June 2011 Michigan Retailer

3

Sales Rebound

More Michigan retailers rang up better sales in April, but they remain concerned about higher gasoline prices.

Page 3

5

Never Never

Here’s a rule for protection against scam artists: never wire money to someone as part of a retail transaction.

Page 5

7

What’s In It For Me?

Tell customers what they want to hear, namely how they will benefit from doing business with you.

Page 7

® June 2011 Vol. 36 No. 3

MRA offers new guide to starting a retail business

Michigan Retailers Association has produced a new booklet to help reignite Michigan’s entrepreneurial spirit by assisting would-be retailers in starting their own businesses.

Entrepreneur’s Guide to Starting a Retail Business is available to anyone interested in learning the basics of opening a store or e-commerce website.

“Our organization has been helping retailers for more than 71 years, so who better than MRA to encourage and assist new retail startups?” said James P. Hallan, president and CEO. “There’s strong agreement that we need to help spark an explosion of startup businesses in this state to ultimately create hundreds of thousands of new, good jobs. We’re doing our part to assist Gov. Snyder and others in their efforts to reinvent Michigan’s economy.”

The guide brings together information from many sources to help entrepreneurs navigate the steps they’ll need to take in preparation for their first retail sale. It walks them through the important details of planning, setting up and registering their businesses, navigating tax obligations, planning store operations, protecting assets and more.

“While the booklet serves chiefly as an overview of these topics, the material and resources included can get would-be retailers started in the right direction,” Hallan said.

The new booklet is being released in connection with MRA’s 2010 Annual Report, which focuses on the importance of entrepreneurial spirit in rebuilding Michigan’s economy.

To request a copy of the guide, contact MRA at mra@retailers.com or 800.366.3699.

The official publication of the Michigan Retailers Association

www.retailers.com

Main Street Fairness new top goal Closing the sales and use tax loophole that gives many out-of-state, online retailers a competitive advan-

tage over Michigan stores has moved to the top of Michigan Retailers Association’s legislative agenda.

Item Pricing Reform. Gov. Rick Snyder (seated) signed into law the MRA-backed Shopping Reform and Modernization Act on March 29. Standing (from left): Sen. Mike Kowall (R-White Lake), MRA VP Eric Rule, MRA President and CEO James P. Hallan, MRA Sr. VP Tom Scott, and bill sponsor Rep. Lisa Posthumus Lyons (R- Alto).

Better retail marketing using mobile barcodes To the naked eye they’re incomprehensible — strange little boxes filled with a seemingly random pattern of either color triangles or black and white squares that could be a crossword puzzle on steroids — but they are showing up with increasing frequency in magazine ads, on billboards, on soup mix packages or anywhere products are being advertised or sold.

T h a t ’s b e c a u s e w h e n c o nsumers scan the squares with

app-equipped smartphones, such as the Apple iPhone or Google’s Android OS, they’re transported to a world of information and salesmanship that could never fit on even the best-designed product label.

Known as mobile or 2D barcodes, they’re the latest version of the vertical line codes (known as 1D barcodes or UPC codes) that have been familiar to shoppers for decades. The newer codes contain a link that jumps a smartphone to a website, where the consumer can learn far more about a product or company.

It’s also an effective way for a static marketing piece, such as a postcard, sign or magazine ad, to “come to life” through video on the website.

Continued on page 4

MRA is talking with Gov. Snyder’s administration and key state lawmakers in an attempt to get the legislature to enact “Main Street Fairness” legislation, said MRA President and CEO James P. Hallan.

“Following the successful completion of item pricing reform and elimination of the Michigan Business Tax in the first six months of this year, Main Street Fairness has risen to our number one issue,” Hallan said.

“There are steps state government can take right now to make Michigan retailers more competitive and improve Michigan’s economy. This issue has dragged on far too long.”

To move the issue forward, MRA plans to borrow a page from its successful strategy to secure passage of the item pricing reforms signed into law by Gov. Snyder on March 29. MRA will again lead a large coalition of retailers and other businesses, this time to push hard for Main Street Fairness.

Loophole When someone buys merchandise online, he or she must pay the Continued on page 4

Prepare for Sept. 1 start of pricing law MRA is helping retailers understand the new shopping reform and pricing law changes that take effect for stores on September 1.

