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Jul 06
2009
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In my last blog, we have discussed one of the possibilities that might lead your store to promotion trap. In this blog, we will discuss another one.
Let us go back to Jessica’s story. Jessica found out that both of sales and gross margins of her brand A purse increased, but total gross margin for the store slumped. So sales of some other products must have fell. After she carefully read her sales report, she came to interesting results but not out-of her expectation- she lost big sales in other purses…
Looking at the results, it is easy to reason that increasing sales of brand A purses came from sales lost of other purses…
Generally speaking, when you promote an item in your store, it will affect sales of other similar items in your store. Should you stop promotion ever? Definitely not. However, even other items’ sales are affected, as long as total gross margin increase, your promotion is in a good path.
Quick tips to minimize the affect and maximize total gross margin:
Manage promotions in category/sub-category level.
- Promote the whole category/sub-category.
- If you promote certain item(s) within a category/sub-category, read your category/sub-category sales report daily :
How much is the total gross profit of those items?
How about the gross margin of the whole category/sub-category? If it is not good, stop your promotion, find which items’ sales are affected. (next time, you probably should consider to add these items to this promotion group). - If vendor A ask you to promote one item which would affect the sales of products from vendor B, negotiate with A to get more money or talk with B to get big discounts.
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written by Ted Hurlbut, July 04, 2009
This is the reason why many retailers will run their promotions as buy-one, get-one. Not only does it provide some margin protection, but it also generates the add-on sale, and turns over the inventory more quickly.
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