Okay Mr. Retailer, if you are in the fishing tackle and/or sporting goods business your sales, and thus your profits, are directly related to the sales number, and the sales are impacted by unit sales per SKU.
Huh? What’s that mean in real talk? If you sell a specific SKU for $5 each with a cost basis of $3 each versus 3 for $12.88, your sale is $5 in the first instance compared to $12.88 in the second example. Net effect: your sales have increased by $7.88. But your gross profit has increased from $2 to $3.87 per sale.
The typical retailer thinks in terms of item sales, i.e. a single lure, flashlight, pair of socks or a fishing hat. It’s not like that is bad, but there is a better way, namely sell three lures for “X” or six pairs of socks for $9.88 instead of $2.00 each. In concept, the retailer is reducing the unit gross margin percent but increasing the gross margin dollars per sale.
The master of this form of retailing is Wal-Mart or COSTCO. Smaller margins per SKU but greater gross margin dollars per transaction. Remember, you can’t bank gross margin percent, only gross margin dollars.
You can significantly increase your margin dollars per transaction, and, at the same time increase your net profit by adding SKU packaging options for the customers. The most common option is widely seen in grocery, hardware, discount stores and internet web sites. “Buy 1 item for “X” or buy a package of 3 for “Y”, where “Y” represents a noticeable savings for the consumer and a noteworthy increase in gross margin dollars for the retailer.
Other very effective approaches are “Buy any 3 specific SKU’s for “X” and get the 4th item for half price or for free.” Similarly advertise buy $50 worth of any assorted fishing tackle and get a $20 gift certificate for you next purchase. Such offers are very enticing for consumers and enhance both the image and sales of the retailer.
If you are going to pursue this form of pricing and enticement (and you should) work closely with your vendors to select product packaging, pricing strategies and margin objectives. Tackle and sporting goods buyers should develop a trade show strategy while working with their vendors with more guided and margin objectives such that the consumer, the store and the vendors all benefit.
In addition to increasing the unit packaging, the retailer must enhance the salability through effective display and signage in the store. This translates into bulk displays, end cap presentations, dump tables, main aisle displays and other forms of exhibit that sends the message that “this is a super good deal.”
Remember, the customer knows value and is usually well informed regarding the value of items. If you are going to offer multiple items in a value offering, make sure the items in question are solid sellers and that your offer will get attention and result in increased sales.
Such forms of marketing and pricing will grow your sales, gross margin dollars, profits and reputation. But if you are going to give it a try, then do it well and make your deals very consumer attractive. Also do it throughout the store. Make friends, make return customers and make solid proifits!