The Association commissioned a legal analysis of the Shopping Reform and Modernization Act and what it means to store operations. To download a free copy of the analysis, along with a copy of the actual legislation, v i s i t w w w. re t a i l e r s . c o m / m r a / ItemPricingReport.html The new law sought by MRA eliminates the mandate that all items in a store have a price sticker or tag. In doing so, it provides retailers with new flexibility in communicating prices of merchandise.

The law also continues many consumer protections that were in place under the old item pricing law that was enacted in 1976 and took effect in 1978.

2

Michigan Retailer

Triple Progress

by James P. Hallan, MRA President and Chief Executive Officer After eight years of playing mostly defense against the Granholm administration’s legislative agenda, it has been a real thrill — and of enormous value to Michigan’s retail industry and our state’s economy — for Michigan Retailers Association to be able to go on offense in 2011.

And what an offense it has been so far!

During the first five months of Gov. Rick Snyder’s leadership — and the solid performance of the new legislature — Michigan Retailers has already achieved two major, longtime legislative goals to improve the business climate in this state.

These two accomplishments are: 1) Reform of Michigan’s antiquated item-pricing law; and 2) Repeal of the jobs-killing Michigan Business Tax surcharge (along with the rest of that complicated, confusing and unfair business levy).

Gov. Snyder signed into law the MRA-initiated Shopping Reform and Modernization Act on March 29, and then put pen to paper on May 25 to wipe out the MBT, a move strongly backed by MRA. Achieving only one of these goals would have been a big accomplishment. But two…in less than a year?

Unprecedented.

A third major, long-term retail business issue we are pursuing right now is Main Street Fairness.

We’re talking with the governor, his administration and key lawmakers to try to close the loophole that currently gives giant, online-only retailers outside Michigan an unfair price advantage over our in-state retailers, especially Main Street brickand-mortar businesses.

These online-only retailers refuse to collect state tax on the merchandise they sell to Michigan residents, despite the legal obligation of their customers to pay the tax (and who are generally unaware of the requirement to pay a “use” tax that equals a sales tax).

Michigan Retailers has been hammering on this issue of fundamental fairness for decades. In fact, we started educating lawmakers and pushing them for a solution long before there was an Internet, when the problem started with out-ofstate catalog and drop-ship (mostly furniture) retailers.

Our core position is that a level playing field means all retail sales should be treated/taxed equally, regardless of the sales channel. Otherwise, government is in the position

Hallan elected national vice chair MRA’s James P. Hallan has been elected to a two-year term as vicechair of the national Council of State Retail Associations (CSRA).

The MRA president and CEO has served on the board of directors of CSRA the past four years and moves up to vicechair from board secretary-treasurer.

CSRA, based in Charlotte, North Retail By Norm Feuti

Carolina, is the national organization dedicated to building strong state retail associations by facilitating communications and idea exchanges.

CSRA members work together to track state legislative trends and combine forces to react to federal congressional proposals.

of picking winners and losers by giving some channels more favorable treatment.

We have made some progress on this issue in recent years through the multi-state Streamlined Sales Tax Project, which has made it easier for some of these large online-only retailers to voluntarily collect the state taxes owed by their shoppers.

The ultimate solution, however, will come when the U.S. Congress finally decides to make collection mandatory.

www.retailers.com

Michigan Retailers Association Board of Directors: Barb Stein

Chair Great Northern Trading Co., Rockford

James P. Hallan

President and CEO Michigan Retailers Association

Thomas Ungrodt

Vice Chair Ideation, Ann Arbor

Peter R. Sobelton

Treasurer Sundries Plus, Birmingham

Jean Sarasin

Secretary Michigan Retailers Association

Joe Swanson Past Chair Target Corp.

Dan Marshall

Marshall Music Company, Lansing

But faced with the reality that Congress won’t act any time soon, some states are taking actions on their own to compel more of these online-only retailers to comply. We want Michigan lawmakers to take similar actions to close the large and growing loophole that hurts Michigan Main Street businesses and adds to our state deficit.

The retail industry really came together under the coalition put together by Michigan Retailers to achieve item pricing reform this spring. We plan to use a similar strategy to achieve Main Street Fairness. Which is why many of you are being approached to provide public support for this effort by adding your name to those who “Stand with Main Street.”

