Matt Wagner (00:22.69)
Welcome to another episode of the Main Street Business Inside podcast. I'm your host, Matt Wagner, Chief Innovation Officer at Main Street America. And this show in many ways brings back some perhaps unfortunate memories of discussions we were having in April and May of 2020. And I suspect I don't need to remind you, you may recall this was a time in which very much like today,

there are some unknowns relative to how certain macro systems in our economy and consumerism and these changes are going to impact small businesses. Now, currently there are a number of really kind of concerning data points out there that I think are worth, you know, examining relative to what's been happening in the marketplace in general. And

So the first one really is around consumer confidence. You see that the March report coming out of the Consumer Confidence Board is suggesting a future expectations from consumers that tumbled 9.6 points to 65.2. That's the lowest reading in 12 years. Now that's a grabbing headline. And the board's monthly confidence index of

current conditions slipped to 92.9, which was a 7.2 point, 7.2 point, yes, decline in the fourth consecutive monthly contraction. Other troubling signs out there include retail sales. I have predicted in my 2025 prediction show that retail sales would not grow more than 3 % this year.

My suspicions are I was actually not aggressive enough. And think there's a lot of confusing mix on retail sales right now. It's kind of early, but you know, February sales were up 0.2 % and yes, while they were up, that was below expectations. And overall, when you look at year over year sales, retail is down 0.9%. And then finally, as we look at the consumer side more directly,

Matt Wagner (02:45.823)
In the fourth quarter of 2024, delinquency rates on consumer loans, including credit cards and auto loans, rose with 3.6 % of outstanding debt in some stage of delinquency. And credit card defaults overall reached their highest level in 14 years. So we're setting some big records that haven't been seen in at least a decade.

You know, for us in this discussion, what I wanted to do was really focus on ways that we could think about how best to navigate in a very challenging time. Now, I'm not a doom and gloom kind of person. While certainly I see economic headways and challenges, I didn't even mention the T word, tariffs. So if you're interested, I actually did a show

a few weeks back around navigating tariffs. And nonetheless, you can check that out. But I'm most confident in the creativity and resiliency of Main Street small businesses to pivot and shift and adjust when macro shifts really require us to perhaps rethink and adapt our business models. We did it during the pandemic, and I'm sure we can do it again.

Today's show is going to be examining some suggestions that I hope you find helpful where you might want to place your energy and focus, gain some clarity and be really strategic on things that can give you the best opportunity to position yourself, remain resilient, no matter what sort of like shifts happen. You've kind of built that ingrained muscle to be able to do that. It's kind like the stock market where

Don't try to time it, have a strategy, and just be able to execute. It's all about execution. So here we go. First area I want to talk about is really focusing in on what I would refer to as kind of like low hanging fruit. It's focusing on core customers. So one of the first things you might want to do is just prioritize retention.

Matt Wagner (05:06.079)
as they stay like a bird in the hand or whatever that saying is like it's just easier to keep your existing customers than it is to try to attract new new customers to the table. So retaining existing customers is more cost effective as well than acquiring new ones. So focus on building those strong relationships and providing excellent customer service. OK, now one aspect of that.

is being much more hyper personalized in terms of your interactions. This too was something I talked about in some trend analysis in our retail matters report that we did with the Virginia Retail Alliance. You can check that out on our website and download that report as well, but really about understanding your customer needs and pain points and then tailoring your interactions accordingly, again, based on the data at hand.

You can also think about like loyalty programs, you creating or if you've got one, perhaps strengthening it, you know, implementing loyalty programs to reward their repeat businesses and encourage customer retention. You probably have all seen, maybe you go to your local coffee house and you know, there's a clip there. That's a form of loyalty program. Perhaps with every fifth item, there's some sort of, you know,

percent off coupon that gets sent out to your customer. So a lot of different ways you can design those. And certainly you can do some searches for some other creative ways to think about loyalty programs. But certainly one to be thinking about instituting is part of strengthening customer relations. And the last one is maybe designing some form of a referral program where you've got existing customers

You've probably said, hey, refer a friend. You see this a lot in other businesses where, you know, you'll get $100 or $50 or whatever it is for every referral that's make. It's an incentivization for your current customers to, in essence, be kind of like your sales force out there. The best thing about that is there's a lot of trust built up in sort of friend.

