Tuesday, July 16, 2013

Beware the Cocaine

This Thursday we are having our one and only big sales event of the year. We call it the Summer Fun Sale. My buddy, Randy, calls it the Make It Go Away Sale. Yes, it is a clearance sale where we mark all the slow moving merchandise, the dogs, down about 50%, put them on shelves in a special section right in the middle of the store, advertise the heck out of it, and turn those slow movers into cash.

When we implemented our current POS system in 1999 and discovered all the dogs we had in our merchandise, that Summer Fun Sale was huge. We set records from '99 to '01 for single day sales, surpassing the busiest Black Fridays and Saturdays before Christmas in fewer hours and at half price. It was crazy.

Today our buying is tighter. Our inventory is more under control. The only dogs are soft and furry and sell really well. We still have a few slow movers and we still have our Summer Fun Sale, but it will generate about 30% of the business it once did.

The downside is the effect. The sale, when it was huge, was so exciting. The influx of cash was a godsend to our cashflow. The traffic, the excitement, the smiles all felt so good that when the party ended we wanted to ramp up another party and do it again. It was addictive. Like cocaine.

My dad lamented the other day that this year's sale just won't generate the same kind of cash it did a dozen years ago. I reminded him that we also didn't spend as much cash on merchandise that didn't sell. And we won't be taking such a hit on our profit margin because of tons of markdowns, either. Short-term the sale isn't quite what it used to be, but long-term the numbers are much better.

The hard part is the allure of the instant cash, the allure of the excitement of the big sale. Part of me wants to mark down more stuff, just to make the sale bigger. Part of me wants to give away good merchandise, products that will sell at full price, just to get the cash. Part of me has tasted the fun of a big sale and makes me want to slash prices deeper to get that taste again.

Yeah, it's addictive.

Here's your friendly, sober reminder. A clearance sale is a means to an end. The end is to rid yourself of merchandise that wasn't going to sell at regular price. Plain and simple. Turn the dogs into cash. Don't give away the workhorse, too, just to make the sale bigger. Only the dogs.

Some years you have more dogs, some you have less. Resist the call of the cocaine to make this sale bigger and better than ever. Don't ever measure your clearance sale to a previous year. Make it only about moving out this year's dogs.

You've been warned.

-Phil Wrzesinski
www.PhilsForum.com

PS We prefer a big, one-time clearance sale of select items over a year-round clearance room or sale rack or a blanket percentage off everything. The sale rack only trains people to wait for the markdown. The blanket percentage off everything means you'll sell more of your good merchandise at prices lower than necessary without getting rid of the dead-weight products. Those kinds of sales feel good, but so does morphine and cocaine. The big sale gets all your Transactional Customers in at once to move out the goods you want to move and gets you a shot in the arm of some cash. Just be aware of the side effects.

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