Boosting consignment sales may be easier than you think

Sometimes, it’s the little things. Seemingly insignificant actions that make all the difference to a customer. Oftentimes, boosting consignment sales can even be pretty easy. Try a few of these and see if they don’t make a difference in your overall sales next month.

1.) Snobby salespeople required?

What is it that brick and mortar stores have that online retailers don’t? People! You can’t make a day of it with friends by shopping online. Boosting consignment sales starts with the right customer service. For most of you, your staff should greet everyone with a smile and a genuine “Hello!” A friendly sales staff in the right environment can increase sales by as much as 23%! However, research has shown that if you sell luxury items, “the ruder the sales staff the better the sales.” Train your staff to sell according to your merchandise and your brand.

The Whizbang! Tip of the Week #617 suggests adding a little something special to your sales experience. He sites several examples. One is as easy as the way Nordstroms hands you your purchase when the transaction is finished. They come around the counter rather than schlepping the bag over the top.

2.) A captive audience

Take a good look at your Point of Sale (POS) area.  Is it neat and tidy? Do you offer smaller, impulse items for sale? This is the fastest way to increase store sales. Whether you’re offering jewelry and accessories at a clothing store, wood cleaning products at a furniture store or small toys at a children’s shop, make sure you take advantage of this captive audience. Change it up so regular shoppers are always surprised. The quicker you can complete the sale, the better. Younger generations get extremely frustrated if the checkout process takes too long. Make sure you have an updated POS system that runs quickly and easily.

3.) Somewhere between the floor and ceiling

Consignment and resale are in a very unique position when it comes to pricing. Since most of your merchandise is used, the value is arbitrary. Brand, quality and age all determine an item’s price. Many retail stores use cost-based pricing and most experts suggest anyone selling physical merchandise should do the same. Cost-based pricing begins with the manufacturing cost of an item. Then, a range is set for the selling price. The range is referred to as the floor amount (the lowest possible price) and the ceiling amount (the highest). Value-based pricing is determined by a customer’s perceived value of an item. The perception changes according to rarity, brand name or even the amount of personal service a customer receives. Make sure your price points maximize your profit. Read 4 tips for setting correct price points.

4.) Engage the eyes, ears and nose

E-commerce, at least at this point, cannot give consumers the full shopping experience. Physical contact is still the #1 advantage for brick & mortar shops. Let customers experience your store fully. Free up rack space and floor space so shoppers can move around and easily touch the merchandise. Make your store memorable with a delightful smell too. Did you know that scent is the strongest sense influencing memory recall and emotions? Emotions happen to drive 80% of decision making. Hello! Buying! When a store wants to sell its most important items quickly, they are always placed at eye level. Whether it’s shelving or wall racks, make sure you’ve placed them at a median height, 57″ from the floor. Lastly, play music that appeals to your target market. If I walk into a store and hear Chicago, The Doobie Brothers or Earth, Wind and Fire, I’m not only dancing, I am shopping!

5.) It’s time to give back

In 2017, Forrester released their findings on the impact of customer loyalty programs. They stated, “loyalty program members on average spend $42.33 more with traditional retailers than shoppers not in a loyalty program.” Boosting consignment sales means giving back to your most loyal customers. Make your loyalty or rewards program easy to enter. The points or rewards need to accumulate quickly. In fact, one study found that if shoppers are given points when they enter the program, they’re likely to spend more in a shorter amount of time. Remember, those happy program members are often tremendous store ambassadors too. Many POS systems such as SimpleConsign have a built-in Rewards Points program. Check a box, set your values and let the program do the rest.

When setting correct price points, think like Goldilocks. Not too high. Not too low. Just right.

If you are a new business owner or have been in business awhile, make sure you do a thorough review of your pricing structure at least once a year. The rising cost of goods and services should mean you are raising your prices too. Even a 1% increase could result in a big change in your bottom line. Let’s look at how you set the correct price points.

Pricing Too Low

Norm Brodsky in an Inc. magazine article writes, “People have a natural tendency to undercharge when they’re first starting out in business.” He claims that the uncertainty of succeeding causes new business owners to undercharge.

