Ready? It’s the markdown season again!
September 16, 2011
Filed under Aftermarket
For many of powersports retailers, now is the time to start marking down unsold spring/summer 2011 apparel and accessory products. No retail business can afford to hold on to its “dogs” (basically, any unsold seasonal merchandise). I know dealers really hate giving away margin or marking down products in any form. I have known many dealers to have more than three-year-old merchandise on their showroom floors at full retail. Here’s why this is a BAD idea:
- Cash flow. When going into a slower season, its best to get as much cash out of the outgoing seasonal products. It makes no difference if you own the inventory or you have great term. If the product seasonal window closes, it gets less valuable to the consumer. GET YOUR MONEY OUT OF IT! Build your winter reserves.
- You need to reinvest in products for the next retail season. Every 90 days we have a new season. July/August is for spring/summer season products to get first markdowns; this is also the time you start to restock the store with new fall/winter season products. Don’t keep unsold seasonal products to maintain the margin, as you will lose money ultimately in the big picture.
- Customers no longer care about the past seasons products. Calendars don’t roll backward, and products don’t either. Customers on the grand scale want to see the next thing or the new thing. Yes, there are always bargain hunters, but they want the old stuff at a bargain price not the retail price.
- Products lose that “new freshness.” Some stores have issues with dust; customers handle and try on the product, and in any situation, apparel product is much like when you drive a new car off of the sales lot, it’s not that new anymore. You can’t fool customers into accepting that stale inventory is worth retail pricing or a small markdown. If you have products in store and the condition of the product is shop worn, please be aggressive and mark it down as far as you have to move it. Less is more!
- Stale products take up space and give you no return. If you had a short season or a really slow selling season, you may have more unsold products than usual. In this situation, unsold merchandise is taking up space and not paying you back. There are many reasons why products don’t sell. No matter what, you need to get them out. Don’t wait; waiting costs you lost sales of product that would be more suitable in the same space. One hang bar with a size run of jackets on a wall or a whole four-way rack of garments is still lost sales.
Many dealers avoid taking margin loses. Managers may be compensated by the stores margin, but remember all stores that sell products will have markdowns – it’s a part of the business and one that you should not think you can beat. I have experienced too many powersports retailers that end up looking like a roadside flea market instead of being a customer’s place to find the latest products and outfits riders for safety and comfort.