How And Why To Sell Low Profit Margin Products

By Bob Phibbs

selling margin retail profit tips

Many retailers are being forced by their vendors to sell high-priced products at low-margin right now for a variety of reasons.

Store owners must maintain focus on their customers’ experiences, not just the profit margins...

When my parents moved us from Toledo to Los Angeles back in the sixties, one of the non-negotiables was that our new home had to have a pool.

Coming from a suburb with nothing but shade trees, violent thunderstorms and newspapers I delivered in bitter cold, a pool represented everything Toledo wasn’t.

The L.A. image was all about fun times around a cloudless sky. Easy living. The good life.

And I was only eleven.

And while the pool was a beaut, the one thing it didn’t come with was a pool boy.

That fell on me.

Instead of the pool being just for fun, it was work. Every day I had to scoop up dates that fell into the pool from the palm tree overhead. When I missed even one, it stained the plaster. Then every Saturday I spent two or three hours brushing down the plaster surfaces and vacuuming the entire pool.

Didn’t matter if it was cold, hot, or windy. Like a farmer raising cows, work had to be done every day.

The glamour of having a pool quickly faded for me. It represented a chore.

I thought about that when I was interviewed about selling low-margin automatic pool cleaners.

I told them it’s not about the margin, it’s about the customer. And that's whether you sell pool cleaners, computers, cameras, appliances or other high priced/low margin items...

Admit it, the first reason you keep selling your high-margin products is because it is easier and more profitable.

Now think of the guy or gal who dreamed of having a pool. Couldn’t wait to plan parties around it, turn on the lights at night – live the dream. Then reality set in! The parties weren’t planned, the midnight skinny dips were forgotten, and yet she had to come into your store every month to buy chemicals for the buzz-kill chore of owning a pool.

Wouldn’t you want everyone to get that having-to-clean monkey off their back?

Wouldn’t you want to find a way to make their pools enjoyable again?

And if you could do that with an automatic pool cleaner, don’t you think these thrilled customers would tell their friends?

But no, these $300-$1000 automatic pool cleaners often sit in their boxes in the land of misfit toys … on a back shelf. If anybody wants one, they have to ask for it.

And why is this?

Because it’s easier and more profitable to sell your higher-margin brushes, nets and cleaners that your staff is used to clerking. And it takes no work.

It's much easier to sell several nets at $20 than one machine costing up to ten times that much.

The second reason your low-margin products do not sell might be because you have commissioned employees who know your profit margins and sell down accordingly.

Here's how it looks...

I was in a store looking at welding equipment. I asked a guy about a hood. He said, “ You can buy the more expensive one, but our private label one is just as good, and I make a better commission on it.” Wow, while I appreciated his candor about his commission, I knew by looking at the two products, that the more expensive one was better.

He was looking at me with those extra commission dollars in his eyes. He was being a pal, honest, he expected that would translate into an easy sale.

A less informed customer would not have known and would have bought the cheaper one. This same scenario is happening in brick and mortar stores across the nation with all kinds of goods.

And why is this?

A crew member confided from one store , “Why would we want to try to sell the lower margin stuff when we can sell the higher margin, lower price items? We make more money and the customer is happy!”

But are they, really?

I don’t think so. In most cases the customer leaves the store - not with the best, specific solution to their needs... but with a general OK one.They’ll continue to buy the low-priced one but you’ll never deepen your relationship because you have only thought of your profit margins, not your customer.

Many retailers are being forced by the manufacturer to sell high-priced/low-margin products right now.

It is important to remember that you need to maintain focus on your customers’ experiences, not just your profit margins.

You need to treat the low-margin products as stars and display them prominently on your salesfloor. Then you need to train your employees to suggest these products to every customer who would benefit from them.

You need to reward your commissioned sales team not solely on margins but also on average ticket.

Only then will you open the door to higher sales because you’ll be thinking of solutions to the customer’s frustrations. And higher priced items usually can solve those.

From that attitude, you open the door to a world of other choices your store provides.

Why do you want this?

Because you’ll begin to see smiles on the faces of your returning customers instead of frowns. And once they’re smiling, it’s much easier to sell higher-margin add-ons.

After I moved away, my mom got herself an automatic pool cleaner and has enjoyed it’s convenience many times over what it cost her. And the pool store that sold it to her has enjoyed her undying devotion for nearly forty years.

It’s not about margins; it’s about the customer. Always.

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