Today’s consumer loves a good bargain, which is one reason why dollar stores and discount stores have become so popular. These types of businesses present with their own unique challenges in that you aren’t just trying to keep your costs down but you are trying to keep them down so much that you can actually offer products at a discount price.
Even just a couple of cents savings on all the products you stock can lead to thousands upon thousands of dollars in savings annually. Reducing your cost of goods involves looking at the actual price of the item, the freight cost to get the item to your store, damaged items, and missing items. Cost of goods makes up a large part of the operating cost of any discount store.
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If you are opening a discount store, you like entrepreneurs before you, will discover that your business will succeed or fail based on your cost of goods. Just as it makes up the major operating cost of your business it also represents where the most savings can occur. Let’s break down those associated costs.
As the cost of fuel continues to increase it has directly impacted shipping costs. Ways to reduce freight include
- Try to purchase products closer to your location
- The cost of shipping generally goes down as the number of pallets goes up so order more or share a trailer with another business.
Larger quantities almost always reduce the cost per item. It’s common for wholesalers not to remind you of this. It’s also common not to tell you if you are only short a few items to get the next tier of pricing. So keep this in mind when placing your orders.
Don’t ever be afraid to negotiate and renegotiate items prices. The longer you deal with a supplier and the more you order the more negotiating power you should have.
Dollar Cost Average
This technique works especially well in a dollar store but can work with a discount store too depending on the products that are carried. It works by averaging the cost of every item across the entire order. So if your order is made up of high and lower priced items, the price is averaged out across all of them.
When opening up a discount store the cost of goods will be the true indicator of your success or failure. Be diligent and continue to strive to reduce these associated costs.
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