How can I save … my business?

The resale and consignment business has always been difficult, but the growing competition online is making it even tougher.  In the final analysis, it’s meaning fewer customers and sales.

What’s the answer?  While there is no one answer, one sure answer is to lower your operating costs, become more efficient.  And one sure way to do that is to reduce the amount of time being spent pricing items for resale.  The time spent buying or accepting items on consignment generally accounts for much if not most owner/staff time.

Navigating Google and other online shopping sites, piece by piece, is a voracious time and money eater.  NextGen’s Suggested Pricing and quick online [Checkit] features quickly pay for themselves, grow your profits, and may just save your business.

Automated Price Markdowns—a losing strategy

A common feature of the more established point of sale systems geared for the consignment and resale industry are automatic price markdowns.  Percentage markdowns can be set at pre-determined intervals (e.g. 30, 60, 90 days).   Markdown Tags indicate both the date of the price reduction and the new price. Then, when an item sold, the sales clerk is not required to change the price at the register as any price markdown is recognized when the price tag is scanned.  This means faster sales transactions and improved accuracy.

It also means slower inventory turnover and thus less sales revenue according to NextGen’s limited data to-date and related reports from NextGen clients having moved from automated markdowns to NextGen Pricing,   This has been born out by studies  in the retail sector.

Whether actively promoted or not, if markdowns are near-continuous, regular shoppers become accustomed to the process. This not only increases off-price demand, but also can decrease full-price sales. As some retailers assume ever more aggressive markdown strategies, the net effect is a serious erosion of price and more importantly margin much earlier in the product’s lifecycle. Promotions are one of the reasons commonly given for Kmart’s near demise. It has been estimated that some retailers actually sell less than ten percent of their products at full price – their customers have been trained well. White Paper: Managing Markdowns: Why Prevention Is Better Than The Optimization Cure

Online Price-checking Imperative

NextGen’s value proposition lies typically in the user’s ability to avoid the time and risk involved in setting prices based on retail and resale prices found online.   However, in a few cases online price checking makes sense, and the NextGen System’s [Checkit] function is designed to expedite the process.

  1. Top Brand prices. Designer –brand Children’s and particularly Women’s  apparel, footwear, jewelry and accessories sell for wide-ranging prices, e.g. a child’s fashion boot prices for a Burberry may range from just under $100 to over $600, a women’s handbag from around $200 to more than $2,500.  These ranges are much too large to derive reliable suggested prices.  Using the checkit button to view retail and resale prices for items in the same category, brand and like descriptors(key words ) supports a more well-founded pricing.
  2. The prices for selected equipment and large toys, online and off, can drop sharply for short periods of time—sometimes longer–as retailers use them to drive traffic.  For this reason, even for categories where the system shows suggested prices,  it can be worth a click of the checkit button before committing to a suggested price.
  3. In addition to brand, suggested prices for smaller toys are lumped into categories defined by size, what they are made of(cloth, metal, plastic, …, ), and whether they are electronic. These suggested prices are built for speed.   Using the descriptors(key words) to name or describe a particular toy and the [CheckIt button] permits a more refined pricing referent… time permitting!

Keeping Track of the Risen & Fallen Women’s & Children’s Brands

Several years ago the number of brands appearing in the NextGen Women’s and Children’s Pricing Systems numbered just over 4,000 each.  Today the number is double that.  The growth in number reflects New brands being introduced continually as manufacturer’s, wholesaler’s and retailers create new labels for new products and to keep the identities of existing products fresh.

The growth also reflects obsolete brands–those associated with discontinued products and those replaced with fresh brand names.  NextGen continues to show obsolete brands (connoted with a trailing X) to alert buyers and inform the buying/consigning decision.  As a rule, obsolete brands should not be purchased or consigned for resale as they often mark apparel that is out-of-style or at least out-of-favor among brand-conscious customers.  If the decision is made to purchase an item, the NextGen  Buy/Consign and resale prices suggested in the NextGen Pricing System drop to the lowest level.  Carrying too many obsolete brands can tarnish a Resale store’s reputation.

Off-Brand Pricing

Since NextGen first built its Children’s Pricing System in 2011, the number of children’s off- brands and no-name brands has increased dramatically.  So much so, that NextGen has had to add a “bottom” brand level and corresponding resale pricing specific to this group.

