More On Exclusivity

We Love Glamour

I used to try to find suppliers that would sell products to me but nobody else in my marketplace.  I wanted my stores to be exclusive.  I still try to do that kind of thing once in awhile.  There is something about that thinking that will not go away.  I guess we have this need to believe that if we are the only ones who carry a particular brand of product in our marketplace we would benefit from having no competition.  I have learned to think differently over the years.

Once I penciled out the real cost versus profitable return patterns of my exclusive rights buying requirements to protect my exclusive brands from drifting into my competitors stores I discovered how low my margin of profit came out.  I was not making a lot of money trying to discount the amount of product I was required to purchase and make sure I did not get stuck with too much brand inventory.  In order to sell the huge amounts I was required to buy to protect the line, I found I was discounting the items more than I should have been doing to protect the health in my profit.  Offering exclusivity on brand name products is a wonderful idea, just not a profitable one.

When I look back in my retail history and honestly evaluate the dollar benefit of the buying requirements to maintain the exclusive relationships I discovered how much revenue I had to forfeit for the benefit of promoting "their" brand even more.  Looking at the idea with a more pragmatic approach helped me to realize how much it truly was not necessary to approach marketing from an exclusivity slant.  I got trapped like many into believing it was the 'right thing to do.'  Since I killed my efforts to work extra hard on exclusivity, my volume and profits have improved.  I now allow my dollars to do the talking, not my heart's desires.  I can also promise every retailer that this will be one of those hard things for them to give up.  My recommendation, give up working over time on it.  You may be "killing down" your profitability and you do not even know it.

I have helped others to make this kind of mental switch in their marketing efforts and they have had a noticeable improvement in their bottom line.  I have seen it work to the favor of the business models that have made this change in their marketing efforts.  They realized how much gross margin they were forfeiting to maintain the volumes required to secure the brand line they were trying so hard to protect.  Many of those same retailers also found bits and pieces of their exclusive brand products scattered about in their marketplace in very creative ways.  One greeting card company described how they provided a 'one-time-only' unique birthday card promotion that was designed for all comers during a specific time period.  That may be the truth but now every single retailer in your area has at least this name brand in their little retail box for the customers to see.  Your unique efforts have now been violated.  You have been buying a ton more inventory than all of your neighboring competitors to maintain the exclusive rights agreement that was not really an exclusive rights agreement.  How cool is that?  Give it up.  Your bottom line will love you for it.     

The only reason I might recommend exclusivity is if you are trying to market part of your 'product mix' as being unique.  Sometimes having a few unique items scattered about can actually work in your favor.  It can give your presentation a fresh look that does not shine the same in your competitors business models.  If you are not truly an exclusive high-class business by design, you have little reason to work over time on finding exclusive rights to support your product mix.  Do not waste a whole bunch of valuable time on the effort.  If a brand line came across your model with an exclusive offer to 'initially get in' make sure you get it spelled out in writing before you commit to some high dollar purchase requirements.  Do not get too excited until you see the language in print.  Even then you are not protected very much.  Be aware that they are aware of your intrigue to 'fall for' the exclusive marketing idea as being a benefit.  It is usually not a great benefit.  We just want to believe it is.  They know that.  It becomes part of their marketing plan to exploit that truth.  Do not fall in love with exclusivity as your key marketing efforts.  If you are my neighboring competitor, I hope you fully misunderstand this truth.  It will help my bottom line more than yours.  I do not consider that kind of thinking a very good strategy to support.  Believe what you want to believe, but I will still outrun you on bank deposits.  Go ahead, make my day...give your competitor this advantage.

Glamour Can Become A Distraction To Profits

Once you make this mental change you will notice how much your sales will improve.  Do not get me wrong, I litter my retail stores with brand name products.  I try to get as many into my mix as much as I can.  I just do not believe

Instead, I recommend that you do more bank deposits.  I actually find them more fun to do.  I still do physical deposits, most of the time.  I like the idea of knowing money is going that way.  I like the physical confirmation of seeing my money heading to the bank.  I also 'work' my bankers to make sure they develop a very strong relationship with who I am and what I do.  I may need them to 'bend hard' for me on a 'border line' money request sometime in the future.  You never know.  If I become a stealth operator, I will be treated like a stealth operator the first time I come knocking for money help.  Do not place yourself in that position by accident.  I like to take the time to get to know my bankers more closely.  I consider it good business.  In fact, I think it is a good idea to get to know your bankers, lawyers and accountants more closely.  Work on it.  You will not be disappointed when the time comes to "need" them.

A long time ago we expanded our retail model.  We opened a new retail store in three different cities in our state.  We expanded those three stores during a three year process.  One of those new retail openings was located in a small coastal town.  When we arrived we were not necessarily welcomed.  The small town already had one furniture store retailer in place.  We became the new guys with the new furniture store.  It was a bumpy beginning.  Local acceptance was difficult to acquire.  We had to work extra hard on public relationships, consumer service and 'belonging' issues that eventually worked us into the local fold.  It was a good experience for us to learn how to do this kind of work.  It helped us in other expansion efforts in the future.  We learned some things.

Once we became established in the coastal area, we began to grow in volume.  We had some very good growth and some very good success down that road.  We also learned something tremendously valuable in that move.  After we became volume competent, the owner of the only other local furniture store came in to have a heart to heart chat with us.  He said he had been meaning to come in to thank us for coming to town.  He said he has struggled all of his life to try and make his little furniture store succeed.  He said financially, it has been an uphill swim for many years.  He said since we arrived, his foot traffic and volume improved almost over night.  He said he has never seen this kind of success opportunity before.  He described how the locals would look at his products when they were in the market to buy furniture, then go to the major city located 60 miles away and make their purchases.  He believed they had nothing local to compare so going to the city was their only choice.  Once in the city, they felt they could not waste the trip so they found something to bring home.  He believed he lost thousands of sales during his years as the exclusive operator in the region. Once a new competitor arrived, the comparison credibility arrived also.  The need to travel to the 'city' was diminished greatly.  As a result, both of our retail models found the benefit of that switch.  He said he was so upset when we first arrived, only to find out later what a great move it allowed him to experience.  He thanked  us and became a close friend to the family.  He has since passed away.  The lesson was huge.

The consumer is looking to validate their good decisions to buy.  They need to compare.  It is basic stuff.  Deny them this right, this process or this need and you may actually be denying yourself some opportunity volume.  Be careful when you fall into the belief that exclusivity is a good thing to market.  In mass terms, you may be dead wrong and never know it.  I have sat on both sides of this fence.  I like the increased deposits better.

Give the customers what they want.  Allow them to compare.  They like doing that.  Get more in line with what they want, not what you believe you want.  And for goodness sake, quit whining when one of your brand line exclusives opens up next door.  Do not forget, that's exactly what they need to do, too.  They need to increase volume.

Until next time...