Tennis Industry magazine

 

Retailing 109: What Do Women Want?

Answering this age-old question — as it applies to tennis retailing, of course — can bring more love to your business.

While recent statistics show that men are beginning to do more retail shopping than in the past, women still buy the majority of goods at retail. As a tennis specialty retailer, are you addressing the needs of women when it comes to shopping? Do you and your staff know the different shopping habits between men and women? Do you know how to attract more women as customers to your retail store?

To start to understand this, we first need to realize that retail shopping follows social change. According to Paco Underhill, the author of “Why We Buy: The Science of Shopping” and a pre-eminent retail anthropologist: “Retail must pay attention to how women wish to live, what they want and need, or it will be left behind.”

Understand, too, that there are fundamental differences in how men shop vs. how women shop. “Males just want a place that allows them to find what they need with a minimum of looking and then get out fast,” says Underhill. “If made to wander and seek — in other words, to shop — he’s likely to give up in frustration and exit. Men take less pleasure in the journey.”

Women, on the other hand, demand more from the shopping experience — or journey — and hence from the retail environment itself. Women need to feel comfortable in retail environments and be able to move about comfortably.

So the challenge for specialty tennis retailers begins with making their retail environments appealing to female shoppers.

A Complete Experience

Increasing sales to women is all about the complete retail shopping environment and the total shopping experience! No matter what size your store is, think about a redesign built around a friendly, fun tennis lifestyle shopping experience that will make shoppers comfortable.

You should evaluate your customer service and develop a store culture based on education. Create an operations manual that focuses totally on the consumer. Start by getting together a group of women who you know play tennis, and ask them to “mystery” shop your store and evaluate their shopping experience for you. If you are a one-man operation, ask them to shop your store just like they would any other specialty tennis store, and provide the same evaluation. Then, walk through your store yourself and do your own evaluation. Here is a checklist to consider:

Addressing the needs of all shoppers, and in particular the needs of women, will help bring in more customers, and create more loyalty among your current clients.

Coming Up:

Direct response marketing.

This is part of a series of retail tips presented by the Tennis Industry Association and written by the Gluskin Townley Group (gluskintownleygroup.com).

Finances: Spreading the Word

Mark E. Battersby

Without marketing or advertising, no one will know your business exists. Fortunately, a marketing strategy doesn’t have to mean multimillion-dollar TV commercials. After all, there are plenty of ways to market a retail store, tennis facility or your teaching business — and a variety of tax deductions to help make that marketing and advertising more affordable. Include entertainment in your operation’s marketing strategy and tax deductions will also underwrite the fun side of promoting your business.

Advertising, as well as marketing, can mean the continued life of any business affected by the economy, competition or other factors outside the control of the operation’s owner or manager. Because there are many aspects to both advertising and marketing, it is not surprising that the expenditures related to these activities fall within several sections of the tax regulations.

Advertising Expenses

All too often, one of the first expenses reduced or cut by many troubled businesses is the most basic of expenditures — advertising costs. This is a doubly short-sighted strategy given the necessity of advertising in bad times and the fact that Uncle Sam, in the form of tax deductions, will often pick-up a portion of those advertising expenses.

Advertising expenses encompass everything from expenditures for business cards, brochures, fliers, prizes and contests, new product or service launch costs and other promotional activities. Generally, advertising, marketing and other selling expenses are immediately tax deductible as “ordinary and necessary” business expenses — but not always.

All reasonable advertising expenses are tax deductible so long as they bear a reasonable relationship to your tennis business. Under our tax rules, deductible expenses may be for the purpose of developing goodwill as well as gaining immediate sales. Even better, the cost of advertising is deductible when paid or incurred, even though the advertising program extends over several years or is expected to result in benefits extending over a period of years.

Lobbying Expenses: When it comes to promoting the interests of your store, pro shop, facility or business, lobbying expenses directed toward influencing federal or state legislation are generally not deductible. However, this prohibition does not generally apply to in-house expenses that do not exceed $2,000 for a tax year. Lobbying expenses pertaining to local legislation are, of course, deductible.

The cost of public service or other impartial advertising, such as advertising designed to encourage the public to register to vote, are also deductible. But, no deduction may be claimed for the expense of advertising in political programs, or for admission to political fund-raising or inaugural functions and similar events. This includes admission to a dinner or program if any part of the proceeds of the event directly or indirectly goes to a political party or a political candidate.