Winning this fight won’t be easy, but we fully expect to be successful before the end of the year.

I can’t begin to put into words the importance of winning not just one, not just two, but possibly three huge legislative victories in one year. Call it a three-peat, a trifecta, a triple play, a triple crown or whatever else you like. We call it tremendous progress for Michigan.

Orin Mazzoni, Jr.

Orin Jewelers, Garden City

Joseph McCurry Dovetail Alliance

Larry Mullins

Brandon Tire & Battery, Ortonville

R.D. (Dan) Musser III

Grand Hotel, Mackinac Island

D. Larry Sherman

Sherman Investments, Birmingham

John Smythe Lansing

James Walsh

Meijer, Inc., Grand Rapids

Michigan Retailers Services, Inc. Board of Directors: Becky Beauchine Becky Beauchine Kulka Diamonds and Fine Jewelry, Okemos

Brian Ducharme AT&T

James P. Hallan Thomas B. Scott Publisher

Editor

Pat Kerwin

Design Manager

Publication Office: 603 South Washington Avenue Lansing, MI 48933 517.372.5656 or 800.366.3699 Fax: 517.372.1303 www.retailers.com www.mallofmichigan.com

Subscriptions:

Michigan Retailer (USPS 345-780, ISSN 0889-0439) is published in February, April, June, August, October and December for $20 per year by Michigan Retailers Association, 603 South Washington Ave., Lansing, MI 48933. Subscription fees are automatically included in the Michigan Retailers Asociation membership dues. Periodical postage paid at Lansing, Michigan.

POSTMASTER: Send address changes to 603 South Washington Ave., Lansing, MI 48933. The Michigan Retailer may be recycled with other white office paper.

June 2011

3

HOW’S BUSINESS

Retail sales rebound in April, but retailers wary last year, while 32 percent recorded declines and 23 percent saw no change. The results create a seasonally adjusted performance index of 53.1, up from 42.9 in March.

Index values above 50 generally indicate an increase in overall retail activity.

Looking forward, 48 percent of retailers expect sales during May-July to increase over the same period last year, while 16 percent project a de-

Current

crease and 36 percent no change. That puts the seasonally adjusted outlook index at 60.9, down from 63.8 in March and 72.3 in both February and January.

Department stores, gift retailers and automotive service shops posted the best performance in April. Central and Southeast Michigan were the strongest regions.

State sales tax receipts totaled $496.8 million in April, down 1.7

3-Month

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Performance Index

09-10

80

70

70

60

60

50

50

40

40

30

30

2010

600 549 569

500 400

505 497 431 447

300

APR

MAR

JAN

FEB

DEC

NOV

OCT

SEP

AUG

JUL

Join Bob and Susan Negen on July 18 and 19, 2011 for the...

2011

700

JUN

MAY

APR

MAR

JAN

FEB

DEC

NOV

OCT

SEP

AUG

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The question is…

Will you be one of them?

Complete results of this month’s Michigan Retail Index—including data on sales, inventory, prices, promotions and hiring—are available at www.retailers. com/news/retailindex.html. The website includes figures dating back to July 1994.

09-10

Seasonally adjusted diffusion index, calculated by adding the percent of respondents indicating increased sales and half the percent indicating no change, and then seasonally adjusting the result using the U.S. Census Bureau’s X-11 Seasonal Adjustment procedure. Index values above 50 generally indicate an increase in activity, while values below 50 indicate a decrease.

Every year, hundreds of independent retailers from across the continent gather in Grand Rapids, Michigan for a mind-blowing, business-changing, bank-account-expanding experience.

percent from the year-ago level. Yearto-date sales tax collections are up 5.5 percent. March was up 3.7 percent from the year-ago level.

10-11

Outlook Index

80

MAY

Michigan retailers rang up better sales in April, although they remain concerned about high gasoline prices and unemployment, according to the latest Michigan Retail Index survey conducted by Michigan Retailers Association and the Federal Reserve Bank of Chicago.

“A late Easter and resilient consumers helped overall retail sales rebound in April,” said MRA’s James P. Hallan, MRA president and chief executive officer.

“However, retailers’ short-term sales projections dipped for the third month in a row, indicating continued concern about the economy. The recent easing of gas prices — after this survey was completed — should help soften some of those fears as we head into summer.”

