Friday, August 25, 2006

The Power of Retail

One of the concepts that I will be discussing on a regular basis is retail and how important it is to your bottom line. You’ll find it all over our website, www.fitnessconsultinggroup.com, and Pat Rigsby goes in detail on www.personal-training-money-machine.com, but the key to profitable business lifespan is the lifetime value of the client. And you cannot ever achieve that peak lifetime value without a backend retail strategy. And it is definitely strategy. You will never see the maximum LV by accident, I assure you.

First things first, understand that offering retail does not mean having shelves stocked with a ton of inventory that sit idly by while you sell training. You MAY have inventory and a retail sales area, but it’s not absolutely necessary in order to offer retail goods. Retail as we discuss it is making tangible goods available to clients at a profit to you. So you may sell products from a shelf in your facility, you may have an autoship program, you may do all special orders for clients, or you may keep your inventory at your home and deliver upon order. No matter how you choose, there is money to be made. The amount of money depends on how well you control certain variables.

1) Cost of Goods – Cost of goods sold is important for your accounting purposes, to determine your actual net profit from each sale, and how much to expense on taxes. The actual cost of goods is important to monitor because you need to get the best price on each product you can find. The better your price, the more money you can make. Very simple. And don’t be scared to negotiate discounts.
2) Inventory/Turnover – How much inventory you keep on hand, if any, will directly affect your bottom line. High inventory with a fast turnover = $$$$. Any inventory with slow turnover = losing money. If you keep inventory, age it and make sure it moves. If you don’t want the hassle, autoship. Either way can be equally effective, depending on what type of systems you want to monitor.
3) Margins – Most products, when bought at wholesale, have an MSRP. Manufacturer’s Suggested Retail Price. So the margins are predetermined for you. Supplements tend to stay around the 100% markup range. We price ours slightly higher. Hey, it’s only worth our time if we’re making good money. Some products, like HR monitors, pedometers, it’s closer to 45%. T-shirts, if you get a good price, can go to as high as 400%.

Then of course, the #1 variable is:
How well you market your products within your service.
Your best customers are already using your services, they are prime to buy your retail products, if you can intertwine them with their needs. All you have to do is market your selected retail products to your client base! Then watch the snowball effect and see your bottom line climb month after month.

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