Website Development Costs: Although the IRS has not issued formal guidance on the treatment of website development costs, informal, internal IRS guidance suggests that one appropriate approach is to treat these costs like an item of software and depreciate them over three years. It is equally clear that taxpayers who pay large amounts to develop sophisticated sites have been allocating their costs to items such as software development (currently deductible like research and development costs) and currently deductible advertising expense — all without challenge by the IRS.

Research and Mailing Lists as a Tax Deduction: Testing the waters before committing to an advertising campaign is always advisable. Unfortunately, only costs of research in the laboratory or for experimental purposes are tax-deductible. Market research and normal product testing costs are not research expenditures under the tax rules.

Mailing lists are an important part of the advertising campaigns of many racquet sports businesses. On one hand, the mailing list is an intangible asset, deductible only if a reasonable life can
be determined for it. A tax deduction for the cost of compiling that list is a little trickier.

Consider the situation of a tennis retailer that mails catalogs to people on its mailing list as well as to others on lists that it rents. Prospects for the permanent list are drawn from advertising, and added to the company’s mailing list if they make purchases. The business keeps records of its costs in adding to the mailing lists and expenses those costs in the year the catalog to which the expenses relate is distributed.

The IRS has ruled that the company may deduct as an ordinary business expense its costs related to adding names to the mailing list. Keep in mind, however, that this situation involved a catalog that was published semi-annually, while in other cases the IRS ruled on the catalog had a useful life of several years.

Marketing As Advertising

Paid advertising isn’t the only way to spread the word about your business. Public relations are marketing strategies that span everything from press releases and networking at a Chamber of Commerce meeting to sponsoring a contest to holding special events.

However, no deduction is allowed for dues paid to any club organized for business, pleasure, recreation, or other social purposes — even if membership is used to promote your racquet sports business. Fortunately, this disallowance does not extend to trade or professional organizations, or public service organizations (such as Kiwanis and Rotary clubs).

Entertainment

A tennis retailer or facility operator is allowed a deduction for business entertainment, so long as there is a direct relationship between the expense and the development or expansion of the business. Remember, however, special limits are imposed on the deduction of business-related entertainment, meals and gift expenses.

First and foremost, no tax deduction is allowed for the cost of entertaining guests at nightclubs, sporting events, theaters, etc., unless that cost is either: Directly related to the active conduct of a trade or business, or for entertainment directly before or after a substantial and bona fide business discussion associated with the conduct of that trade or business.

The business discussion must be the principal aspect of the combined entertainment and business and must represent an active effort by the tennis business operator to obtain income or other specific business benefit. However, if a meal expense directly precedes or follows a substantial and bona fide business discussion (including a business meeting at a convention or trade show), then it is deductible if it is established that the expense was associated with the active conduct of a trade or business. The retailer or operator must, of course, be able to substantiate the expense.

There are two additional restrictions placed on the deduction of meal expenses: (1) meal expenses generally are not deductible if neither the business operator nor the operator’s employee is present at the meal, and (2) a deduction will not be allowed for food and beverage to the extent that such expense is lavish or extravagant under the circumstances.

50% Limitation Rule: The amount allowable as a deduction for meal and entertainment expenses is generally limited to 50% of such expenses. The 50% rule is applied only after determining the amount of the otherwise allowable deductions. For instance, the portion of a meal that is lavish or extravagant must first be subtracted from the meal cost before the 50% reduction is applied.

Giving is Often Advertising

Another form of advertising is giving gifts. Deductions for business gifts, whether made directly or indirectly, are limited to $25 per recipient per year. Items clearly of an advertising nature that cost $4 or less and signs, display racks or other promotional materials given for use on business premises are not gifts.

A tennis business that provides customers or prospective customers with an item that might be considered either a gift or entertainment will generally benefit from the entertainment write-off, ignoring the $25 limit. Of course, if the operation gives a customer packaged food or beverages that are to be used later, they are considered gifts.

To spur sales, many retailers frequently give away small samples. Under the tax rules, the cost of the samples can be deducted immediately — if the samples are purchased separately from the products being sold. If purchased separately, their cost is an ordinary and necessary business expense. However, if the item was included in inventory, it cannot be deducted twice. It will already be part of the cost of goods sold.

The tax rules clearly label the majority of advertising and marketing costs as immediately tax deductible albeit with some restrictions or limits. Obviously, to get the maximum benefits from advertising and marketing expenditures or to reap the cost-cutting deductions often requires the help of qualified professionals.

Whether help includes advertising or marketing professionals or is limited to a qualified tax professional, the decision of whether to advertise or market your business’s products or services should be a “no brainer,” good times or bad.

 

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