Retail Strategy - Markdowns - A Guide For The Boutique Business Owner

Good morning, everybody. Let's talk markdowns. Inevitably, markdowns, something we all deal with in retail. Yeah. So I'll wait for a second for some of you guys to pop on, but one of the big questions we get asked here at the Boutique Hub all the time is markdowns. When do we take markdowns? How often should we be taking them? What discount should we be doing? How long do we let things sit on our sale floor or on our website? So today we want to just talk about some strategies and some tips to help you be more profitable. Because at the end of the day, that's what we're all here in business to do is be profitable. So for those of you don't know me, I'm Sarah Burks. I'm the director of partnerships and education for the Boutique Hub. I've been with the Hub for about two and a half years now, and I owned a store for many years, a very small rural community, and know what it's like to have excess inventory. I know what it's like to have the struggles of maybe over buying for a season or under buying for a season. And yeah. Good morning, guys. Good to see you. Good to see you. So I teach retail bootcamp with Ashley in the Hub. I also teach boutique owner basics and do a number of speaking opportunities and educational seminars and things like that for the Hub. But my big passion, having been a boutique owner for many years, I started back in the early 90s. My big passion is to help you guys understand how to make money in your store and find a way to turn cash faster in your store, turn your inventory faster to make more money. Who doesn't want to make more money? Because I know one of the big things boutique owners tend to do is feel like they need to reinvest every dollar that comes into their business back into their business, and they fail to take a paycheck. They fail to reward themselves for all the work they're doing. And anyway, it ends up for burnout. Right. So I want to talk to you guys today about markdowns. So I've got. I've got four or five tips, and for those that you know me, those four or five tips. Hey, John, those four or five tips are probably going to turn into six, seven, or eight because I'm very passionate about this. I'm very passionate about helping you guys and giving you guys as much information and tips as possible. So that being said, a lot of what we go over here today, I will deep dive further in in our retail bootcamp. Course that Ashley and I are launching right now, we do a 12 week retail bootcamp course that is extremely in depth in all things retail. And so I just want to give you kind of a, I don't know, some fun, easy, quick tips today. And for more information, let us know. And happy to provide some of that information on how to get into retail bootcamp. The course closes on Friday. So anyway, very excited about that, but let's dive into markdowns. So a couple myths about markdowns is I think some people feel like if they have to take a markdown, it's a bad thing. And it's not a bad thing. Markdowns are inevitable in retail. It's gonna happen. So just own it. It's not a big deal. It happens all the time and it happens for a positive reason. Right? There's a lot of things about markdowns. It entices your customers to come in. It creates a little bit more excitement, moves inventory faster. So if you look at it as a negative thing, I'm going to say you've probably waited too long to take the markdowns. So number one tip, markdowns are inevitable. You're going to take them. Knowing that up ahead, be mindful of your pricing. For all of you that are watching this, that are saying to yourselves, I want to be an affordable store. I want to be affordable for people. I want to be the next trendy, affordable online boutique. Well, guys, it costs money to make money. There's a lot of expenses in retail. Golly, you know how many times you open the mail and you're like, crap, more bills. Just keeps money, keeps going out of your business. Well, that's inevitable too, right? It costs money to make money. So be mindful of the pricing strategy you're implementing. Make sure you're setting yourself up to win. Don't show up to the game unprepared. Don't invest in that $20 sweater and mark it up to $29. I see it happen and you and the reason why people are doing it is they tell me, they're like, well, Sarah, I want my, I want to, to sell fast. That's fine. But really, are we in the business on making $9? Because that doesn't pay for anything. You already owe the vendor the 20 bucks, right? Plus the freight to get it there. Plus you're going to unpack it, hang it, steam it, merchandise it, put it on the floor. Basically, it's taking up rent space in your store. Right? You're giving it something whether it's on your website, on your sales floor. Then you have to pay bills out of that. And don't forget I said our main number one goal is to pay yourself because it's super important that you make money. You're not going to go work at the bank down the street or the school system or McDonald's or Walmart and just be like, oh, you know what? That's okay. You can't pay me this month. No big deal. I'll be back tomorrow and I'll be your hardest worker ever. I'll show up early and stay late. Yeah, no problem. I won't take a lunch. That's no problem. Yeah, no, somebody else can get my kids. Oh, I'll hire a babysitter to get my kids so I can stay late. But don't worry, don't pay me. That never happens, you guys. If that happened, you'd be gone and never come back, right? Well, why, why would this business be different? So from the get go, set yourself up to win, right? Make sure you have the margins built in with your investments. So markups are