Agree? I do. His “recap” is what I’ve been preaching to consignment, resale and thrift shopkeepers for years.
Pay attention… BIG attention… to the spaghetti story. Around 4:30.
We’d love to hear your take on this issue. Go ahead, add a comment. I promise, I won’t bite (well, nibble, maybe, but it’s a love nibble….)
This video is straight out of the MBA curriculum but like many MBA lessons lacks real world practically! Sure, it’s obvious that its best to always “add value” to your product or services, how would you ever distinguish yourself from competitors if you didn’t! That being said, this is 2014 folks and sorry to brake the news but DISCOUNTING is here to stay!
Let us not forget that we (consignment stores) are all DISCOUNTERS! Let us also not forget that our customers come in for one primary reason, yep…to get a discount! After 17 years of running a successful women’s consignment store I can tell you with no reservation that discounts have been, and will continue to be, an important part of our marketing strategy!
Unlike some some of our competitors, we do NOT discount anything for 60 days. We get full price for the great majority of our inventory and our consignors love it! After 60 days however, we DISCOUNT 50% and in the last weekend of every month we discount 70%. Why donate items when you can sell the bulk of them in a monthly 50-70% OFF sale! We have never needed a $1 or $5 rack and never will!
One thing is certain. The dude in the video has never owned a retail store. If he ever does, I’ll be looking for his DISCOUNTS in about the third month after opening!
Consumers today expect discounts. It’s our job to manager the discount cycle to maximize sales and profits.
That’s great, Jackie, that your business can present goods for that 60 days at the price you originally set and that people keep buying, and that you don’t feel the necessity of having a dollar rack. In other words… the only discounting you do is a “final clearance”. Good for you!
I have read this blog with interest. I operate an online consignment store, consignista.com and one of our promises is that we will never discount an item unless the seller asks us to do so. We can do this as we do not hold inventory and we feel that to discount an item without the owner’s consent may not be what they want. Having consigned something myself way back when, they slashed the item by almost 80% and I received a check that almost wasn’t worth cashing. I am interested in your comment regarding customers thinking items are overpriced if an item doesn’t sell within the first 3 months (we have no listing period either it stays on the site unless consignor requests it be removed from site) – do you feel it is more profitable to lean more towards the consignor or consumer? Or even better, is there a balance that can be had for both?
Hi Penny! Glad to hear from you. Of course, online consignment, where you have virtually the entire world as your sales floor, is SO different from having even the largest retail store. There’s no way that a retail store should keep goods on their sale floor for an unlimited amount of time, so of course it is necessary to reduce goods if they haven’t sold, if only to make room for something that will!
Reputable consignment shops have, in their consignment agreement, info on how, when, and by how much unsold items will be reduced in price.
As to whether “it is more profitable to lean more towards the consignor or consumer? “… that’s the fascinating, intriguing, ever-changing challenge of the consignee: How best to facilitate the exchange of values between your consignor-supplier and your shopper-buyer while creating enough profit to make the service viable for the owner and staff. I lean towards making sure that all parties’ needs are fulfilled.
It’s an online store’s greatest strength that they can leave the metadata up forever on their server while the actual goods are remaining in the consignor’s home… I’m sure B&M shopkeepers wish that they too, had unlimited space. I’ll watch your site with interest, and thanks for bringing up this fascinating subject!
I have a formal wear consignment store, and previously we did no markdowns, and items stayed around for a long time. We have moved to a new location and this year I started marking dresses down by 15% after 2 months, and then another 15% after 4 months. On January 1st of this year we had an OK month after a month of miserable sales in December. We have also had twice as many shoppers this month. Most proms do not even start until the end of March here. I am hoping that this is not a fluke. I will only mark a dress down twice, if it does not sell then it goes back to the owner or get’s donated. I am still trying to find my way in the retail world and I am hoping that this is not the wrong thing to do. After reading a previous post about putting the original retail price on the tag and then ‘our price’ I am really leaning toward doing that. I had been thinking about it already, and then Kate said it really may be a good thing to do. Great minds…..huh? I am actually thinking about changing the tags I have put on merchandise that has just come in. What do you think?
