London Zu Blog
Behind the scenes chit chat from London Zu.
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To Sale or Not To Sale?
Posted on 12:24pm Wednesday 18th Jan 2012
As Christmas fades into a distant memory and pre Christmas Sale signs are replaced by January Sale signs, one wonders whether these 'Huge Reductions' and '70% off' sale offers can firstly be genuine and secondly be sustainable if they are genuine.
It doesn't take a mathematical genius to work out that if a retailer buys something for £10 and prices the item at a standard retail mark up for £27.50 to reduce it by 70% would mean selling it for £8.25. Allow for VAT and the item is being sold at a significant loss for £7.94. If the same item is reduced by 30%, allowing for VAT the retailer will receive £17.40 which covers the cost of buying the item but is unlikely to help cover any other costs incurred with running a retail business such as utilites, rates, rent and wages. And a 30% discount does not give any retailer a profit. So for the small independent retailer offfering items at a reduced price it should be a considered decision. Independents which follow the big retailers business model may find they go out of business fairly quickly.
Large high street retailers work with a much higher footfall and stock turnover, it's a numbers game, a matter of volume turnover of often cheaply sourced items from the East each generating a small profit. A small independent retailer rarely has the luxury of high footfall and large volume turnover, and may struggle to negotiate lower unit prices on the stock they buy. So the business model simply can't compete with the High Street model. And let's not forget there have been plenty of High Street retailers that have gone to the big retailer in the sky because this model was not sustainable.
In our shops we occasionally run a sale cabinet which offers quality items at a reduced rate. These will be the last one or two of a range which isn't being repeated. We tend to sell collections of designs, and when something is the last of a range it makes sense to sell it at a reduced rate, rather than have a shop full of bits and bobs, which are difficult to merchandise together. But such items only go into the sale cabinet when we are sure that we have sold enough of the range to make the profit we need to sustain the business. It's no use giving our customers a bargain if it means they won't have their local gift and jewellery shop in six months, because it's gone out of business.
So whilst we all love a bargain just take a moment to think about the whole story; is that '70% off' genuine or is it a garment brought in from a warehouse after being stored there since 1995! And so what if your local shops can't offer you huge discounts, their products are probably nicer and better quality, the staff probably offer you a much better service and if you don't support them and shop locally you won't have any local shops left.