Hi Omnivorous,
You're dead wrong about the greeters at Wal-Mart. See Crowley,
Louisiana in Made In America. Page 292-293 in the paperback. Greeters
were first put in to prevent shrinkage (theft). The easiest wau to
steal is to leave by the entrance if no one is standing there and you
can keep known thieves out of the store. (and it is a lot friendlier
than a security guard.) At IKEA Utrecht we have automated counters
using a sort of radar system.

Now here's the question: see www.sinaas.nl (my site, and yes I will
change the layout I'm just a big Google fan).

I'm setting up a small test shop of 270 square meters. The charge will
be 42 cents a day per small article. I want to know which KPI"s I
should track so that I have relevant input for a computer simulation
for a big store. I think you might like this one. Please let me
clarify before you give me your final answer.

---

Request for Question Clarification by omnivorous-ga on 20 Apr 2004 12:06 PDT

Ansgarjohn --

My assumption here is that you're looking for key performance
indicators for a consumer-to-consumer site?
Are you ruling out business-to-business?
Will there be services (hotel rooms, concert tickets, etc.) as well?
What 3-4 target market do you believe will be your early adopters?

Key performance indicators:
http://management.about.com/cs/generalmanagement/a/keyperfindic.htm

There are lots of things to measure, so I'd think of what you'd do if
it were a traditional bricks-and-mortar store?  Here's one web metrics
site that provides services on a progressive basis and explains them
clearly:
Onestat.com
http://www.onestat.com/

NIST also has some tools that may be useful to you:
http://zing.ncsl.nist.gov/WebTools/

Note that Webmetrics is beta testing a new measurement service:
http://www.webmetrics.com/signup-hitanalyzer.html

For a start-up site, I'd push lots of my initial investment and
activity towards visibility.  Generating as much traffic as possible,
generating as much relevant traffic as possible, then finding out what
works best with which customers.

I'm not sure that there is an answer for you here . . . I think that
you may find that the answers develop over a period of time as you
test the site and test-market the services.

By the way, thanks for both the correction and the reference on
Wal-Mart.  I'll have to pick up "Made in America" now!

Best regards,

Omnivorous-GA

---

Clarification of Question by ansgarjohn-ga on 20 Apr 2004 20:33 PDT

Hi Omnivorous,
No not a site (I'll use www.marktplaats.nl, which is bigger than Ebay
in the Netherlands (Metcalfe's law and all that). It is a physical
location to which consumers bring tangible goods which are auctioned
in parallel using a self-serve system and Dutch auction price tickets.
See the site. www.sinaas.nl ->sinaas.nl in English

---

Request for Question Clarification by omnivorous-ga on 21 Apr 2004 05:07 PDT

AJ --

You're probably aware of what's required: the standard retail measures
of revenues/square foot; revenues/day; gross margin.  Any measures or
ratios have their use -- and of course there are limits.  For example,
you can incent a store manager to build volume then end up with lower
margins (per the examples in your question on Wal-Mart).

I would be looking at:
*  how can I build volume the fastest?
*  to what market segments will this format be most-attractive?  This
is the toughest question because it might be:
   -- an age group

---

Request for Question Clarification by omnivorous-ga on 21 Apr 2004 05:20 PDT

continuing . . .

*  to what market segments will this format be most-attractive?  This
is the toughest question because it might be:
   -- an age group
   -- products with certain characteristics (like timeliness: a hotel
room for this weekend; an airline ticket that must be used before the
end of the month; fresh asparagus)
   -- a business segment
*  where are your costs?  In getting people in the door?  In closing
the sale?  In your retail space?  Inventory carrying costs?

The startup phase is especially sensitive.  It's critical to build
reputation and an economic volume; often businesses have to shift
revenue bases or dramatically adjust cost structures.  Here's a good
example, in an Internet information supplier which initially relied on
advertising; built volume quickly; then adjusted to a subscription
model in the past two years as it became obvious that advertising was
not a stable revenue source:
http://answers.google.com/answers/threadview?id=332729

Consider strongly who your competitors are.  New business concepts may
not have direct competitors, so consider where else will people
acquire these products?  At IKEA?  A local craft or farmer's market? 
Classified ads in the newspaper?

