Dream and Hustle

Applying Catalog Merchant Patterns to Create M-Commerce-Enabled Affiliate Showrooms for the Hood

Brothas and sistas are failing to establish economic empowerment in their communities by not developing retail/business commercial zones in the same pattern done worldwide among emerging nations. The underlying problem is current generation of African-Americans are extremely distracted by internal factors such as their ego and pride and distracted by external factors such as negative media programming and working non-growth jobs, resulting in lack of time and capital to reinvest in themselves for progress.

While these other Black media entities seek to entertain and provide lightweight content during this critical time in Black America to compete in the global economy, Dream and Hustle will continue to look worldwide as well as the past and future to create real solutions and applied practices for our people progress. The truth of the matter is, African-Americans and our high-density communities are in a great position and have the tools available to us right here and right now and should divest from the tired and failed White Privilege assimilation thinking to Black self-empowerment thinking of doing for self, our people, our communities and our future.

One of the biggest teaching moments and educational values I’ve learned over the few years of studying self-empowerment economic development in the hood is brothas and sistas have to go to basics to build up a real platform and foundation. Look, these Boule and these cornball brothas and sistas graduating from college wanting to work at some big name corporation ain’t going to be the ones and we need to realize that and accept that fact at face value. The true brothas and sistas who are going to do this ish are cats who probably at secondary schooling like community or technical colleges, from the hood and can recognize opportunities instead of negativity when they see their own community from a business opportunity perspective.

So enough of all of the soapbox speeches, we know only the hood ninjas are going to put in the real hustle and work to build up and progress ourselves and our people. These other cats are on some outdated 20th century irrelevant crap of chasing fame and seeking validation and acceptance from a system of White Privilege trying to claim they are “Black-orientated” and pretending they represent me and you when they wouldn’t even step a foot in the hood or our communities. So the rest of you real cats, just sit back and let’s discuss how we really going to do for you and yours as while uplifting our community and our people at the same damn time.

Challenges to Developing Retail Sector Development in Our Hoods

For a few years, Dream and Hustle has been looking at the barriers preventing brothas and sistas from starting retailing operations in our own communities. We come to realize some of the stated barriers we heard over the years were not real barriers but excuses and scapegoating our previous generation of Blacks used to justify spending money on Cadillac ragtops and white wall tires instead of investing in their Black children future.

Here are the real challenges we discovered from our research that is prevent us brothas and sistas from starting retail operations in the hood:

Strong-Armed Violent Crime Against Black-Owned Establishments. There is a pervasive mentality that it is easier to rob a Black shopkeeper and get away with it. The reason behind this train of thought is the bigoted cops are not willing to help a successful Black entrepreneur and the Black thugs and Black community believe the Black entrepreneur should understand our kids ain’t got no choice but to rob and steal because they have no other opportunities. These violent crimes consist of robbing crews ambushing a store with guns, targeting customers who leave the store as well as targeting the money drop.

Inventory Shrinkage. This is the result of shoplifting but the majority of shrinkage comes from internal employee theft. One form of shoplifting is called “boosting” where cats steal from one store to sell to another store and honest Black business owners are put in the same category as larger chain stores. In addition, many employees of Black-owned business believe the business owner would not mind missing an item here and there and think the loss can be written off on taxes or insurance, which is absolutely false. A loss is a loss and the negative impact is almost immediate to a Black-owned business.

Cash Management. Cash money is a physical item and once you got all of that money, let’s say $10,000 in bills and coins each day, you need a plan to deal with that large money moving it from your business to the bank. You know cats are going to go after the safe if you keep the money in there and it cost money to hire an armor truck or a cash management crew to move your cash from the business to the bank. This is a serious problem in the hood in terms of a business that actually starts making cash and cats around them want to see how they can dip into that physical store of cash.

Retail Sales Taxes. Depending on where you live, you may have to collect city taxes, county taxes, state taxes and then you got federal taxes. Then some items have different taxes than others depending on regulations and you have to keep track of all that or these governments will be on your behind. So to the new entrepreneur, all of this paperwork is frustrating and it cost money to hire a business tax accountant to handle these matters for you.

Cost of Employees. Of course, you can start “paying cats under the table” but we cannot do that on a real enterprise level – brothas and sistas need real stable jobs that going to pay bills and keep them focused on growth and contribution that matter. Once you get an employee, there is overhead in terms of tax withholding and other withholding as well as medical and other benefits to provide. This can add up to $20,000 per employee very easily on top of wages or salary! This is why most Black businesses and foreigners who run business “keep it in the family” because family members are exempt from these types of withholding and paperwork. But we need real job creation beyond just hiring family members.

Inventory Management and Pricing. Managing inventory, pricing and fulfilling demand is a very expensive and costly science to new entrepreneurs and can fail a business quickly. The price has to be right but now too low where profits are not made and if demand is there, the inventory has to be in stock. If any of this goes out of whack, the business operation will suffer and success and failure relies hard on making sure all these factors are working as expected.