In 2011, we would never have imagined apparel being offered at such unforgivably low prices.   Despite numerous media accounts of overseas factories employing children in 19-to-20-hour shifts, often for seven days a week, for wages as low as 6 ½ cents/hour to manufacture it, this clothing and footwear continues to find its way onto our sales floors in the U.S. and Canada.

Who sets your Prices?

In retail businesses, it’s safe to say that prices are invariably set by owners be they individuals or corporate, or by managers using pricing conventions provided by the ownership.  This only makes sense as pricing is the revenue side of the bottom line.

When NextGen started working with resale stores, we expected to find the same.  Much to our surprise, pricing in a number of children’s and women’s resale establishments is left largely to employees.

Prices set by employees are rarely optimum when compared to prices obtained by stores in comparable markets; they are most always on the low side.  But as damaging as the profit loss commonly associated with employee under-pricing, is the price inconsistency that comes when employees are left to price largely on their own.  The result is a loss of customer trust.  With inconsistent pricing comes customer uncertainty that the tag price reflects value, and the consequent declination to pay the asking price ( i.e., buy) for items with unfamiliar labels.  Translation > lost sales.

Owners need to own their pricing.  While some employees who’ve been pricing welcome a company pricing system and the reduced anxiety that comes with it, others resist giving up this control.  Indeed, NextGen has had a number of owners decide against the pricing system for fear of losing valued employees vested in the existing pricing—their pricing.  Even with employee support, if customers are accustomed to employee under-prices, prices cannot be bumped abruptly.  Prices must be adjusted incrementally in order not to sour longstanding customers.  Fortunately, the mixed price/value association characteristic of most employee pricing practices, can effectively mask modest price changes.

The time is always right to take control of your pricing, … to take control of your business.

It’s never too late to start pricing right, but far better to price right from the start

The NextGen Pricing System suggests the best price for an item, specifically, the price at which an item can be expected to sell within 75 days.  Initially, NextGen obtained these data from a limited number of stores around the country.  But in the 2 yrs since, the data base has grown to include stores in most  states and provinces in North America, most of which had been in operation for years before procuring a Nextgen Pricing System.  The addition of these stores has allowed Nextgen to examine prices, controlling for area income levels and competition.

What have we learned?   Far more stores under-price than over-price

In the vast majority of stores, prices fall short, often far short, of the prices at which the same items are selling in markets with like incomes and competitive situations.

Why do stores tend to under-price?  The fear that higher prices will turn away buyers

Underlying this fear is the assumption that buyer decisions are based on price more than value.  This is to say that buyer decisions are driven more by item-specific price ceilings, i.e., “I would never pay more than ten dollars for a pair of sneakers” than on Value, i.e., I would never pay more than $10 for a pair of Converse” sneakers.”

Is the fear justified?  No

While the ‘price ceiling” mentality may be common among thrift shop customers, our analysis clearly demonstrates that it is the ”Value” mindset that reigns in better consignment and resale shops.  Simply put: Customers pay more for better brands than lesser brands.

Give our customers credit.  They are value conscious and knowledgeable.  Even those who may not have been in times past, are now, thanks to Google and other internet shopping and price-comparison sites—accessible at the press of their smart phone buttons.

What’s to be gained by raising under-prices?  Customers, Sales and Profits.

Right pricing is not what the market will bear, but what the market will embrace, as manifest in timely sales.  Dollar sales will increase.  Margins—bottom-line profits—will likewise increase.  Item sales may not, but should not decline.

Raising the price of under-priced items allows a corresponding increase in the amounts paid for these items.  To get better brands , we must pay for them.  The more we pay, the more we get.   Right pricing is Fair pricing meaning fair to seller/consignor as well as buyer.  In the end, it’s a win-win-win.  The sellers earns more, we owners earn more, and buyers have access to valued items they would not otherwise see.

The Good news?   While under-prices cannot be abruptly changed for fear of alienating longstanding customers, prices can be nudged up (optimized) gradually and imperceptibly over a number of years.   Clients use the NextGen Pricing system to manage these changes.

They know what they don’t know…and what they do

NextgenResale consults with hundreds and hundreds of aspiring business owners each year.