Kathy Thompson
Hi Kathy, With your specialty, you have a very limited window, I imagine, for good traffic in your shop, so you have to do EVERYTHING you can to get the traffic…. and the sales… when the gettin’ is good. Why wouldn’t you go back to already-produced tags and write “New price $XXX” on them? It’s a shame that your area didn’t have any formal events in December… or did it, and you missed marketing to those attending?
Kate,
This area may have had formal events in December, but we were in a very serious economic crunch here. When the government shut down this area suffered greatly. People were not buying anything they did not have to. Most of the people in this area work for the government either directly or indirectly and they may have been working, but they got no paycheck or they just weren’t working. So in December they had gone back to work but they were still gun shy and still only bought what they had to. Now the New Year has come and money is once again flowing. Hallelujah!!
Kathy Thompson
Okay but also pay close attention to the JCPenny’s story. They stopped their discounting for an every day value approach and TANKED, Maybe for a new store just opening you should avoid ever discounting from the get-go but most established stores have a discount policy in place. What is the story for them (like me)?
I’m interested in why such big name stores do BIG discounts. Kohl’s, Jo Ann’s, Bed Bath & Beyond. The first two always have huge sales after the initial month at full price and BB&B has 20% off everything all the time w/ coupon.
I almost want to start my price tags with:
RETAIL PRICE $100
“Our Store” PRICE: $50 just so they can see the value from the very beginning when they buy used vs. new
My 2 cents 🙂 Thanks for making great thought provoking conversation as always Kate!
I love the idea of mentioning the retail price, Jenni.
I discount every month. I bought a children’s resale shop 4 years ago and they were already discounting so I continue to do the same. After 3 months at full price, we discount to 30% then the next month is 50% then after 6 months its 70% off. In addition to discounting, I email out monthly coupons. This month is $5 off $25 or more. Lastly every other month I have a special event that always include some extra discounts. Jan was our birthday bash that included hourly discounts. Feb will have 50% back Saturday where any purchase over $30 they will get 1/2 that amount in store credit. The question is we are constantly discounting. I agree customers now expect it. But for a store that is cash strapped, it helps with cash flow when I have these sales. Also for inventory levels, we buy seasonally so I want that off season inventory out of the store. Lastly we only advertise through Facebook, website, monthly email, and I put a coupon in a monthly coupon magazine. If you were to advise us, what do we cut back on? Do we stop cold turkey?
Chenay, it’s tough: customers have been trained to “wait for sales”. You’re waiting 3 months to do your first MD of 4\30% though: I would NEVER give ANYTHING 3 months’ “free” sales space. My opinion: I’d ramp up your MD timetable to keep things moving and to keep the shop looking fresh to regulars.
I also strongly suggest, when I consult with BORs, that they buy all seasons all the time and if necessary, get storage space until out-of-season things are in demand.
Finally, I cannot say what to cut back on: in your advertising. But I know for sure not to go “cold turkey”, if you mean stopping advertising altogether. THAT is the biggest mistake any retail shop can do.
I opened a consignment shop a little over a year ago. After 45 days, our prices go 20% off for a couple of weeks and then 40% off for a couple of weeks and then 50% off for a week. After that they go on the dollar rack. Our customers do not want to see the same items for six months! Just my opinion! And believe me, they buy! As far as clothing, shoes and purses go, I usually wind up with only one large hefty bag of stuff that heads for donation!
What can we offer of value instead of having sales in consignment though? How to get them in without it when revenue is needed ? Especially after they are already accustomed to the sales and discounts. They don’t wait necessarily but they will always come in for a sale. We do need to pay that rent. Lol
Cindy, when you mark down consigned goods, you’re doing one of two things (actually possibly both): reducing the consignor’s part of the income, or cutting into your profits. It’s GREAT to have a “good sales day”…. but it needs to be said that you need to look at your profit after COG. Example: A consignor owns an item you’ve priced at $150, of which he will receive $90 when/if it sells. You MD, or negotiate, selling this item for $100. Your sales that day just went up $100… but your gross profit went up by just $10, assuming you pay him the $90. He’s happy, your gross sales looks good, but you only made $10 on that item.