Retail sales dipped sharply in March as a combination of rising prices at the pump, a late Easter and cold weather hit the industry. But that same late Easter helped pull up April sales, and enough consumers shrugged off $4-agallon gasoline to move the Index back into positive territory.

The Michigan Retail Index for April found that 45 percent of retailers increased sales over the same month

200 (millions)

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46

Michigan Retailer

www.retailers.com

Better retail marketing using mobile barcodes Continued from page 1

Endless possibilities “The possibilities are endless,” said David Custer, marketing executive with food producer Country Home Creations in Goodrich, which recently began using the codes. “We can’t fit everything we want to fit on our labels. [But with mobile barcodes] we can supply as much information as possible, from recipes to reviews.

I can link [shoppers] immediately to what other people are saying about our product. Testimony is the best marketing.”

Custer has been putting the barcodes on Country Home Creations labels since the beginning of the year in an effort to better get the word out about the company’s dip mixes, soup mixes and gourmet food. The company sells the products to consumers via its website and ships them wholesale to more than 1,000 stores nationwide.

Custer said he first learned of the codes while visiting his brother in Washington, D.C., and immediately realized their usefulness.

“I thought, ‘How cool would it be if somebody could scan our product with their phone and see the things that we can’t fit on our product label?’” he said.

AT&T, which provides smartphone users with one type of free code scanner at http://scan.mobi, suggests several ways retailers can use mobile barcodes: • A shelf card beneath an espresso maker could link to a 90-second digital video demo; • A billboard for a new urban clothing outlet could link to a GPSenabled map, directing pedestrians to the location; • A magazine ad for a new organic frozen entree could allow for the loading of an electronic coupon, plus a

pass-along text for friends.

Creating code Reminiscent of the old competing Beta and VHS videotape formats, there are two formats of mobile barcodes: QR codes and Microsoft tags.

QR codes use the black and white squares, and Microsoft tags use color triangles. To create codes or tags, retailers can use free programs available online.

Custer said consumers, especially the tech-savvy younger generation, are becoming more and more aware of them.

“People who use an iPhone are very familiar with what these are,” he said.

Doing price comparisons, checking for product reviews and receiving special offers are the three biggest reasons consumers use their phones to check barcodes, according to a survey by New York-based Scanbuy, which provides technology to read the codes.

Eighty-one percent of respondents said they used the technology to check prices, while 63 percent reported they searched for reviews and 63 percent said they looked for special offers.

According to Scanbuy’s survey, released last December, an estimated 30 to 40 percent of smartphone users have downloaded a barcode scanning application. Ninety-seven percent of barcode users reported finding mobile barcodes useful.

On average, each user scans two to three barcodes a month, Scanbuy found.

The age group doing the most scanning is the 35 to 44 demographic, which accounts for 30 percent of users, followed by the 25 to 34 group, which includes 25 percent of users.

Men currently make up 70 percent of the scanning population.

Main Street Fairness new top goal Continued from page 1

same 6 percent tax as if buying the product in person at a store. The loophole occurs because online retailers without a physical presence in Michigan are not required to collect the tax, explained Eric Rule, MRA vice president of government affairs.

“That loophole puts our in-state retailers at a price disadvantage, because they must collect the 6 percent tax,” Rule said.

“Legislation closing the loophole would level the playing field and treat all sales the same. Government should stop picking winners and los-

ers by allowing some businesses to avoid collecting sales and use taxes.”

Rule said that currently, these online businesses are passing the responsibility for paying these taxes onto their customers. Most consumers are not aware it is their responsibility to pay the use tax when they file their state income tax. As a result, they are at risk of being audited or penalized for unmet tax obligations.

Hallan emphasized that Michigan businesses that do business online would not be adversely affected by the legislation.

June 2011

5

RETAIL TECHNOLOGY NEWS

Dental Insurance rates Never wire money as part to stay at current level

of retail sales transaction

John Mayleben, MRA’s senior vice president, technology and product development, writes a regular column on retail technology. Contact jmayleben@retailers.com.

“Never say never” usually holds true in life, but in the case of handling a MOTO (mail order/telephone order) transaction as a retailer, you should never wire money to someone.

L e t m e re p e a t , b e c a u s e i t ’s that important. Never wire money to someone as part of a retail transaction.