Looking at Catalog Merchant Retail Business Model

One of the business models that interested Dream and Hustle in our study of retailing patterns was the catalog business model. Again, let’s go to Wikipedia to see the description:

A catalog merchant (catalogue merchant in British and Canadian English) is a form of retailing. The typical merchant sells a wide variety of household and personal products, with many emphasizing jewelry. Unlike a self-serve retail store, most of the items are not displayed; customers select the products from printed catalogs in the store and fill out an order form. The order is brought to the sales counter, where a clerk retrieves the items from the warehouse area to a payment and checkout station.

…

United States

Catalog merchants in the United States have declined since 1980, in favor of chain discounters, big box stores, and internet shopping.

The repeal of the resale price maintenance sanctioning law in 1980 meant that chain discounters such as Wal-Mart, KMart could set and change prices at will, in a more consumer- friendly environment where the customer can examine the goods and confirm availability before approaching sales staff. As a result, this retail sector went into decline in the 1980s. As big box stores and internet shopping became increasingly popular in the 1990s, the decline of the catalog merchant business accelerated.

Many companies in recent years have moved away from relying solely on catalog sales, augmenting them with on-line sales or direct retail. The move toward on-line sales includes long-established department store chains such as Sears and JCPenney that relied heavily on catalog sales. However, many long-established catalog merchants have gone out of business in recent years including Best Products, Brendle’s, Ellman’s, KeyMid, Montgomery Ward, Rink’s, Service Merchandise, Sterling Jewelry & Distributing Company and Consumers Distributing.

Source: http://en.wikipedia.org/wiki/Catalog_merchant

Many of you are familiar with these retailers such as Service Merchandise. In this setup, cats would walk around a store and see things they like and add it to a catalog list, kind of like catalogue shopping with a showroom in front of you. Then what happens is the person when they ready to buy goes to a fulfillment room that look like a warehouse pickup area to get the item – similar to how you pickup furniture nowadays. I know, because I’m thinking the same thing is I don’t know how in the hell this model work with the exception of pricing – the pricing was lower.

Catalogs had value only because the lack of retailers and scarcity of products where you could only have gone to a few places to buy something like a washing machine or a blue blouse or something similar to that. But these companies began to fail when Wal-Mart was more aggressive in their pricing and the emergence of other big-box retailers began to emerge. Customers can now flock to Wal-Mart and Target as well as Super Wal-Mart and Target Supercenters instead of these Service Merchandise stores and the JC Penney jewelry counter.

However, I want you brothas and sistas to realize something – big box stores like Wal-Mart and Target have not penetrated our hood communities and what we cats do is have to drive way out to the nearest Wal-Mart or Target in the suburbs (Target does have some stores in some inner cities) to get items. The reason why is they require large real estate and square footage for their business layout design to accommodate car traffic to pile up the trunk with $100 – $200 purchases per customers a day.

The second thing I strongly want you brothas and sistas to remember is the reason why the majority of big business go bankrupt or dissolve is not because of their business model but because the business became off track or sideways and failed to re-invent themselves. The business model is still valid and never assume because a business failed that their business model is a failure- that is a big mistake most brothas and sistas believe. For example, you don’t need a nationwide grocery home delivery service but you can create a smaller scale version in the hood that may be just as profitable.

With that said, the catalogue business model had some benefits but some of the workflow was based on outdated technology. We have new technology and more improved processes to revisit the model and give it an update scenario to modern times and that is what me and you is going to analyze right now. Before I continue, it’s still cats out there that believe Black Enterprise is more relevant than Dream and Hustle when it comes to Black entrepreneurship, yeah – show me an article on Black Enterprise in their entire history that goes in-depth like Dream and Hustle on Black economic empowerment and development – yeah, thought so.

Applying Next Generation Practices to Catalog Merchant Retailing

While catalog merchandising been crushed by big box retailing and e-commerce, the business model still have some validity for the hood. But there are several new concepts out there we brothas and sistas need to pay attention to. Here are the modern and next generation practices that we can consider using the old catalog merchandising model.

Affiliate and Commission-Based Showrooms. In this setup, we do not setup a traditional retailing operation, we setup a showroom of items from an e-commerce web site that can be ordered online from a customer mobile phone or we can provide in-store tablets for them to order online. The business gets paid based on commission of the sale from the e-commerce operation as a lead referral. This is how insurance agent, cats selling window blinds, floor tiling and stuff get paid. For example, we sign up to Amazon Associates, pick a vertical category like home security and display product demos and we create a showroom for customers to checkout. Then we sit them down and put in an order or they can order themselves but we get commission from the sale. No sales tax, no inventory, just a showroom and collecting checks from commissions.

