Masterclass / Skill Session:Meeting Room 4

Retail in Museums and Galleries - Merchandise Planning, Purchasing and Production

Colleen TuxworthPrincipal, Cultural Retail

Retail in Museums and Galleries -Merchandise planning, purchasing,

and production

Colleen Tuxworth – CULTURAL RETAILM&GSQ State Conference, August 2011

Wish list for your shop

ROLE OF RETAIL IN MUSEUMS & GALLERIES- commercial & community asset

• Educational extension of the institution• Enhances the visitor experience• Promotes the gallery/museum through the sale of

exhibition and collection related merchandise• Generating income (e.g. for council and the further

development of programs for the gallery/museum)• Supports local artists and the community • Attracts new visitors

• Often complicated – for-profit component of a non-profit institution

MERCHANDISE PLANNING

A Merchandise Plan:

• Defines goals and objectives• Clearly communicates strategies • Means of determining and allocating resources,

especially budgets• Coordinates operations• Measures performance• Plans for the future (can learn from the past)

• Should be composed of narrative and financial guidelines

MERCHANDISE PLANNING

STEP 1 - MISSION STATEMENT• A Mission Statement communicates to others and

keeps you focused on the purpose of the shop• The Merchandise Plan follows logically from the

mission statement• Seek approval/awareness of your mission statement• Seek to work with other staff from your institution to

help achieve the objectives of the shop

STEP 2 – MERCHANDISE PHILOSOPHY

The shop’s merchandise should reflect the purpose and reputation of the parent institution and enhance the visitor experience.

The shop’s merchandise should relate to:– The gallery/museum’s:

• Collection and themes• Reputation• Visitors

– The shop’s:• Intended target customer• Pricing policy• Concept and size

STEP 3 – OUTLINE MERCHANDISE DEPARTMENTS YOU (PLAN TO) STOCK

• 2007 MSAA Benchmarking Report

Report findings:• Council owned institutions have Cards as their

biggest selling item• Regionally located shops have Cards as a bigger

seller than city shops• Even though Books were the biggest selling

department for most shops, this was not always the case for galleries who reported Cards as big sellers

• For museums, after Books, items individual to their museum were the next best sellers

• Maximum of approx. 10 Departments• The classification of Departments directly impacts

on reporting and can also be a guide to where the merchandise is located in the shop.

• Typical Department descriptions:

Books Multi mediaCards Gifts

Branded/Custom HomewaresSouvenirs Jewellery

Toys & Educational Special ExhibitionApparel Fossils & gemstones

Poster & Prints Consignment

• Include any additional narrative to further explain philosophies and purchasing guidelines

STEP 4 – IDENTIFY CATEGORIES (& Sub-categories) WITHIN EACH DEPARTMENT

• Where possible, describe how Categories relate to or enhance the themes of the museum/gallery. This is usual for Books.

• The level of classification for Categories is dependent on the level of reporting required, and assists staff in locating merchandise.e.g. Adult Books / Children’s Books

STEP 5 – PROJECT AN ESTIMATION OF TOTAL SALES

Example: Art Gallery Shop with budgeted annual sales of $25,000

Department % of

total Sales $ total

Gross Profit Margin

%Gross Profit

$% of Gross

Profit

Exhibition guides 20 $ 5,000 40 $2,000 16%

Cards 25 $ 6,250 52 $3,250 27%

Gallery Branded 15 $ 3,750 60 $2,250 19%

Gifts (inc. Jewellery) 10 $ 2,500 48 $1,200 10%

Souvenirs 5 $ 1,250 53 $ 663 5%

Toys & Activity Kits 15 $ 3,750 58 $2,175 18%

Consignment 10 $ 2,500 25 $ 625 5%

$12,163

STEP 6 – PROJECT KEY PERFORMANCE TARGETS

• KPIs for gallery and museum shops:- Spend per visitor- Spend per customer- Conversion of visitors to customers- Stock turn

• Should have POS and inventory systems to measure and evaluate sales performance.

• Spend per visitor is a crucial KPI as it links sales performance to visitation – most institutions are dependent on visitors for customers.

PURCHASING PRODUCTS THAT SELL

• Customers:- selective and informed- pay more for innovation and exclusivity- more demanding

• Understand visitor demographic• Identify segments of customer types within

demographic

• Find products for customers Vs finding customers for products

The Emotional Experience

• Museums and galleries:- rich in emotional and personal experiences, nostalgia and history

• Museum and gallery shops:- assist in connections with the emotional brand of the institution

• Connect products to customers’ motivational buying decisions:

- memento - impulse- collector

DETERMINING PRODUCTS THE CUSTOMER WANTS TO BUY

• Being on the shop floor - observe and listen to customers

• Ask staff to document comments and questions from customers (e.g. “ideas book). Look for trends and repeated comments to inform purchasing plans

• Ask customers direct questions. Ask as many customers as possible the same question/s over a short timeframe, e.g. “How do you like our selection of postcards?” Record answers

