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!