randy Howell is president of the Colorado Craft Beer Hall of Fame and a proven master of merch, metrics, and helping microbreweries increase their visibility and revenue streams. For more retail tips, tricks, and methods of marketing your brewery, visit www.coloradocraftbeerhalloffame.com or contact Randy directly: email@example.com.