Peter Sandeen in an article titled, “Guide to Smart Pricing: What Are You Really Worth?”  mentions a number of problems that occur when you don’t set correct price points. Here are 3 hazards of pricing too low:

1. You lower your product’s and your shop’s perceived value.
2. You can attract the wrong clientele who won’t pay higher prices.
3. This starts a pattern of competing on price alone.

Sandeen explained, “…when you’re thinking of how much you should charge, don’t look for the lowest price you can live with. Rather, look for the optimal balance between price and number of sales.” Thinking you will build a solid clientele based on the concept of offering the lowest price, only sets you up for failure. Someone can always out price you.

Pricing Too High

We all are aware of the damage that can be done when price points are set too high. The following are just a few of the problems that can occur:

1. Reduced sales volume.
2. Negative perception when the product value doesn’t equal the price.
3. Limited clientele based on cost.
4. Longer time on the sales floor as you wait for the right buyer.

Known as “prestige pricing,” higher prices are a possibility if you take into consideration your location, the exclusivity of your merchandise and the economic status of potential shoppers near you. Add exceptional customer service and you might be able to pull it off. It is difficult to achieve however. Your entire store branding has to scream “luxury.”

Pricing Just Right

Pricing Solutions, encourages business owners to “stop making reactive pricing decisions.” They say, “It’s essential you understand your company’s value proposition.” A value proposition is merely what you have to offer and how it sets you apart from the other consignment stores in your area. Here are 3 methods for pricing:

1. Mark-up Pricing – Adding a pre-set profit margin or percentage to the cost of the merchandise.
2. Competitive Pricing – Pricing is strictly based on other shops in your area and then adding a perceived value to merchandise.
3. Psychological Pricing –  A form of this is Odd Pricing… setting the price to end in an odd number (i.e. $8.99) therefore the consumer believes it is a better value.

Sandeen writes, “You have to know what makes your products worth buying in your customer’s eyes…To find the right pricing for your products and services, you have to consider how much your target customers value the different reasons for buying from you.”

Brodsky adds, “The goal is to find the right price, meaning a price that (1) reflects the true market value of whatever you’re providing, (2) allows you to earn enough gross profit to build and maintain a healthy business, and (3) doesn’t leave you vulnerable to competitors.”

Consignment / Resale Pricing Suggestions: 

1.) When you have an item new with tags, pricing should be around 75% of the original retail.

2.) When original price is unknown, items are usually priced at 25 to 35% of the retail value. The correct price points may vary according to the brand, quality and current popularity.

3.) Check e-bay and Amazon

4.) Check online consignment shops such as The RealReal and ThredUp

5.) Visit competitors

6.) Check the classified section in your local paper

7.) Don’t let the consignor sway you. Everyone values their items higher than they may be worth.

8.) Remember the resale golden rule. If you wouldn’t pay that much for it, don’t price it that high.

9.) Competitive pricing based on having the lowest price only works if you’re selling the exact same item as your competition. Since consignment and resale rarely have the same item twice, steer clear of pricing just to have the lowest price possible.

Do you remember the emotions you experienced when you decided to open a store and the planning that happened afterwards? Remember the adrenaline rush just days before the grand opening? And the first week of store operations? Euphoria.

Store-Opening Postmortem 

Thud! The honeymoon is over.

Store counts are low and continuing to decline. Your best employee just left for greener pastures (who happened to be one of your best friends). You are late on one rent payment. Your last holiday season was so-so, but 12% lower than the previous year. Is it time to close?

All is not well in paradise. You thought you had a sure thing. When a few family members said, “You’d be a great store owner. You just need to do it,” you believed them. But, as it turns out, you’ve learned there’s a lot to running a business. Marketing, merchandising, finances, people, administration. This was supposed to be easy. Instead, you’re ready to write 10 Reasons to Never Open a Resale Shop.

Is it time to close or continue the madness? That is the question. Perhaps there is a better question. Can I turn this ship around? And if so, how?

