The hard truth is, we mess up…often. Yet every once in a while we get it right, too. The same youthful inexperience which precipitates these errors, also leads to stunning breakthroughs of originality. Thursdays are dedicated to true stories from my own experience and from the experience of people I know. These stories are about successful experiments, lucky innovations, and happy coincidences.
In retail, conventional wisdom says: do not discount. Unless you have a specialized business model, standard (as opposed to sale) discounts simply do not pay for themselves. But there are many kinds of retail stores.
My first store was a game store. Not video games nor gambling supplies, but those geeky role playing games, card games, and miniatures strategy games. There is a peculiar element in game stores, something I do not think occurs in many other types of retail establishments. This is an element of community. Like old soda jerk or an enclosed mall, game stores are a community unto themselves. Gamers come to those stores to meet friends, play games, and spend their days.
Obviously the main profit center was the games themselves, but early in the setup we agreed the store needed a soda machine. A little shopping around revealed a deal available through the local Coca-Cola distributorship. They supply a soda machine for free provided it is stocked directly through that distribution hub at a price of thirty-five cents a can. Given that we had no funds set aside to purchase our own machine and given that thirty-five cents a can was barely more than the best wholesale prices available, we took the deal.
The delivery man rolled by to position, stock, and initialize the machine, and then he asked me what final price to set the for the sodas. Standard markups place the price between sixty-five and seventy-five cents. In a decision made literally at that very moment, I answered: “fifty cents.”
The guy asked if I was sure, assuring me that most locations go for at least sixty-five cents. “No,” I assured him. “Fifty cents is right.” My decision was based on the same reasoning that led my partner and me to acquire the machine in the first place. The soda was not meant to be a major profit center, it was merely meant to give the customers one less reason to leave. (A customer in the store beats a customer not in the store any day of the week.) I chose fifty cents for its roundness. Two quarters is easy—clean.
The result was a resounding success. We received a vast number compliments on the price. We easily turned over the entire stock of the machine every month.
The calculating observer may believe that we would have turned over the same stock at the higher price. I seriously doubt it, but even had it been so, I would only have earned an additional fifteen to twenty dollars per month, small change in the face of the profits returned by virtue of being the ‘cool store’ the store clearly more dedicated the comfort and needs of the every-day gamers who called my store home.
Basically, today’s lesson boils down to: do not discount….unless you do. Remember the reason why a given product or profit center exists, and remember that maximized profit does not necessarily equal maximum profit.
Read some related articles:
- First Causes There are types, shades is you will, of knowledge. There are facts and theories, rumors and rationales, but the most elusive—the subtlest and rarest shade...
No comments yet.