Matt Wagner (07:23.117)
referring to another friend or a family member referring to another family member or what have you. So it's a very strong and cost effective, but also has a high return on that investment. So that's a very big one. The other thing I wanted to throw out kind of just as another pivot tip here is you might want to consider subscribing to a simple CRM where

that holds your customer and transaction data to examine any habits leading to more strategic engagements with your core customers. It's a way to track who your customers are, maybe some interesting elements about them, their birthdays or what have you, a way to contact them, what their shopping habits have been. So you can think about inventory. This goes back to that kind hyper-personalization.

In order to do that, you kind of need a system in place to hold that data. Now, sometimes that can be in your, if you have employees or even in your own mind, because you just know them. And so a CRM might not be necessary, but some way of tracking that can be highly effective. All right, let's move on to the second area to consider. And that's really focusing in on what's value and how to get higher ROI.

for the decisions that you're making. Now, the first area to be thinking about is what is your value proposition? It's important that we clearly communicate to customers the value of what we're providing, our products or our services. So emphasizing how they address customer needs and providing a good return on that investment.

Okay, so what makes you different within the marketplace? Perhaps it's your customer service, perhaps it's the experience of the in-store design or a particular product that you have that's exclusive to your store. But think about those points of differentiation and use those as part of your marketing tools.

Matt Wagner (09:41.439)
Upsetting and cross selling this is really exploring opportunities to sort of move upstream or is someone's buying something well have you thought about tacking this on occasion you'll see see this promoted where this product works best with this product it's sort of a plus okay by this one and if you consider buying this one okay so that's that's a form of upselling or cross selling and what it really does is it helps to

improve the actual or the average transactional value that ticket that's going through the cash register is part of an upselling tactic. Especially again, is part of your overall strengthening your relationships with existing customers and not necessarily having to attract always brand new customers. Some other things to think about are like offering discounts or bundled deals.

where you could group some products or services together, but at a lower cost than if you were to buy them individually. And oftentimes, especially for budget-conscious consumers, that can be an effective way where they can, buy in bulk. The other is just featuring a lost leader. I don't want to leave that one out. That's a classic retail strategy where you've got something, perhaps where you've got

pretty good margin to kind of on. It's a volume product, but it gets people into the store. And while they're there, they may be buying something else. So I don't want to consider it a total giveaway, but in essence, it's a giveaway, knowing that they're likely to buy then other things. One of the pivot tips you might want to consider here in this particular area is if you're selling a product,

Maybe add a service or vice versa. So a great example is, if you've been into a, a salon or a barbershop, obviously I haven't recently. but you know, often you will see that they're also selling hair care products or other personal care products. That's an example. Okay. Of a service industry that's offering, more retail products, the supplement sales, because they're already there getting that service.

Matt Wagner (12:06.641)
It's natural then they maybe buy a few products. And same thing like a bike store, selling bikes, but having a service to repair, replace parts, whatever it is. That's another way of showing additional value in achieving higher ROI with both existing and new customers. All right, let's move on to the next area. And that's really about assessing and adapting your marketing strategies. This is really key.

to be very strategic and at the same time, hopefully be cost effective in what you're doing. So first area obviously is thinking about what channels of marketing are we using? Social media, content marketing, those tend to be a little bit more cost effective. I will say however, that what some of the latest data has shown is it's getting more expensive

to reach those customers online because there's a lot of clutter there. There's just a lot more activity on the social media side. So you may want to think more about ways that you can direct like email marketing or thinking about exploring different social media, maybe going video route as well like on TikTok.

