Loss leader mentality and bad sales staff to blame for lost profits

By Patrick Avenell

SYDNEY: A specialist retail service professional has identified poor sales skills and as an institutionalised loss leader mentality as two main instigators of price erosion.

Bob Johnson, the proprietor of Turning Point Training & Development, has been involved in retail for over 30 years, and has run his own specialist retail training company for 15. He is very passionate about the consumer electronics retail industry, so when he saw comments from Panasonic managing director Steve Rust and specialist retailer John Messer about the current level of aggressive price erosion, he wanted to share his thoughts.

“The problem is, some electrical retailers sell almost everything as ‘loss-leaders’, then get excited because they sold an add-on that had a 60 per cent gross profit, but it’s 60 per cent of $20-$30,” said Johnson.

Johnson compares this loss leader phenomenon to the retail book industry, which frequently discounts the most anticipated books to cost price – all to get people in the store. Considering that people queued for hours for the final Harry Potter book, Johnson was amazed that stores sold it for almost half the publisher’s recommended price.

It’s not just price erosion that whittles away profit, though, with Johnson identifying a paucity of sales skills as major cause.

“A good chunk of lost sales and margin also comes down to poor sales skills.

“The other day I was browsing in a well-known electrical retailer’s store in an affluent suburb of Sydney, at a quiet time of the day.  At least four AV salespeople ignored me as they went about re-laying stock and razzing each other. No eye contact, no acknowledgement of my presence – nothing.”

Johnson attributes the lack of training to retailers not being prepared to make the commitment to their staff.

“It seems not enough retailers are prepared to invest the time and money in training and/or coaching their people.

“Some will say, ‘But what if I spend all this time and money on training my salespeople and then they leave me?’; my answer is simply, “Well, what if you don’t spend the time and money to train your people – and they DON’T leave you?”

What’s your view on price erosion? Are sales people really so bad? Send me an email.

Bob Johnson is a regular contributor to Appliance Retailer magazine.

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