Each of the above have a cost structure for delivering products:
you're trying to be more efficient.

One final note AJ: you might be best to look at detailed case studies
of E-Bay or Marktplaats.  How do they segment their businesses?  Where
are they looking to grow?  Do you see gaps in their coverage?

Best regards,

Omnivorous-GA

---

Clarification of Question by ansgarjohn-ga on 23 Apr 2004 00:18 PDT

Hi Omnivorous,
Here is a short business plan I made. Maybe it makes it a bit more clear.

Merry-Go-Round The low cost auction; Business plan on 1 A4:  Last
update April 23, 2004
Based on ideas from Southwest Airlines, C&A, IKEA, Dutch flower
auctions, Filene's Bargain Basement, and Toyota. Copyright Ansgar-John
Brenninkmeijer; E-mail: aj@sinaas.nl
1 Summary of the Plan
1.1	General description: Physical self-service slow Dutch auction of
secondhand goods. Massively parallel auctionshop. 3 random
pricetickets in the auctionstore today (friday april 23) might look
like this:
BRONZE FIGURINE: fri23april$10,s24ap$9,s25ap$8,m26ap$7,t27ap$6,w28ap$5,t29ap$4,
f30ap$3,s1ma$2,s2ma$1,m3maFREE
COMPUTER MONITOR: 20ap$13,50:t21ap$12:w22ap$10,50:t23ap$9:f23ap$7,50:
s24ap$6:s25ap$4,50:m26ap$3:t27ap$1,50:w28apFREE
WOODEN CLOGS: f16ap$20,s17apr$18...t22ap$8,f23apr$6,s24apr$4,s25ap$2,m26apFREE
So today the figurine costs $10, the Monitor $9, and the clogs $6. 
The articles were brought in on different days by different sellers,
but can be bought at any time. A buyer just takes it to the cashdesk
and pays. The seller then receives the money minus costs on her
bankaccount.
1.2	 Mission: To improve the lives of the many people by lowering
their cost of living and helping create a sustainable economy.
1.3	 Objectives; 1st year running test store; after 10 years auction
more products than Aalsmeer.com
1.4	 Strategy: Focus on families with growing children, more upscale
than pawnshops or thriftstores
1.5	 Milestones; March 20th start website, May 1st (temporary)
location, June 1st at least 100 articles auctioned off, end of 2004
concept running normally, end of 2005 positive cashflow
1.6 The Entrepreneur
Ansgar-John Brenninkmeijer, MscBA, Rotterdam School of Management,
Experience C&A Germany, Konmar Superstores, Cap Gemini, Ahold
E-commerce, IKEA. Management of various functions including: buying,
product development, merchandising, IT, shopmanager, spacemanagement &
commercial planning.
National service NL: Platoon commander, Student: President Rotterdam
Rowing Club "Skadi"
2 Market Analysis Summary 
2.1	 Customer group: Families where someone has access to an Internet connection 
2.2 Competitive comparison: presently trade in second-hand goods is
generally done very inefficiently
1. Internet(Ebay/Marktplaats.nl)/classified ads/supermarket notes>>
time consuming, shipping is expensive for relatively cheap or
large/heavy goods
2. A. fleamarkets, B.consignment stores (A.inefficient use of labor,
B. slow stockturns)
3. Traditional (English) auctions (expensive, time consuming only 1
article at atime, high threshold for customers)
2.3 SWOT analysis
Strengths: 	Motivated entrepreneur endowed with endurance and varied
retail knowledge and experience. New solution, easy and fun for
customers, lowers transaction costs by auctioning in parallel and
self-service
Weaknesses: Entrepeneur lacks the necessary frugality and interpersonal skills. 
IT and logistics systems possibly very expensive to develop.
Possible legal problems due to the new nature of the service.
Opportunities: Market in secondhand goods is growing quickly.
Acceptance is increasing. Key words: sustainability, environment,
vintage, community. Internet is a cheap marketing/information tool.
First mover advantage leads to possibility to realize positive network
and virus marketing effects.
Threats:  Easy to copy concept. Low thresholds for competitors to
enter the market. Possible misuse by dishonest customers in unforeseen
ways? Unwanted visitors only looking for free articles. Dependent on
www.marktplaats.nl site.
2.4	 Image and future: Always the lowest cost but a trendsetter, not
cheap/shabby. People should feel welcome and at home. Marketing
focussed on children. Part of a fun day out with the whole family.
Elements of: McDonald's, Boyscouts, IKEA, Rabobank, Unicef (Kid?s
United), H&M
3 Marketing
3.1	Competitive strategy: The low cost auction; always the lowest
transaction costs in the market. Dissuade possible entrants by having
low gross margins.
3.2	Product (this is the auction service): Easy and beneficial, people
can quickly get rid of unwanted goods and at the same time find
something they want or need
3.3	Price: Fair & honest costs based on the size of the article and
the number of days it spends in the store. 42¢ per day per article.
Not a percentage of the selling price.
3.4 Place: Auctionstore should be located in an inexpensive, quiet
area that is easy to reach by car.
3.5 Promotion: Individual postings of articles on www.marktplaats.nl
posted by sellers themselves.
3.6 Presentation: Goods slowly move through the store in a circle from
entrance to cashdesk as the price decreases. There are in bins of
different sizes on a conveyor system with "rollers?". Having little or
no handling is essential to keep costs low.
3.7 People: Hard working, down to earth people who care about the
success of the company and want to learn continuously. Should earn
more than average in retail. Long term relationship with the company.

