For retailers of fast moving consumer goods, innovation is key. Faced with the challenge of disposing old stocks and re-stocking new ones when economic realities are taking their toll on businesses, most of them have resorted to clearance sales, a sure and innovative way of retaining the loyalty of old customers. TONIA ‘DIYAN writes.
Mrs Modupe Shopeju, owner of Delightsome Gift Concept, a store in Gbagada, Lagos, believes that the best option to dispose of old items is to discount them. Such items, according to her, occupy space that have been paid for.
As a store owner, Mrs Shopeju pays rent and other bills, including salaries of workers. Sometimes, she even takes loans from the bank to fund her business. Expectedly, the challenge of meeting expenses and making profit imposes considerable pressure on her, hence, her resort to clearance sale.
In a chat with The Nation Shopping, Mrs Shopeju narrated an ugly experience of how she kept a particular flower vase for four years because she wanted to sell it twice its cost price, a decision that boomeranged, making her incur losses instead of profits.
Her words: “I had a flower vase I bought in 2011 on my shelf. I bought it for N2,000, and wanted to sell at 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. Now, that the economy is bad and my customers complain of lack of money. I am willing to sell it at N2,000.” She added that her decision to eventually sell at the cost price of that item has not made it inferior in anyway.
Chinedu Agwu, a retailer in Balogun Market, Lagos, 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 traveled abroad to buy some of the items and paid huge sum of money to ship them into the country.
Chinedu told The Nation Shopping that because his business is an international, 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, particularly now that the economy is not friendly, 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 money 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. Mrs Shopeju and Chinedu said the determinants of discount in a harsh economy are weak sales and lack of human traffic to their shops, which has made them discount their 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 months, he wouldn’t have sold everything. Sometimes a retailer can introduce discount because he doesn’t have cash at hand but, if he stocks well 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, said they got items at reduced rates, particularly luxury items, which ordinarily they wouldn’t have been able to afford.
Femi Babalola said: “People are ordinarily attracted to cheap items whether the economy is good or bad, 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. Though might not be easy for manufactures and sellers right now.