inevitable. They're going to happen. But when you go to market or you go and invest in product that you are going to turn around and sell, be mindful of what you're going to sell it for. I talk a lot about this in retail Bootcamp and I'm big on saying, okay. So I walk into this vendor booth and I like this sweater. This sweater is super cute. I just think it speaks to my. My customer, all this stuff. The first question I ask, and I see Patty Durham in here, watching Patty, I know you know the answer. The first question that I'm going to ask myself is, what is my customer going to pay for that sweater? I'm asking myself, I'm asking my sales staff or whoever might have come with me say, what do you think we can sell this sweater for? Right? If I honestly, in my heart of hearts, feel like that sweater is sixty dollar as a dollar sixty sweater, I'm going to turn that for sixty bucks. And as a matter of fact, I can think of four customers that are going to buy that for 60 bucks. All right? And then I asked the sales staff, I said, okay. The vendor, like, when is that shipping? They say, well, it's shipping tomorrow, but I don't need it tomorrow. Pass, Move on. Don't fall in love with it, right? Because if you don't need it, you don't need it. I'm going to take notes on it. I'm going to reinvest in it later maybe, right? So I know that sweater in my heart of hearts. I believe I'm going to sell it for 60 bucks. I asked the vendor, the vendor says, well, actually if not shipping for 30 days, that is a new arrival for next month coming out next month. I'm like perfect. That fits into my buying plan. Next thing I'm going to do is touch, feel it, make sure it's good quality, right? Then I'm going to ask about the size. Like okay, so that says it's a medium. Is that fitting me or is that fitting my seven year old daughter? Right? What's the medium size run? Right? What are we doing here? Tell me. Be very upfront and honest because if I bring in a medium that's going to fit a size 12 toddler child. Sorry, it doesn't fit in my program. If he says that medium spitting you. And I usually wear 6, 8. All right, I feel good about it so far. This shirt's winning. This sweater is winning, right? Feeling like it's a good investment. All right, so then have whatever other conversation you want. But the very last thing you're going to ask that vendor or you're going to do is you're going to flip that sales ticket around the, the and their price tag, whatever, and you're going to look at it and if it says that sweaters $40 wholesale cost, nope, not a good investment. It's not worth my time. If I see that that sweater is $20 near that $20 range right there, I'm like, bingo, I'm making 40 bucks on this thing. That $40 is gonna pay for a lot of stuff. As I already said. I feel like I have four, four customers that I know we're gonna invest in it, right? I'm pretty sure I have it in my mind. And actually when I would write the purchase order, when I'd write that up, I'd write those four customers names right next to that style number. So, so when I got home or when I was speaking with that person, wherever it was, I'd say, hey, Jennifer, guess what? I saw the most amazing sweater. It's coming in next month and it's got your name on it. Da da da da. It's the best color for you. It's the best fit. All these kind of things. Okay, so that being said, that $40, what is it going to pay for? It's going to cost me 20. I'm going to retail it at 60. So I'm making 40 bucks there. What am I going to pay for with that 40 bucks, the cost of the sweater, my expenses and markdowns. Remember, markdowns are inevitable. So that 40 bucks is going to be able to absorb any markdowns that I have to later take. Maybe I'm wrong. Maybe I've completely missed the boat on this, which happens, right? We're human. Trends change, weather patterns change, culture shifts, whatever it is, bad deliveries, all these kind of things happen that maybe affect why or why it didn't sell. But that 40 bucks is built in, and I feel confident that that's a $60 sweater. So if there is something that happens, it doesn't sell as well, right? Say instead of selling four of those at full price, I sell three. I have built in some profit that can afford some markdowns. All right, Mic drop on that one. Markdowns are inevitable, but you've got to price your inventory to win. Those people that are in this game that may be set up down the street from you that are hanging their hat on the fact that they're the cheapest place in town and they're the most affordable place to shop, and they'll be absolutely everybody, even the flying Jay Chuck stop on a graphic tee. So be it. Let them be that person. They're not going to have the money to turn the lights on. They're not going to have the money to pay the staff, they're not going to have the money to pay the state. And they're going to be. They're going to be here today, gone tomorrow. So don't even worry about that. Be you, be awesome. Be the most amazing customer service store, boutique website you possibly can be. And you're going to do that by having money to pay people, right? Because you as the owner can't be everywhere all the time. So all of that happens with your markup, right? You've got to price your product to make the money to pay for the expenses. We already know. We invested the $20 to the vendor. They want their money now. And as a matter of fact, the way the world is, you probably had to put it on a credit card. So they're getting their money right away, right? You have to pay for all these expenses, guys, your government does not just want you to be in business and let you live without paying taxes. No, they will come knocking, right? It's you have to pay your