Adjusting your margins is a great way to boost revenue.Every attraction retailer faces the challenge of figuring out how to boost their revenue, especially in today’s tough economic climate. Long gone are the days of keystone margins — today’s retailers face higher labor, utilities and shipping costs.
Adjusting margins is a simple yet important way destination retailers can boost revenue.
Lean on dataMany buyers struggle with setting the perfect price for their products, and they may be tempted to price based on feelings or be afraid to test a product’s true price.
With pricing, I often encourage attraction retailers to use the scientific method instead of gut feelings. I suggest retailers aim to price any new items with a four-times margin. Test the sell-through rate on products priced at that four-times margin for a 30-day period. At the end of that month, gather data on those new items and review the outcome. Based on the data, make an educated decision about prices on your new products.
"Adjusting margins is a simple yet important way destination retailers can boost revenue."
You can always adjust your prices if the sell-through rate is off. For new products that aren’t moving great, lower the prices or perhaps try motivating guests to buy them with “sale” signs.
On the other hand, if your data indicate that your new items have had good sell-through rates, that’s great news. It’s a job well done and you’ve just made more revenue for your attraction.
Create dealsMany customers are bargain hunters. They are often conditioned to look for “deals,” so create deals when and where you can in your gift shops.
If you want your guests to feel like they are getting a great bargain, even with a four-times markup, try to bundle items. For example, if the wholesale cost of T-shirts is $4 per shirt and you retail them for $18 each, try bundling them in a “2 for $32” deal. This bundle deal helps to turn inventory more quickly and offers customers a perceived discount.
As another example, I tried a retail experiment where I signed an item, “1 for $5, 2 for $10.” Nothing was discounted, but my sales still doubled in 30 days on that item. The “2 for $10” sign gave customers a perception of a “deal.”
Be selectiveDestination retailers can make a four-times margin happen, but it’s important to focus on products with a higher perceived value. Customers will spend more on what they consider to be higher quality items.
An item that won’t sell for a four-times margin might not be a good fit for your store. For attraction retailers to survive today, experiment with margins in order to get the most revenue possible during peak seasons.
Tommy Brown has over 30 years’ experience in retail management. He’s held positions for Dillard’s, Sears, and Six Flags Inc. and is a past ZAG vice president. He currently guides retail at the Saint Louis Zoo. Reach him at tbrown@stlzoo.org. |
