Published in The Economic Times in the HardSell Column on the 14th August 1999
WHEN THE CHIPS ARE DOWN, ADD-ON SALES IS THE ONLY WAY TO SMART COMPUTER RETAILING
In an industry where retailers are continuously under pressure for lower pricing by both the consumer and the competition, the value of an average sale has taken on greater importance in retailing business. It’s not what you sell, but what you sell with ‘ it ‘ that’s more important. Because of this, add-on sales opportunities could make the difference between being profitable and going out of business. The recent years have seen a sharp decline in margins on personal computers. In order to cover his overheads a retailer has to sell solutions and not boxes. Unlike any other product, the personal computer has virtually unlimited add-on sales potential. It’s the perfect product to keep your customers coming back to your store over and over again. In the current market scenario computers carry margins of 5% to 8%, while other computer accessories like printers, modems, scanners, line conditioners could fetch margins as high as 20%, thus making a higher net profit. There are literally tens of thousands of solutions for home, business, and personal use. Some of them are as follows
- Peripherals like printers, modems, TV-Tuner Cards, Scanners, Digital camera’s, multimedia keyboards.(Margins earned 10 to 25 %)
- Software useful to any home user which would include edutainment and game software.(Margins earned 25 to 35 %)
- Accessories like cartridges, floppy boxes, storage boxes, dust covers, mouse pads etc.(Margins earned 50 to 100 %)
- Internet connection.
- Even training and support can be a value-added method of increasing your average transaction.
The problem is most retailers don’t take the time to analyze all of their add-on sales possibilities. And analyzing isn’t enough; they need to be documented and merchandised. All this takes time, commitment, and strategic planning. Add-on sales, by nature, increase the value of a sales transaction, and most have low operating overhead. As a result, add-on sales can play a major role in increasing your sales and profits, thus destroying the disturbing industry trend toward increasing sales and decreasing profits. Many retailers have developed intense training and special incentive programs for their sales staff to ensure a successful closing ratio for add-on sales. Some of the most profitable retailers in the country can trace as much as 90% of their bottom line to add-on sales. One requirement is that the average sale per customer must go up, and this happens as a result of add-on sales. Because today’s retailing world is so much faster, and there are so many more products on the market, the art of add-on sales is just that much more difficult. We find that even the software and hardware manufacturers are bundling, or packaging their products to increase their average transaction to the retailer. This bundling must be easy for the salesperson to sell, and the customer to buy. So, how important are add-on sales to your retail business? The typical retail store takes advantage of only 20% of all the possible add-on sales. When you factor those lost sales into the industry trend of decreasing profits, it’s easy to see just how critical add-on sales can be. The possibilities for creative add-on sales that have true value to the consumer are limitless. They make your store more appealing and interesting to your customers, while making your store stand apart from your competitors selling the same base products. Add-on sales equal add-on profits. That adds up to SMART retailing!