Articles and News
The Five Stages of Profitable Retailing, Part Three: Keep Your Top Sellers Selling | May 31, 2017 (1 comment)
Omaha, NE—In our first installment of the “Five Stages Of Profitable Retailing,” we talked about stages one and two: what to do before you buy, and how to buy better. In the second installment, we discussed stage three: how to sell what you buy. Now we’re going to address every retailer’s dream--what to do if it sells quickly--and how to keep that momentum going and avoid shooting yourself in the foot when it does.
Stage Four Of Profitable Retailing: What To Do If It Sells Quickly. Congratulations! You bought something within budget, that was planned, researched, successfully launched, and it sold through very well! Now what?
It’s a funny thing, that no matter how easy you find it to buy new, unproven product (and again we can see how easy you find it from your numbers!), most of you really struggle with the concept of re-ordering it.
“Phew, that piece I bought actually sold! That was lucky! Now I’ll take the money from that sale and go and buy something that doesn’t sell.” Now I know that is not what you consciously think or do—but it is what happens in a majority of cases. So why does it happen?
In my experience, it’s just a bad habit born of habitual ways of thinking and behaving. And not just yours, either: your staff and customers also have habitual ways of thinking and behaving. For example: Have you ever re-ordered a fast–seller, and when it arrived back in store, your staff reacted less than enthusiastically?
“We’ve sold three of those already, can’t we try something different?”
I frankly find that type of behavior extremely arrogant because you are basically telling the next 15 people who may also have loved this item, that you have decided, on their behalf, that they don’t want it and won't have an opportunity to buy it. My advice to you is to take the advice of one of my very first clients, a man named Noel. Noel is sadly no longer with us, but back in the day when I was running workshops for our clients at a particular buying group, I would ask everyone present, “How many of this ring have you sold?”
Some answered that they hadn’t sold any because they decided not to stock it; others said they sold one but didn’t re-order it; others sold five but then decided to stop re-ordering it. But when it came to Noel, he would say, “David, I’ve sold 37 of them.”
He never failed to get a collective gasp, and when pressed as to how he achieved that, he simply said, “If a fast-seller sold that day, I couldn’t sleep at night until I knew a replacement was on its way before I left the store.”
Noel’s behavior was simple, highly profitable and, sadly, very uncommon. Pretty much everyone in retail knows that re-ordering your fast-sellers is fundamental to your success, but unfortunately we see the enormous disconnect between knowing what to do (Best Practice) and doing it (Common Practice) which is reflected in jewelers’ very average GMROI of 70 (or worse). Just remember, it’s your staff who get sick of selling it long before your customers get sick of buying it!
Imagine a customer who gets upset because the ring they bought for $2,500 last week is back in the store again. If you told them it was a one-off, then they have every reason to be upset, but there’s a price to pay for exclusivity—and $2,500 is not it. Try it for yourself: go to your local BMW dealer and tell them you’ll order a brand new, top of the range, 3 series in red with tan leather interior, but only if they promise not to sell another one in the same color.
What do you think they would say? "Sorry, no can do!"
But jewelry is different, right? It’s an emotional purchase, whereas a car is, well, just a car, right? Wrong. The reason people spend $100K plus on a car is all about looking good and feeling good. In other words, emotions. Sound familiar?
If you do decide not to re-order a fast seller because you don’t want to upset the customer, please make sure you contact your local competitors and tell them not to stock it either. That’s the only way you can guarantee your customer that they won’t see another one in town.
For those few customers who do ask you if it’s a one-off, tell them that this is a finished product, that you, and other jewelers, buy from a manufacturer, so you can’t guarantee they won’t see other people wearing it—then take the opportunity to sell them an exclusive, custom-designed piece that you will create just for them—at a price!
It’s a funny thing that many of you will happily re-order cheaper items, but hesitate to re-order more expensive items (imagine if your BMW dealer did that). While I was at a client’s store a few years ago, she sold a $4,500 yellow diamond ring and a $3,500 watch to a good customer. Both items had literally been in the store for one day (I actually delivered them to her on behalf of the vendor), so before continuing with our management session I told her to re-order them. She looked at me like I was a crazy man and said, “I wasn’t going to do that.”
I said, “well there’s really no point in us continuing with anything else today, because this is ‘Retail 101.’ You bought them believing they would sell, you proved yourself spectacularly right, and then you hesitate because it was just a lucky sale!” Long story short, she re-ordered both items and went on to sell four more of the rings and 12 of the watches within four months. I even had the watch manufacturer ask me if he could use this story to help educate his other clients.
So how fast is fast? This is one of the most common questions we get asked, and the answer is, it depends. It depends on what the item is, what the price point is, and how quickly the vendor can replenish it.
As a rule of thumb, you should re-order everything that sells within three months. If something sells in three months it has the potential of a four-time stock-turn, significantly higher than the industry average of 0.7 (i.e. takes 17 months to sell). Next, re-order almost everything that sells with six months, regardless of price, but use some discretion around stock-turn. I.e. if you need a three-times stock-turn for this product and it takes six months to sell, the best you will achieve is a two-times turn.
For some items, I would still re-order them even if took nearly 12 months to sell because it was at a higher price point; it had a great margin; by being in the store it helped sell other items, etc. The key is to use your judgement and entrepreneurial skill on an item-by-item basis, remembering that if it sold quickly once, it has an 80% chance of selling quickly again, and again.
In summary:
- If it sold quickly, re-order it immediately (before you leave the store) regardless of price
- Pay quickly and help make yourself important and special to your vendors
- Keep re-ordering UNTIL your customers stop buying it
- Keep your staff motivated to repeatedly sell proven, popular items.
In the final installment of our series, we'll address the fifth stage of profitable retailing: strategies to use when what you've bought doesn't sell at all.
The Edge Retail Academy is a highly effective jewelry industry consulting company that provides customized strategies for retailers and vendors to increase profits, optimize growth, reduce debt, create profitable inventory solutions, build effective teams and enhance brand loyalty and profitability. The Academy is committed to helping jewelry businesses improve their bottom line while reducing uncertainty and stress. Edge Retail Academy software and the unique talent pool of their business advisors provide real world knowledge and advice for guaranteed results, all on a “no-contract” basis. www.edgeretailacademy.com.
David Brown is a native New Zealander who in three years tripled sales and net profit in a jewelry store he bought in Australia. He is an expert in the areas of inventory management, sales growth strategies, retail systems and staff management and, with the development of powerful industry- specific software, Brown can supply business owners with information and strategies to significantly improve sales, profit margins, control, and ultimately peace of mind. To reach Brown, call (877) 569-8657 or email inquiries@edgeretailacademy.com