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Retailing Winners: Deep Discounters and Used Re-Sellers January 23, 2009

Posted by David Dirks in Building Foot Traffic, business strategy, Increasing Your Profitability, Recession: How to Beat It!, Retailer Store Strategies, Sales Strategy/Tactics, Sales Tactics.
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David DirksWe should have seen this one coming.  While most of retailing struggles, there are those who are doing just fine, thank you.  I noted a recent cnbc.com report that told the story of Family Dollar Stores with quarterly profits jumping 14% in the 4th quarter of 2008.  Deep discount stores have for a long time been the butt end of business jokes but no more.  If every dog has its day, then this dog is having a good one.  Mind you, stores like Family Dollar and 99cent Power have always done well and only just increase their sales and profit tempo by several fold in tough times like this.

Gamestop is another interesting retailing story.  They sell both gaming hardware and software but with  a twist:  they also re-sell used gaming equipment and gaming software.  Just think of it.  When some people move up to the next system or change systems, they are often stuck with  a substantial inventory of gaming hardware and game cartridges.  However, they realized that there is a very vibrant and growing secondary market for this stuff.  So they buy it outright and re-sell it at good profit.  So far, the kids can’t get enough of this stuff and keep buying and selling.  Gamestop also offers a discount off of new games if you bring one in for trade.  Either way, they make a good profit.

You might be familiar with a franchise called “Play It Again Sports” that buys and then re-sells used sporting good equipment of all kinds.  What an idea!  Take the stuff that we who have kids seem to accumulate in droves, buy it on cheap (we just want to get rid of it not realize an ROI!), and re-sell it to folks who are smarter than we are (because they can buy sports equipment in excellent condition for a fraction of the cost we paid for it).  It’s a great play but especially in times like these where every dollar spent is measured carefully.

What can we learn from these retailers?  Here are a few questions I’d be asking myself:

  • What part of my business could take advantage of this concept of offering deeply discounted or re-selling high quality, slightly used products?  For example, if I owned a retail shop that sold hi-tech equipment (think like a Best Buy but on a smaller scale), I might seriously consider buying slightly used, ‘late-model’, high-quality equipment from folks who are looking to unload it for cash.

I’m not suggesting here that you sell junk.  Leave that to the yard sales to move.  Instead, you are creating another source of incremental sales revenue and profits by way of offering a less expensive alternative to ‘new’.  Don’t worry about selling the new product as there will always be those who will only buy new…however, in these times there are a lot less of them.

  • Don’t get hung up on the concept of selling slightly used products.  Don’t let your pride get in the way of your ability to DRIVE TRAFFIC TO YOUR STORE.  This is about creating another level of differentiation that customers will value.
  • Set up a distinct area of your store or website that offers the re-sale product and promote the heck out of it.  Nine times out of ten if it doesn’t work, it’s because it wasn’t promoted  every way possible.  You can build it but if they don’t know about it, they won’t come.
  • You have to let folks know you are a buyer of product.  You have to market to the people who own the product you want to resell.  If you promote to sell product, you also have to do the same to buy it.
  • Buy low, sell high.  Establish an idea of what the used product goes for on the market given different levels or grades of quality.  Ebay is a great place to start.  Look there to see what used items in that category are going for.
  • Set high quality standards for the used products you buy.  The good news is that you don’t have to buy anything that you deem junk.  Set standards for quality (and safety) that anyone could use to measure whether a used product is worthy of you buying.

This concept of re-selling slightly used product or deeply discounted new product doesn’t fit every business model.  Remember, this is about giving customers and potential customers a reason to come to your store (or retail website).

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