David Geller: Set a Time Limit
Look to a consignment store to learn about moving inventory.
BY DAVID GELLER
Published in the January 2014 issue.
One weekend recently, I was helping a friend get rid of a piece of furniture. He had decided to give it to a consignment store and make a few bucks. They told him what they would ask for the piece and he got half.
Gee, that sounds like memo in a jewelry store and a keystone markup, doesn’t it?
To me, “consignment” means it comes from a private customer and you can’t get another one. Memo means it comes from a vendor and you can order dozens more.
Jewelers believe as long as you get keystone whenever you sell it, you’ll make money. What’s more, they think memo or consignment is free and you make money whenever it sells, even years later.
Both statements are not true. At keystone, one year is the maximum length of time to make money.
Most consignment stores will tell you they’ll give it 120 days, and then it’s outta here!
So, the customer will pay full price for the first 30 days.
31-60 days. It’s discounted 10 percent.
61 to 90 days: It’s discounted 20 percent.
91 days to 120 days. It’s discounted 30 percent. Both the store and consignor seem to make less money.
On the 121st day, it’s out of the store — gone! The contract says that on the 121st day you must come and get your stuff or you lose all rights to it and it will be donated.
So even though it doesn’t cost them to keep it six months or even a year, they start discounting right away.
Or does it cost them?
The store can house only so many items and people come in often to see what’s new. They don’t want to see the same-old, same-old every week. Fresh stock means excited customers/excited sales staff and, therefore, more sales. And much higher than if it just sat there.
Take it from almost all other retailers in America: Give everything a time limit (even more so things you own!) and get rid of it after a certain time to get fresh goods in the store and therefore fresh money.
My suggestions?
Up to nine months of age: Discount a little, not over 15 percent.
Nine months and a day: Start getting nervous that it will be old. Discount it 25 percent. Try not to have it celebrate a birthday with you.
12 to 15 months: Discount 30 to 35 percent, or better yet, have signed agreements with vendors that it can be returned toward new orders.
15-18 months: Discount it up to 50 percent and double the commission to the sales staff.
18 months and over: Melt it, take it apart, and remake it. Don’t have it in the store. Don’t even worry about recouping costs. Get out of it. If it’s over 18 months old, it has an 80 percent chance of still being in your store five years later.
Stores that take this advice have higher sales, lower accounts payable and bigger checking account balances.