I’m Fine: Volume Based Discounts and the Impact to Small Shops vs. Box Stores vs. Online
By: Greg Koch
Think about a time where you asked somebody how they are doing and they looked you in the eye and said,
They tell you this even when you clearly know they are actually not fine.
Might mean they don’t want to talk about it, don’t want to burden you with their problems, or don’t think you’ll truly understand what is going on.
I know for a fact I’ve done this millions of times with my wife. Hey, we all got issues we are working on and not talking about things or in some cases talking too much about things, is my thing. Trust me, I am indeed not fine.
The point is that sometimes in life people can tell you one thing, but clearly mean something else. In the running industry this comes into play when I go into brand meetings and discuss our purchasing strategy. Now, on many occasions some of our best brands have looked me right in the eye and said that their selling strategy is not based on volume. This is the equivalent of,
Every single one of our brands operate on volume-based discounting. This common pricing strategy is used in wholesale purchasing. It involves offering customers a lower price per unit for purchasing larger quantities of product. Wholesalers (our brands) offer a sliding scale of prices that decrease as the quantity purchased increases. For example, a brand might offer a price of $82.50 (on a shoe that retails for $150.00) per pair of shoes for 100 pairs of shoes, but offer $80.00 per pair of shoes for 200 pairs of shoes.
Typically, we will be offered our best discount for what is known as “future” orders. These are orders that we schedule sometimes up to 12 months in advance. We will then get a different, less friendly discount for what is known as “fill-in” orders. This discount also applies to any special orders we might place for folks that want a different color or size option than what we forecasted. So, depending on when we purchase a shoe, and how many of those shoes we purchased, all impact our overall margin. This creates a complex task of shipping and receiving product, and forecasting what our market will buy including: style, color, price, brand recognition, comfort, functionality and purpose.
As a small store it can feel like the deck is stacked against us in comparison to larger box stores. Here is another,
Category from our brands. Our product is classified as run specialty, meaning you should only be able to find it in a store that specializes in running. However, our products are found in places like REI, Scheels, Dicks and other similar box stores disguised as specialty outfitters. That is a controversial statement, but the reality is that while these stores might be a step above JC Penny, Target, Wal-Mart or Kohls, they are in-fact box stores that cannot compete with the service offered from a true specialty outfitter.
So how do these stores get product? Big box stores have greater purchasing power due to their large size and higher volume of sales. This means they may be able to negotiate product into their stores and get better prices and pass these savings to their customers. And that is where the next,
Statement comes into play. This involves what is known as a MAP policy or minimum advertised price. In our industry this is supposed to be the equivalency to the law. These policies are in place to insure that even though we don’t pay the same price for shoes, small shops and big box stores alike, charge the same amount of money for shoes and gear. There are supposed to be penalties for breaking MAP policy. In 2023, with all of the access and power that is at each individuals’ fingertips, this law feels like it is fading away. Not even powerful box stores can compete with direct-to-consumer sales. Especially, when the brands selling product deliver what they call a,
And change their own prices to push product sales. Sometimes these come with little to no warning.
Maybe, it is time to reimagine the wholesale experience. When businesses over-purchase inventory to take advantage of volume-based discounts, it can lead to higher levels of waste and resource consumption, contributing to environmental problems such as greenhouse gas emissions and pollution. A box store might over purchase inventory and continuously move it from one store to the next based on sales performance – increased transportation. Direct-to-consumer websites package each individual shoe in an extra box with packaging and spend more money on shipping direct to people’s homes. This is all wasteful, and when truthfully examined, shameful.
This is where I’m going to write about the power of shopping local. When it comes to purchasing goods, consumers have a choice between shopping online, at big box stores, or shopping at local businesses. While big box stores may offer lower prices, added convenience of purchasing multiple items from several different categories at once (I.G. running shoes, fishing tackle, a purse and beef jerky), and *shopping online can be done from anywhere (I.G. at your work desk, on the couch, or in the bath); shopping local can provide several advantages that are often overlooked.
The key advantage of shopping local is the opportunity to support your local community. This doesn’t just create a sense of community pride. This actually supports local economies in a much more significant way than making that purchase anywhere else. I’ve previously written about the benefits of shopping local so I’ll link that post here to more clearly state this case. I cannot tell you the number of people that have talked to me about all of the great things my business has done for our community; while in the same breath they tell me that they bought shoes online or from a box store. It happens more often than you think, and it hurts every time. This doesn’t deter our work in the community or stop us from providing excellent service. In fact, it makes us better every day. Simply put the impact of just one shoe purchase has a significantly greater impact on me and the folks working with me than it does at a box store or online.
