Each week, we seek expert advice to help a small or medium-sized business overcome a key issue.
Four years after launching Needlework, a fabric shop and creative workspace in a quickly gentrifying part of downtown Hamilton, owners Liz Simpson, 28, and Kate Hunter, 30, have come to a crossroads.
In addition to selling fabric, clothing patterns and books, the pair offer sew-by-the-hour spaces and textile workshops as well as classes in cross-stitch, embroidery and sewing. Now that they are making a profit and have nearly paid off their startup loan, Ms. Simpson says they would like to expand.
But what should they do?
The pair recently bought a $15,000 long-arm machine for quilting. It allows for the making of large quilts, and Ms. Simpson and Ms. Hunter have added classes and rental time on it. Would it be better to continue to invest in more specialized equipment or should they hire people to develop and run new classes and workshops?
Another option they are considering is the development of their online store and Web presence. Ms. Simpson says it's hard to maintain that while running the physical store, especially since her partner is on maternity leave and she only has one part-time employee.
"While an online store doesn't demand physical space, it demands time, and there are only so many hours in a day," says Ms. Simpson. "The challenge there is finding the right person and making room in our budget to afford even a part-time dedicated person."
They aim to post daily on social media using Instagram and Facebook to promote new classes and projects. They have paid for an advertisement just once, to sell sewing machines through Facebook, but although that went well, they haven't used it since.
In the past year, fabric made up about 53 per cent of the store's sales, Ms. Simpson says, with notions (including tools, books and patterns) earning 28 per cent, and classes with 19 per cent. But the classes fuel the fabric and notion sales, as students need to purchase items.
While Ms. Simpson says the business is "never in the red," there aren't enough resources to develop in every direction.
The Challenge: How should Needlework focus its efforts on expansion?
THE EXPERTS WEIGH IN
Sam Fiorella, partner at Sensei Marketing and author of Influence Marketing: How to Create, Manage and Measure Brand Influencers in Social Media Marketing, Toronto
Their business is really an experience. What they've developed – in part because of their location and personalities plus their unique combination of per-hour rentals, classes and fabrics – is what will grow their business. My advice to them is to determine what that experience is and invest there. You can buy fabric anywhere, right within their own town. I'd ask, what is the unique differentiator that they have? What do they do that nobody else does?
They currently offer a hands-on personal experience in-store, but I don't see a lot of experience extended online. I would first lead with developing an online persona. One way is to create a YouTube series. It could be a weekly three- to five-minute video. They could make these themselves – they're creative people. It could be the tip of the week or a feature on what somebody has done in one of their classes. They can have customers subscribe and can advertise it in-store. Not only would this extend their personalities and knowledge onto the Web, but they'd become experts in that field.
The great thing about featuring clientele in the videos, alongside one or both of the owners, is that it shows the community being built within the physical store and translates that online. Also by tagging these people, everyone is going to share it on Facebook and Twitter because they're in the video. That will help create a larger ecosystem online to drive the friends of their customers in.
Angèle Beausoleil, adjunct professor of entrepreneurship and innovation, Sauder School of Business, University of British Columbia, Vancouver
Needlework has an interesting product-to-service mix, with 80 per cent of their revenue from products and about 20 per cent from classes. So where can they quickly increase their profit margin?
In their case, the classes help fuel the product sales, so we call that a bit of a bundling. One leverages the other. Typically, something gets discounted when you bundle, so what they need to do over time is gradually increase the profit margin on to either the products or the classes.
They might try experiential marketing by providing small samples of what their classes are about to get people really excited. It's a way of promoting instead of paying for advertising, which is expensive and would probably have a low rate of return for them.
Besides Instagram, they could add Pinterest plus other sites that have a visual feature or are female-dominated and centered on crafting. Once they join, they could offer discounts to members, a free sample or class and essentially connect that social community back to their website.
They could also use Meetup.com to find groups in the area who are focused on needlecraft. The partner who's at home on mat leave could also be connecting with other young mothers. As a working mother, she can access the entire mommy blog community, so their growth is potentially exponential. All this is at little or no cost.
Berkeley Warburton, managing director, advanced customer strategy, Accenture LLP, Toronto
Hamilton is an up-and-coming city for young families, so I think they have a perfect niche to capture. I'd suggest that they try to exploit that before they make any major investments.
I tell a lot of my customers to sell through someone else. They could develop a network of people who can be their brand ambassadors, similar to what Lululemon has done. You create this community of people whom you offer special privileges to – incentives such as discounts or buy one, get one free – and those people are responsible for getting your brand out there.
It's about getting more out of the relationships that they already have with their customers. They need to identify who those high value customers are – people who really like Needlework and their brand. Then ensure that those people share their love of the store within their own communities and help get people into the store. That's selling through other people.
Our research indicates that 71 per cent of Canadians value in-store service for that tailored experience. Canadians want personal service and human interaction, so it's really important to get people into the store and deliver. Forty per cent of Canadians are also willing to pay more if it ensures a better level of service. Knowing that, it's really about making a human connection.
THREE THINGS THE COMPANY COULD DO NOW
Extend your brand online
Make YouTube videos and include customers, who can share them with their friends on Facebook and Twitter.
More social media
Add Pinterest and other visuals-oriented and female-dominated social network sites.
Engage brand ambassadors
Determine who your best customers are and make them brand ambassadors.
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Interviews have been edited and condensed.