A reader wrote:
I’m doing some consulting work for a furniture resale shop that is NFP (open under 2 years). They do not discount inventory based on date but think we should consider this option to decrease product stagnation and increase sales. Thoughts one way or another? Thanks for providing a great resource!
Reader, there is nothing so fraught with emotion than how a resale shop handles (or doesn’t) markdowns. Why is this? Because resale stores generally only have one of an item, at least one at a time. Whether it’s a bittersweet 1950’s kidney-shaped couch, or a pair of Gucci pumps in her size, it’s tempting the think “Well, the right customer just hasn’t come along yet, so I am going to stick with the price I put on it.”
There’s one big problemwith that attitude. The price the manager, pricing staff, or owner assigned to that item is almost entirely guesswork. What’s it worth? is not a definitive question. To one person, it can be worth nothing (“I hate it”) and to the next person along, it could be worth much more than you thought (“I love it, I’ve been looking my entire life for this… AND I just got my tax refund!”) So what’s it worth? Zero, until it sells. And if cutting the price that was (let’s be realistic here) somewhat arbitrarily assigned to that souvenir beer stein or the pump organ, is what’s necessary to turn said stein into cash in the shop’s till, then so be it. Mark it down. The only way a shop profits is with turnover. Move it on, make room for something new in that space.
Turnover is important not only for the dollars to be rolling in and the floor space to be available for new incoming, but for a much more important reason that can make or break a shop: Change. “A new store every time.” “Miss a week, you miss a lot.” The very thought of missing out on something when someone else buys it, makes your goods MORE likely to sell at “full price”… that is, the price store staff set on a consigned or donated item.
If a shop opts to operate without a set (well, somewhat set, there should be some flexibility built into the marketing plan, especially at a non-profit which relies on donations) way to reduce prices on items that haven’t sold in whatever time period they choose, there’s another real danger that could cost the business money: underpricing. The shop underprices to keep things moving. The pricers start assigning low prices to items which could well have sold for multiples of that price, thus depriving the sponsoring charitable group the inflow of cash the shop’s supposed to maximize.
Now, it may well be that your client business does discount based on something else besides age on the sales floor. If they do, I’m gonna take a wild guess and bet that the store manager says “I mark things down by gut instinct if no one’s looking at it… or if it’s taking up space I need for something else… or I get in a better version of the same piece of furniture.” Or even, as a manager I know will do: “I’ll give 10% off anything if they ask. In fact, I often go to a third- or half-off if I really need the sale that day.”
Perhaps they feel haggling is a better way to sell? Some folks love to haggle. And that’s fine, but there is a substantial majority of shoppers who don’t… and who accept the price on the tag as the price it is… and simply don’t buy. Or they can’t find a staffer to ask. Or the only staffer who can do the deal is busy elsewhere or out to lunch.
Now, I am all about adding value rather than reducing price. I’d much rather “throw in” some throw pillows if she’s hesitating on the price of the sofa, or say “tell you what, I know that wonderful centerpiece is what attracted you to this dinette set, so let me give that to you for free”… a technique that works well if you’ve been interacting on the sales floor with that customer, and that is easily done if your shop operates with donated goods. Consignment shops, needing to protect the selling price of other people’s merchandise, might offer double punches on their Frequent Buyer Card as an incentive to purchase rather than reduce before their stated, planned, agreed-upon markdowns dates/ percentages.
But here’s, really, the ONLY reason, especially now, that markdowns should be visible, generous, and (relatively) common in a resale shop:
People want to feel like they are smart shoppers… and part of that is feeling like they’ve outsmarted the “system”… AKA you, the shopkeeper. How many times have we seen, and even cheered on, a shopper who waited out the required length of time until something she wanted was reduced? She’s thrilled! She brag to her friends! She might even hug you! And you’ll feel like hugging her back, because finally those darn Gucci pumps sold.
If your client remains set about set prices, here’s a post about how to add value, instead, that might help. If your client is amenable to introducing periodic markdowns to a clientele that has gotten used to a “take-it-or-leave-it” merchandising process, suggest that they try the Big Tag idea for a few weeks, even a month. See how much more excitement and word of mouth it engenders, and I guarantee that your consulting clients will be thrilled!
For lots more about how to use price reductions to increase traffic, sales, and the shop’s word-of-mouth appeal, here are the Auntie Kate posts about markdowns. Including Ever wish you could come up with a good, quick, polite answer to the perennial question, “Do you have sales?”?
Auntie Kate The Resale Expert 