I’m Fine: A Perspective on Volume-based Discounts and the Impact to Small Shops vs. Box Stores vs. Online
By Greg Koch, 605 Running Company Co-Owner/General Manager
I know for a fact I’ve done this millions of times with my wife. Hey, we all got issues we are working on and not talking about things or in some cases talking too much about things, is my thing. Trust me, I am indeed not fine.
The point is that sometimes in life people can tell you one thing, but clearly mean something else. In the running industry this comes into play when I go into brand meetings and discuss our purchasing strategy. Now, on many occasions some of our best brands have looked me right in the eye and said that their selling strategy is not based on volume. This is the equivalent of…
Every single one of our brands operate on volume-based discounting. This common pricing strategy is used in wholesale purchasing.
Typically, we will be offered our best discount for what is known as “future” orders that we schedule sometimes up to 12 months in advance. We will then get a different, less friendly discount for what is known as “fill-in” orders as well as any special orders placed for folks that want a different color or size than what we forecasted. So, depending on when we purchase a shoe, and how many of those shoes we purchase, our overall margin is impacted.
As a small store it can feel like the deck is stacked against us in comparison to larger box stores. These stores have greater purchasing power due to their large size and higher volume of sales.
Even though our products are classified in the run specialty category, meaning you should only be able to find them in a store that specializes in running, our products are found in places like REI, Scheels, Dicks, and other similar box stores disguised as specialty outfitters. That is a controversial statement, but the reality is that while these stores might be a step above JC Penny, Target, Wal-Mart, or Kohls, they are in-fact box stores that cannot compete with the service offered from a true specialty outfitter.
Maybe, it is time to reimagine the wholesale experience. When businesses over-purchase inventory to take advantage of volume-based discounts, it can lead to higher levels of waste and resource consumption, contributing to environmental problems such as greenhouse gas emissions and pollution. When a box store over-purchases inventory and continuously moves it from one store to the next based on sales performance, transportation impacts increase. Direct-to-consumer websites package each individual shoe in an extra box with packaging and spend more money on shipping direct to people’s homes, which is all wasteful.
When it comes to purchasing goods, consumers have a choice between shopping online, at big box stores, or in local businesses. The key advantage of shopping local is the opportunity to support your local community. This doesn’t just create a sense of community pride. This actually supports local economies in a much more significant way than making that purchase anywhere else.
I’ve previously written about the benefits of shopping local so I’ll link that post here to more clearly state this case. I cannot tell you the number of people who have talked to me about all of the great things my business has done for our community, while in the same breath they tell me that they bought shoes online or from a box store. It happens more often than you think, and it hurts every time. This doesn’t deter our work in the community or stop us from providing excellent service. In fact, it makes us better every day. Simply put, the impact of just one shoe purchase has a significantly greater impact on me and the folks working with me than it does at a box store or online.
If brands can recognize this valuable, positive impact and price products accordingly, we’ll all be able to say,
And mean it.
Source: The full version of this blog post can be seen on the 605 Running Co. website.
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