4 Organizational structure and management 
To be developed. In the short term a business controller should be hired.	
5 Financial plan
To be developed. Entrepreneur is willing to personally finance at
least the initial phase.

6 Evaluation and risks
A small test/pilot store will be set up before December 2004 to learn
more. This will enable a more realistic, detailed and financially
sound plan to be written for a possible future large-scale operation.

End.
--------------------------------------------------------------
Onivorous,
What I don't know is what people will bring. How large will the
articles be? What will be the average value? (Because it is an
auction, I don't have to finance the inventory and by paying out the
seller later will have liquidity like Costco). How much will not be
picked up even if it is for free after 10 days (garbage disposal
costs). After how many days on average does the customer by the
article? ->how many turns a year.

---

Request for Question Clarification by omnivorous-ga on 23 Apr 2004 04:37 PDT

John --

You've got the shop size; you've got an idea of pricing ($0.42/day per
item).  Revenues of $3.400/month -- assuming 1 item/square meter?
Revenues of $30,600/month -- assuming 9 items/square meter?

As for KPIs:
*  revenues per square meter
*  gross margins
*  inventory turns (by category)
*  management of major cost categories:
   -- insurance
   -- theft/shrinkage
   -- employees
   -- cleaning & maintenance
   -- IT costs
   -- disposal costs
*  sales/customer
*  shoppers/day
*  customers/day
*  frequency of return visits -- and this is one area where a web
presence can expand your reach, allowing someone to 'shop' at night or
casually browse for what's new

Finally, I think that there needs be a measurement for items or
pricing with the Dutch auction -- perhaps as simple as average days on
sale.  Your desire: higher turns to produce revenues and satisfied
customers and suppliers -- even though you could make money simply by
warehousing inventory at $0.42 per day.

But I think that your major issue will be choosing a category to make
this work.  One where there are inefficiencies in the used-item
market, yet one where there's substantial demand so that you can get a
constant flow of inventory -- and customers who are back on a daily or
weekly basis.

