Store Policy Changes Part I: Special Orders

After I posted about the difficulties we were facing as a business, the rallying cry of support from people whose lives were made better by the shop touched me on such a deep, emotional level that I can only describe it as love. Yes, I truly love all of you who so willingly gave your support, who shared the post, who encouraged others to visit us, who sent me personal words of encouragement and solidarity. You made my life better through your actions, and I have spent the better part of the week crying and smiling while reading everyone’s messages. My takeaway was that I not only made the right decision in fighting to keep the shop afloat, but also that I am very fortunate to be part of such a loving, caring community.

Part of the changes I want to institute to make A Sophisticated Pair more solvent involves refining and enforcing policies which are causing us to bleed money, both to help us rebound now and to improve our cash flow in the future. My goal with the shop is and always will be to help people, but at some point, my desire to help others eclipsed my ability to help myself. I put other people’s position above my own and sacrificed my own financial well-being to improve theirs. Even though we are a community-minded business, we are still a business. Making a profit keeps us open but also helps us to grow and expand, giving you, our customers, more options and an improved shopping experience. In keeping with my pattern of transparency, I want to explain why we made these choices, and due to the length, I am breaking it up into two separate posts, one for special orders and one for returns.

I also want to preemptively state I am not directing this post at any one person in particular. If you engaged in a behavior which influenced the policy change, I hold no grudges nor do I have any desire to make you feel responsible. This is completely my fault for being so accommodating and for not enforcing the policies I created in the first place.

The Special Order Policy

What the original policy was: Customers could order whatever they wanted without providing a deposit, and we offered a special order discount on anything purchased. In 2018, we decided to require a 50% deposit to ensure our costs were covered, but I seldom enforced it.

Why it needs to change: People frequently fail to pick up orders in a timely fashion, if at all. Furthermore, with the loyalty program, everyone saves 10% over time, meaning the added discount erodes our profit margin too much.

How this impacts us: In a perfect world, special orders are picked up and purchased within two weeks of arriving in the shop. Not only does this replenish cash flow quickly, but it also increases the overall turnover rate of inventory. Furthermore, since most special orders are styles which the customer has already tried or purchased, the risks are low, and we are able to improve sales without carrying excess inventory.

However, the world is far from perfect. This year, in particular, we’ve faced ongoing problems with people not coming into the store quickly, sometimes wanting us to hold items for weeks or months at a time. Our vendors do not give inventory on consignment, meaning everything must be paid for either at the time of shipment or 30 days afterwards. Consequently, special order items not purchased in advance or within a short time frame can account for a significant portion of our monthly budget—a portion we cannot recoup until we either determine the customers are not interested or that we cannot continue to wait. A long delay in visiting the shop can also lead to size changes, and in some instances, a bra that would have fit when it arrived, is no longer the right size. In those cases, we now have a product without a buyer which has already been tying up cash flow for months.

Sometimes, the bra never gets picked up. Sometimes it’s not a single bra but several. I recently moved heaven and earth to obtain a prime number of bras for a customer in a certain time frame only for her to tell me she ordered them online and no longer wanted them after they already arrived. As unlikely it as it sounds, this was not a worst case scenario because at least she was quick to return my call, and I was able to put the bras on the sales floor immediately. In other cases, we follow up week after week until eventually we have no choice but to put the bra(s) on the sales floor.

Because Math! That’s why! Math was one of my favorite subjects, and I think, especially in business decisions, it can underscore a point better than emotional pleas. Let’s examine an average month. Assume we have five special ordered items which go unclaimed and are listed on the sales floor. Our average retail price for a bra is around $60 with a whole sale cost close to $30.

Suppliers required I pay $150.00 for the customers’ bras, which is now removed from my available cash flow until the bras sell. I also lost my $150.00 in profit on these bras which would go toward expenses like rent and utilities, the paycheck I can draw from the business for the month, and my budget for future expansions. This example is for only five bras per month. If I double the scenario to 10 bras, I now lose $300.00 in cash flow plus the $600 in sales. Over time, if I average five bras a month every month, then after a year I’ve potentially tied up $1,800 in wholesale costs and lost $3,600 in sales. This is especially true for bras which are in sizes or styles we don’t sell frequently because they are the ones that end up on our final sale rack. In those cases, I sometimes am forced to sell them for less than I paid.

But wait, you ask, you’re still selling those bras eventually, right? So is it really a loss? Let’s unpack that for a sec. First, cash flow is often what most businesses live on, so even if a bra sells in October which arrived in January, the cash flow was still impacted by having an unnecessary product hanging around the store. That also assumes the bra sold at full price. Often times, special orders end up on the sale or clearance rack, and in those cases, I am lucky to make back what I paid for the bra. On average, I put about eight bras out on the floor per month, and at $30 a piece, that’s $240 sitting around waiting for a buyer each month. If they don’t sell after a month, I may start marking them down, and the longer they don’t sell, the more they are discounted. After a while, they may even be donated. Meanwhile, each month, more bras are not being picked up. It not a hemorrhage, but it’s still a bleed.