Concept Store Model. By creating a store that focus on affiliate or commission programs partnering with an external e-commerce site, this gives entrepreneurs the freedom to try out concepts and perfect the technique to draw in more consumer traffic. Now we can create concept stores that showcase ideas or people or a theme with visuals and special effects and do other things like offer a viewing bar or even create a space for people to take pictures of themselves at the establishment. The goal is to bring in traffic and have them browse and shop and order online within the store.

Provide Hospitality. In order to provide excellent service, cats can create a showroom offering catered stuff like free Starbucks coffee as well as create interactive wall displays and lounge areas to chillax. Other examples is providing free demonstrations of a product like vacuum up dirt, or play with an Android tablet or get free eyeliner makeup. And here is the thing – you don’t need to have the inventory of new apparel fashion but you can have the outfit for them to try on in every size as a sample where you cut the tag. The goal is provide a no stress try before you buy environment for customers to feel at ease about products we selling and we are stress free.

Commission-Based. By being commission based, we get checks based on the orders we refer to the e-commerce operation. The e-commerce operation will work on notifying the customer, collecting payment and local taxes and drop-shipping the product to their home or to your business under your brand and will just send you a check for the sale they are processing. You just getting checks or write-transfers into your bank account and that’s the income.

M-commerce. Customers can make orders on their mobile phone while they are looking at the time. The geo-location feature can be used where if someone order on their mobile phone, the nearest showroom gets the commission. So cats can come in with their mobile phone, place an order right then and there and leave knowing they like what they saw and probably don’t need to see a salesperson and you still get the commission. In addition, the store can provide tablets for cats to make an order online by themselves.

New Challenges

However, this retailing business model does have challenges and Dream and Hustle discovered these issues talking to cats worldwide and based on our own experience.

Showroom Taxes. In the UK, they have a “showroom tax” where these type of stores pay taxes based on square footage. I have not found any such tax here in the USA although there may be some kind of tax on car showrooms but I’m not sure and need someone to clarify this. Even if that is the case, then we can still do a lot by having interactive walls that provide a smaller showroom space even for 200 square feet if you want to be honest.

Overcoming the Hunter Instincts. Keep in mind that a customer wants to take home something they purchased for instant gratification. Walking away with shopping bags is a self-gratifying experience and we cannot ignore this feeling that customers will have. This is a primal hunter instinct of humans to collect and gather things and that is why it will be hard to sell grocery and clothing exclusively online. The way you overcome this is understand while customers want instant gratification for themselves, they will wait and be more passive when purchasing a gift item or for someone else.

Loafers. We have noticed and I personally noticed that some stores have the same losers showing up hogging up the demonstration area, particularly if it is a video game. These same losers show up on a weekly basis and they are not customers and just want to use the free resource. I do not know yet how to handle them professionally but this is something that has to be addressed also. A lot of people also have their kids run and use these demonstration centers as babysitters.

Summary

Creating a retail commercial zone in our hoods is a necessary step to develop economic empowerment. However, there are real barriers for brothas and sistas to start up a full-fledge retail operations in the hood. But thanks to modern technology, it is possible to create merchant showroom concept stores that use affiliate-based commission to offset these barriers.

The benefits of merchant showroom stores is it allow a faster and cheaper ramp up of retail presences in the Black community without the upfront SBA loans for inventory, no shrinkage risks as there is no inventory and better security as there is no cash handling, just order taking and receiving wire transfers of commission payments.

But the biggest benefit is new Black entrepreneurs can experiment in creating their own concepts and even create pop-up stores for our own people to visit and experience and enjoy right in our own hoods. For example, someone starts up an e-book store that get commission from Amazon.com and the store have a bunch of tablet kiosks that let customers come in and read e-books for free. So if someone reads an e-book by a Black author and even if they don’t buy it, they can spread it word of mouth to someone else who will come in read the e-book and buy it if they like it. This is the kind of next generation nice retail models we can create in our hoods on the cheap.

So how do we start? The first step is to first identify a hood where we can set this ish up on the cheap. I don’t know which hood would be the first hood to be honest. The second step would be to ramp up a bunch of entrepreneurs who going to put in the work to make this happen. The third step would be to setup a whole block for this hustle, not one or two business but we need at least 7-15 of these types of business on a commercial zone all setup. And last is to get the cats in the community to come by and hang out in their commercial zone and support these catalog merchant concept stores.

In my opinion, creating this concept catalog merchant retailing model is a win-win for everybody. Brothas and sistas can start businesses at a lower cost, e-commerce operations can focus on fulfilling physical environments instead of trying to by pay-per-click advertising to promote online and the community will see revitalization going on in their own back yard. And eventually, enough profits will be made from these entrepreneurs to take their hustle to the next level and open up real retailing in our hoods to provide jobs and vendor opportunities.