Free delivery
and give-
a-ways like
free pillows and protectors
do more harm than just eroding
margins. It lessens the perceived
value of your
retail brand.
Maybe it’s because we’ve got the winter blues, or maybe it’s because we’ve been shut in our house for a year. Over the last few weeks my everlovin’ bride and I are in a purging mood. For those who have not Marie Kondo’d their condo, that means moving out, throwing out, or donating anything in your home that doesn’t bring you joy or isn’t being used (aka is useless).
We sorted things into three groups—items that are worn out and destined for the trash heap, others that have some cash value if we can sell them, and things that have no value to us, but could be donated to find a good home elsewhere. We learned quickly that for the last category, it’s just too hard to donate things these days. While it’s a noble endeavor to give to the less fortunate, most agencies aren’t taking in used clothing, housewares or furniture.
Explain the value of
each item in your store. Make sure your team knows why delivery
service costs $49-$99
or more.
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We wanted to get the word out about our excess merchandise. You probably do the same thing and call it advertising. Knowing that digital marketing is the way to go, we forwent the traditional process of a newspaper classified ad and handwritten signs on lampposts. Instead, we posted the flotsam and jetsam on Craigslist and our own neighborhood Nextdoor website. I created several postings with photos, descriptions, measurements. Prices and free items were marked as well. This is where it became interesting!
We started with about a half-dozen things priced $10-$100 and a half-dozen FREE items. People who responded to the “for sale” items asked one or two questions, set a time to pick up, showed up on time and paid with cash. I found it strange that most of them did not have the exact amount even though prices were all in multiples of five. They had bigger bills and expected me to make change. The buyer of our vintage Atari deck wanted to pay me electronically but also brought cash.
The people wanting the FREE merchandise were more cavalier about getting their new treasures.
They asked more questions such as if we had a non-smoking house, how many volumes were in our encyclopedia set, and if we could deliver those free goods. Almost all broke their pickup appointments, and others texted us nastygrams when we told them the items had been claimed by someone else (Why didn’t you hold it for us?).
I’m not a sociologist and I don’t play one on TV. But it occurred to me that when you assign a value to something… it becomes valuable! Contrast that with zero cost items and free services that can be perceived as having no worth. They become worthless. People who paid for stuff—new or used—were more respectful of my time and what they were getting. Freebie people couldn’t care less.
It is said that FREE is the most powerful word in advertising. And since the job of advertising is to bring shoppers’ footsteps to your door, and eyeballs to your website, you probably still want to use that word to drive door swings. But the job of the sales team is to convert those shoppers into customers and then raving fans. Giving away free gizmos or services may be a misstep on the ladder of success.
Build value by building packages of services and products that make sense to your shoppers and lessen confusion in the selling process.
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A profitability rule of retail is that when someone gets something for nothing, then someone else gets nothing for something. Whether it’s delivery, removal of customer’s old items, accessories like pillows or protectors, each those has a cost to your business and a value to your shoppers. They only lose their value, to your customer AND your sales team, when you give them FREE!
It’s understood that first time closing of sales is more important today than ever. Please don't misunderstand me, I’m not against using bonus merchandise incentives to gain that sale. Those bonuses can still have value when your sales team properly frame the inducement.
Which phrase do you think has more impact?
- I’ll throw in delivery for free if you buy now.
- I can save you time and money by including our full-service delivery, normally $99, for no extra charge on an order placed today.
High Cost of Discounting
Every time your sales team discounts an item or gives merchandise away for free, they shred your profit margin. Retailers that work on a 50 percent margin (100 percent markup) gain a gross profit of $50 for every $100 they sell at retail. A 10 percent discount comes right off the top and reduces the gross profit from $50 to $40 or a 40 margin. A 20 percent discount takes margin down to 30.
Free merchandise giveaways have a similar effect. Think in terms of 10 to one. It takes about 10 retail dollars to make up the loss of one free merchandise dollar. Tossing in a pillow with a $20 dealer cost means that you’ll have to create another sale for $200 to earn back the lost NET profit dollars.
Free Yourself From FREE!
I’ll never say never, but giving stuff for free is a disservice to your business and merchandise. Everything in your store has a value and giving it for free makes it worthless and reduces the value of your brand.
Build value by building packages of services and products that make sense to your shoppers and lessen confusion in the selling process. Think of McDonald’s Happy Meals and Taco Bell Combos: The toys or the cinnamon crisps aren’t free, they are value-added inclusions.
Explain the value of each item in your store. Make sure your team knows why delivery service costs $49-$99 or more. Know the value of each accessory item and quote the full price first.
There’s never a real need to give sumthin’ for nuthin’…but if you know someone who needs 83 VHS tapes, a maroon leisure suit, or a Veg-O-Matic, I might be able to help.
