One of the biggest mistakes that most retailers make when running a Store Closing Sale. Going Out of Business or Retirement Sale is to take too deep of store closing discount at the start of the sale. They end up losing valuable margin dollars. Many of your better selling items only require a small discount.
When determining your initial store closing discount for the sale you should divide your inventory into three groups. Groups A – B – C.
Group A Items for a Store Closing Discount
These are your best selling items. Items that sell at a good rate and those that you know you will sell. They are the 20% of your items that do 80% of your business. These items should only require a small discount to rapidly increase the rate of sell. In the current economy a discount of 20% is required to even peak customers interest. Do not take further reductions on these items until at least 1/2 way through your sale.
Group B Items for a Store Closing Discount
These are those items that sell at a slow and steady rate. Many times these are your basic items. They are the 75% of your items that account for 15% of your sales. These items should also only require a small store closing discount to increase their rate of sale at the beginning of your sale. The difference here is that an additional discount will need to be taken 1/3 of the way through your sale. That store closing discount should be another 10 – 20 %.
Group C Items for a Store Closing Discount
These are those slow selling, discontinued, out of season or previously reduced items. They usually account for about 5% of your sales. These items require a much deeper discount to increase their rate of sell. If the item has never been reduced before, you should start at a 40% discount and hold it at that price until 1/2 way through your sale. At that point you should begin taking an additional 10% discount each week until you reach 80% off and you hold it at that price until the last week of the sale. Group C items that have been previously reduced should start at 50% off (or their current reduction if greater than 50%) and follow the same schedule of further reduction as the other Group C items.
This approach allows you to have a planned approach to your reductions and prevents you from taking too deep of discounts on A & B items, while making sure you face the challenges of C items.
One of the major benefits in using an experienced store closing retail consultant to plan and implement your sale with you is their knowledge of pricing tactics and their experience of making adjustments at the right time. The right price at the right time means more bucks in your pocket at the end of the sale.