On my most recent yearly statistical post for band sizes, Annika asked:
You mention that you special order different sizes and styles, but does it affect your profit? If I asked my local store to do that, would it be a hint that they could expand their size range, or would it be an inconvenience?
While I was formulating my reply, I not only realized my penchant for lengthy explanations created a “tl;dr” comment, but also that people may find the topic to be an interesting entry in my “Retailer’s Perspective” series. For those of you unfamiliar with the shop, our special order policy is a trusting and generous way of providing another level of service to customers. Anyone can order or pre-order styles, sizes, or colors not stocked in the store without leaving a deposit or being under obligation to purchase the garment. However, if the item does work, you receive a 5% discount (10% for pre-orders) as a token of our appreciation for your patience. The policy was born out of our desire to help as many women as we could within the limitations of our space and budget, and overall, the program succeeds. Whether the policy is profitable and sustainable depends greatly on the customers taking advantage of the program, and a retailer needs the right mix in order for a special order policy to be feasible. My business partner/dad and I have discussed our own policy at length and sometimes heatedly because on more than one occasion it has cost us valuable cash flow. Once an order arrives, several possible scenarios can occur which make the difference between a program that is profitable and one that puts a boutique out of business.
Quick Pick-Up & Purchase
The ideal scenario, a quick pick-up and purchase involves a customer visiting the shop within two weeks to purchase whatever they ordered. Not only does this quickly replenish our cash flow, but it also improves overall inventory turnover rate in the shop. Even though we lose a little of the profit margin because of the special order discount, the instant boost to our bottom line, most likely on an item I do not need to repurchase, makes it worthwhile. In this scenario, not only is the special order program profitable, but it also improves sales without adding extra time or labor into the mix. [Read more...]