I was alarmed at the enthusiasm with which my peers at TGtbT.com, Too Good to be Threw| Products for the Professional Resaler, greeted the idea of using February 29 as an opportunity to offer a 29% discount. Many shops offered that on everything in the store… without, methinks, stopping to consider whether their profit margin is even 29% to start with (most consignment and resale shops are not at that margin, believe me!)
Is it wise to give away the store…even if you “can afford the markdown one day in 4 years”, as one shopkeeper said?
I’m here to say that no, it’s not. We all know that marking down works…very well, to train shoppers to expect markdowns, regardless of how reasonable your prices are. Here’s what Saks does: It’s called spend$ome get$ome, it’s a one-day and several-times-a-year promo and I quote: “Shop…and receive a Saks Gift Card good towards future shopping” [emphasis mine] Here’s the deal:
So, do the math. Get 10% max (assuming you spend less than $2000 on that one day) or 5% minimum… on your NEXT purchase. NOT the one you just bought. The NEXT one. And let’s say, just for laughs, you earn your $25 Gift Card by spending $250… then, next time you’re in, they’ll take $25 off the next purchase which might be (heck, let’s be conservative here) just $65 for a jar of face cream. You have now spent, in your 2 trips, $315 and gotten $25 off. That works out to less than 7% off when you consider both purchases.
Considerably less than 29% off everything right now, right. AND Saks has a built-in ComeBack feature… you don’t get the money off UNLESS you come back.
Notice as well:
- Gift Card, not “coupon worth X” SO much more motivating…ohh, a Gift Card (even I will fall for that one!)
- The future discount is in store dollars, NOT a %-off a given price level next time (that would be too cheap for words! Saks isn’t cheap…they’re crafty)
- The reward level STARTS at $250. Now I have no idea what the average sale in Saks is, but I’m guessing it’s less than $250. So if you’re just an average Jane, bumbling thru the Blahniks and the Burberrys, you’ll be tempted to spend a mite more today than you otherwise would…so you can save 5-10% the NEXT time you wander thru the Wangs or sidle up to the St. Johns…
- This promotion results in TWO visits, and with luck, TWO purchases in a row…and TWO successful shopping trips to a nice store gets that shop in the TOP of the customer’s mind for future visits. THAT is worth 7% in my book!
I’m real tempted to say that Saks knows best. That yes, consignment and resale shops, already bastions of bargains, are giving away the store…29% at a time…and not even tempting folks to return! (After all, all the “good” stuff is gone now, right? And when is the next sale gonna be?)
More of Kate’s retail and resale wisdom at Too Good to be Threw, home of The Complete Operations Manual for Resale & Consignment Shops, as well as consumer-focused thoughts at HowToConsign.com where you can find a professional resale shop
Auntie Kate The Resale Expert 
[…] But, beware of being Ms. or Mr. Bountiful. Don’t give away the store. […]
Sorry, I didn’t have a specific resale shopkkeper in mind when I pointed out that those who thought 29% was a good offer, probably didn’t consider that they would, in 99% of the cases, be LOSING money with each purchase. So many folks look at what’s in the till at the end of the day when it’s important to look at what STICKS. In addition, I think that the Saks offer has some important messages to heed, when one has an open mind, and I pointed out:
* It was an offer that took LESS out of the shop’s pocket
* It was an elegant way to give the customer a deal
* It served TWO purposes: additional purchases on the day of the event, and a STRONG motivation to return.
For the further consideration of all, not just the poster above: I got this message today from a resaler on a matter totally unrelated to this blog entry:
“other retailers are having huge markdowns and sales, and we have not needed to do this… it seems to me that are FBC works as well as the regular markdowns and value added promos and great customer service keeps them coming back…. I actually have people apologize if they have not been in for awhile… who knew!)”
Wouldn’t you love to maneuver your shop into such a position?
Kate–
As the owner you may or may not be referring to (either way, I did make that comment), I feel that we made excellent use of our sale. We have had numerous return customers whose attention was grabbed by our sale. The amount we “gave away” that day was less than us taking out an extra couple of print ads, and we know for a fact that we got extra customers out of it. Not only that, but we debuted our loyalty cards that day, so that does give people a reason to come back. AND also got tons of brand-new names on our mailing list.
I doubt one sale in a year of business has trained people to wait for sales. We routinely mark down our stuff after it has been here for a certain period of time. The sale moved a great deal of merchandise we would still be sitting on otherwise. Had we not had the sale, it would likely have been just another average day, no extra money coming in, and no customers who decided to check us out because there was an attention-grabbing reason to do so.
Another thing I feel is missing from this whole assessment is, can you honestly name a major retailer that does not do sales? Most stores even do storewide sales from time to time, or if not the entire store, very close to it. I can’t walk through the mall without tripping over somebody’s 65% OFF sign. I know as resalers our prices are fair to begin with, but I doubt American Eagle/Aeropostale/White House Black Market/Georgiou/Bath & Body Works consider their prices unfair to begin with either. And all of those retailers do major sales, especially if there is a holiday or special reason to do so.
Kate –
Thank you so much for this post. I thought I was the only one thinking the same thing and that I must be stupid for not thinking this 29% off was a good idea!
Also, thanks for the Saks tip – it solves a particular problem I’ve been stewing about. Perfect.
You have been one busy lady lately! Best – Cynthia