You may not be familiar with Auto Nation but are more likely to know
Wayne Huizenga, a founder of Waste Management (a private waste hauler)
and Blockbuster (video stores):
http://www.chickslayingnesteggs.com/arch01/v010820.html

Huizenga set up Auto Nation because the gross margins on USED cars in
the U.S. were the highest in the transportation industry, at 20%. 
(Note that the article above shows the naivete of the writer --
expecting a retail business to produce gross margins of 50% when most
American mass merchants shoot for gross margins in the 30% range). 
Huizenga felt that by standardizing the offering and maintaining
quality levels he could reduce the cost of used cars and make a
profit.  The strategy was a disaster, with store costs averaging $25
million -- and resulted in a total shift of strategy.

Which is not to say that the resale market for cars ISN'T attractive;
simply that one has to put the right mechanisms in place to make it
work:
http://pages.ebay.com/ebaymotors/index.html?ssPageName=ML01

The interesting part of planning for this is that you could test
several categories (music, formalwear, cookware, jewelry,
theater/sporting tickets) in advance of a shop opening in order to see
where the best opportunities exist.

Best regards,

Omnivorous-GA

---

Clarification of Question by ansgarjohn-ga on 10 May 2004 15:03 PDT

Hello Omnivorous,
Today I sold my first item on site (2 chairs for 45,- euro's) The
buyer paid 45 euro's in cash and took the chairs home. Tommorrow they
would have cost him 41 euro's. The seller receives 45 - (6 days x 42
cents a day) is 42,48. I get 2,12 and 40 cents (19% of the margin)
goes to the taxman as VAT.
I did some simple marketresearch to test for a name for the store and
came up with "The Bargainmill" but in the States it might be called
something like; "The Garage Sale Factory". That means I haven't chosen
a category, because my sellers are basically people moving house or
cleaning up who don't know what to do with their stuff and garage
sales are culturally not acceptable in the Netherlands (you don't want
strangers nosing around in your personal belongings.) Accepting
everything means that the store is also alwyas interesting for fun
shoppers.
As to your answer Ebay is ridiculously profitable; (as described in
the book The Perfect Store by Adam Cohen) that was the inspiration for
my physical store. The KPI's mentioned above are very relevant.
Could you make a summary of the KPI's discussed above in logical
categories with an short explanation of the links between them as a
definitive answer? Then we can close this thread.

---

Clarification of Question by ansgarjohn-ga on 10 May 2004 15:05 PDT

PS I would like to set up an Ebay now in the Netherlands but I am a
few years too late (as is Ebay) because Marktplaats beat me to it.

John --

There's so much data available on American retail operations that
these resources have a heavy bias for businesses in the U.S.

First, you can't beat the detail about every aspect of business
planning and financial management at the U.S. Small Business
Administration site.  It has information on everything from standard
business measures to site selection for retail stores -- and the
publications are virtually all electronically available:
SBA
Publications
http://www.sba.gov/library/pubs.html

---

An excellent, easy-to-use site that monitors major industry
performance indicators for retailers is Bizstats, which uses
publicly-available information from industry, government and even
annual reports to follow key measures for a variety of retail groups. 
You'll probably find this summary on national retail sales/square foot
to be relevant:
Bizstats.com
"Sales per foot & Sales per Store - Retail Stores" (2003)
http://www.bizstats.com/spf1.htm

Note that Bizstats has a LOT of stuff and tracks what Wall Street
analysts are saying publicly about retail performance measures:
Bizstats
Home Page
http://www.bizstats.com/

---

The U.S. Census Bureau conducts a complete economic census every 5
years, with 19997 and 2002 being the most-recent.  The 2002 Economic
Census results are being released during this year for retail.  They
do a good job of showing summary numbers such as sales/employee and
the size of the business by locales.  In these reports it's good to
know the SIC and NAICS codes (5300 and 440000) as they use them to
further break down categories (such as furniture retailing).  Also,
note that the 2002 Economic Census is the first to attempt to measure
the impact of information technology on businesses:
Economic Census 2002
Schedule for Release of Reports
http://www.census.gov/econ/census02/guide/INDRPT44.HTM

