Thursday, March 31, 2011

Buy it while you can.

I have made a fairly strong choice. I will take up every opportunity to save money on product.

To me, all stores need to do three things to survive (minimally; I could come up with half a dozen other things that need to be done, but these are the Essentials):


1.) Pay overhead. Fixed expenses, like rent, insurance, electricity, phone, etc. and non-fixed like capital improvements and wages.

2.) Buy new product as it comes out.

3.) Replace product that has sold.

It seems to me that most store can do 2 out of 3 well; but it's extremely difficult with the competitive margins allowed these days to do all 3 well.

You can tell which two Essentials the store you're shopping at is doing. If they never have any new stuff, or they never bring back what they sold, or -- well, overhead can be more hard to see, at least at first, but eventually you might see the store run down, or a lack of enthusiasm on the part of the store owner who isn't making any money.

Anyway, that's a roundabout way of getting to my point, which is a sort of corollary to the above theory:

1.) A store needs new product.

2.) A store needs to replace sold product.

But a store needs to do those two Essentials with sufficient profit margin to pay the overhead.

The thing that I've found works best, is to constantly jump on every "Sale" offered by my distributors. To be shamelessly opportunistic.

I struggled for a long time with the idea that I was buying less than evergreen product with a large percentage of my budget. Shouldn't I just buy the best-selling product?

But the extra margin in the "Sale" product is what can allow me to do everything else I need to do.

If -- and it's a big if -- I can sell enough of the "Sale" product to gain the advantage. Ironically, it seems that if I buy on a constant basis, it works better than just taking advantage of the occasional blow-out.

A constant stream of "Sale" product, whether I buy at 10% off, or 20% or more, helps with the first 'Essential' (new product) and often for a portion of the second 'Essential' (replacing sold product) and gives me enough extra profit to pay for the first and probably most important Essential -- overhead.

It's more or less a constant tinkering with the formula -- how much to spend on new and perhaps unproven product, and how much to spend on older "Sale" product that may or may not be in demand.

What I'm saying, I guess, that I'm getting more and more comfortable ordering a larger percentage of "Sale" product the more time goes on. It isn't really even the lack of money that stops me from buying more, but the lack of space. (Which ordinarily would be a sure sign that I need to expand -- enough money to buy product, but not enough space to display -- but that's another can of worms.)

I'm assuming that I'm being offered so many bargains because the economy is weak -- so that's a compensating factor to the downturn. Those of us with established store and the ability to buy, have a great opportunity to bring in more product than we normally would.

It's also possible that there is just so much material in my retail corner of the world that "Sales" are inevitable. Or perhaps, I've diversified so much that there will always be a "Sale" in one or the other of my categories.

Whatever it is, I'm betting that I'm established and experienced enough to take full advantage.

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