Talking buy-outright (or even consignment) for store credit only amongst some resalers.Wanna listen in?
Do any of you have shops that just offer store credit?? No cash/check payouts?? People usually spend more than they have anyway and then there’s customers that haven’t consigned yet so the revenue is still coming in. Just wondering if anyone does that and if it works
Here’s my take on that:
Several problems with offering credit only in a BOR shop (these points are specific to childrens-only shops)
* What happens when the kids outgrow your shop? Will it make it difficult to fill your larger sizes. or to expand, as many kidswear shops eventually do, into junior sizes?
* How would you receive goods from folks leaving the area/ who wouldn’t dress their child in used clothes? Sure, it’s not a common occurrence but it’s just one more obstacle you might have to deal with, or one more supplier you’ll never see.
Problems re credits in general, no matter what merchandise a shop deals in:
* Bookkeeping. A whole ‘nother category to track, to solve problems about. A complication that may not be worth whatever benefit a shopkeeper thinks she’ll gain.
* Legalities. Don’t forget, The State wants their finger in the pie. Issuing credits may well involve filing annual accounting with one’s taxing authority, an onerous task for all concerned. Also, unused credits may have to be PAID to The State at some point.
Solution I offer in my consultation process for those doing BOR, once I have discussed with them what they hope to accomplish with this, or any other store procedure:
* If the goal is not to deplete the shop kitty by cash payouts in a given day, increase the kitty. If the problem is fear of robbery, pay by check only. If the problem is only one person can sign checks, leave several blank checks, or entrust an employee with your signature stamp, or add an employee to your checking account. If the problem is finding an employee you’d TRUST with the signature privilege, maintain a separate acct for payouts that is small enough to limit damage.
* If the goal is to “manage” cash flow, by trying to maintain a 0 cash flow (no $ pd out, no $ received from the purchase she makes)… that’s a fallacy. Doesn’t do any good as far as $ in yr pocket goes.
* If the goal is to get suppliers to “look around” so they see how great your merchandise is, there’s easier ways to do it.
And finally (you still there, reader?) my ULTIMATE SOLUTION:
* If you want to encourage a supplier to look around and hopefully buy something while she’s in-store
* If you want to encourage her to keep cleaning out those closets
* If you want to build loyalty to your shop
* If you want to show appreciation for her effort
Pay cash. AND give her a discount valid that day only, for a %age of the price of the goods she’s BUYING or for an amount or %age based on the goods she just SOLD you, however you want to. She gets her full value out of what she’s just sold to you and a “ThankYou” chit.
Market this chit as a WIIFM bonus, NOT as “you’re being paid $X in cash and $Y in credits”
And remember the chit’s purchase value can be used as a marketing tool to motivate consignors or sellers coming in as well. Simply announce altered to manipulate your incoming: more value when you need the goods season-wise, more value for items you know you have a customer for. For example: “Our customers are clamoring for bookcases. Bring them in now. We’re paying top dollar PLUS you’ll get a shop gift certificate!”
Auntie Kate The Resale Expert 
We have been is business for almost 3 years and have always offered a bonus for the customer who uses their store credit for purchase. It is very easy and managed through our software which is Liberty 4 Consignment. The software allows me to assign a percentage to match when the customer pays with store credit. If a customer applies $10 of store credit to a purchase, they only use $9 of their balance and the store pays $1 toward their purchase. If they apply $50, they only use $45 of their balance and the store pays $5 toward the purchase. It is not a discount per say but instead it is like receiving a higher percentage return on their consignment. They also have the option of taking cash at any time and aren’t locked into one choice or the other. It has resulted in over $27,000 being spent this calendar year in store credit instead of being paid out in cash. Our match was $2,700 – money well spent in my opinion.
About two years ago, we decided to offer both options at our shop. We had been strictly consignment before. Adding the ‘Store Credit’ option has worked incredibly well for us – actually better than we’d hoped. We carry women’s, junior’s, and children’s and so far, our customers have been thrilled to have the option. I have to say though, I have been very surprised at the number of our consignors who brought in only women’s items that have actually switched their accts to credit accts. According to your market, it might be something to look into.