for example, some people are more comfortable than others in that. But just think about both the cost effectiveness and perhaps where you're going to get the greatest return on that investment. More target marketing, focusing on marketing efforts, the most promising customer segments. So that goes back to know your customer. That's maybe where that CRM can come into play. Where are they getting their information?

what social media are they using and just honing in on that and putting most of your marketing efforts there. Third, I would suggest tracking marketing performance in return. So make sure you're understanding what's been the click throughs, checking out if you've got a website and you look at the analytics of that, where are they coming from? How did you reach them? What pages are they looking at?

Matt Wagner (14:32.221)
What did they click on most often? This is a way again to be more strategic both in your marketing, but maybe even in your inventory mix. And then finally, don't cut marketing. I think from a business perspective, it's very easy to look back and, okay, I got to cover my labor costs. I've got rent to pay. I've got utilities to pay. What's variable? Marketing.

And so it becomes very easy, a very easy target to cut, but in a downturn, this also means you could lose market share pretty darn quick, sort of out of sight, out of mind. And so, while it's easy, it's probably not the first thing. Maybe there's other things, maybe you can hold off on another expense, or not add something, but I wouldn't suggest cutting marketing. It's very key.

especially in the down market. And then relative to a pivot tip here, I would consider leveraging AI. We just did a survey back in October, November, the fall of 2024, asking small businesses about their adoption of AI. And frankly, it was pretty low and maybe not a big surprise to folks out there. But when you think about

the potential of AI to help you perhaps design more strategic messaging just really saves a lot of time for putting in a few prompts into chat GPT or Gemini or whatever. And then having it, you know, roll out very quickly, like 10 seconds later, some marketing messages that you want to do where you might have to spend an hour or two coming up with that. Well, that hour or two could help you to

work on something, some other aspect of your business. So while I know AI can be a little scary, think, you know, based on your comfort level, I think starting out with just having it, you know, help you with some strategic messaging for social media is a great way to get started and with not a lot of apprehension, hopefully. consider, consider that moving forward. All right.

Matt Wagner (16:58.867)
The other area that we want to talk about is exploring new markets and opportunities. Yes, retention is key and it's important to focus on what you currently have. But at the same time, and what we saw during the pandemic, shifts in consumerism, economic headwinds also have the opportunity to decrease barriers to entry.

or allow people to think differently about their shopping habits or whatever that could open up new markets or opportunities. And so being nimble, being agile is a great trait of a small business to be able to spot those opportunities and be in a position to execute. And so a few areas that you might wanna consider as we're thinking about exploring new markets.

is how do we identify those? Doing some research, identifying potential new markets or customer segments. Maybe you're recognizing some new trends that are occurring within the store. Maybe some new folks coming in or from a different geography. Or maybe you've had this idea and now is an opportunity to pursue it when you've got some more time perhaps.

There are many low cost ways we'll get into that in just a second that you can explore new market opportunities. Also be able to understand and adapt to changing needs, demands and trends. So not only you focus in on what's happening in the store itself, but what's happening around you. Is there new developments occurring?

Are there new trend lines in the more sort of macro economy about how people are shopping or where interest lies? Again, if you go back to my predictions 2025, for instance, I talked about the big ozembic, okay, the weight loss drugs and the impact on consumer trends and perhaps new business opportunities or new market opportunities is a result of that. That's just one of many.

Matt Wagner (19:09.241)
things that develop on a more macro level that perhaps your business is well positioned to adapt to a new product or a new service as a result. both in store, but also sort of the more macro, be aware of what's happening out there. And then finally, you might want to think about partnering with other businesses, explore potential partnerships that are either physical in nature or just supporting.

one another. And what I mean by the of the physical nature, you've seen things like where coffee shop bike store comes together. And while they're two distinct businesses, they're partnering and even sharing space together. And so there are various ways that you can link up and sort of bring the best of both worlds of each other's business together to be able to offer a new service or a new product or what have you.

