Operating Costs & Revenues

As one can see from the variety of store styles above, different stores have different missions. If the retailer or salon owner wishes to compete, the owner needs to follow the established rules determined by the type of store he seeks to emulate. Most stores naturally will want to emulate the example of the specialty store, since tanning itself can be seen as a specialty item or service. Three major trends dominate most forms of retailing today and predictions point to these formats continuing into the next decade.

Trend 1: Volume Buying. Most retail operations are anxious to cut out the middleman and deal directly with the factory. The idea is that if the retailer can buy in a big enough volume and obtain the same types of discounts the wholesaler gets, he can pass the extra savings along to the consumer. This buys him consumer loyalty. The trend seems to be working with many stores slashing prices and fancy looks in order to give solid financial discounts to the consumer. The danger is that an operation that buys on volume could be stuck with a lot of a losing product. Buying in volume and assuming many of the functions of a wholesaler can be difficult. Profits are certain to be made, so many specialty shops will enter this field in the next few years.

Trend 2: Minimum Service. Many new stores do not value service as a major factor in selling. They feel that service costs them money in labor and expenses. Nowadays, the consumer is an independent creature who would rather pick an article of clothing for herself. The goal is to provide the consumer with needed services (for example, shoe salesmen are still needed to find the consumer’s proper size), but allow the individual space to make personal decisions. Keep in mind that even if you decide this
principle applies to the retail portion of your business, it’s unlikely that it will be appropriate for the service portion.

Trend 3: Low Prices. Price wars adversely have affected revenues in tanning, especially in recent years, and the same problem makes retailing especially competitive. Low prices draw customers where other techniques fail. Everyone wants a deal so they go where prices are low. One method for counteracting the low price-seekers is to give them items they want desperately, but can’t find anywhere else. This produces a climate where the retailer has some control over demand and thus can charge a higher market price. However, the cost of a product places a definite limit on how far the price can be profitably cut. Keep this in mind if you decide the low-price avenue is the one for your business.

A major problem in retailing is getting the goods efficiently to the consumer. Many stores are fine at getting goods out, but often times, the hottest goods are in the shortest supply. Timely ordering and delivery can help, but an empty shelf that should be filled with a hot item can cost the retailer many valuable sales. The objective of distribution management is to keep the store’s inventory low and the accessibility of goods high.

There is a definite logic to this approach. First, the store pays for inventory which, in turn, must be moved, rotated, marketed and sold. If an item isn’t selling, it is killing floor space and the company has paid for a non-productive item. However, a good item that sells well should always be close at hand. When an item is moving well, the last thing a retailer wants is a break in the flow of that product that could inconvenience consumers and harm overall sales. To alleviate large backlogs of inventory, the retailer must control the quantity of stock so it doesn’t take up too much storage space, but also so that it can be reached quickly for immediate sale. For this reason, finding a supplier who has a good, reliable source for the product and offers quick delivery is important.