Department of Commerce
1997 Economic Census
http://www.census.gov/epcd/www/ec97stat.htm

---

There's a book published by Prentice-Hall called "Almanac of Business
& Industrial Financial Ratios," by Leo Troy.  It uses IRS data to
break down industry segments (and obviously there are several for
retail stores) -- and by size of the business.  It's really a great
resource and it has all of these measures for retailers in 12 size
classifications (by sales).  It also includes trends in retail over a
10-year period:
?	number of enterprises
?	sales
?	gross income
?	cost of operations
?	salaries and wages
?	taxes paid
?	interest paid
?	depreciation & amortization
?	pensions & other benefits
?	other
?	officers compensation
?	operating margin
?	operating margin before officers compensation

BALANCE SHEET AVERAGES
?	net receivables
?	inventories
?	net property, plant & equipment
?	total assets
?	notes & loans payable
?	other liabilities
?	net worth

FINANCIAL RATIOS
?	current ratio
?	quick ratio
?	net sales to working capital
?	coverage ratio
?	total asset turnover
?	receivables turnover
?	total liabilities to net worth

FINANCIAL FACTORS
?	debt ratio
?	return on assets
?	return on equity
?	return before interest on equity
?	profit margin before income tax
?	profit margin after income tax

Here's the Amazon link -- and note that the book now comes with the
data already prepared in a Lotus 123 or Excel spreadsheet:
Amazon.com
"Almanac of Business & Industrial Financial Ratios"
http://www.amazon.com/exec/obidos/tg/detail/-/013096266X/104-6058330-5571112?v=glance#product-details

---

Another good source of retail studies of all kinds is the National
Retail Foundation.  Most-relevant here is their annual "Retail
Industry Indicators" study, reasonably priced at $35 for non-members. 
You'll probably have to use their search form in the bookstore section
of the website, but it has a further description:
National Retail Foundation
Search
http://www.nrf.com/bookstore/NewBookstore.asp

Their "Retail Horizons Study" specifically includes benchmarks being
adopted in the industry.



SOME OTHER READING/RESOURCES
===============================

Two other good resources for retail data are Plunkett Research, a
consulting firm that publishes an annual Retail Industry Almanac.  It
is $300.

However, their web page has a large number of statistics on the
industry that you may find interesting:
Plunkett Research
"Retail Industry Market Research"
http://plunkettresearch.com/retail/retail_statistics.htm

An excellent news and information source is About.com, which has a
retail expert named Melody Vargas who stays on top of news and issues.
 The website itself has a large collection of data on all of the
aspects of running a retail operation:
About.com
"Retail Industry" (Vargas)
http://retailindustry.about.com/

Google search strategy:
"retail stores" + benchmarking
retailing + benchmarking

Another important way to search for information on the retailing
industry is by Standard Industrial Classification code or the North
American Industry Classification System:
SIC 5300
NAICS 440000

I'm glad that you're off and running with the store concept.  I think
that you'll find furniture and home furnishings a natural arena for
your services:
?	furniture has high intrinsic value and depreciates little if well cared for
?	it is bulky, so your store location serves as "storage" while the
owner is seeking to sell it
?	buyers are easily profiled, as they are establishing households (or
furnishing for new additions to the family)
?	sources of inventory are also easily identified in people who are
downsizing a household or even estate sales (after a death)
?	some of the most-profitable stores in high-income suburbs like
Bellevue (Seattle) or Highland Park (Chicago) are resale shops with
high quality and even near-antique goods


Best wishes for success,

Omnivorous-GA

Thanks Omnivouros, A very good answer. I very enthusiastic about the
new information you gave me such as the About link a lot of
interesting stuff there (such as RFID which would be great for my
concept in the long term).
regards,
AnsgarJohn