Impulse Items

This post originally appeared at Mine Your Own Business on October 23, 2006.
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We all know that grocery stores love to put high-margin impulse items near the cash register.  They know that, while you’re waiting in line, you’ll keep your mind occupied by looking over the merchandise that’s right there in front of you.  Most of us will be tempted by something, if not every time, at least enough times to pay for the shelf space. (Isn’t it ironic that the slower the service is, the longer you have to stand there and, up to a point, the more you’re likely to buy?)

This same psychology is used throughout the store.  The most profitable items are always located at eye-level, with the less profitable ones near the floor.  The higher profit may be in the form of larger margins, or it may be in the form of rebates from the manufacturer for the prime spots.  A successful grocery store will never put staple items like milk and bread in the front of the store.  Intense competition on these items makes them very low-margin.  If you’re going to buy them, you’re going to have to walk past other, more profitable areas of the store, much like the Las Vegas casinos make you walk past the slot machines to get to the cheap buffet.  There are many other ways that grocers, who work on razor-thin profits, use human nature to increase both sales and margins.

How about your store?  Have you studied your customers to see what areas of your store they naturally gravitate to?  If you haven’t, you should.  If you carry something that’s a staple, the equivalent of milk and bread, it should be at the back of the store.  High-margin accessory items should be displayed near the check-out just like the grocer’s candy bars and magazines.  This is also a good place to have an add-on item that the customer may not have considered buying when they came in.  And, in case they don’t have their glasses on, your staff should mention these add-ons to every customer.

I once managed an electronics store.  One year I had an opportunity to buy a pretty nice car ice scraper for 50 cents.  I marked them $1.99, stacked them by the cash registers, and paid my salesmen a quarter for every one that they sold.  We sold hundreds of ice scrapers that winter, at $1.24 profit each.  The customers were happy because they got a nice ice scraper that wouldn’t break off in their hand the first time they used it.  My salesmen were happy because they made an extra quarter, and sometimes more, on just about every sale (this was when a quarter was really worth a quarter) and my boss was happy because I was adding extra margin to almost every sale.

As we approach the busy Christmas season, it’s important that every square inch of your selling space generates the maximum amount of profit.  A little time spent analyzing customer traffic patterns and placing the most profitable items in the spots where they are most likely to sell could pay big dividends.

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