The words we’ve long used to characterize the mentality of the vast majority of these aspirants is “they don’t know what they don’t know.”

Their level of knowledge is limited, level of naivete, high.   This is understandable.  The knowledge and tools required to be successful in any business today are considerable, and resale is no exception.  It’s what the franchises, increasingly chains, and yours truly, NextGen Resale, advertise—know-how.

We enjoy exploring the resale world with folks, sensing their excitement, exploring the possibilities, and introducing a measure of the real world of resale.   We’ve been in this business long enough–20 plus years each –to predict with a fair degree accuracy who is likely to succeed and who is not.

A telltale sign.  Those likely to succeed “know what they don’t know.”

They have their ideas, like everyone, on what they would like to do with the business, but they’re not locked in.  They look for, and listen carefully to concerns, limitations & problems relating to their ideas, and facts that don’t square with their vision.   We have a lot of respect for owners who’ve been in business for decades.   It means they’ve continued to learn and keep pace in an industry that has changed significantly over the years.  They’ve learned to take advantage of the technology to manage their sales and inventory, to keep themselves visible in their communities and to compete with the growing number of competitors, on-line and off.

It’s the reason—here comes the NextGenPricing System plug—we’ve been so pleased and excited that the Pricing System is proving so popular among savvy, longtime Owners.   They recognize the value of this tool even though they’ve been operating without it for many years.

Price changes in children’s resale occurring at a record rate—Why?

 

 

NextGen currently tracks the pricing on over 4,000 children’s brands in order to keep its suggested resale prices in tune with the children’s retail prices.  This involves the timely identification and valuation of brands—new, old, rising, fading, fallen; and distinguishing the many labels continually introduced to appeal to different markets.  It’s a demanding task in normal times, and especially now as the rate of brand/price change is as high as we’ve seen.

Why?

The significant change we’re seeing in children’s pricing, specifically the growth in the boutique brands at the top, and discount brands at the bottom, reflects the broader shift in income distribution.  To quote Schwartz in his recent New York Times article (2/2/14) entitled The Middle Class Is Steadily Eroding. Just Ask the Business World.

“As politicians and pundits in Washington continue to spar over whether economic inequality is in fact deepening, in corporate America there     really is no debate at all. The post-recession reality is that the customer base for businesses that appeal to the middle class is shrinking as the top tier pulls even further away.

The top 5 percent of earners accounted for almost 40 percent of personal consumption expenditures in 2012, up from 27 percent in 1992. Largely driven by this increase, consumption among the top 20 percent grew to more than 60 percent over the same period.”

John Graubard’s graphic observation in the same article sums it up “In a few years the consumer choice will be Neiman Marcus or WalMart.”  

 

Auto-Pricing: a Resale Point of Sale (POS) System MUST

“A Resale POS system without auto-pricing waddles like a duck on land, with auto-pricing it streams like a duck in water” NextGen Knowledge Base

POS Auto-Pricing is a must-have tool for resale businesses today.  It instantly suggests the resale price based on brand, condition, currency, features, composition, … . It dramatically cuts the time required to price.  It assures that prices are correct and consistent.  It adds considerably to a store’s bottom line.  It frees owners and significant others to tend to sales, customer service and other areas important to the success of the business.

The challenges facing the buyer of resale merchandise, whether buying outright or on consignment, are far greater than those facing buyers of new.  To arrive at an item’s selling price, the resale buyer must assess the currency, quality and condition of hundreds of types of merchandise (apparel, footwear, accessories, toys, equipment, each carrying one of thousands of possible brands / labels– numbers of a magnitude dwarfing those faced by even the largest retail buyers. What’s more the resale buyer must examine these items and determine the selling price one by one, each in a matter of seconds.

Little surprise that owners quickly find themselves and others in their employ spending an inordinate amount of time buying.  It’s the black hole of many if not most resale operations.

It is no surprise that the POS system of virtually every resale franchise or chain has auto-pricing built-in.  What is a surprise is that ResaleWorld’s Liberty 4 is the only POS system today with built-in auto-pricing available to independent Resale owners.

In the Retail industry, the gain in productivity realized with the move from cash registers to POS systems has been significant.  In the Resale industry, the gain in productivity realized with the move to POS systems w/auto-pricing is proving no less significant.