March 15, 2017
From the Counter: Thriving in the Post-Election Retail Year – Part III
50-plus days into the Trump Administration, the shooting sports industry’s political dynamic has clearly changed. Retailers that experienced buying in the past are finding competing in an altered selling environment requires more planning and forward thinking to maintain a consistent bottom line.
This column is the third of the four-part series, “From the Counter,” providing a perspective from firearms dealers offering strategies and adjustments to compete successfully in the new environment.
Scott’s Outdoor Sports, Jay, Florida—Take #2
As I related in the last column, this small-town, North Florida Panhandle retailer is one of the largest independents in the Deep South. The 10,000-square-foot facility stocks a substantial inventory of more than 5,000 firearms, with eight full time employees.
Located less than five miles from the Alabama state line, this retailer services a large rural retail area that includes northern Florida, Alabama, and southern Mississippi.
In my last discussion with store manager Jim Brown, he discussed the trends in MSR sales he’s seeing and an interesting way he’s found to keep those sales lively. Jim had a lot to say on this subject, so here I’ll continue the conversation I had with him and discuss promotional sales and finance strategies that are increasing this retailer’s bottom line.
To Increase Profits, Be Cost Aware
This retailer is on a constant vigil to save money and increase profits whenever the opportunity arises. One of the most controllable factors, according to Jim, and one he makes every effort to take advantage of, is “Net 30” on billing.
“I find it amazing that any retailer would walk away from a discounted early payment. Most of our incoming shipments offer a five percent discount for a net 30-day payment,” said Jim.
A second strategy Brown employs is holding close reins on inventory control while keeping a wary eye on taxes. While it may seem shrewd to hold inventory over a fiscal year date, for most retailers doing so can come at a cost of at least 11 percent.
“Our goal is to move as much of our remaining inventory as possible with our year-end annual sale. First, we calculate the financial cost of keeping the inventory for another year. We look closely at our profit margins and determine how deeply we can discount each item. Then we host a storewide, month-long sale. The sale drives customers into the store and keeps the register active. By combining the net 30 and 11 percent holdover tax on our inventory, we avoid paying a constant, net 16 percent more on every SKU in our store,” Brown said.
The Right Deal Builds Traffic
While it’s tempting to make large, upfront commitments and to stock inventory when trends are jumping, it’s important to think through major expenditures and plan for a sales strategy that creates flexibility. For Brown, competing in the marketplace begins by looking for a sweet, traffic-building SKU.
“All it takes is one … It may be a low-priced revolver or a great price on ammunition. There must be a constant and frequent supply of a SKUs that can be advertised at a deeply discounted special. We love selling price-point handguns; it always creates heavy traffic. And we can almost always beat the local big box store’s prices significantly,” said Brown.
Brown expressed that speed is important in this strategy.
“When we find a great deal, we can have it on the floor within a week. It takes the big box stores at least four to five weeks to respond. By the time they respond to our promotion, our inventory has flooded the local market and we have moved on to something else,” he said.
When it comes to a “deal” Brown recommends you say “no” more frequently to those quick sales that distributors offer you on the phone or by email. This helps you earn a reputation for looking for the excellent deal. Then, when distributors call with the right killer deal, you need to say “yes,” and move and act quickly. This will give your suppliers an idea of what it will take to get you to move their needle. These often-unexpected offers are key to deep monthly discounts—or, ideally, week sales events.
Brown doubles that savvy buying by holding on for the first two and half quarters and saving his sale cash for when the deals are really sweet.
“Our best deals come in the fourth quarter. When manufacturers sense they are overstocked, they are going to dump products at deep discounts. They, too, have an eye on their bottom line,” he explained. “They don’t want to carry expensive inventory into the new year. The trickledown effect goes right to the distributors. It can, in turn, go to the retailer if you have the cash on hand to take advantage.”
Lessons Learned Across the Counter
Brown points out that every time he’s working to save money he’s actually also working to create customer traffic. His deals are their deals. Increased traffic creates sales and, when well managed, naturally creates profit. These are just a few of the lessons learned across the counter. By adopting a nimble stance to identifying and acting on the right product opportunities—and by holding the bottom line—this retailer creates a strong financial balance. In a challenging year, these strategies can make the difference as to whether a retailer stays in business.