Best Practices for End of Year Closeouts
Try as you might, it is impossible to perfectly predict the fickle desires of customers when selecting assortments. Add to that the churning lifecycles of technology like printing or cameras and your job as sales fortune teller becomes more difficult. With the holidays behind us, you may have excess product sitting on your sales floor and tying up inventory dollars. Here are good practices for moving out clearance goods from your store.
Principle #1 – Re-valuing your inventory. This is possibly the most difficult transition to make psychologically as a retailer. You bought a case of goods months ago at $150– let’s say, planning to sell if for $300. Customers have not been interested in the product and today you still have nearly all that product on the sales floor. Remember that inventory is not like fine wine – it does not get better with age. If your customers were not interested in the product in November, it is highly unlikely they will like it any better in February.
At this point you must try to determine what price will move the products off your shelves and into your customers’ baskets. Instead of thinking “I have $300 or $150 worth of product on my shelves” you need to dramatically shift your view. If the customers are not buying the product, you actually have a product worth $0.00 and your goal has to be how far from $0 do you have to price the product to recoup some portion of your initial investment. Actually, one could argue that non-selling merchandise has a negative value since every day your inventory is locked in product that is not selling, you give up future sales potential you could get if you could invest your money (and your shelf space) in more appealing stock. I’ll explore how to revalue that inventory in next week’s post.
Principle #2 – Merchandising: Clearance and closeout merchandise is an ongoing retail dilemma. A best practice by most retailers is to create a permanent clearance or closeout location in the store with clear signs shouting out the value. Examples include using a back facing endcap or stand alone display rack and placing a permanent “Up to 75% off” sign over it. Some retailers keep the bottom right or left corner of the category “home location” available for clearance or closeout product. But gathering all of your clearance product together creates a “treasure hunt” destination for bargain shoppers in your store and generally yields better sales results.
Even if the product is marked for final sale, remember that it is still your job to make the product as appealing as possible. Half opened cartons, dusty or dirty products and broken goods create a negative halo over all of the product marked for final sale. Even an item in pristine condition will look tawdry in such conditions.
Principle #3 – Returns Policy: If your store will not accept clearance or closeout products for future returns it is good practice (and possibly a legal requirement in your jurisdiction) to publish this statement to the customer. Consider at least these three locations:
- At the point of sale fixture
- On receipts and bills of sale
- Online and websites
At the end of the day, your goal is to keep your store inventory fresh and compelling. Once you see slow sales, take proactive steps to address any obvious issues: poor positioning, poor signage, non-competitive pricing. But if the product is simply not of interest to your shoppers, come to terms with your customer’s decision and move quickly to liquidate the product and move on to something more appealing.