What’s Wrong With Retailers Part 1

The Issue

This week I plan on covering a common practice in the retail environment. This problem is sometimes called stockpiling or “pulling”. “Pulling” is when a retailer will pull certain items from the store shelves and hold them in the back of the store until the beginning of an ad. This is common with many of the “next” gen video game consoles due to their scarcity but can extend to video game and mp3 player accessories, even an entire store’s selection of computers. When I refer to pulling or stockpiling I am not referring to a retailer holding an item based on a release date, simply holding an item for an advertisement. There are several problems with this practice.

The Logic

The reasoning of retailers behind pulling these items is so that they will have the items in stock come Sunday when the ad begins. The stores also plan on running out of these hot items come Sunday, sometimes even planning on passing out tickets before the store opens for hot ticket game consoles. The stores rationalize the early sell out by believing that customers will still be drawn in by the advertisement. These retailers falsely assume that the consumer will in disappointment purchase another big ticket electronic item.

Examples

As I have previously mentioned the practice of holding stock is common for high demand video games. The Nintendo Wii is commonly held by retailers until they have enough quantity in stock to run an advertisement. One example of Best Buy holding stock is backed up by an insider publication for Best Buy stores, relating to a December 17^th Wii sale. Personally I have been told be retail associates at several stores that an item I wanted was not available until tomorrow because there was a sale on the item. Just this past week some Best Buy stores pulled their entire selection of PCs for several days so they could switch over to selling Windows Vista computers, leaving the store unable to sell PCs to any customer for that period of time.

Why it Fails

When it comes to pulling stock solely for the purpose of having the item “in stock” for a later ad, you are losing sales to your current customers. There is no reason to hold an item in the back of the store when a customer is in your place of business who wants to part with their money for something you have for sale. This is doubly horrible for a retailer because the ad price may be lower, which means the money the retailer receives later that month will actually be less. From the consumer standpoint there is nothing more disappointing than having a retail employee tell you that the hot electronic item you want is “in the back” and that you cannot make the purchase for 2-3 days. This is the point at which retailers lose customers. I know this seems very rudimentary but many stores continue this practice and in the process alienate customers and lose money.

The first rule of retail, Never turn away a customer willing to part with their money.

The second rule of retail, Never turn away a customer willing to part with their money.

Wrap Up

This is the first in a running series of articles which will detail common retailing practices garnered from my past experience in retail, contacts inside the retail industry. and various online sources. The articles will focus on things that retailers do wrong, from industry practices to marketing. If you have any input or suggestions for other articles please leave them in the comments. You can track this series by clicking on the What’s Wrong With Retailers (WWWR) tag below.