Smart Dollar Store Sourcing Strategies

Date: June 16, 2015

Smart Dollar Store Sourcing Strategies

Expanding Your Product Types to Boost Sales

Dollar stores (Variety Stores) are snapping up retail space at an amazing rate throughout the world. In the United States alone, some 8,500 new dollar stores have been added since 2001, compared to only 1,024 new Wal-Mart stores in the same period. These dollar-store retailers have identified a successful retail approach, along with effective product-sourcing methods, the combination of which enables them to maintain and heighten profitability even in times when the economy has slumped. So what are the secret sourcing strategies for dollar stores?

Buy in bulk. Because dollar stores offer a wide range of goods at such a low price, it is almost inevitable that the profit margin per item will not be too massive. Buying in bulk, however, allows the retailer to reduce the per-item cost, thereby simultaneously increasing the chances of reaping a more significant profit on its overall sales. Bulk purchasing also has other financial benefits; for example, it can reduce shipping costs and ensure that each delivery is a bulk delivery, thereby potentially saving on the amount of money spent on the total number of deliveries.

However, in the event of any product-related or supply-related defects, inconsistencies or incompatibilities, these would affect a much more sizeable batch in the scenario whereby bulk purchases are made. Nevertheless, one cannot deny that a dollar store retailer’s ability to buy in bulk would ensure an all-encompassing range of products, offering clients everything imaginable under the sun. By consistently maintaining a comprehensive, diversified portfolio, not only can dollar stores count on a certain level of brand loyalty within the market, they also boost their bargaining power. After all, with the Minimum Order Quantity (MOQ) necessarily being bigger, and by operating within an industry which will always require supply-replenishments, they are in a better position to negotiate with suppliers, thereby arguing down the prices and increasing their own profit margins.

One additional, underestimated but rather smart option in bulk sourcing is liquidation sales. Admittedly, such products may vary widely in quality and may lack consistency; nonetheless, liquidation sales offer a great deal of potential when it comes to making savings on a large scale.

Source internationally. International suppliers are frequently able to sell products at significantly reduced costs. Pricing is much lower in China, India, Brazil, and other countries that have an undervalued currency in comparison to the fairly stable U.S. dollar. Retailers willing to source products from abroad can seek out a vast array of international suppliers and increase the odds that they will find a cheaper price.

Buy directly from product manufacturers. Savvy dollar-store owners often aim to negotiate directly with product manufacturers. Evidently, they are aware of the fact that it is more financially advantageous for them to liaise directly with the relevant manufacturers, thereby bypassing wholesale distributors who often charge a fee for their services. Smart retailers buy direct and save those extra pennies, which can lead to substantial savings over time.

Use E-sourcing. E-sourcing can be a cost-saving measure in that it allows buyers to research suppliers, obtain details on products, and solicit bids from various suppliers without ever leaving the office. Even contracts can be completed electronically, saving time and travel costs.

Pay attention to shipping costs and timelines. Once you have found the products you want at a great price, be sure that they can arrive at your store in a timely and affordable manner. Negotiate shipping costs carefully and obtain delivery dates in writing. Sourcing from suppliers within the vicinity can also minimize the overall delivery costs. The disadvantage for retailers choosing to buy in bulk may also lead to less flexibility in the shipping because the orders are in bulk (e.g., inflexibilities with regard to the timing, types of shipping container, etc.), so they need to plan earlier.

Stock up for your customer. If you sell what your customers want, you will be successful. Experts have suggested that store owners and managers who maintain their presence on-site and get to know their customers fare better than their eternally absent counterparts. To be profitable, staff members should go out of their way to talk to customers and see what their needs are. Perhaps partly as a result of the relatively smaller store sizes, dollar-store owners can quickly identify which merchandise needs to be changed and how to rearrange their store layouts, in order to better cater to the needs of their target consumers.

Overall, it is slightly easier for dollar stores to stay in touch with buyers’ needs, without a high level of investment in terms of time, resources and administratively complicated surveys (which larger supermarkets like Walmart would have to resort to in order to obtain the same amount of information). Dollar stores can tweak their inventory levels; move things around to group items in a more sensible manner; efficiently process customers’ special-item requests; and promptly identify shelves that need re-stocking.

The rate at which dollar stores have been blossoming seems to indicate that they are a profitable business to own, brandishing a robust business model and a fairly stable foothold in today’s economy. By applying smart business practices along with smart sourcing strategies, dollar-store enterprises will be able to stretch that dollar even further.

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