In the January issue of RUNTIME, there was a general article about updated considerations of gift shop programs vs mega-shopper sales. In that letter, I promised to offer a perspective on product mixes, pricing and organization. As always, I invite your varying perspectives and will share them (including credit) with your permission.
Here’s a summary of the gift shop chairperson’s perfect shop.
“We need lots and lots of items below $1 so our children can afford to shop. Give us nothing over $5, but no junky carnival-trinkets either. We want high quality end of semester gifts. No Santas (problematic for some religious schools), no mangers, crosses or anything Christ or Christmas (problematic for other religions, atheists and secularists) but we still want to do well in church schools. Red and Green might be a problem because someone might make the connection between those colors and a “religious” holiday. We want unlimited reorders with pre-8am delivery, even if we call you at 4:45pm. Can you do same day? We want no count in/out inventory, but you need to take our word for it if we tell you we’re short – or if we think your final billing is too high. Just because our shop is on the stage doesn’t mean somebody’s stealing our stuff. We want to make a ton of money at this without inflating prices. And, oh yeah, even though we’ve already collected the money, we want to wait to pay until after you count everything back in and send us an invoice with Net 30 terms. We want the early sign bonus, even though we signed up December 10th and we also want the quick pay bonus. You can afford it because it is on your list. We want three free cash registers (may we keep them?) and 1000’s of extra bags in all sizes. We’d like to have enough left over to use for our holiday book fair. You should provide us some “free money” for our underprivileged children to use. Send a complete set of samples for our Open House (you don’t need those back, do you?) and at least one giant stocking full of gifts that we can offer as a drawing prize. It’s okay, isn’t it, if we include last year’s leftovers, along with some home made items several of our parents are donating? We’d like for customers to be able to make checks payable to the name of the gift shop so we can just give them to you to deposit for us so we won’t have to deal with any bad checks ourselves. You do offer a 1-yr warranty on all merchandise, right? And, since we’re willing to do both our gift shop and our fundraiser with you, we’d like an extra 5% on both. We WILL be your exclusive customer in this county! If all this is acceptable, we’d like to go ahead, but don’t want to sign any binding agreements. Okay, that’s about it.”
That makes gift shops sound pretty bad, doesn’t it? Sorry. Actually, that’s a near-perfect example of the kind of prospect you should refer to your fiercest competitor.
About fifteen years ago, I was a distributor with a territory for a national gift shop program for three years. For about four years after that, I was a warehousing gift shop service provider to local schools. With borderline volume not quite justifying the warehouse aspect, I got out of that business. That was a decade ago. Last year, I took the opportunity to hire some reps with gift-shop experience and we jumped back into it. So, from a perspective of a distributor with several years of gift shop business, with about a 10-year lapse, I can offer a somewhat unique combo-perspective of a rookie with experience. With that in mind, here are some things that happened to us during Fall 2004 and as a result….. we’ve
- signed several long distance school customers that wouldn’t have considered us for their local fundraising – but are now.
- signed new total school fundraising business for next Fall based on the gift shop experience from this past Fall.
- re-signed about a third of last Fall’s gift shop business for Fall 2005.
Product mix / results
What I’m going to use is an elementary school of 360 enrollment in a small rural town in Indiana. This was a new project for them – they had never done a gift shop. They did significantly better than expected (note the obscene number of re-orders) and better than average, but they were not our largest sale. We’ll know to send them more start up merchandise next year.
The Basic Merchandise list is our generic shop and contains a variety of items in the $.20 to $4.90 range – with a retail of about $4000.
|Items||Retail||Avg Items||Avg ITEM
The following are based on an industry conservative markup of 3.2x.
Retail of 5043.30 less approx product cost of $1567 leaves gross profit at $3467. Deduct 20% commission ($1008.66) for an adjusted profit of $2467 after I pay my rep. Of course, there is still freight in/out/in, boxes, tablecloths, bags, envelopes and other supplies and excess inventory, which I can use for next year’s new groups. What I don’t have is BROCHURE EXPENSE!
Here’s summer of items and dollars by price level and special list:
|Items decrease and dollars increase per level. Note the dollar values of the Collegiate and the Expensive items. Those two areas accounted for $1166 or 23% of the total sale. The dollar (approx) and under levels accounted for $521.65 or only 10% of the sale.Keep that in mind when groups tell you they don’t want any expensive merchandise.
Also note that some of your leftover fundraising gift items are very appropriate for the Holiday or Expensive categories.
We don’t tell the school what selling price to use. Our product prices are the school prices – and are designed to be just below a very logical small markup for the school, with the idea that most schools do gift shops as a “service project” rather than a fundraiser. For example: $.20, $.40, $.65, $.90, $1.15, $1.30, etc. Our highest price in the Basic List is $4.90. Service project means lower prices and more pieces of product sold. Part of our “service” to the group, however, is to include a “suggested markup” guide in our handbook. We show “exact” and “rounded” markups for 10%, 20%, 30% and 40%.
The first time we did gift shops we organized product by TYPE, i.e. Toys, Mom/Dad/GM/GP, toys, holiday, etc. But this time we organized everything in the boxes by PRICE – logic being that the group could open Box #1 and start setting out merchandise in order.
To make this work, we had to determine how many price levels we could fit into a box, but then used a 4-digit system. Example 1A02. The #1 indicates Box #1 and that item lists on “Page” 1 on the record-keeping paperwork. The ‘A’ indicates the price level and the ‘02’ is the item number.
We provide our groups with an Inventory Worksheet that shows only items in their shop. Unlike our competitors, our customers never see lists with zero quantities because an item is no longer available. There are Pack Slips for each box, a Price List for the cashier and Product Table Labels. And we have CashBox Cashier software that can replace a cash register at checkout. When a group returns an Inventory Worksheet with quantities filled in, we enter those into WinUltra and then print a computer-calculated summary for their records – and to show any significant discrepancy. Realizing that not everyone who reads this letter does gift shops, I won’t automatically send sample printouts – but as a PRIORITY reader, they are available upon request. Email John@QDPCorp.com.