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The retail environment is now especially challenging for the small, independent retailer who is not only faced with penny pinching consumers, but also with giant retailers slashing prices. The only major national retailers who seem to be reporting increases are Walmart, TJX and the warehouse clubs. For everybody else, arrows are pointing down.

Most retail experts generally advise small and independent merchants to avoid competing on the basis of price. Independents succeed by having compelling product offerings and great service.

Driving sales by dropping prices has been a slippery slope that few retailers are ever able to get back from. But as we have seen in the daily headlines, unprecedented times require fresh thinking and pragmatic approaches. Here are some suggestions for striking the balance between the need to offer customers exceptional values, while maintaining the store's fundamental pricing integrity and brand equity.

Identify narrowly defined categories of merchandise around which promotions can be developed. Each offering must be meaningful and compelling. It might be a specific subcategory of merchandise, such as dresses or silk flowers, or lamps, or it might be a specific vendor's branded or designer line. The offering may also be driven by inventory levels, focusing in on categories or subcategories that are somewhat heavier than others.

Then, establish a promotional calendar, through the rest of this year and into the early part of next year, at least. Plan a promotion every two to three weeks, each lasting no more than two to three days, and running on the best sales days of the week.

Do not run the promotion longer than several days. If you do, it tends to blur the distinction in your customer's mind between promotional and non promotional periods. Determine which grouping of goods would be most attractive for each promotion, and be sure that each promotion in turn is featuring distinctly different merchandise from the prior one.

For each promotion, offer a single grouping of goods at a significant discount, at least 25 percent off, perhaps as high as 40 percent off, depending on the discount level necessary to grab the customer's attention. The key consideration is offering a discount great enough to drive traffic into your store without sacrificing image. Large swaths of merchandise are not on sale.

Focus advertising of the promotion around the store's customer email list. Target the offering to those customers that value the store enough to supply their email addresses. These are customers who have demonstrated their willingness to buy at your store. They're the customers that are most likely to be drawn by the offering. If the retailer needs to communicate more broadly, run a simple ad in the local newspaper.

Also run an unadvertised, in-store special, in addition to the promoted merchandise. This will drive up units per transaction and the average sale, while pleasing customers and giving them an extra reason to come to the next promotion. Ask the supplier of the featured merchandise if it has any promotional items that can be used as giveaways.

Dress up the store. Make it a special place to visit. Change out the displays and vignettes. Make sure everything is properly accessorized. Be sure to feature the promoted merchandise prominently to the best effect. Set up a coffee urn, bring in some coffee cake, do whatever it takes to fully create the warmest possible atmosphere.

Greet every customer who enters the store warmly and treat each as a returning guest, invited in and immersed in the interesting and comfortable atmosphere. Be sure every staff member fully engages their customers. Each customer must come away with an experience worth telling their friends about.

The business objective of each promotion is to drive traffic, conversion rate, units per transaction and average sale. The point is not just to sell the items being promoted, but to generate add-on sales of unpromoted, full margin merchandise.

By focusing each promotion on a narrow slice of the store's merchandise, and not putting the whole store on sale or running an early clearance, your store's brand equity and pricing integrity, as well as its profit margins, are maintained as much as possible, while still driving the top line.

Tough times call for tough choices. Most small and independent retailers take a principled, strategic stand against competing on price. Many also know they simply must offer their customers special values in this uncertain environment, to get them into the store and entice them to spend. Finding the right balance is the key to achieving the necessary short term results, without sacrificing long term integrity.

Information in this article was edited from a story by Ted Hurlbut of Hurlbut & Associates, a retail consulting firm in Foxboro, MA.

Article ID: 860