10 Nov Insights for Brick & Mortar Retailers
Insights for Brick & Mortar Retailers
Bernard McClay of Rancho Cucamonga, CA
Bernard McClay, a long-time customer of Via Trading, recently gave us some insight into what it’s like to run a brick & mortar discount store with a specific focus on hard goods: tools, home & garden, industrial products, etc. Mr. McClay runs a warehouse outlet in Rancho Cucamonga, and has grown his business considerably over the last few years. “I started selling pallets of merchandise at yard sales and quickly realized there was an opportunity to do something bigger and increase my sales. In less than two years we’ve grown from purchasing single pallets at a time, to buying whole truckloads of tools in one go.” McClay focuses on reselling customer returns, liquidations and some overstock items. “I decided to get into selling hardgoods when i realized the kind of demand there was for these types of items, and that the profit margin potential was there. I surveyed and tested several categories but I found that- especially when you plan to test the items – it’s best to sell things you know something about.” He added that it does take a certain level of skill and service to resell certain types of items and differentiate yourself from the competition.
McClay’s primary business is his warehouse outlet, which supplements with online sales. “I list items on eBay and Craigslist, and I often use other channels to move merchandise like consigning the products to other businesses, selling them at auction, wholesaling them or even bartering them. “We’ve even traded merchandise for food!” he stated. Aside from the aforementioned secondary resale channels that McClay uses to move his merchandise, he has launched three websites that he uses both to drive traffic to his primary business (the warehouse outlet), and where he resells different types of products and services. www.surplusindustrialsupply.com is a retail website for industrial supplies including industrial equipment, power tools, cleaning & janitorial supplies, furniture, hand tools, vehicle maintenance, etc. www.hollywoodbluejeans.com provides an avenue for McClay to liquidate branded clothing at significantly discounted prices. You’ll find great deals on Levis, Dockers, Dickies and other famous denim brands there. ww.bargainoutletstartups.com provided information and seminars on how to sell merchandise using various resale outlets (online, flea markets, etc).
“I take a well-rounded approach to the business. My brick & mortar store allows me to resell the returns and salvage items I buy, while my online sales allow me to make a little more off of higher ticket and newer items. I complement all of this by selling services and knowledge, and teaching people how to make this business work for them. There is a learning curve involved and I’ve been through it, so I teach others how to get there too.” When asked how much of a return on investment he typically expects to make on any given load that he purchases, Mr. McClay replies “Realistically? 20% net. We research every product in the load and try to sell most of the items for 40% to 50% of its retail value. That allows us to remain competitive but does cut into our profits a little bit. The point of this is to offer merchandise for a lot cheaper than what people can get it for in the store, so it makes sense.” Over the years, Mr. McClay has honed in on the types of products that suit his business model and that do well for him. He now typically purchases truckloads at a time, though occasionally he sources individual pallets if he has customers with specific needs he needs to fill. He works with 3 different suppliers, depending on the product they are offering and what he might be looking for at any given time. These days, over 90% of his purchases are made at Via Trading.
“One thing people should look out for in this business is to find reliable suppliers. This is a dog-eat-dog industry and it’s important to look at a supplier’s reputation and the customer support they can offer you. Since it’s not a clean-cut “buy it, it’s brand new, resell it for a great profit” kind of business, customer support is paramount- you need to know that your supplier is there if there’s a problem with your load.” Other aspects Mr. McClay stressed as important things to look for in a supplier were locality (if you can visit the supplier in person and inspect the goods, more power to you), consistency of product (you want to make sure you can build a loyal customer base for a type of product that will be available consistently), and quantity/qualify of supply (that the goods be of good quality and plentiful). “The success of your business largely depends on the product you get – how consistently you get it – what quality of product you get. Don’t be afraid to interview your suppliers and find those that fit your standards.” As an entrepreneur, Mr. McClay recommends to all who are considering entering into business for themselves reselling merchandise to “learn from others and know all your options before you leap.” It’s much harder to get back on your feet after making poor critical decisions, and much easier to plan things out correctly from the start. “Consider attending one of our start-up seminars – they give you a lot of valuable information and help you make some more educated decisions from the get-go.”
INSIGHTS FOR RETAILERS
- BE CREATIVE! Retail doesn’t have to be just in a store, or just at a flea market, or just online. When purchasing liquidated merchandise, you will often find yourself with a wide variety of items within any given lot. Some of the items may be high value or branded, while others may be of lower value or potentially damaged. Maximize your sales by tailoring HOW you resell items according to WHAT you are reselling. If you have a flea market stand, consider selling lower value items there and saving the higher ticket items for online sales. You can start a small e-commerce website or sell those higher value items on eBay or Craigslist. In general, you will be able to get more out of those higher items if you sell them online rather than at a flea market.
- Be realistic in your expectations. Many people who start out in this business expect to at least double their money on every lot they purchase. This is simply unrealistic when dealing with liquidated goods. While it CAN happen, it is also a fact that not every purchase will even be profitable! In the long-run, this can be a very profitable business but set realistic expectations for yourself and plan accordingly when you find yourself unable to source new goods because profit margins are not what you had anticipated. Start small, test the waters and build your way up.
- Be flexible. Not everything will work in every market. Take the time to understand your customer base and cater to their needs. You may be selling a particular type of item that does very well. Keep sourcing that item but consider bringing in complementary items to boost your sales. For example, if you sell a lot of shoes, consider purchasing other accessories like handbags or belts, that customers will pick up at the same time. Conversely, if you are selling items that are not moving as quickly as they should, liquidate them.
- Use slow-moving inventory as freebies or giveaways. If you are stuck with, for example, a few hundred pieces of a t-shirt with a particular design on it that is just not selling well, consider giving away a free t-shirt for every $X amount your customers spend with you. This works no matter what your resale channel is. Retail buyers love freebies so use them to your advantage!
- If you have a physical store or flea market stand (this is easier to do with a physical location than online), stock up on impulse items. Impulse items are goods that are usually found near the checkout counter, that customers pick up without thinking while they are waiting in line. Small items make the best impulse buys– consider cosmetics, DVDs, personal care accessories, hair accessories, electronic accessories or other such items. You can either hang them on a slat wall or dump them in a bin near your checkout counter or section of your store/swap meet stand and let those items raise your average invoice amount!
- Give your customers purchasing incentives in the form of promotions. Excite them with schemes like “Buy 2 and get the 3rd one 1/2 off” or “Buy 2 and get 1 Free!” This is not only a great way to increase your average sale but also a great way to move unwanted or slow-moving inventory and make room for new things.
- Research the items you are selling. You know what you’re paying for the items but you don’t always know what they’re actually WORTH. Instead of just sticking a price tag on them that “sounds” like a price you’d be happy with, take some time to research what the items originally sold for. This will help you price them accordingly and you can also use the original retail price as an incentive to your customer. “Originally $149 – Now only $49!” for instance. Often times retailers just count the number of items they received in a lot, to calculate their desired return on investment without factoring in what the goods are actually WORTH. Chances are you’ll be able to make a higher profit margin by taking the time to research.