staff, you have to pay for electricity, you have to pay for the props, you have to pay for heat, you have to pay yourself. You have to pay for all of these things. So if you buy this top at 20 bucks and price it at 29. You guys, you can't pay for any of it. You just can't. So tip number one, markdowns are inevitable. But in order to make those happen, you have got to be conscious of your markup. So tip number two. So he said markups are inevitable or I'm sorry, markdowns are inevitable. And very important to learn from the markdowns you take. If you have to take markdowns, which you will, why are you doing it? What is the chain of events that have happened that has led to that? Right. Hopefully if you implement all of these things that I talked about when you go to market and you purchase or you go online and you're buying, hopefully you're reducing these buying mistakes that you're making. Hopefully you're reducing these errors that you're making in delivery times, errors that you're making in quality, errors that you're making in fit. Hopefully you're reducing that. I'm not saying it's going to go away, but hopefully you're reducing that. Because I know one of the biggest buying mistakes a lot of boutique owners do, as they fall in love with the product too soon, they look at it, they think it's cute, they think, oh my gosh, I saw that someplace else. My customers are going to want it, I'm buying it. They put it in the cart, they say yes to the dress. Next thing you know is it shows up and it fits a junior sized person or it's got some big graphic on the back of it. They did not know. Right. That happens. So hopefully if you're implementing number of those tips, I said earlier, this won't happen as much, but let's be real, you're going to end up with sale merchandise, you're going to end up with stuff that's not moving, no big deal. But just learn from it. Is it the wrong fit? Is it the wrong size? Right. Is it like, did you get it in plus? Should you have gotten it in junior or did you get it in junior or missing? You should have gotten it in Plus? Is the vendor not shipping you when they said they were going to, did you tell them you need it the 1st of February and all of a sudden it showed up the end of March or it showed up in January, but getting it in too early or too late, you know, there's a window of opportunity there. Did you miss it? Right. Was the fabric not right? You know, a lot of people are very texture driven and I am that person. You know, is there A something flawed with the material? Is there something flawed with the fit? Did you have it in really bad place on your website or really bad place on your on your store floor? Did you get complacent and lazy in selling it? How about features and functions and value? You might know it. This is another thing, a little side tip to tip number two. But when you were at market and the brand or the vendor guy told you how awesome this product was and why it was going to fly off your shelves and the features and functions of this and that was great and you got excited and you thought it was the coolest thing ever when you got back and UPS dropped it off at your store. Did you explain that to your staff? Do you. Did they know that there's a hidden wedge in that boot? Do they know that those that the waistline has a tummy control in it? Do they know that this fabric is wicking or breathable or all these kind of things? Do they know that? They probably don't if you didn't tell them. You know why? Because that girl was at school all day studying for finals. She came here, she still got finals on her brain. And she's gonna do her best to sell to your, your customers, but she wasn't living in the world of studying that that item at market. She didn't walk the store floor or the sales floor and at Magic or win and be enticed and excited about all the trends and fashions happening. She's not getting all the publications and reading about forecasting and trends and what the world is doing in fashion. Nor is the stay at home mom that's been changing baby's diapers all week that comes to your store to work for four hours, right? You are the one with the knowledge as the store owner or the manager, I hope you're passing that on to your customer, your staff, so they can pass it on to to your customers. So a lot of times when you have to move markdowns, it's because you haven't stayed excited about the product, your staff hasn't stayed excited about the product or your staff's not really even sure how to communicate products to your customers. I'm going to give you an example of there's these and they're still on the market. I still see them. They're these vests that you can wear multiple different ways, right? You can wear them with. So they're long, they're like almost like a scarf material. You can wear them so they're long. More like a tunic type vest. You can flip them upside down and wear them so they're more of a cropped vest so they have the long tails in the front. Right. You can wear them as a scarf. You could actually take them and loop the excess fabric through the armholes and wear them as a scarf. And you can also wear them as a poncho. Right. So the armhole goes over your neck and then the one side drapes down your arm. Hopefully you guys are getting a visual. Right? So that's like four ways right away that you can wear this. And we would price these at 1995. They would just roll out the store. Well here's the thing. I went to market, saw these things, fell in love with them like oh my gosh, these are going to be awesome. I got a great markup on them. My customers are going to love them. Perfect shawl dolls. Absolutely Patty. You know what I'm saying? Well, error by.