Pivot tip here you might want to think about is could you use this time to try a mobile service or a pop-up to explore new geographies or even a new menu item as a low-cost test or put something out at your farmer's market as many of them are starting to will be opening I should say some maybe have started in some warmer climates but a way to test things out at a very low cost level and

I always think about getting outside the store because I think you have the opportunity to reach new customers as well. So whether it's an event where you can be at or a farmer's market or hey, partner with a business in another community to explore that geography and create an internal pop-up, I think there's just a lot of ways to think through low-cost methods for exploring new markets.

or new opportunities for products or services as you think about expansion going through this. right. Okay. Focusing in on efficiency and cost controls. All right. So we've talked a little bit about growing, expansion, trying new markets and opportunities even during the downtime, but in a cost-effective way. But it's also a chance to be

Matt Wagner (21:28.081)
way more efficient so you can free up some dollars perhaps to be able to do that. So the first thing that you might want to consider is just auditing your pricing structures. Obviously there's been inflationary pressures, tariffs that some businesses may be feeling the pinch, so to speak. And so auditing your pricing structures on a regular basis, just to understand that

Hey, am I holding margins? Am I being competitive? Do I still obviously with margins have profitability there in an ever changing environment, especially one that's pretty quick. If you're going a month or two and not looking at your pricing, you could be, you know, underwater relative to, to margins or frankly, pricing yourself out of the market. So stay on top of that.

And consider regular audits and reviews of how your pricing is matching up to the competition, but also how is it delivering the bottom line. Secondly, consider negotiating with suppliers. Explore opportunities to get better pricing terms, better payment terms, perhaps. And much like they say in the insurance business, consider shopping around.

Just because you've been with someone for a long time, maybe there's some new players in the market and maybe they provide better service or pricing. yes, negotiate with your existing suppliers, but don't be afraid to kind of check out others as a backup even. Cutting unnecessary expenses. Identify and eliminate any unnecessary expenses to protect your cash flow. Sort of like they say,

In the house, the first thing to start with is, do I have a bunch of subscriptions out there perhaps in my streaming services that I'm not even watching that are just reoccurring? That's kind of like low hanging fruit to look at any of those that you have out there. But consider just going through the expense lines and what might be able to be cut or where savings might be able to take place.

Matt Wagner (23:52.187)
And then finally focusing in on core competencies. Recognize and concentrate on things that you do really well. Okay, that are strengths for you that provide the most value for your customers. And that's where you put your time and your energy. Don't try to be something that you're not. Okay, it's okay if they're if your competition is doing something else, that's their value prop.

Focus back on yours, what you do well and keep moving in that direction. And then finally, sort of a pivot tip here that you might wanna consider is investing in technologies to support this system. I talked about a CRM system or something in email marketing, accounting software or cloud-based e-commerce platforms if you're not on the web or a POS system software.

The other great thing, frankly, is there's just a lot of other free emerging softwares out there that can help bring efficiency and cost controls that you might be able to leverage as well. So I'm not suggesting going out and spending a ton here, but keep them, you know, explore where opportunities might exist for free or low cost software that you can bring in. That's going to be helpful to your business. Everyone's a little bit different. So

You know, it's for you to pursue and look and see and explore what's going to be best for you.

All right, so wrap up here. Some bonus pivot tips you might want to consider as part of your business journey here in navigating economic headwinds. First one is maybe transitioning a core skill or expertise to something that could be small scale production. There a lot of restaurants out there that have a sauce that everyone raves about. Could you bottle it?

Matt Wagner (25:53.513)
Maybe you're a coffee, you make coffee, you do some roasting for yourself, but could you roast it for others? Is that a pivot or shift that you could make that would put you in a more of a B2B versus a B2C? And so you can think about those elements. Maybe you could launch your own subscription service.

