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One of the never ending battles those opening a dollar store face is reduction in the cost-of-goods-sold (COGS) in their store. When the COGS calculation includes shipping they’ve seen a tremendous increase in COGS over the past two years. While some store owners have chosen to become victims of the increases others have chosen to diligently work to reduce the COGS for dollar store merchandise in their stores. In this article I present 5 tactics to lower cost-of-goods-sold. #1) Focus dollar store merchandise COGS reduction efforts on the highest volume items first. Focus on items with the highest sales volume. The impact of even a penny reduction will be most significant using this strategy. As you gain control over your top sellers work down to the next highest selling products and repeat the process. Over time you will gain significant overall reduction. #2) Batch orders to increase the purchase size. If you are opening a dollar store remember that the bigger the total purchase the greater the leverage you have for price reductions with your suppliers and freight shippers. Hold back orders as long as possible to increase the size. Look for weekly or monthly sales on those items to gain even more benefit. #3) Batch shipments among close distributors. Order dollar store merchandise from all of your suppliers in close proximity to each other at the same time. Many freight haulers and brokers will work to offer lower shipping costs as the number of pallets you want hauled on a single load increases. Many don’t mind travelling a few blocks between suppliers to fill their trailers before leaving on their route. #4) Never stop negotiating for lower prices. Ask for specials. Ask for closeouts. Ask for sales. Ask for price breaks. If you don’t ask you will definitely receive less discount buying opportunities. While a few companies will instantly say ‘no’ over time all will remember you asked – and you keep on asking. Then when opportunities arise you’ll receive a call with an offer – often an offer you cannot believe was possible. #5) When opening a dollar store continually be on the lookout for new dollar store merchandise suppliers. It’s almost a certainty that there is another distributor selling the same or similar products for less. Your challenge is locating those lower-cost suppliers. Your next challenge is to screen them to make sure they qualify as a supplier for your business. You will find good quality products from reliable suppliers at lower cost if you stick to this strategy. To your dollar store success! Find out how you can open your own dollar store business.
Bob Hamilton is an entrepreneur, author, writer, business consultant and trainer.
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