Your First Markdown’s the Cheapest
Business is an art, not a science. Science is consistent, demonstrative and repeatable. Art varies, because, as the
old truism goes, “beauty is in the
eye of the
Nowhere is this more accurate than when discussing pricing issues.
A recent report told how “expert” wine connoisseurs, when presented with the
same wine in two different bottles with two different price points, unanimously gave a higher rating to the
$50 bottle. The
y strongly preferred it to the
identical wine marked $8 on the
label. Pricing does impact how we perceive things. We believe we get what we pay for. While we’re always looking for a “deal,” something presented as cheap turns us off.
Let’s couple this with the
hard fact that, for most of us, the
season is winding to a close. As hard as we tried, we still have merchandise that hasn’t sold. How do you turn that inventory into cash so your
store looks fresh and you can have money in the
bank—or, at least, owe less to your
re are many ways to close out merchandise. This is truly an art. What can work in one market may not work as well in anothe
r. Let’s face it, if a product didn’t sell during peak season at the
original price, you have to do something differently.
One thing might be to simply relocate it in the
store, put up a new display, new signage—anything that will attract attention so the
customer notices the
product and can clearly understand why the
y should own it.
If that doesn’t work, sometimes you have to create movement by having a sale. “Sale” is a word so overused that many consumers are anesthe
tized to it. But before you decide to immediately dump the
product at half off, are the
re ways you can massage the
“art” of pricing to yield more revenue and still get your
answer is always yes—if you act quickly enough. The
time to take the
markdown is not at the
end of the
season when store traffic is low. If you can identify an overstock situation earlier in the
year, when you have regular traffic through the
store, you can take an earlier markdown or promotion and move the
goods at a higher price point. Rathe
r than half-off, think about “Buy three and get one free.” That works out to the
equivalent of 25% off retail and at a much higher average sale price, too.
This is intellectually easy to talk about, but harder to do at retail. It requires us to admit we may have overbought (or undersold, depending on your
perspective). Yes, we did. Every retailer does. The
re are times we will have inventory imbalances. The
quicker we move on the
more cash we can generate from those sales.
Sometimes just taking the
merchandise off sale, putting it in a back room for a month and the
n bringing it back out as “new” will create enough excitement to move things along. Sometimes an incentive or game for the
store staff can generate movement. The
re was one garden center operator who assembled his seven employees and showed the
m seven $20 bills. He pointed to a pile of trowels and said, “By the
end of the
week I’ll eithe
r give each of you $20 or I’ll offer those trowels at $10 off to our customers. Do you want the
money or should we give it to the
customers? “One of the
employees was a newlywed and that $20 meant a lot to her. She encouraged everyone on staff to talk to the
customers about the
trowels. You know what happened—at week’s end the
pile was gone and the
entire staff got the
When all else fails, giving half or three-quarters off can move merchandise, but it won’t move the
bottom line in the
right direction. Yes, we need to close out the
merchandise, but let’s find creative ways to do so sooner rathe
r than later. Let’s do it in a way that leaves cash in our bank.
Bill would love to hear from you with questions, comments or ideas for future columns. Please contact him at email@example.com or (877) McCurry (877) 622-8779.