4 minute read
Minimizing the Effects of Inflation
MINIMIZING THE EFFECTS
By Phil Wrzesinski
Inflation is not only causing hardships and decreased earnings for your customers, it is having a huge effect on your bottom line. Here are some steps you can take to mitigate some of those effects.
CHANGE YOUR BUYING HABITS
Order less, but order more often. You have heard this advice before. Now it is time to put it into practice. Smaller orders done more often has three huge benefits that will help you combat inflation.
Better Cash Flow – you will have more money available at the right time to pay those higher bills coming through. Better Stock Position – more orders means you are able to stay on top of hot products and fast-moving items, meaning less out-of-stock positions and less lost sales.
Better Merchandising – let’s be honest, every time an order comes in, the department gets a merchandising overhaul. More orders means more overhauls, which means better merchandising. That leads to more sales.
Stick to buying what is already in stock from your manufacturers and you will have a better flow of products to keep your shelves full, which will lead to higher sales and better cashflow. The math also shows that even if you have to pay freight for smaller orders, if you make three or more orders per vendor per year, your cash flow is better than one or two big orders per year.
LOOK FOR MORE MARGIN
There are several ways you can increase your own prices to give you the margin necessary to cover your increased expenses. Here are some key places to look.
Impulse Items – these items are never “shopped”. They are bought on an impulse,
hence the name. See where you can move a price from $3.99 to $4.99, or $5.99 to $7.99. The jump may seem large to you, but most customers won’t even notice.
Giveaway Prices – if you have anything in your store marked with an 8 or a 1 in the dollar slot, you are giving away money. $28.99 and $29.99 are the same price (“thirty dollars”) in the eyes of a customer, but you are losing a dollar with each item you sell at $28.99. Same goes for $21.99 and $22.99. No one is ever going to pick up a $22.99 item and say, “Gee, if this was only $21.99, I’d consider buying it.” Bad Numbers – the same can be said about the numbers 3 and 6 in the dollar slot. It is more subtle, but customers are not as comfortable with those numbers as we are with 4 and 7 respectively. You could find more dollars there.
Blind Items – items that are unique, such as art pieces, custom-made items, or products not found all over the Internet can also be good sources for extra margin.
Plush – Your stuffed animals are bought with the heart, not the head. When someone falls in love with a piece of plush, the perceived worth of that item goes up dramatically. Make sure your pricing matches the heart and desire of the customer
Although raising your prices may seem like you are adding to the inflation, if you do it right, most customers won’t notice.
Unlike gas or food, customers aren’t shopping for the same toys year after year. Most of your customers can tell you what they paid for gas six months or even a year ago, but none of them remember what your prices were two months ago on the item they want today.
If you are making these smaller changes in the right spots, most customers won’t even notice the change at all.
Even if they do, they get it. They know you need to make money to stay in business, too.
TURN OLD STUFF INTO CASH
The inventory that has been sitting on your shelf since before the pandemic is costing you money. It is dead weight. You need to get rid of it and replace it with something that sells. Here are some criteria you can use for identifying the dead inventory. Couldn’t Sell a Case Pack – If you bought a case of six and only sold four at Christmas, the other two are dead.
Hasn’t Sold in Six Months – If the last sale was January (and it isn’t a sled), it is dead.
Packaging Damaged or Changed – if you can’t get a new package from the manufacturer, mark it down and move it out. It is making your store look bad being on the shelf.
If you have old fixtures you are not using, you can turn those into cash, too. Teachers love old book racks. Parents use spinner racks for many different reasons. Daycares can use old shelves and bins for storing toys not in use. Put a $20, $40, or $50 price sign on your old displays and turn them into handy cash.
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