Quick example, some of you may recall when Panera Bread came out with its, think, 8.99 monthly coffee. You could have your subscription come in and fill up with coffee anytime you want it. The brilliance in a sort of subscription service is kind of twofold. One, it's reoccurring revenue, okay? And in general, people are pretty consistent with staying.

with those subscription services once they get past the first month or two. So it's pretty good reoccurring revenue as a result. The second thing is, is the upselling. So in that example of Panera, I'm sure those folks that are going in for the coffee might be buying a bagel or some other sort of ticket item. And so while they're getting their coffee for 899, there's really an upside.

there. And that's really where the benefit it's almost like a loss leader. The coffee becomes a loss leader in the subscription because there's the upside. So reoccurring and then the upside of additional revenue through purchases as they come into your store. One of the big emerging areas that we're seeing that is is more of an indirect consumer benefit. It's a value proposition. It's a way to hold customers

We're seeing small businesses really become like micro community builders. They're programming their space. Maybe they're bringing in music or they're holding events or they're allowing the space to be used by a local community group. But it becomes a place where there is brand affinity being built that where trust in relationships are taking root.

Matt Wagner (28:13.289)
that then bring those same consumers back because they feel a part of something. And in a time where, you know, loneliness and mental health and isolation are all time highs, and most of us are like this behind a computer screen, we're yearning for that connection. And it's small businesses that in many ways are filling the void that's been left as a result of so much dispersion

of our interactions and our engagement with one another to an online virtual world. And so I think that's another area, whether it's a third space in a passive sense or something again that I would form more like as a micro community where you're really programming and you're encouraging that interaction and engagement without really even the retail transaction as the forefront to it.

It's largely what becomes the outcome, but there's real mission there in terms of community building. And then finally, I would suggest allowing for perhaps in-store pop-ups or shared space with complimentary businesses. And so while you might be, as I mentioned in a previous comment, out doing mobile or other pop-ups yourself,

You can also think about your space and how you can build greater density of activity that might create win-win scenarios for other smaller, more micro enterprises as they use your own store or you sublet a portion, which might bring in more rental income. But a pop-up or a shared space is also attracting other customers that perhaps on your own, because of inventory selection or whatever, they wouldn't have come in

But since they came into this other store that's in your store, they're now browsing around your inventory as well. So it can be very much a win-win situation as well as a revenue opportunity there. So these are just a few other shifts and pivots. If you go back to MainStreet.org and you look in our various blog sections, you'll see other articles we've written in the past around sort of pivots and shifts.

Matt Wagner (30:38.976)
And these are sort of a few that we can bring back kind of from the pandemic times as we think ahead about new revenue streams or ways to kind of shift and make sure we've got that muscle in play. All right. So that's going to wrap things up. But before I leave, I hope that you're open to connecting, reaching out, send me a question or a suggestion at any point.

Email is here at mwagner at MainStreet.org. We love to hear from you. And it's really important that interaction gives us new ideas for future shows or questions to address on a future show. As always, if you're a business owner and likewise to my place professional colleagues out there, I hope this episode has provided plenty of new insights, solutions and inspiration.

And as consumers, please continue to support your local small businesses and of course, tell their stories. They're so important to our local and national economies. And most importantly, they promote and provide quality of living to the places we all call home. And don't forget to show your Main Street pride by checking out our Main Street swag at shopmainstreet.org. Now, secret, we're going to be launching, not a secret anymore, a new feature within the show.

beginning in April, highlighting a segment of small businesses we call Made on Main, the makers, producers, and brand creators scaling along our main street. So be sure to check that out. Probably as this show comes out, you'll be able to see it. And before we depart, just a few other things here. If you're new or want a refresher, check out our past

podcast recordings, whether on Spotify or iTunes, or of course on our Main Street America YouTube channel, where you can also check out really a growing library of education and training content from our small biz digital trainers as well. So until next time, thanks for all the support.