indwe magazine – Jan 2005

Retail 101 and the Profit Motive
Text: Sam Weber
Images: © L'Esprit Photo
The beginning of a calendar year is always a good time to set awful resolutions. You know the ones I mean: this year I will be a happier, healthier, nicer, more fulfilled blah-blah person. ‘This year’ usually means ‘the first of January’. As far as resolutions are concerned, the first of January actually constitutes an entire year all by itself. We wake up determined, if hung-over. By the time winter rolls along – i.e. lunchtime – our resolve is already a little shaky. As the sun sets, we actively yearn for the comfort of our old, wicked ways. By sunrise on January 2nd the New Year is over and we are absolved of all responsibility.
Wishful resolutions aside, we do seem to be almost programmed to spare a thought or two during this time of year for what we want for ourselves. I have spared a thought and concluded for sure that I don’t want a shop. Not on New Year’s Day, not on the 2nd of January, not ever.
The reason for my aversion is that I have finally made peace with my inability to understand what it takes to run a successful shop. I am not stupid. I have been blessed with a fair intelligence and a proven ability to learn. Yet, there are aspects to retail that I just do not get, aspects where my logic is directly opposed to the observable policy of countless successful retailers.
Take stock, for instance. My deluded instinct would be to take a stab at predicting what people might want and then to stock up on those items. Come summer, for instance, I would hazard a wild guess that people might be interested in air conditioners. In my foolishness, I would have a substantial stock of air conditioners standing around in my hypothetical shop. I might even go as far as displaying them in the window. Should a heat wave strike, my hallucination would probably soar in tandem with the mercury and I might very well rush out to order even more air conditioners.
This, I have now learned, would be disastrous. The point of having a shop, I have learned, is to specifically not stock what people want. There is logic behind this, as any right-minded, pony-tailed professor will tell you. Now pay attention and I will explain this simple piece of logic to you too. It goes like this: when demand outstrips supply, prices will go up and profits with it. For a retailer this is a happy event. If, on the other hand, you stock what consumers want and in sufficient quantities, demand will never outstrip supply and you will never make a profit. This is not a happy event. You might even say that stocking what the consumer wants would be tantamount to retail suicide.
Once you understand this principle you will also understand why air conditioners are not to be had for love nor money during the summer months. More over, you will understand why no self-respecting retailer has heaters for sale in winter. This principle is also behind the phenomenon of winter clothes gracing storefront windows in February, traditionally the hottest month of the year. It is indeed the reason why school stationery suppliers are forever running out of textbooks. It is also the reason why supermarket aisles overflow with sachets of 2% Low Fat Milk and the only full cream milk to be had, is still in the cow. It’s all about market forces demand and supply.
Let’s take the stationers, for example. Half a dozen phone calls could yield the exact number of the various textbooks that will be demanded by youthful, if reluctant, consumers at the start of any particular school year. It is thus within the realm of possibility for stationers to order a sufficient supply of all required textbooks. The fact that they never do, yet continue to do business year after year, can be subscribed to only one thing: they don’t want to stock the blighted things. And the reason they don’t want to stock them is that they want to make a profit and if supply so much as met demand, they would be committing (say it with me) retail suicide.
It has been a frustrating and up-hill battle for me to understand this principle. I have had hissy-fits on shopfloors. I have shed tears. But, at age forty-one, I now understand this one guiding principle. Learning the entire retail-thing would require more time and tears than I have left on earth. And that is why I don’t want a shop. Instead, this year I will become a happier, healthier, nicer, more fulfilled, blah-blah person. Happy 2005!
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