In Retail Done Right: Part 1, we covered how to increase your revenue per client in a way that not only benefits your business, but your customers as well.
We covered product research and selection as well as having the right motivations behind your retail operations. Today, we’ll introduce the final pieces of the puzzle: acquiring goods at wholesale rates, understanding product markups, and managing inventory.
Acquiring Wholesale Accounts
After you’ve selected the products you would like to start offering at your gym, the next thing you’ll do is to acquire those products at wholesale cost.The process of setting up a wholesale account will vary depending on whether you are looking to sell apparel, drinks, supplements, or gym equipment like jump ropes. For many products, a great place to start is by visiting the product website. The site may already have a section with information detailing how to setup a wholesale account, but if not, find the contact information and send an email introducing yourself and your business. From there, ask if they can provide you with more information about how you can become a reseller of their product.
When to comes to drinks, Kill Cliff, FitAid or Coca Cola products (water) may even be willing to include a fridge that you keep at your facility as long as you fulfill minimum order requirements. In the world of supplements, some speciality supplements may require a visit to their website to setup a wholesale account, but other more mainstream items are probably available through a supplement distributor such as Europa Sports. Companies like these assign you an account representative to help you place orders, recommend products that work well in other facilities like yours, and usually offer “just in time” delivery which means there is only a 2 day lapse between when you place your order and you can put it on your shelf for sale. Finally, most gyms develop a relationship with a local press company when it comes to selling shirts or other apparel within their box. And to let you in on a little secret, we are getting ready to launch a new website to produce your box’s apparel, stickers, and more through our own centralized shop.
Understanding Product Markup
So now that you’ve acquired your inventory at wholesale rates, what should you sell those items for? What is a good retail markup? Typically this will depend on the product, but as a general rule of thumb, your markup should never fall below 20%. As you setup your wholesale accounts, most companies will let you know right off the bat, your wholesale cost (cost to you) and the MSRP (Manufacturers Suggested Retail Price) the difference is your profit margin. You can choose to sell at or below the MSRP, but dip too far below and you’ll risk hurting your bottom line. Also, don’t forget to include costs of shipping in your product cost.
For supplements and gym equipment, 20-30% markup is typical to be competitive with local supplement shops. When it comes to apparel and drinks, however, you can usually charge a “keystone” markup rate of 50%. This is the standard markup rate for most retailers whereby the margin on the sale is equal to the cost the retailer paid for the item. The more items you can sell at this rate, the more your investment of purchasing the products will pay off.
Managing Inventory
Finally, a successful retail operation will require accurate inventory management. As you are starting up, most companies that you establish wholesale accounts with will require a minimum purchase to start or maintain your account. This will help with your initial goal of filling up your shelf or shelves, but what about after initial purchase? How do you maintain a profitable amount of inventory?
After your initial setup, you’ll want to keep 3-4 weeks worth of inventory in stock. Use your first several months to set a baseline for how much you to anticipate to sell each month. This should allow you to get your retail orders down to a once a month regular order, allowing you to manage costs as well. Remember, managing inventory is like navigating a fine line though, while you don’t want to run out of any products-causing customers to look elsewhere, you also don’t want to have too much in your back stock as this risks depreciation, expiration or a decline in popularity of your products. Maintaining a healthy amount of inventory makes your products appear popular and will benefit your sales. While spreadsheets may seem like a viable option to help manage this process, gym management software as well as accounting software typically have a function to help you manage inventory more precisely.
At the end of the day, a successful gym operation will have multiple profit centers. Whether those profit centers include weight loss management, personal training, retail, or anything else is up to the creative entrepreneur. At 321GoProject, we offer mentoring for retail programs. Contact us today to find out more!
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Amy Duchene and her husband Marc own CrossFit 915 in El Paso, Texas. They also have their own kid’s fitness company, CuzImABeast, that offers informational articles, WODs, coaching videos, and cartoon learning aids for CrossFit Kids programs. Amy also is one of 321GoProject’s specialty business coaches. Amy helps Affiliates build their kid’s fitness programs.