Ok, I am paraphrasing Shakespeare’s “All the World’s a Stage”, but for retailers knowing how to properly price and then discount items is critical to their success. In last week’s article, we talked about not being to attached to your inventory (they are not family after all). This week’s discussion is what to do with your unwanted inventory. I recently read an article stating Bed Bath and Beyond is testing a loyalty program in which you pay $39.95 per year and get an automatic 20% off all orders. This would take the place of the constant stream of coupons they currently mail and may drive the Post Office Revenues further into the red. In their research, Bed, Bath and Beyond discovered that people only bought if they could take advantage of the coupons and that depressed their margins, (shocking, I wonder if they had to pay a consultant to tell them that) My point is that if you are constantly holding sales, you train your customers to just wait for the next sale. So what to do?
First of all, can you return the items to the vendor for credit on a future order? Often times this is not possible, but consider asking. If the vendor values you as a customer, they may be willing to exchange items for credit. This will free up your inventory dollars to purchase items that can be sold more quickly.
Before putting the item on the “clearance rack” and discounting 50%, 60%, 70% or more, consider the product placement in the store. If you are a women’s clothing store, perhaps you just need to feature the item on a display as an outfit, or give it better shelf space. Another idea might be to offer a spiff to your employees to help encourage them to suggest the items to customers as they move about the store. Also consider putting items together in a package if that makes sense in your store and offering the package at a discount. This will tend to lead to a higher ticket sale and allows you to put less desirable items with those the customer wants and move more product faster.
If all else fails, this don’t be afraid to discount the product. However rather than just putting items on a sale rack and sticking it by the door, consider how you can create some excitement in your customers. Use social media to announce a Flash Sale. Use action words that create urgency. For example, send out a tweet or post to FaceBook, Discounts up to XX% off this week only. Consider timing the sale around special events in your neighborhood. For example, several neighborhoods in San Diego have walk about nights and a number of my retailer create special sales just for these events. While we are all familiar with Black Friday and all of the holiday sales events, Be creative. How about a customer appreciation sale where you offer a few popular items at a small discount and then display your slow moving items with large discounts.
Lastly and if all else fails, don’t hesitate to move the merchandise. There are several stores in San Diego that will take the retailers merchandise (at a heavily discounted rate) and then they make a business out of selling those items at deep discounts. Research to see if there are similar stores in your area.
Getting rid of slow moving items, however you do it is one of the most important lessons a retailer can learn. We recently consulted with a retailer who decided to open a second location. As I walked into the new location, it was shocked to find it was almost fully stocked with inventory. When I asked, I was told that it was all items that were in storage waiting to go into the other location. Remember that inventory are dollar bills sitting on the shelf and the goal is to turn inventory back into dollar bills as fast as we can to use to buy more inventory, pay other expenses and pay ourselves.