My father, like his father before him, was in retail. He worked in a large department store, one that sold everything from greeting cards to housewares to underwear. Through him I got an after-school, then summer job there, really a series of jobs. I generally started late morning in the jewelry repair department, changing watchbands and engraving ID bracelets (remember ID bracelets?). In the afternoon I moved over to the stockroom of the makeup department, moving fragrant boxes of fragrance and powder from the back of the house to the front. Then after a dinner break, I put on a tie and went to the menswear section, there to straighten shelves and work a cash register ringing up sales.
I trot out these bona fides if only to demonstrate that I have at least a cursory knowledge of how a store works. While much of the action has shifted from brick and mortar establishments to virtual ones online, those three phases are still the lifeblood of any selling business. You have to get the products from the factory and put them in front of customers. You have to merchandise them in some way to show what you have, then process the sale. And you have to service the products after the fact, dealing with issues that arise to keep the customer happy. While the details vary widely, whether it’s a pack of socks or a computer, whether you are making the purchase at Target or Amazon, the process is basically the same.
For the seller, the equation is this: the cost of all those steps, plus whatever amount you want to make as profit, is the price you can charge. Optimizing that margin to the point that maximizes sales and still gets you enough dollars in your pocket to make a living and stay in business is the holy grail of retailing. Which begs the question these days: how does anyone make any money selling stuff anymore?
Take an example, one that many of us have had. I needed a pair of basic black casual work pants, so I went to our local Kohl’s big box store. They have five different types, any of which would suffice. For the ones I chose, the aspirational MSRP, or Manufacturer’s Suggested Retail Price, was $49.99. But as always they were having a sale, this time at half- off. On top of that the store had sent me a coupon for an additional 20% savings. And I had $10 in “Kohl’s Cash” from a prior promotion. The final cost to me was $10. It’s hard to imagine that the material alone in the garment doesn’t cost at least that.
Or take the batteries I needed for the older watch I had. While I could have found them at the local CVS or Target, I opted to save the gas and shop from my keyboard. They were available as a pack of two on Amazon for $3.99. As a Prime member (which, yes, I pay a fee for), I was entitled to expedited and free shipping. I punched the order in on a Sunday afternoon; they were delivered to my mailbox Monday morning at 11 a.m. The labor, packaging and gas alone to get them from some warehouse in New Jersey to my house had to total that or more, never mind the cost of the goods themselves. And my cost to get them in time and petrol was effectively nil.
Yes, it goes without saying that often there are corners being cut in the form of exploitation of labor, and factories that run lean by ignoring safety standards, and nonsustainable supply chains. None of that can or should be discounted, and all factor into the discussion. And yes, I understand the concept of loss leaders and promotional items that keep me coming back for more. Even accounting for that, however, it’s hard to understand the economics. I know it’s all about the data they get, and how they can use that to sell me more stuff, but just how far can that go? At this rate, pretty soon the cost to me will be zero. Or maybe I’ll start charging Fruit of the Loom to wear their shorts. Now that’s a business model I like.
Marc Wollin of Bedford shops when he needs to. His column appears regularly in The Record-Review, The Scarsdale Inquirer and online at glancingaskance.blogspot.com, as well as via Facebook, LinkedIn and Twitter.