How to Increase Profits For Your Hardware Store
Whether in business for a while or just starting up, every entrepreneur’s goal is to maximize their profits. However, securing a healthy profit margin is easier said than done. It takes time and effort to set up business operations so that the running costs are kept as low as possible while the earnings potential is boosted.
If you are running a hardware store, what would the logical steps be to boost that store’s profits?
- Always know the market. Make sure you constantly follow trends and market demand. Buying merchandise that is not in demand will not help you make a profit. What do you often sell out of? What tools can you never seem to sell?
- Adapt to your customers’ needs. Build relationships, establish a connection with your buyers. They tend to feel more attached to a seller if they form a more direct link. This is often the case with contractors working with local hardware stores.
- Optimizing your procurement costs is of huge importance. Keeping an eye on the budget is crucial. If you are buying merchandise at prices just below your resale prices, your business model may not be sustainable.
- Look into liquidation merchandise. This merchandise can be bought at lower prices and can give you a better chance of securing significantly higher profit margins.
- Put effort into your store’s layout and appearance. Make the products you sell appealing to the market, not only through presentation but also through your service.
- Research ways to reduce your costs in addition to lowering procurement costs. For example, you can look for ways to reduce delivery costs, seek further tax exemptions, etc.
Adapt to Market Demands
There are several ways you can increase your profit margin, none of which are a silver bullet. But combining some strategies will help increase your chances of a more significant profit.
You should review your business plan while paying particular attention to your customers’ profile and the market you are operating in. Remember that your existing business plan does not always have to stay the same and should adapt to changing market conditions. You should always test the market, ask your customers what they need, what they are looking for in terms of services and products, and adapt to the market demands.
Your competition may also be a good source of information and inspiration. Are they reaching different markets to you, e.g. through their website? Do they have more impressive window displays or more eye-catching discounts and offers? See how your competitors have set up their businesses, what they are offering, and learn from them.
Optimize Your Costs
This will probably be the most important step. Your purchase costs have to be carefully monitored and constantly compared to the market.
The first thing to do is to go over your supply sources. Having multiple supply sources is better than depending on a single one. But it is also essential to build relationships with your suppliers. The longer you work with a supplier, the higher the chances are that they will respond well when you ask for better rates, discounts, better delivery terms, anything that would reduce your procurement costs. If that still doesn’t work, look elsewhere. There may be other sources that would offer you a better deal.
There may also be another that you may not have considered, and that would complement your typical vendors and wholesale suppliers: liquidation marketplaces. At liquidation marketplaces, you can buy merchandise at prices well below wholesale, allowing you to sell more discounted products, which will bring in more customers.
Why Consider Liquidation Merchandise?
The most important reason is the price. Liquidated merchandise is sold at a much lower price than retail. But to capitalize on this advantage, you have to know a few things about liquidation merchandise. Liquidation companies sell a variety of items from brand new, unopened items to untested customer returns.
One of the most established liquidators in the market is Direct Liquidation. We work with renowned retailers, and when it comes to tools and hardware, you will find merchandise sourced from Lowe’s, Walmart, and other top retailers on offer on our website. How? We are capable of purchasing merchandise liquidated by these retailers in large quantities, breaking it up for resale to you. Due to the nature of the merchandise, its condition, and the amount we purchase, we can provide you with significant cost savings.
What is the nature of the merchandise we sell? These are often customer returns or overstock items that retailers do not put back on the market through their stores again and instead choose to liquidate.
- Customer returns are products bought and returned by customers for a variety of reasons. Looking at Walmart U.S. alone, its second-quarter eCommerce sales grew 97 percent. Why is this important? Well, some 30 percent of all online sales get returned. With the volume of items sold by a company like Walmart, you will notice there is a large amount of stock out there.
- Overstock merchandise is merchandise that is surplus to requirements. Often it is seasonal merchandise that did not sell in time. In other cases, overstock occurs when the management overestimates the market demand and orders too much of a specific product. This results in pallets of a specific product remaining in the warehouse, in brand new condition, never seeing the store shelves.
- Another category of merchandise available is shelf pulls. These are products that have been displayed but were not sold and got replaced with newer models.
So how does that help you? The last two categories are basically brand new products. They will also be sold at a much lower price than you’d have to pay from a wholesale supplier. This is their greatest advantage.
How to Boost Your Profit Margins With Liquidation Merchandise
Now that you’ve decided to look into liquidation products, we will run you through the whole process of finding, selecting, and purchasing your merchandise.
First of all, you have to know how to find the right merchandise. We’ve already advised you to research customer behavior and see what your customers are looking for. Then you should check whether those products are available in our listings and go through the purchase process.
When it comes to listings, always look out for information. Always look out for a manifest. We include these in the majority of our lots, and it includes the number of items, description, UPC#, and the product condition. You will notice that overstock and shelf-pulls are sold at a higher price point than ordinary customer returns. Although they will cost you more to purchase, they are as new and need no additional work before resale.
You will see other categories, like ‘tested, not working’ or ‘untested customer returns.’ These can also be attractive options. These are at the lowest end of the price scale. And this is where your hard work comes in, as well as your willingness to take some risk.
If you are not afraid of getting your hands dirty, these products might be perfect for you. Untested Customer returns can contain new items in the original packaging, but also you may get damaged and used products. The risk is paying for a pallet and not knowing whether any of the products work at all. But, if we focus on tools or power tools, there are ways to extract maximum value out of them. If you can’t fix things yourself, find someone who can. You can often use one item as a parts donor to fix several other units that, on resale, would push you into a profit. There is a strong market for spare parts for tools and appliances, which your store can also cater for.
Getting Maximum Value Out Of Liquidated Merchandise
Focusing only on brand new merchandise is a path many stores will take. Even with brand new merchandise, you have to take steps to get yourself into the best position to make a profit.
Presentation within your store as well as online presentation such as through social media, e.g. Facebook, should not be underrated. Having plenty of photographs of your store as well as your opening times and highlighting your latest special offers are great ways of maximizing the potential of social media.
Focus on your customer relations. A happy customer is a returning customer, and they may bring other customers like fellow contractors or family members to you. An unhelpful attitude will not bring customers back and will give your store a bad name.
Buying from Direct Liquidation
Let’s say you’ve decided to buy merchandise from Direct Liquidation. All you have to do is register for a free account, and you are good to go. Once you find your pallet, or lot, or even a truckload, there are several buying options. You have the option of buying the lot immediately; alternatively, you can choose to go through a bidding process. Whatever option you choose, always keep an eye on your budget.
Once you’ve purchased the merchandise, you need to deal with logistics. You have several options. You can usually pick up your lots free of charge (check the listings for details on pickup). You will also find a shipping calculator on each listing, which will give you an instant quote for us to handle your shipping. Finally, you can organize your third-party shipping. Due to our cooperation with couriers, we can provide you with rates that will help you reduce shipping costs.
Buying liquidated stock to resell opens up another avenue that enables you to sell discounted products, which will bring in more customers for an affordable price.
Jordan currently works as a sales representative for Direct Liquidation, assisting businesses with product sourcing of liquidated merchandise from the largest retailers in the world. Whether you are looking for a pallet or a truckload Jordan is here to help you grow your business.
View Jordan’s Bio on YouTube.