The “Profit” Side of Being Nice…..

Sales, especially this time of year are something most of us enjoy. No, I do not nor ever intend, to participate physically in “Black Friday” events. Anyway, way back when I was a teenager, a “Five and Dime” store, a regional chain that I don’t think exists any longer, opened a new store in town. I was just turning sixteen and they needed extra temporary help to get the store ready and for the first few weeks. Work permit in hand, I had my first retail job. I came back later and worked there part time when I was in college. We lived in a small college town, so it made for an easy set-up. In coming from a one-income middle class family, a part time job was necessary. (One summer, I actually had three, but that’s for another post.)

I’ve never pretended to be an economist, but there some valuable lessons I learned about the corporate world with that job. The manager knew I would be moving on and he chatted with me sometimes about how things actually worked. It was school supply season and we were selling notebook paper for an absurdly low cost. I made the comment and he explained. “We do lose money on that and a few people will come in only for that. Most though will bring their whole list and rather than run around to different stores, will buy everything they need here. We lose on the paper and make it up on the rest.” Ah, got it.

Fast forward to the other night when a discussion came up about wine stores. We were talking about one we used in Maryland and I recounted that aside from them having a big selection and good prices, the staff was knowledgeable and friendly. We mentioned they often recommended less expensive wines for new ones for us to try and we appreciated the approach. One of the individuals in the group had once worked in a wine store. “There are two good reasons for that,” was the explanation. “The truth is the profit margin on an expensive bottle of wine is often lower than on a mid-to-low price one. So, you make $2 by selling the expensive one and say $4 dollars per bottle by selling the lower price one. The customers feel like you’re looking out for them – and you are – but at the same time, you make more profit.” Another ah, got it. Makes perfect sense.

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