Last week Mom needed a few washers, and of course, the best place to buy a washer is the hardware store. And as we stood there mulling over sizes, I was inspired to write this blog post. You see, washers (and I don’t mean washing machines) are quite inexpensive, often just pennies, and Mom needed only 9. After a few minutes a helpful store employee came over, one of the joys of shopping in a local hardware stores, instead of a “BIG BOX” store, and she spent about 10 minutes helping Mom find the right washer for her project. The washers were 11 cents each, with 9 in all totaling 99 cents. They made NO MONEY on that sale. If the employee who helped is paid just minimum wage, the 10 minutes alone cost the store at least $1.00. And even if the washers had a 200% markup, the cost was still 33 cents. Scroll past the picture and take a look at the numbers, just the straight costs – no overhead or other things we can’t really track:
Let’s take a look at the numbers, just the straight costs – no overhead or other things we can’t really track:
INCOME ——–$0.99
COSTS
Labor ———–$1.00
Inventory ——–$0.33 (aka Cost of Goods Sold)
GROSS PROFIT -$0.34
The store took a loss, to make the sale, so why do it?
Because, it is the nature of business. You sell things that your customers need, you develop relationships with them, and then you are there for them when they need more things. In the context of a hardware store, it’s easier to do. The overhead cost is there whether we come into the store or not. The inventory is already bought, and the staff is already staffed. Our being there does not “disrupt” business, it is the business.
When you open a hardware store you know going in that you have to sell things that make you nearly nothing, but in return, come spring, customers like us will be back to load up the carts with all the things that help our organic garden grow.
How can that work in your business? Can you offer products or services to your customers that don’t disrupt your overhead, and that won’t bankrupt you if you don’t make money on them? Think about the lives and lifecycle of your customer and find away to be in their lives sooner and then you can build longer, lasting relationships, even with washers.