For retailers of fast moving consumer goods, innovation is key. Faced with the challenge of disposing old stocks and re-stocking with new ones, most of them resort to clearance sales, one of the sure and innovative ways of retaining the loyalty of old customers and attracting new ones. For instance, Mrs Modupe Shopeju, owner of Delightsome Gift Concept, a gift store in Gbagada, Lagos, believes that the best option to dispose old items is to place them on discounts. Such items, according to her, occupy spaces that have been paid for.
As store owner, Mrs Shopeju pays rent and other bills, including salaries of members of staff. Sometimes, she even borrows money from the bank to fund her business. Expectedly, the challenge of meeting these expenses in due course and making profit at the same time imposes considerable pressure on her hence, the resort to clearance sale. In a chat with The Nation Shopping, Shopeju recalled an ugly experience of how she kept a particular flower vase for four years because she wanted to sell it two times its cost price, a decision that boomeranged, making her lose instead of make profit.
Hear her: “I had a flower vase I bought in 2011 on my shelf, which I bought for N2, 000, and wanted to sell for N4, 000. I regret delaying selling that vase when I was supposed to sell it. I have come to realise that my money has been tied down since then, and that the space the item occupied for years would have been useful for other items. I am willing to sell for the cost price of N2, 000.” She added that her decision to eventually sell for the cost price of that item hasn’t made it inferior in anyway.
Chinedu Agwu, a retailer in Balogun Market, Lagos, has also embraced clearance sale. Agwu owns a store where he sells shoes and bags. In his store, a black Gucci handbag has been on the shelf for one year and two months, but he thinks putting it on discount is the only solution to getting a buyer for it. He had travelled abroad to buy some of the items he sells, he pays huge sum of money to ship them into the country, which indicates that there is a huge cost attached to Chinedu’s kind of business.
Chinedu told The Nation Shopping that because his business is an international one, it needs huge capital and as such, he borrows money from the bank and for this reason amongst others, he often places some of his items on discount, which is capable of bringing customers from all around the world. This is because people tend to fancy discounted items more, especially luxury goods, which on a normal day they wouldn’t afford.
“In some cases, people will be waiting for such shop to open because luxury items are on discount. Also, if I want a new deal and a company offers me a new product at a particular discount too, but I do not have the cash to make payment, I can place some of my items on discount, so that the cash I get from it can be used to purchase new items,” he said.
Indeed, experience has shown that as a retailer, if an item is kept longer than necessary in a shop, the capital used to purchase such item will lose its value. The risk of selling it more than its cost price will also arise. Besides, the item would have become older, out of vogue or out of fashion. Shopeju and Chinedu say that determinants of discount placement include weak sales and the quest for foot traffic to a retailer’s shop, which makes such retailer place discount on items.
For slow moving items, the merchants said when a retailer is in business, he knows the turnover of goods he gets; he knows how often he sells his items, and if he hasn’t made sales within two month, he wouldn’t have sold everything. Sometimes a retailer can introduce discount because he doesn’t have cash at hand but, if he stock swell over 50 million worth of goods, he can decide to put some things on discount and end up making close to 10 million to meet his immediate needs.
Speaking on the benefits of placing items on discounts, retailers say that it is certain that the retailer gets back his money on time because what ordinarily he should sell for N2,000, he will sell for 1,000 and make immediate profit even if it’s little, but getting ones money back is sure. The retailer will surely benefit in the form of customers’ loyalty, as customers will want to come back because of what they are getting.
Some shoppers who have benefited from discounts sales say they get items at reduced rates, particularly luxury items which ordinarily they wouldn’t have been able to afford. Kikelome Akande said, “One of the clothing stores at Ikeja City Mall stock lovely United Kingdom (UK) tops for N5, 000, and I have always wanted to buy. I guess I am lucky because it was recently reduced to N1, 500, making it affordable.”
Also, Femi Babalola said: “People are ordinarily attracted to cheap items, even the rich doesn’t want to spend too much when he goes shopping.” What this means, according to analysts, is that all parties stand to benefit from discount sales, including manufacturers, sellers, and buyers, and it should be encouraged.
