I am not a fan of sale or return offers from newsagent stationery and gift suppliers yet we take them in my newsagencies from time to time.
Sale or return makes sense for circulation product, (most) greeting cards and (most current issue) books, it does not make sense in other categories when it is used to get us to take product which does not move quickly and or to take product for a lower margin.
I wonder if the sale or return offer lulls many newsagents into a false sense of security around the product offer – it’s sale or return, I don’t have to worry about whether it sells because I have protection.
With rents the way they are, we need to ensure that every square metre of retail space is performing well. We cannot afford to be lazy about product. If products don’t deliver the floor-space return necessary, they have to be cut. The floor-space return is based on sales and margin as a ratio to floor cost. This is where the sale or return offer can cloud our view. I have seen newsagents factor that a product is sale or return into the assessment of economic value to the business.
My sense is that we work harder when we take more risk with products. This is also true with (most but not all) products with better margins. Better margins are usually achieved from products we purchase on firm sale.
I think there are suppliers who know that a certain amount of product supplied on a sale or return basis will not be returned because the retailer will forget about this option or because the conditions around this are left to lapse.
The best stock outcome for us is good margin product which turns at an above average rate, product which generates a handsome return on the floorspace allocated and inventory capital invested.