With the Great Recession of 2009-10 has come a marked increase in the number of merchants who are being taken advantage of by fast-talking scam artists who want something for nothing.

The scam usually starts innocently enough. You get a nice size order for products or services from an unexpected source. The story seems legitimate and fits your business model.

After the bad guy has set the hook, he suddenly “discovers” a problem that can be “solved” with the help of you, the merchant. Usually it is for shipping or for other services; the problem has even been to help the “customer” with customs (for an international order) or tax reporting.

The “solution” to the customer’s problem is for you to run another transaction and wire the money to another person or company.

These scams are limited only by the imagination of the scam artist and the gullibility of the merchant. Here are some real-life examples: • A jewelry store customer requests a custom diamond ring, but needs part of the purchase price rebated to cover shipping and/or duty; • A car dealer customer is interested in purchasing a unique used car, but needs part of the purchase price rebated to handle the shipping of the car; • A granite memorial customer is interested in purchasing a custom headstone for a dead relative, but needs a portion of the purchase price rebated to facilitate delivery and installation; • A tire dealer customer wants to purchase four racing tires, but wants them shipped to the racing event and requires a special

shipping method; • A B&B owner receives a request to “rent” the entire facility for executive meetings, but requires the use of an interpreter and needs the separate services to appear as one transaction for tax reasons.

As you might expect, the person or company receiving the wired funds is a partner in the crime being committed. The scam artist has no interest in the actual item or the service, just the wired money.

If you receive an order that follows this track, do not wire money.

Ever. Once you wire the money (via Western Union or similar service) it is gone forever, because there is almost no way to get it back. The bad guy has your money, and the credit card transaction will become a chargeback with you holding the bag.

If you ever have doubts about a transaction, call your help desk.

They have probably seen or heard of the scam before and can offer sound advice.

Remember, a sale that turns into bad debt is not a sale, it is just bad debt.

For the second year in a row, dental plan rates for MRA subscribers will remain at current levels on July 1.

Board members approved the rate freeze for the 2011-12 fiscal year following Delta Dental’s annual review of claims utilization.

Although the review suggested small rate increases were in order, board members chose to use a small surplus from last year instead of raising rates.

MRA’s self-insured dental plan is administered by Delta Dental of Mich-

Looking for the best way to reach retailers in Michigan?

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Members not currently subscribed in the program can obtain more information and a no-obligation quote by contacting MRA at 800.366.3699 or mra@retailers.com.

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6

Michigan Retailer

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LOTTERY

Lottery visits local events

by M. Scott Bowen, Commissioner

Be on the lookout for the Michigan Lottery at Michigan events this summer.

Again this year the Lottery’s Mobile Retail Outlet (MRO) will travel across the state to fairs, festivals, Michigan International Speedway racing events and concerts to allow players the opportunity to play their favorite Lottery games while enjoying the sights, sounds, tastes and smells of summer.

Events the MRO will be at include: • Michigan International Speedway, Brooklyn – June 17-19 • Detroit River Days, Detroit – June 23-26 • Muskegon Summer Celebration, Muskegon – July 1-9 • Common Ground, Lansing – July 11-17 • Ionia Free Fair, Ionia – July 21-30 • Coast Guard Festival, Grand Haven – August 2-6 • Rock the Rapids, Grand Rapids – August 8-13 • Michigan International Speedway, Brooklyn – August 19-21 • Warren Birthday Bash, Warren – August 25-28 • Arts, Beats & Eats, Royal Oak – September 2-5 Lottery App If they haven’t already done so, Lottery players can download the free Michigan Lottery app to Apple and Android devices.

The app features many of the same services as the Lottery’s Player’s Club website, www.michiganlottery.com. It provides Lottery players the ability to watch Club Keno drawings, view jackpots and winning numbers, search past numbers, and view prize tables — all at the touch of a finger.

For Club Keno players, it offers a new way to experience the game.

Once they’ve purchased their ticket, players can watch the drawings from their personal devices.

For players who buy instant tickets and participate in the numerous second chance contests the Lottery offers, the mobile app allows players to enter their non-winning instant tickets into the Player’s Club to earn points and Instant Replay entries.

