Retailers are optimists by nature. You wouldn’t believe it to talk to them but it’s true. They keep hoping that they will have a run on their slow-moving merchandise. They are not willing to continue to drop their prices, because if they do, their cost of goods sold will go up, and their profits will go down. Their Balance Sheet will take a hit, and when that happens their ability to borrow suffers. Having a Liquidation Sale or Auction at their location is out of the question, because their customers might get the wrong impression. So, month after month they sit on their inventory hoping it will sell. Their inventory turns slow down. Since cash is tied up in slow moving merchandise, they borrow more money to keep the business running. The balance sheet looks great because they have a large inventory asset, but eventually there is no cash to run the business. Why do most businesses fail? They run out of cash.
The liquidation solution? Take your sale on the road: rent a room in a hotel or engage a booth at an out-of-town flea market or sale.
You see, liquidating inventory in your local market uses up your “ready-to-buy” market. It makes no difference whether you hold the sale yourself or consign your inventory to a local auctioneer, the result is the same: you burn through your local customer base. What’s needed for effective liquidation is NEW customers, not your existing customers.
The concept is simply this: go where the new customers are. “Piggy-back” your sale onto events where large numbers of people will already be gathering: Home Shows, Fairs, Resorts, Arts & Crafts Shows, etc. The attendees at these shows have come to shop, and you give them something to buy where they can name their own price. You move your inventory without losing a customer back home.
It Worked For Me, It Can Work for You
I owned two retail stores for fifteen years. I was in love with my inventory. I figured that if I didn’t have an item in stock, I couldn’t sell it. I wasn’t just going to give my inventory away. Then cash started to get tight, and I started to look for liquidation solutions. I consigned a few items to the local auction house, and they sold quickly. The next day I phoned a prospect to follow up on a product inquiry, only to be told that they had purchased a suitable item at the auction house the previous day. My item. The one I consigned to the auction house. The one the customer didn’t want to buy in my store because it “wasn’t exactly what they were looking for”. I had shot myself in the foot by consigning to the local auction house. I got rid of a slow moving item, but I lost my sale. What was the solution? I still needed to move my excess inventory, but I also needed to keep my customers and my profitable sales. That’s when I realized I had to “take my show on the road”.
Here’s How Retailers Benefit From a Remote Sale:
- They increase Inventory Turns
- They increase Profits
- They increase Cash Flow
- They reduce the need for borrowing money
- Their interest expense drops
- They are open to buy new inventory
Setting up a Remote Sale Is Easy. And, if you own the inventory you are selling you won’t need to hire an auctioneer. An auctioneer is need for consigned merchandise only. Shy about bid calling? In most areas you can hire an auctioneer for bid calling at a modest daily rate and save having to pay a commission on every item sold. If you have questions about the process, drop me an email and I’ll be glad to advise you at no charge.
Originally posted 2011-03-18 09:51:00.