Is Holding a Sale Really “Selling?”
It is rare retailer who has never put something on sale. Sales are seductive. Hold even a mildly successful sale and your cash register suddenly fills with cash. Selling couldn’t be made easier — could it?
The catch is, the short-term cash flow sales bring often comes at a price. Case in point:
Back in the 1980s, a friend of mine found himself in an unusual position. His new dive store was growing at an incredible rate. Unfortunately, so was his quarterly estimated tax bill. Come October, the IRS wanted more tax dollars from him than he had the cash to pay. What to do?
His solution was to send out a postcard to everyone on his mailing list, announcing a one-day sale in which everything in the store was a minimum of 10 to 20 percent off.
The strategy worked…in the short term. The sale generated enough immediate cash to keep the tax man happy. For several weeks thereafter, however, sales were flat. People who might have normally purchased equipment during that time had made their purchases during the sale — at substantially lower profit margins (or, in many instances, at no profit margin).
At many dive stores, sales have become institutionalized. Customers have come to count on their being annual Spring Sales, Fall Sales, Presidents Day Sales, etc. So what’s wrong with sales?
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