When it comes to retail sales, there are two figures most self-storage professionals worry about: what to charge and what to pay. In this article, we’ll explore both and give you some ideas you can use in your business. In fact, we’ve answered some of these questions so often, we’ll refer to them with the familiar acronym FAQ (frequently asked questions).
1. How can I compete in price with the big retailers?
The bad news is you can’t. The good news is you don’t have to. Is there a home improvement center or Wal-Mart next door? If not, don’t worry what they charge for locks, boxes or anything else you sell. Remember, the convenience you offer has value. After all, if a customer needs boxes it usually means he is in the midst of a hectic life event.
Whether leaving for college, between houses, clearing out a deceased relative’s belongings, or in the middle of a divorce, you can bet the customer feels stressed. Anything that simplifies his day will be appreciated. If you’ve got the supplies he needs on hand, he will be less price-sensitive. Such people will gladly pay extra to avoid making another stop to pick up what they need. Remember, convenience is why convenience stores make money despite higher prices.
2. Do low retail prices bring in customers?
Unless you count only the most extreme penny-pinchers, no. As a general rule, retail sales are a byproduct of unit rentals, not the other way around. Ask yourself: Will a one-time $10 savings on boxes make a customer overlook a $15 dollar higher monthly rental fee? Lowballing retail prices doesn’t bring in rental business ... it just gives away profit.
It’s strange how often self-storage people, especially the ones who brag about being near capacity despite higher-than-average prices, are the ones who fret about retail prices. Is it likely their customers are both willing to pay more every month and, at the same time, reluctant to pay more when buying supplies? Or could it be that these owners are still not quite comfortable making retail sales?
3. What are loss leaders?
A loss leader is when your supermarket sells a product, such as milk, below cost. They can do this because they make it up when the customers buys other, higher-margin foods. Try pricing a popular box size at a lower margin while pegging other sizes or tape a tad higher. You may be surprised at the results.
Once you accept the loss-leader philosophy, you come to realize you don’t have to stick to the same rigid markup on every item across the board. For example, those slow-moving cotton gloves might sell better at a lower margin. And popular items, like locks, might support a higher margin.
4. How much higher can you peg your retail?
One wine importer I know tried selling the same vintage at three different stores and priced each a dollar apart. To his surprise, he found the middle price generated more sales in every store he tested. If you have more than one facility, test price points to learn how much you can make before you encounter sales resistance.
5. What about special sales?
With the exception of a clearance sale to get rid of old merchandise, don’t run any “unadvertised sales.” Sales are meant to generate traffic. If only seen by people already there to rent units, you are reducing your profit. On the other hand, if you can use a retail sale to generate more money, such as advertising “free” supplies with a rental, a sale may work.
Again, when people come in to rent a unit boxes and locks are still secondary and, generally, renters are not too price-sensitive. If they find you’re having a “50 percent-off sale,” do you think they’d be likely to buy twice as much in supplies?
1. When isn’t the lowest price the best price?
Buying a season’s worth of product may save a few cents per piece but it will also tie up scarce capital for as long as that overstock lasts. Smart retailers keep as little inventory on hand as possible. They rely on suppliers to deliver what they need “just in time.” In that way, they use their supplier’s warehouse as their stock room.
Of course you could get the lowest price by substituting odd-sized boxes, substandard locks and flimsy mattress covers, but that could lead to customer complaints and jeopardize your customer relationships. When it comes to quality, ask yourself: Should I take a risk just to save a dime? Or should I simply raise my retail by a dime?
2. What else is there to consider but price?
Service, for one. If the low-bid supplier can’t supply what you want when you want it, what good is a lower price? Do they offer speedy delivery? The less time it takes to place and receive an order, the less inventory you have to keep on hand.
3. What is the order minimum to earn free freight?
If you have to order more, you’ll need to stock more, which ties up more capital. Not a good thing.
4. Does the supplier provide attention-getting signage and help with organizing your displays with professionally produced plan-o-grams?
A well-planned retail display can bump up sales by more than 12 percent. These are services every supplier should offer. The best suppliers offer them at no charge. “Free” services have a measurable value to your business. If you have to pay extra for any, add them to your real costs.
What about employee training? Some suppliers offer webinars and sales training materials to make training a breeze. Better-trained managers always sell more retail.
5. How do I deal with a price increase?
Though rising prices are a fact of life, you shouldn’t just accept them without doing your due diligence. Get prices from other suppliers, but first ask them to guarantee their prices won’t jump after you’ve switched. Assume that most vendors will lowball just to get your business. When you compare prices, consider whether a 5 or 10 percent difference is worth the hassle of dealing with a new supplier. Be a smart business person, not just a tough haggler.
6. How do I take advantage of a price reduction?
Sure it happens! Maybe it’s a sales promotion or a supplier’s inventory reduction, but deals do come along. It’s your chance to get supplies at prices that’ll fatten up your bottom line. Be cautious. Buy wisely. You don’t want to be in an overstock situation at the end of the busy season. Consider the cost of your capital and buy no more than a few months supply. If you’re wondering whether you should “pass the savings on” to customers, stop! The small price reduction will do nothing to increase your sales volume and, again, you’ll be giving away profit.
This article covers most of the frequently asked questions regarding buying and selling retail product. You can also ask your retail supplier for advice on making your store more profitable. After all, when a retail supplier’s customers do better, we all do better.
Rob Kaminski is vice president and general manager of Supply Source One, a division of Schwarz Supply Source, a retail supplier for more than 100 years. With a dozen warehouses across the country, the company has one of the self-storage industry’s most complete selections of retail products, as well as office, maintenance and janitorial supplies. For more information, visit www.supplysourceone.com.