Start With a Marketing Focus

I’ve been an outsourced CFO since 2001. I was once a controller for a large regional retail operation. I serve multiple e-commerce clients. So I understand the business of retail, and I can understand the frustrations a store owner goes through in such a competitive environment. While my focus is biased toward operations and finance, the first thing I study when working with a struggling retailer is their marketing plan and how they are executing it. Solid marketing equals sales amplified. 

Build it and they will come? Sure, that works in the beginning. Now, you have to start earning the customer visits if you not only want your store to survive, but thrive.

Let’s start with a simple income statement for a struggling resale shop. (All numbers are fabricated)

The income statement is for a recent 12-month time period, and note that the total store transactions (or customer purchases) are 3,848. That’s roughly 75 customer transactions per week or about 12 per day.

So my first question is, is it time to close or can we do better? We need to answer that by noting the simple equation for calculating total sales for a given time period (let’s stick to 12 months)

Total Customers
As the store owner and entrepreneur, are there more potential customers you are not attracting? If so, who are they? Where are they? And what’s the strategy to pull them in?

There is no holy grail to a perfect marketing system, but you have to start with a plan. It has to be simple, clear, easy to execute, and measurable. Rinse and repeat often. That’s the only way you’ll build up your customer base over time.

Average Purchases (Transactions)
Obviously, if you are selling furniture, the average number of customer purchases per year will be a small number (for example, about one customer purchase per year). If you sell clothing, you’re probably looking at 6-7 customer purchases per year. Accordingly, our store merchandising strategy plays a major impact on your repeat customer counts. If you don’t want to overhaul your inventory mix, you can enhance customer purchases through more special promotions throughout the year. You’ll just need to get creative.

Average Ticket
Like total transactions, the average ticket is driven by your merchandising plan. Take note of specific items where there’s not as much price sensitivity to some of your best sellers. For a store that generates 5,000 customer purchases per year, every dollar added to the average ticket falls directly to the bottom line and into your pocket. This is where the math gets really interesting. While this may seem like major surgery, perhaps your merchandising plan needs an overhaul. That could dramatically impact your average ticket. Maybe you need a new product category or two. Your customers will be your best advisory board if you are thinking about this.

End With an Earnings Focus

We could spend hours talking about the cost side of your financial business model which includes your average cost for your resale merchandise, labor costs, occupancy expenses, and so on. However,  the cost structure is not a contributing factor that’s causing large retail chains to shut their doors. They are biting the bullet because customers have quit buying from those stores. When many store costs are fixed, a declining store count only spells disaster. Still, you need to keep an eye on the costs you can easily manage (like store labor) and you need to get good at the way you spend your smart money (e.g., advertising and promotions).

In short, you need to be able to clearly state what every cost is in your store operations. You need to know why those cost exists and what drives them. I’ve worked with many executives over the years who cannot answer those fundamental questions.

The Verdict, Is it Time to Close?

I think the answer is simple. It’s time to close when you have exhausted every possible method to increase one or more parts of the top line sales equation. Generally, that means you’ve done everything to figure out how to get more customers in the store and how to get them buying more often. If you cannot figure that out, then the answer is simple. Yes, it’s time to close.

But don’t throw in the towel without thinking about your sales issues thoughtfully and carefully. By the way, I’m pulling for you. I want your decision to be based on logic more so than emotion.

Are you on the roller coaster of discounting?

Conventional wisdom says discounting merchandise brings in more sales. Discounting is never a long-term strategy. If you want to attract shoppers for the short term, offer discounts. These customers will leave you sooner rather than later when they’re off to find the next, best deal. To build a solid base of loyal customers, focus on creating value and setting your shop apart. Here are 3 alternatives to stop the cycle of discounting.

Build loyal customers by focusing on 2 of the 4-Drives

A Harvard Business School study determined that people are motivated by 4 different biological drives. The first is the Drive to Acquire (many discounting programs feed this desire). These are customers looking for either status or the ability to just buy stuff. The second is the Drive to Defend (loyalty programs can feed this). These customers feel the need to earn rewards points in order to maintain a privileged status. Most shops normally focus (without realizing it) on the first 2 drives to gain new customers and make sales. What if instead, you focused on the last 2 drives. The Drive to Bond  is a clear motivator particularly for women. Your shop can build relationships and a sense of belonging by asking for feedback or participation in a special group. Finally, the Drive to Create is especially important for the younger Millennial shoppers. Use classes and events as a way to build these loyal customers.

