Margin is important, NET margin more so. What lengths will you go to to boost turnover and is it worth it in the long run?
I can already feel that this is going to be a very rhetorical column. Lots of questions asked and none really answered in the space that I have to play with here. Over the years, having spoken with retailers, sales trainers and experts on business, it’s become abundently clear to me that there are two schools of thought when it comes to doing business with the end user.
The choices, put simply, seem to be: cheap price and average service, or high price (or at least not a discounted ticket) and great service.
The theory that you can ‘choose your customer’ is one that’s been discussed again and again by many in this trade. Whether or not you choose to humour the customer that comes in asking for a discount before they’ve even looked at your stock is key to discovering what side of the fence you may sit on.
On the one side, is a discounted sale really better than no sale at all? The counter arguement is based around NET margin. Having walked off with their discount, were the man hours invested in the customer worth the hassle? Will the customer return asking for a warranty on an inner tube having ridden through a cactus plantation? This is, after all, a very energy intensive business.
Very few customers entering your average family bike shop will enter knowing exactly what they want and in what size. In conclusion, is being a busy fool a viable way to run a business and will the stress of fighting for every penny send you to an early grave?
As our Retail Survey highlights, things are not quite so black and white. Competition on price isn’t as straightforward as watching what Chain Reaction’s up to, it’s as much about the supply of product and obtaining it on a level playing field to bigger fish in order to be able to price match, not to mention the issue of grey import sources. BikeBiz often hears of retailers buying from other online retailers, both domestic and foreign, at prices below their traditional supplier’s trade cost.
What’s interesting to me though, is that while talking to our Mystery Shopper recently, he’d told us that on the majority of visits at least one retailer of the bunch will offer a ten per cent, or more, discount despite not being asked to do so. Sometimes that’s on top of the mention of purchasing on a Cycle to Work scheme, which itself takes a substantial chunk of margin in commission.
Which side of the fence are you on? And is it time to re-evaluate?