• Customer surveys – exit surveys should be conducted when buying experience is completed. Survey should be directed primarily at customers who bought little or nothing

Product trends for museum and gallery shops

• Museum/gallery branded• Unique and innovative• Children’s products• Locally made• Ethical• Environmentally friendly, “green”

METHODS OF PURCHASING• By instinct• By personal taste• When out of stock• Customer requests• For exhibitions, public programs or promotional

events• Seasonal events• Sales history• Sales based on visitor projections• By supplier, sales reps• Gift and trade fairs• Staff suggestions• Expenditure budgets• Ideas from other shops

CONSIGNMENT MERCHANDISE

• Broadens merchandise mix without extra expenditure• Reduces risk of new product lines and artistic merchandise• Remains property of the supplier until sold• Revenue - is the commission enough to justify the expense of

displaying the items, amount of shelf space etc?• Insurance – liability for loss or damage to the consignment

property• Inventory management system – need for efficient processes

to record sales and produce accurate reports

Agreement:• Highly advisable - written agreement in the form of a

contract, confirmation letter and/or official order form• States product description, quantity, agreed

price/commission, period of agreement, shipping costs (for return of unsold items)

PRICING POLICY & STRATEGIESSet the price BEFORE YOU PLACE THE ORDER!!!

MARGINS AND MARK-UPSDon’t assume margin should be the same across allcategories.

Consider mark-up item by item:• Lower priced items - usually accommodate higher mark-up• More common products - usually a standard mark-up• Museum/gallery developed and unique merchandise -

usually support higher mark-up• Expensive merchandise may benefit from lower mark-up

MARGINS AND MARK-UPS ….What’s the difference??

Let’s say:– you have a new product which cost $10 to buy– you need to make 40% in order to break even

Q: How much do you sell the product for?

A: $16.70!– A profit of $6.70 on $16.70 sale price, margin = 40%– If you said $14.00, margin reduced to 29%!

• Margin - a percentage of the selling price. It tells what percentage profit you’ve made on a sale, before taking other costs into account:

Margin =Gross Profit

x 100Sales

Markup =Gross Profit

x 100Cost

• Mark-up - a percentage of cost price. It’s the amount that you add to the cost of an item to reach its selling price:

PRICING STRATEGIES:

• Keystoning – doubling the wholesale cost to arrive at retail price. Usually not a sufficient mark-up to cover associated costs of processing, shipping etc

• Skimming – starting with high prices and bringing them down over time. Advantage - capturing sales from high-value customers who cannot wait for a lower price.

• Penetration – starting out with a low price to capture market share quickly. Works best with high repeat-purchase rates. Profitability depends on high volume sales.

PRODUCT DEVELOPMENT

PRODUCT DEVELOPMENT1. Make sure you have copyright permissions

2. Work with your curators and image department as to what objects or artworks can be used - are there already suitable images that can be used?

3. Decide on images or design themes that will have most appeal. Make sure images work for product formats. Avoid using just logos - products can look too corporate and usually have limited sales success.

4. Prepare a budget:• Obtain quotes for printing/production – include all costs:

artwork design, set-up, packaging & freight• Estimate order quantities to secure a reasonable cost per item• Set a sell price that includes all costs and achieves a target GPM

RCAG Branded Merch Costs Example.xls

If the selling price is unreasonable – end the project!

PRODUCT DEVELOPMENT 5. Prepare a schedule outlining the various stages of the project. Set

realistic deadlines:• Finalising artwork• Receiving samples• Final approval • Production• Delivery

6. Select designer (in-house/external), who can understand and interpret your corporate style and themes, and also who can meet deadlines. Most suppliers will provide design work as part of set-up costs.

7. Gain approval for product and packaging design from your internal departments such as marketing/curatorial/director. Check image credits and logos are correct.

Redcliffe City Art Gallery merchandise

MagnetsBookmarks

Pocket mirrors

PRODUCT DEVELOPMENT

8. Keep in close contact with designers and manufacturers. Ask for as many proofs and samples as required to ensure you are happy with final product and for showing other staff/departments.

9. Promote and display new product(s)!!

10. Closely monitor sales performance, and gain customer feedback to inform future product development decisions.

PRODUCT DEVELOPMENT Commissioning products• Another option is to commission artists or suppliers to create products

unique to your shop and gallery/museum themes.

• Have a Commissioned Product Agreement clearly stating - Terms & Conditions, including Minimum order quantity (or value) Design fees Production time Terms for repeat orders

- Schedule, including Product (description/specifications) Design brief Origin (location of manufacture)

Yarra Ranges Regional Museum (Victoria)

www.polli.com.au

www.lumbi.com.au

MSAA – MUSEUM SHOPS ASSOCIATION OF AUSTRALIA

www.museumshops.org.au

• Preferred supplier scheme• Information, assistance and professional

development• Networking opportunities with similar

institutions

In Conclusion:

• Merchandise plan – essential tool for your shop, no matter what size!

• Foster support within your institution• Review and revise regularly• Remember to tell your customers where

the money goes!

??? QUESTIONS ???