Add value rather than discount

Discounting tends to erode the consumer’s view of your brand value. In other words, if you discount often, you are only viewed as the cheapest place to shop. Instead, charge full price and add an item or service as a bonus. For a short time, offer a free gift with the purchase of an item Add free delivery on furniture buys or partner with another business such as a hair salon and offer a special discount. In the mind of the shopper they are getting greater value even when paying full price. Make sure you put a time limit on the offer so that it creates a sense of urgency too.

Contact loyal customers with specific messages

Today’s consumer is bombarded by messages. If your marketing efforts aren’t segmented to target groups of shoppers, your message will be ignored. Get a better understanding of your key customers by using an online survey (such as SurveyMonkey’s free survey), a printed survey that you use as a bag-stuffer or even your Facebook Insights page to gain in-depth information about your shoppers and fans. Target specific shoppers with specific messages about specific merchandise they want and you’ll not only have a greater chance of making a sale, but you will be building relationship at the same time.

Squeeze just a little bit more out of your consignment marketing budget

1.) Capitalize first on your loyal customers

You already have a captive audience. They love you, love your merchandise and are eager to tell others. Give them a reason to do so. Set up a killer referral offer that they can’t resist. Or, offer a free item, a free service or membership in a special group that receives exclusive offers. These will do wonders for boosting new customers and making those existing customers feel special. A segmented email list for only your top customers and special hand-written invitations are all you need to add to your consignment marketing.

2.) Host an event or a class

Plan something that will identify you as a leader in a particular area. For furniture consignment shops, feature a furniture painting or a dorm decorating class. For clothing, a Summer accessory fashion show, a how-to-pack-for-a-vacation seminar or an event that promotes local talent will draw a loyal crowd. Print flyers and post them in libraries, coffee shops, schools, etc. Often you can’t post shop advertising, but you can promote a fun event. Consider making it a charitable event and you will have an even greater outlet for marketing opportunities.

3,) Start a blog

If you or someone in your shop has a knack for writing, start a weekly design blog. Post it on your website and Facebook page to get added signups. Make sure your content is relevant and personal. Think about  top 10 lists, how-to or instructional posts and funny behind the scenes stories. By all means add photos. Marketing today is all about images and consignment marketing isn’t any different. For tips on merchandise photography, take a look at 10 Merchandise Photography Tips.

4.) Creative business cards

Whether it’s time to reprint business cards or not, why not make yours multi-functional? Vistaprint offers cards for as little as $16 for 100.  Be sure to add your Twitter handle and a QR code for a coupon that brings them back to your shop. Or, use them as punch cards for purchases and give them a new card when they fill one up. Hand the cards out to everyone, everywhere.

5.) Stock an effective loss leader

Use the same tactic retailers do. If you have a popular item that you know your customers want, offer it at a deep discount to get them in the door. Or, if you have an abundance of particular merchandise that isn’t moving, let your shoppers know it’s a one-time special deep discount. Often, shoppers will spend much more than what you offered for a special sale. Consignment marketing shouldn’t be about the cheapest merchandise at the cheapest price, but the best price on the best merchandise.

6.) Employ urban marketing tactics

This type of marketing is also called Guerrilla Marketing. Take it to the streets. Buy a box of sidewalk chalk and decorate the side of your building, your parking lot, a chalk sandwich board or the entrance in front of your shop. Add your Twitter handle and make it a contest to find a hidden part of the drawing. Be sure and take pictures so you can post them on Facebook. If you’re bold, try putting together a flash mob and head downtown to show off your latest vintage 60’s fashions while dancing to the Monkees.

7.) Build partnerships

If you’re a clothing store, at the very least you should have a partnership with a dry cleaner, hair and nail salon or a local tearoom. If you consign furniture, consider partnering with a local moving company, cleaning company or interior design firm. Cross promoting each other can work wonders for building referrals. Again, your only investment for this type of consignment marketing would be the cards or flyers you have printed.