The F.W. Woolworth Company became a retail power during the depression, amassing a fortune in smartly priced products that undercut the market. What started as a small mom and pop suddenly became a mass distribution giant selling everything from cookware to toys and electronics. Opened in 1879 in Utica New York, it was the forerunner to stores like Wal-Mart, Dollar stores and Target. And in 1925 and 1926 Woolworth amassed 253 million USD and 239 million USD, in sales on products of roughly not more than 20 cents each. The store offered buyers more than just products, but creative ways to engage the customer.
These days it seems businesses continue to lose out without being truly savvy about the market. Without understanding how markets actually work, you will think that all you need to succeed is a product that people need. This would be a mistake. It’s often the mistake of thinking in quotidian terms without considering what makes people buy and what doesn’t.
When people have money to buy, they usually buy what they need–but also they buy it more often and in greater quantities. And where there is discretionary income they buy wants. Understand how inflationary policy is controlling demand in your industry. Many markets in developing countries are examples of an undercapitalized markets where despite having what people need and people who need it–businesses still go out of business. Therefore business is not merely about supply. You, as a business-owner or entrepreneur must learn ways of beating the Fed yourself.
Consider that in many developing countries with large populations there should be massive demand for products and service. Yet many small shops and big malls and retail stores struggle. It is because the citizens do not have the ready capital to buy what they need. The money supply is thin. But you need to find a way around this as many central banks are making local economies operate like developing countries.
In certain times and periods there is a need to undercut the market. This is one of those times. Many in developing countries tend to miss this massive opportunity to stay liquid because they don’t offer goods and services at just a few dollars or cents below the competition.
Many people think Wal-Mart and Best Buy became behemoths over night by great products and loyal customers. No! Both Wal-Mart and Best Buy employed a tactic that nabbed cash directly from their competitors. They promised to beat any price by offering the customer a lower cost. In fact, they would even match prices if a client could bring in an ad for a product at a lower price.
The point was they got the sale. They were aggressive in strategies that made them a better choice, even if it was only by a dollar. Because the truth is that the way the human psyche works is that they generally go for the better deal unless brand loyalty is a factor. But if Store A sells the same brand product as store B with the exception if price, guess where the customer will go?
Many stores are charging inflated prices for miniscule gains. Instead of drawing in more customers, they have to break even by increasing the price. It is better to make 10 sales by 10 customers at $4.50 than two sales by two customers at $6. If your store is known for high prices you will have less customers–but if you sell competitively you will have more customers because they can save. They can even buy more products. And if you losr a custimer or they move, you will have other options instead of fretting and lusting over the lost client. Diversify. A customer will likely tell their friends or patronize with friends in tow who will also purchase. You as a retail outlet can build your own brand during these times when people are choosing you over your lazy high-priced competitor.
Consider formulating creative selling strategies that nab you more profit. Many retailers buy wholesale, so you have an option to market cheaply priced bulk goods that people need at highly affordable rates. Stop waiting for the Fed to change interest rates and change your own rates. Sell one item for 45 each and two for $80/85. McDonald’s did not become a household name alone because they sell great hamburgers. But because they knew how to creatively price meals.
Be the retailer/chain that always beats the market. If you sell single-serve packages of cookies for 50 cents and they wholesale in bulk for roughly 25 cents a package, you make a good return. But if the average price is 50 cents on the market you can sell more by undercutting the market by 5-10 cents and still make a profit. In fact, while other retailers sell about 5 packages a day, you’ll probably sell about 20-30. Other retailer’s cookies are collecting dust on the shelf, but you will be busy ordering more inventory to sell.
Sell to earn customers (market-share), create loyalty and revenue. Remember, you want to sell not just to earn money, but to earn customers. Don’t be so focused on price that you overlook the fact that it is people that pay for those prices. And having more people that can pay those prices and who patronize you often is more important than a lone buyer or two who can only buy once. During high inflation or recession you can still come out on top. Setting your price at market rate will only earn you what the market is experiencing: slow sales and stagnation.
Many small sellers/retailers make the mistake of focusing on the sale. Instead of building loyalty, they immediately hike prices on their new customer(s) in the hopes of getting more cash. Avoid the temptation to be desperate about sales. You’re not–nor should you want to get rich off of one or two customer(s). Instead, realize that one customer probably has at least seven other customers behind them. Be consistent with prices and earn their loyalty.
You want to get the word out that you are offering the best deals in town. And while you have a captive audience (during the recession) patronizing for price, you can enhance buyer satusfaction, loyalty, create rewards programs and subscription services.
Don’t let your products, and services collect dust on the shelf. Strategize on how to sell them better. In a market that is not liquid, you need to be creative to get dollars where others sit on their prices and by default sit on their profits.
For creative sales strategies and methods to up the ante on competitors contact me. Advertising now available at the blog! Will match or beat any ad quote from another outlet.