texas bulldog
Member
i've waited a while to respond to this thread, but here goes...
(unfortunately?) i have spent a good portion of my life managing retail. not guns, mind you, but the concepts from one form of retail actually carry pretty nicely to another.
i see several problems with what the store owner did here, some of which have been touched on already:
1. the replacement cost of the bullets is completely irrelevant. yes, many stores will update their prices even on inventory bought at the older price, but it isn't necessary to do so in order to hit your target margin. it may net you some additional margin dollars, and it's certainly operationally more efficient to simply change the price as soon as the cost changes. but as long as he got his applied margin on the original cost of the bullets, he is turning a profit. he can update the price on the replacements he brings in, though i'm not sure it would be wise for him to ever replace them (see #2).
2. every product in your store needs to "pay the rent" for it's shelf space. if the item isn't moving, then it's taking up space on your shelf that could be used by an item that you turn over quickly. the money he spent on the cost of those bullets had been sitting there for god knows how long, like money stuck in a vault that he lost the key to. meanwhile, he could have had an item that people were actually buying in that same space. this would provide a continual stream of income that the bullets simply weren't. we call products like these "dogs", and we do everything we can to get them the hell out of the store, even if it means selling it at cost, or even below cost in some cases. you can stack 'em high and watch 'em fly or you can stock a lot and watch 'em rot. you really want to do the former. otherwise you have a lot of money of money tied up in inventory that you may never get back. i cannot tell you how important this is; i've seen the proper application of just this single concept turn a mediocre store into a top performer.
3. every business owner needs to assess his market and decide how he will compete successfully in it. what is this guy's competitive advantage? he's probably never even thought about it, which is his first problem. so i'll think about it for him...
it is highly unlikely that this guy can have the lowest prices in town. it is also unlikely that he can have the best selection in town. the big box stores and the internet merchants will beat him every time in those areas. what he can do, what is completely within his power, is to have the best service in town and/or the most knowledgeable staff in town. and the best part is, all he has to do to make this happen is to choose his own attitude. i know that may sound a little hokey, but i've seen it work. the store i've helped manage for the last 9 years was downright surly to customers when i got there, and now i can humbly say that we are as good or better than most anywhere in town when it comes to service. now i certainly can't claim responsibility for that change on my own, and it sure didn't happen overnight. but i can tell you that we make a whole hell of a lot more money now than when we gave our customers no good reason to come back. and all it took was the will to make it happen.
guess i need to open a gun store one day...
(unfortunately?) i have spent a good portion of my life managing retail. not guns, mind you, but the concepts from one form of retail actually carry pretty nicely to another.
i see several problems with what the store owner did here, some of which have been touched on already:
1. the replacement cost of the bullets is completely irrelevant. yes, many stores will update their prices even on inventory bought at the older price, but it isn't necessary to do so in order to hit your target margin. it may net you some additional margin dollars, and it's certainly operationally more efficient to simply change the price as soon as the cost changes. but as long as he got his applied margin on the original cost of the bullets, he is turning a profit. he can update the price on the replacements he brings in, though i'm not sure it would be wise for him to ever replace them (see #2).
2. every product in your store needs to "pay the rent" for it's shelf space. if the item isn't moving, then it's taking up space on your shelf that could be used by an item that you turn over quickly. the money he spent on the cost of those bullets had been sitting there for god knows how long, like money stuck in a vault that he lost the key to. meanwhile, he could have had an item that people were actually buying in that same space. this would provide a continual stream of income that the bullets simply weren't. we call products like these "dogs", and we do everything we can to get them the hell out of the store, even if it means selling it at cost, or even below cost in some cases. you can stack 'em high and watch 'em fly or you can stock a lot and watch 'em rot. you really want to do the former. otherwise you have a lot of money of money tied up in inventory that you may never get back. i cannot tell you how important this is; i've seen the proper application of just this single concept turn a mediocre store into a top performer.
3. every business owner needs to assess his market and decide how he will compete successfully in it. what is this guy's competitive advantage? he's probably never even thought about it, which is his first problem. so i'll think about it for him...
it is highly unlikely that this guy can have the lowest prices in town. it is also unlikely that he can have the best selection in town. the big box stores and the internet merchants will beat him every time in those areas. what he can do, what is completely within his power, is to have the best service in town and/or the most knowledgeable staff in town. and the best part is, all he has to do to make this happen is to choose his own attitude. i know that may sound a little hokey, but i've seen it work. the store i've helped manage for the last 9 years was downright surly to customers when i got there, and now i can humbly say that we are as good or better than most anywhere in town when it comes to service. now i certainly can't claim responsibility for that change on my own, and it sure didn't happen overnight. but i can tell you that we make a whole hell of a lot more money now than when we gave our customers no good reason to come back. and all it took was the will to make it happen.
guess i need to open a gun store one day...