What the new policy is: Customers can order fashion or core items from our existing manufacturers, but we require a non-refundable deposit for 50% of the retail price per item ordered. The deposit is transferable to store credit should the customer no longer want the order or if the item(s) does not fit as expected. We ship for free and accept cash, checks, all major credit cards, and Paypal.

As an addendum to the policy, I may waive the deposit under certain circumstances, such as when I have someone testing a new style for me or if we do not have your size in stock. These will be on a case-by-case basis and at my discretion.

Tomorrow, we’ll talk returns!

Erica

Store Policy Changes Part I: Special Orders
Erica
Erica is a lover all things lingerie and is passionate about helping people find the bra which fits and flatters. Side passions include reading, writing, hiking, dairy-free food, walking her Jack Russell terrorists, and dying her hair everything from black to red.
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11 thoughts on “Store Policy Changes Part I: Special Orders

  • October 13, 2018 at 6:49 pm
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    The details of your special order policy sounds reasonable and fair. I hope you can stick with them, despite your instinct to help your customers. It *is* a business, and more people will be helped if you can stay open and in business.

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    • Erica
      November 1, 2018 at 3:36 pm
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      Thanks, Carol! That’s what I keep telling myself: By helping the business be more profitable, I also help my customers. Repeat as needed until it sticks! 😀

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  • October 13, 2018 at 7:40 pm
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    Erica, I know all about cash flow, I deal with it daily. Your math makes perfect sense.It is a business first bottom line! Wishing you the best

    Fran

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  • October 14, 2018 at 2:44 am
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    You don’t mention your overheads…. many people seem think that the difference between the retail and the wholesale price is profit or at least money that is yours to use, it isn’t…. though of course we don’t need to know the details of your overheads you have bear them in mind on every purchase and sale. I like Bravissimos scheme of a free bra for every 10 bought…. but maybe not practical or appropriate for you. Just giving discounts is tricky….. your special order policy sounds reasonable and should deter timewasters. Best wishes

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    • Erica
      November 1, 2018 at 3:40 pm
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      You are absolutely correct, Janice. There’s a lot which goes into the figure. I had one customer (well, not really a customer because she refused to purchase anything) tell me the prices on our bras were too high and that we were probably buying them for $10 each and marking them up to $60, which is simply not the case. Lingerie is usually only a 50% profit margin, and that has to stretch to cover a lot of overhead. Our loyalty program is kind of similar to Bravissimo although ours is probably every sixth or seventh bra is free. We do $10 credit for every $100 spent before tax so people would theoretically save them up. We still get asked for sales and discounts though, but most people seem pretty satisfied with the loyalty program once they are enrolled.

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  • October 14, 2018 at 8:38 am
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    You have to take care of your business in order to keep it a successful business!! These new policies are fair and will make people more responsible to pick up SOs when they actually have their money tied up as opposed to yours being tied up. As a seamstress doing custom gowns, I have learned that if I don’t require a deposit when purchasing supplies for custom gowns, their minds get changed and they purchase something else leaving me with the cost of fabrics that I don’t/can’t use (think pageant gowns here). You offer such great personal service in your fitting with only the desire to have your customer leave with well fitting bras, and it would be sad to not have this service available to us. Thank you for persevering on!

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    • Erica
      November 1, 2018 at 3:45 pm
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      Lisa, I can only imagine the overhead and headache of doing custom pieces, especially something so specific. When I first opened, I was very naive and had a tendency of bending over backwards for clients. It’s been more about habit-breaking for me than anything else. Everyone has been pretty supportive of the policy decision too, which has made it easier. Ideally, the special orders would be few and far between, but in practice, I like having them as it does open our inventory more. Thanks for the ongoing support of the shop!

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  • Pingback: Store Policy Changes Part II: Returns & Exchanges – Sophisticated Pair

  • October 29, 2018 at 11:22 am
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    As an Entrepreneur, I noticed your New policy states you will transfer the 50% non-refundable deposits to store credits. Could transferring that “non-refundable” deposit to a store credit still cause tie-ups with your cash flow? If you eliminated the transfer of “non-refundable” deposits; you may encourage people to complete their purchase. They win (get an excellent fitting bra) and you win (steady cash flow).

    We sell services instead of products and ran into incomplete sales with 50% non-refundable deposits. Now we require a 50% deposit (Good Faith Payment) for our services; and the balance is due before we render the final product. 95% of our clients complete their purchase rather than lose their deposit; and we get paid. Just a thought.

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    • Erica
      November 1, 2018 at 3:50 pm
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      Valli, you are right that it still can impact cash flow, but in some cases, the purchase isn’t completed because the style didn’t work as expected. I’d hate for people to lose money because of that, but it is something to consider in the future if we aren’t converting the order to a full purchase. Since we started enforcing the policy, most people are pre-paying the full amount rather than just doing the deposit, which is even better. I remember we talked about the clients you had which really stiffed you on the fully payment. With the 50% deposit, the bra itself is at least paid for on our end. I also was pretty forgiving on the time frame I’d wait before putting a bra out on the floor, which I’ve cut down significantly. Small business policies seem to evolve over time as we “live and learn” what is going to work and what isn’t!

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What are your thoughts?