Retail Sales : Beyond Tradition Discounts

In this article we will discuss three different concepts that can be utilized to turn wholesale discounts into retail growth through increased sales. These techniques can be used with new and existing clients. They can be utilized in various types of retail environments including salons, gift shops, food stores, restaurants and more. These ideas can be used in an e-commerce environment as well as a traditional brick and mortar storefront with slight variations. Be creative, do your homework and increase retail sales.

How do you capitalize on the discounts you receive from your suppliers? Most manufacturers and distributors offer monthly sales on certain products. The obvious way to increase sales is to pass those saving on to your customers. You save 25% and you pass the saving on to the customer in equal proportion. But, how do you utilize this discount to sell a larger quantity of product AND increase the different number of unique SKUs that an individual client purchases.

Instead of simply offering the 25% off of one product you can offer 50% of the second of equal or lesser price. Let me explain - Assume you regularly purchase Product A for $10.00 and Product B for $12.00, but you save 25% off each item this month. Your product costs go from $22.00 to $16.50. If you regularly work on a 50% mark-up (some call it 100%) you would normally sell these items for $20.00 and $22.00. If you simply offer the flat discount on each individual item, you would sell them for $15 and $16.50. That comes out to $31.50 if they purchase both and gives a gross profit of $15.00. Here's where you can increase the number of SKUs sold, the total number of items sold, increase incremental profits and grabs the attention of more potential customers...

In this scenario you offer "50% OFF second item with the Purchase of any other Item at Regular Price". You can specify which items are part of the sale. Item B will sell at $22.00 and Item A will sell for $10. The customer saves $10 on the transaction while you are able to move 2 different SKUs and see a gross profit of $15.50. In promoting this way as opposed to the simple one for one discount you accomplish three things.

1. Increase the number off individual SKUs sold per client as opposed to having them just "stock-up" on items they may already have been purchasing - cross promotion allows you to build depth with your clients, which increases the likelihood of increased visits to your establishment.

2. Increased incremental profits. While it was only .50 per transaction, these can add up over the course of a year.

3. Allow for signage to be placed in your store front window showing 50% OFF to attract attention of new clients. (see sample signage to the right)

Instead of a traditional discount, or even the above discussed alternate discount model, how about adding value to a deal. Quite often people like to receive something free even more than a discount, even if the free product's value is less than the dollar savings of a traditional sale. How does this play out in your business?

Lets assume you receive Product A at a 25% discount this month and you purchase it for $15.00 instead of the regular $20.00. That leaves you with, again assuming 50% mark-up, $10.00 to "play" with. Remember you would usually sell Product A for $40.00, but can now sell it with the same % mark-up for only $30.00. Now, lets assume Product A is a fairly strong selling item for you regardless of special promotions, but Product B is a slower seller. If you know that Product B is well liked by those who try it, but not enough people try it, then try this...

Assume that Product B costs you $5.00 or less. Instead of discounting Product A by the $10.00 that is available by way of your wholesale discount, offer Product B for FREE with the purchase of Product A at regular price. If Product B costs you $5.00 that would give it a retail price of $10.00. This allows you to offer a $10.00 item for FREE with a $40.00 purchase. Your cost on the two items is $20.00 and you therefore make your full % mark-up AND introduce a new product to your customer base. This "FREE Product B (a $10.00 value) with the Purchase of Product A" promotion allows you grow depth with existing customers as well as entice new clients to visit your store.

Customers will tell their friends and family about this great gift that they got FREE. These potential new clients will want to see what you have to offer...and probably want to get their FREE gift as well.

This program can be run in conjunction with the first two programs with a little creativity or as a stand alone incentive.

As a stand alone promotion, take the wholesale discount and allocate those monies to a monthly give-away. For example: If you are purchasing 100 Widgets at a 20% savings and they normally cost you $10, then you are saving $2.00 on the wholesale and have a $4.00 per unit cushion on the retail price. If you would normally sell the item at $20.00, offer the item at the regular retail price and offer an entry into a drawing for a prize valued at $40.00 or two at $20.00 each. Your savings will cover the cost of the monthly prize(s) and you will make full mark-up on the items based on your discounted wholesale purchase price. The higher the original price of the items included in the promotion, the higher value "gift" you can give away.

The other option is to split the difference between a discount/or value added item and the monthly give-away. Assuming the same 20% wholesale discount on the same Widget, you can offer this incentive: Offer 10% off the item and an entry into the monthly drawing for an item worth $20.00. The monthly prize value will be determined by the dollar amount saved per item and the total number of items offered for the promotion.

As the end of each month or promotional period approaches, purchase additional inventory of those items that have at least a 15-20% savings or more. This will enable you to slowly and steadily increase the amount of built in savings across a broader portion of your inventory. Each month you will build "sales equity" in your on-going inventory. This will help you in a couple important ways.

1. You will have the ability, after the sale period is over, to have an increased profit margin on those items, while selling them at regular price.

2. As you build this inventory, you will be able to offer special sales through-out the year without reducing profit margins. This is especially helpful during months that you have fewer options to purchase inventory at a discounted price.