Retailer Tips August 1999

“A penny saved is a penny earned” is a very old and wise saying. When applied to your business, it can not only save you money but increase your profits as well. Getting a handle on how you spend your “to-buy dollars” and mark up your product is very important to the success of your business. With more competition and shrinking profit margins on some products, you need to pay close attention to your bottom line. To start economizing you need to be proactive and make a solid commitment. Make your money work for you, and you’ll soon be reaping the benefits. Here are a few ways to stretch your buying dollars and make the most of them.

One of the easiest ways to save money on goods and maximize your profit is to take advantage of prebooking and/or trade-show discounts. Many companies will offer percentage-based discounts for placing orders in advance of product availability. Prebooking shows your commitment to buy, and allows companies to better forecast their production. As an incentive, they may offer discounts from as little as two percent to as much as fifteen percent off the regular wholesale price. Keep in mind that these discounts are designed to increase your margins and need not be passed on to your customers. Prebook deals expire after a certain date, and reorders for the same product will not carry the same discounts.

Another way to maximize savings is to take advantage of quantity discounts. Warehouse superstores work in this same manner: the more you buy, the better the price. As a skateboard retailer you need to be aware of these discounts. They work best and carry the least risk on staple shop supplies. “Items like griptape, bearings, and hardware are a necessity to run the skate department and never become outdated,” says Shane Driskill, skate buyer for Wave Riding Vehicles in Virginia Beach, Virginia. “By buying in large quantities, we get the best margins on products that we use every day.”

Quantity discounts can work with products other than shop supplies, but the benefits should be considered carefully. If the product becomes outdated and must eventually be discounted, the benefits hardly worth the savings, and they could end up costing you money.

Ask your sales rep about split shipments, and if quantity discounts still apply. If they do, you can take advantage of the discount but take delivery of the product in intervals. You may also be able to pay in installments.

Many retailers live and die by their net terms. Terms offer two major advantages in your quest to save money and maximize your margins. From the start, a net term can save you the C.O.D. fee on the shipment┬┐usually a minimum of five dollars per box. Depending on how many shipments you receive per year, this can add 500 or more dollars per year to your gross profit.

The other advantage that terms offer is the ability to sell the merchandise before you pay for it. If a product has a typical markup of 100 percent, selling just half the merchandise will cover your wholesale cost. “Net terms allow the retailer to float the bill and increases their buying potential,” says Alex Almeida, national sales manager at DuFFS shoes. “The more product they are able to bring in the store gives the brand higher recognition, and hopefully will translate to a higher amount in sales.”

A downside to terms is the possibility of overbuying and failing to sell the product before the terms are due. Pay close attention to when terms are due so you don’t find yourself having to write checks when sales are slow; minimize extra expenses when you have poor cash flow, such as the beginning of the month when rent is due. Protect your terms by always paying on-time and buying only as much as you believe you can sell. When you keep these things in mind, terms can be a great tool to help build your business.

If you are not able to get terms directly from a company, paying with a credit card gives you automatic 30-day terms. The trick to this game, however, is tthat you must pay the balance in full when the statement is due. Any balance will be subject to finance charges, which can run twenty percent or more. Not paying the full balance will completely defeat the purpose of using the card, and will definitely reduce your profit margins.

An added benefit to using a credit card to pay for orders are cash-back bonuses or frequent-flyer miles offered by some companies. Using these cards regularly, you can accumulate money and miles to help pay for airfare and trips to trade shows, where you can take advantage of show discounts.

Consolidating orders through an independent skateboard distributor can also save you overall shipping costs. While you may order directly from companies most of the time, consider using an independent distributor for fill-in orders from multiple brands. This will reduce your total shipments, and allow you to be adequately stocked at all times. “Our variety allows retailers to buy a variety of products and sometimes still take advantage of the quantity discounts they are accustomed to getting by buying direct,” says Reggie Barnes, owner of Eastern Skate Supply.

One more way to watch your bottom line is to know your competitors’ prices, and price your merchandise accordingly. There may be times when your prices are much lower, and you’ll be able to increase your profit margins without the risk of losing any customers. Also be aware of which products have high profit margins and which do not, and be sure to have a good mix of both to insure that your overall margins are where they need to be.

There are many ways to save money and increase your overall profit margins. Often, discounts are available that you simply need to ask for. Communicating your needs to your reps will help them help you; as your business grows and succeeds, so will theirs. “There are many different programs out there,” says Damon Richards, manager at Val Surf in North Hollywood, California. “Working closely with your reps, you will find the ones that work best for you and give you the best return.”

It takes some effort to maximize your profits, but what else could be more important to your business? Pennies, nickels, and dimes add up over the course of a year, so keep a close eye to your bottom line. Even without increased gross sales, you could still see a big increase in your gross profit at year’s end. When that happens, your extra efforts will prove worthwhile┬┐and you may need to find a bigger piggy bank.