I mulled this over after reading it the other day. .. we are women’s clothing and accessories. My first instinct (playing customer) was “no way — I’m truckin’ this stuff over there for some extra $$…my stuff is REALLY NICE and if they’re only giving me store credit, I might not find enough and then what happens…I really could use the money to go to Anthropologie.”
Then I put on my owner hat…” it’s really nice when we have things for everyone to buy, but do I really think that Christine will keep bringing me all those cool boutique items if I only give her credit to buy stuff at my store? I want these suppliers out there shopping for more good stuff.”
Seems we continually try to blur the lines — all consignors are not going to be resale shoppers. Wishing it were so won’t change that. Of course, some will cover the spectrum. We can offer incentives for bringing in high-demand items ( I do that with a higher split or in the case of a buyout, a higher buy price). We can stock up on all sorts of new items which may attract some consignors to buy but we already purchased those and we need to factor in COG. This practice serves me well at the holidays when someone needs a gift and we have items for them to choose from while they are wandering. Also works for add-on items like scarves, jewelry-cleaning cloths or candles (we con’t consign jewelry, but offer batch pricing). Plus, my consignors are always welcome to use their accrued credit for purchases.
I keep going back to my original premise — I want my great consignors out there buying great stuff at ridiculous prices (I’m not their accountant!) that they turn over every season – that’s what stocks my store and that’s what my customers buy. Plus, I hate math – I don’t want to do all that bookkeeping and calculating. I prefer simplicity and I think consignors and shoppers alike appreciate that – the price is what it says. They get “x” dollars or if consignment “x” percent. Do we think they don’t get confused?
In the consignor role — nah, I want $$.
Thanks for personifying the thought process shopkeepers must go through, Christine… looking at it from the client point of view, then the owner POV. And it’s SO true that trying to FORCE consignors into becoming customers can be counter-productive.
Personally, I have a really negative reaction to ANYTHING that someone tries to force me to do, whether it’s find something in their store to buy, or use a coupon at Honeybaked Ham before it expires. I’ll scratch that business off my “good” list so fast the pencil will break! Okay, I may be touchy…but why take the risk of it, when it really DOES NOT MATTER TO THE BOTTOM LINE that every consignor spends every penny she earns in your shop?
Better, I think, to learn what items might “tempt” your consignors into buying from you, with their earnings or their discretionary cash. Then put that merchandise somewhere the consignors will see it!
i think consignors like options..not limits…i’m a new shop owner, love all of the input & feedback on this topic…for now i’m letting my consignors dictate what is right for them, credit, check, cash (my preferred if they don’t use credit)…
Just “for now I’m letting my consignors dictate what is right for them”? (Smile) Hope you plan on ALWAYS being a market-driven business!
I like the idea of offering a gift certificate or coupon to cuustomers who fullfilling a wishlist item fr another customer. For my shop we do buyouts and consignment, but when sommeone is fullfilling a wishlist item request I typically offer 50% buyoyt/consignment as opposed to my typical 30% buyout or 40% consignment. So it essentially is a win/win for everyone-
I would not consign to a women’s or furniture shop who only offered in store credit, inventory is just too hit and miss re style and size. I know of children’s shops that offer cash or in store credit and if you take the store credit you get 10 to 20% more than if you take cash. This is a win/win since children are easier to shop for and out grow their things so quickly. But store credit is a choice, not mandatory, I imagine they recognize not all consignors will be shoppers nor would you want them to be if you want to carry nicer items.
We offer our consignors a 10% discount when they use at least $10 of their consignor balance to purchase their items. In our opinion, it costs about the same if we were to cut checks every month, plus pay for the checks (expensive!) and the time it takes us away from the sales floor is priceless. Yes, we eat the discount, but our consignors LOVE it and it keeps them consigning AND shopping.
Tina, is this a 10% discount whenever they stop in to see if they have money on their account? And do you pay consignors in cash on demand, or must they otherwise (if they’re not buying something today), wait until checks are issued to get paid?
As far as the state taxing goes, my accountant told me that I have to pay sales tax on the items that were used as store credit. I would think it would be hard to track sales if you only offered store credit.
Martha, thanks for another aspect to consider. But let’s all remember that learning something new, such as how to account for tax collection or figuring out software, is part-and-parcel of being a shopkeeper, and shouldn’t limit our efforts to tailor our businesses to our potential clients