Now this might be okay with you, or it might not be, depending on how you operate your consignment split, and how desperate you are for the space, the cash, or the customer attention. Multiply this scenario out by having “50% off everything this weekend” and perhaps you would be unwilling to sell everything by forsaking some, or even all, of your profit. Gross sales for the day doesn’t tell all. A $1000 day when your profit’s say $50? Is that better or worse than a $500 day when your profit’s $200? There are times when one is better than the other, but until you define and decide, randomly marking down is a dangerous way to “build sales”… because what you really want to do is “build sales today and in the future, while keeping a close eye on profit.”
Sorry Cindy, I forgot to reply to your Q re what you can offer of value. How about “free hairbow with every $X purchase”? If your hairbows are easily replaced and cost you a dollar, you could set that X at $10 and be giving up one dollar to motivate that sale. If these hairbows are a good seller at $4, the customer perceives a $4 value to your premium with purchase and is tickled.
That’s just one example of adding value rather than reducing price; I know you can think of ways to do this that would appeal to your specific clientele!
We recently bought a consignment store and mark down our merchandise similar to this. My question is how do you do your MD? Retag, move to a MD rack and discount at the register? I am struggling to figure out the best process. Any help is greatly appreciated!
Congrats on your new shop, Cindy! The otopic of MDs is rife with opinions. You can get a taste of the discussion by taking a look at our posts here on Auntie Kate tagged “markdowns”, but the definitive way to handle them easily and profitably is in, of course, Too Good to be Threw, Complete Operations Manual for Resale & Consignment Shops, which is a must-have!
Loved this! We don’t have sales, either. If people ask for a discount, our prices are negotiable to about 25% off. However, this mainly comes into play with higher-priced items such as furniture, antiques and artwork, and if the item has been in the Shop for less than a month, the price isn’t negotiable. Do you think negotiable prices have the same effect as across the board discounts?
No, Heidi, I don’t think that negotiable prices have the same effect as across the board discounts. Why not? Because many, even most, shoppers aren’t brave enough to ask “is this the best you can do?”… or even if they ARE brave enough, you’re not immediately available to ask. So they see a price, it isn’t what they are willing to pay, they walk. I’d rather see a shop discount as they feel necessary… yours is a donation-based thrift, if I remember correctly. In your case, I’d mark down, with a red or purple or whatever marker, the things that needed to move on, for whatever reason. IA shipper is a LOT more likely to buy something already MD’d by 20 or 25%, than think “maybe I could ask for a discount” on something that’s sitting at original, full price.
I agree whole heartedly! I have not had sales in my shop in the 5 years we’ve been open, and therefore trained my customers accordingly. they do not wait for sales. if they like the product, they buy it when they see it!
We have tried both ways. We’ve been open for a year. The first eight months we did no discounting, and we sat on tons of merch. Donated a butt load. Profit margins were high but revenue was lower than I’d like. Last four months we adopted the progressive md strategy except on our high margin jewelry. Profit margin is about 20% lower but revenue is way higher. And so much less to donate. Our consignors and our customers are happy. No need for additional coupons and the only sale we will have is the annual winter clearance. That’s a 75% off original price. I cannot imagine doing dollar sales or grab bags on higher end apparel either. In theory I totally agree with what the gentleman says, but in practice it has not proven to be the best practice for our shop.
There’s an often-overlooked benefit, especially for consignment and resale shops, to some sort of discounting. And that might be a bitter pill to swallow: You are GUESSING (especially if you haven’t a long span of experience) on the price that YOUR market wants to pay for any given item. $20? $25? $30? After all, we can’t fall back on MSRP (manufacturer’s suggested retail price) because there IS NONE. If you have in place a set MD based on time on salesfloor, as suggested in TGtbT the Manual , you can guess high… if it doesn’t sell for $30, in 3 weeks it will be $24 (for example). Wouldn’t you LIKE to get $30 for it? Then, after it’s been passed over for $30, wouldn’t you like to re-motivate shoppers with a $24 price? Whatever prices you choose, whatever % auto MD you choose… the name of the game is move it on OUT!
When you “sit on merchandise”, as Abigail’s mentions, you’re losing in SO many ways: not selling it, of course, but also turning off buyers who think “gee this shop’s overpriced”, wasting precious sales floor space on things that are not selling, and setting up suppliers’ expectations in an unrealistic manner (“she has X at $Y so I should be able to get that for my X”….