The app is just another way the Lottery has made its services more accessible to players. In addition

to the app, players can go to www. michiganlottery.com, the Lottery’s Facebook page at www.facebook. com/michiganlottery, or have the winning numbers and Lottery updates emailed and texted directly to them.

Monopoly Monopoly™, with three instant game tickets with price points of $2, $5 and $10, was launched on May 25 and offers a combined $26 million in total prizes. In addition, players can enter their non-winning Monopoly™ tickets on the Player’s Club website, for a chance to win $1 million!

Every dollar in non-winning Monopoly™ tickets submitted is one entry into the contest. Also, with each ticket entry players will gain access to a bonus Monopoly™ interactive game to play for up to 100 additional entries.

Three drawings will be conducted on June 21, July 19 and August 23 and will award three finalists a $10,000 prize and an entry into the grand prize drawing for $1 million during the fall episode of the Lottery’s game show, Make Me Rich!

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Over 94 cents of every dollar spent on Lottery tickets is returned to the state in the form of contributions to the state School Aid Fund, prizes to players and commissions to retailers. In fiscal year 2010, the contribution to schools was $701.3 million. Since its inception in 1972, the Lottery has contributed more than $15 billion to education in Michigan.

June 2011

7

Tell your customers what they’ll want to hear Ninth in a series on “Managed Common Sense” by Steve Flaster In our last column we emphasized that re t a i l e r s m u s t communicate with customers, and they have a myriad of opportunities for doing so. The obvious next question to ask ourselves is, what kind of messages should we send to our customers?

Let’s face the fact that customers, like everyone else, want to know what’s in it for them. They don’t necessarily care about our success as retailers and are not searching for examples of our artistry and creativity.

Instead, they want to hear how they will benefit from doing business with us and why they should pay attention to our offers. Therefore, when we communicate with customers, we should be speaking to them about customer benefits and why doing business with us is worth their while.

Anything else can be superfluous and confusing.

Creativity should be used judiciously and with a clear focus on achieving the purpose of all retailing communica-

tion. And that is to motivate customers to buy something and build customer loyalty to the store. Keep things simple for customers and make sure you are speaking their language.

Claim to Fame Every retailer should have unique qualities, abilities and competitive strengths that constitute a claim to fame with customers. In order to be more than an ego trip, a retailer’s claim to fame must be meaningful and motivating to customers.

In essence, your communications should be based on your claim to fame, and your claim to fame should be based on what is important to your customers.

Let me explain by showing how a recent nationwide promotion could have been better focused to get better results.

Last November 18, a full-page ad in the Wall Street Journal proclaimed November 27 to be Small Business Saturday…a day for customers to shop local businesses because they are the backbone of the American economy. While it’s questionable that the day after black Friday was a good choice for such an event, it’s

even more questionable that just being small and local would be a huge draw.

In reality, just being small and local generally is not that meaningful to customers. What is meaningful is that because they are small and local, such retailers have a better chance of knowing, understanding and serving their customers.

Many times, such retailers are like extended family. Their true claim to fame is not their size or location but how those qualities enable them to do more for customers. That is what customers want to hear, that is what should be communicated, and that is what will bring customers to their stores.

One Aspirin On New York City’s upscale Madison Avenue there is a posh drugstore named Zitomer’s. It is really more than a drugstore, and it proudly tells customers that it will even deliver one aspirin. Now that’s a powerful claim to fame!

It is powerful because it means something to Zitomer’s target market of neighborhood executives, who might want just one aspirin before

starting a stressful meeting. Telling customers you can “deliver the goods” is a strong communications platform and claim to fame for this particular store.

Because different target markets are motivated in different ways, different stores must find their own powerful claim to fame and use it. Zitomer’s claim to fame is powerful for its rarefied target market, but probably wouldn’t work for a Walgreens.

As you should do in many situations, find your own claim to fame by asking your customers. Ask them what they like about you, why they come to your store, and what would be valuable to them in your ads and other forms of communication.

By taking this common sense approach, you will find your true claim to fame — “true” because it is meaningful to your customers. Only then will you be able to tell your customers what they want to hear and what will motivate their patronage and loyalty.

Steve Flaster is a retailer, instructor of retailing and marketing at Michigan State University, speaker and consultant. To reach him at Yes For Success Retail Consulting, call 517.655.6979 or e-mail srflaster@gmail.com.

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