*You can shop us online or from our app and schedule a product pickup instore. The best of both worlds.
The Power of Your Running Specialty Shop: Why Supporting Small Business is More Important Than Ever
By: Greg Koch
Are you familiar with “The Man in the Arena”?
If you are a sports fan, you’ve probably been familiarized by this from the docuseries about Tom Brady with the same title. Or if you are a TED Talk fan/follower of Brené Brown you are most likely familiar with, “The Power of Vulnerability” and putting yourself in “The Arena” so to speak.
“The Man in the Arena” is a quote from a speech given by former US President Theodore Roosevelt in 1910. I understand the speech to be about the importance of taking action and to not allow yourself to be consumed with fear of failure or criticism. In 2023 there is no shortage of folks on the sidelines ready and willing to share criticisms and let you know when you fail.
In my opinion, this perfectly describes our last few years in business.
“It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, who comes short again and again, because there is no effort without error and shortcoming; but who does actually strive to do the deeds; who knows great enthusiasm, the great devotions; who spends himself in a worthy cause; who at the best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who neither know victory nor defeat.”
Let’s break this down.
“The man who is actually in the arena, whose face is marred by dust and sweat and blood”
For us this is surviving the pandemic. As our daily way of doing business quickly unraveled, we had to pivot and change how we operated. Once we figured that out, we were hit with unprecedented supply chain issues. Soaring inflation and an over correction in both production and buying has led to a flood of inventory; and in some cases, a race to the bottom to offload product. Being in this arena has left us with a face marred by dust and sweat and blood for sure.
“Who strives valiantly, who errs, who comes short again and again, because there is no effort without error and shortcoming”
Over the past few years I’ve been pretty transparent about the mistakes I’ve made at the helm of our business. I alluded to this above, but we over bought inventory. This was done based off of the information that was give to us by our brand partners and reports of shortages across the globe. Because of this we over leveraged our ability to distribute and got sacked with too much inventory. We are not alone here and others are worse off than we are, but this was an error on our part. We also over played our hand in how quickly live running events would return to form in our region and over invested on race enhancements that our events couldn’t afford. All of my shortcomings were in an effort to best serve the local community.
“but who does actually strive to do the deeds; who knows great enthusiasm, the great devotions; who spends himself in a worthy cause”
We are a community first business. I have nine years of operations that showcases exactly what we are all about. Whether it is a race wheelchair (that was recently stolen from us) to provide an opportunity for all to participate in running, to pioneering a run across South Dakota for suicide prevention, to providing shoes for kids at Children’s Home Society; my team and I have strived to do the deeds. We do this with great enthusiasm and will continue to do so. From large events to weekly group runs we want to build the best version of a running community that we can.
“Who at best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who neither know victory nor defeat”
In July of 2022 we boldly picked up our shoe boxes and pioneered a brand-new location in Downtown Sioux Falls. Make no mistake about it, this was a swan dive into the arena. We have a history of boldly pursuing challenges. From adding services like coaching and race timing, to investing in new and emerging brands (like Hoka, Altra and On Running) before you saw them at every box store and internet ad. We know the triumph of high achievement and dare greatly and we do it all to provide a valued experience and service for our community.
My colleague and independent running store pioneer, Mark Jimenez, Owner of Red Rock Running Company out of Las Vegas Nevada, reached out to me via email a year and a half ago with an idea to bring store owners together. We had sat in on a few industry meetings together, but for the most part did not know each other. Mark had done amazing things to grow his business, and rather than sit back and count is endless supply of run specialty money (kidding here, but he has grown his business successfully and continues to reinvest in Nevada running). He wanted share how he earned success and he wanted to learn how to be even better from his peers within the industry. He was directly reaching out to folks that he thought valued the community running store experience as much as he does.
I was impressed with his email, but because I barely knew Mark, I was hesitant to be vulnerable in this setting. It took some time before I officially joined the group, but I’m so glad I did. This network has been indispensable as we navigate business ownership in the run specialty industry. The point here is that we are extremely passionate about what we do and want to make running great in every way possible. These networks and the commitment to the sport simply do not happen in box stores or on direct-to-consumer websites. This is the power of your local running specialty shop and why supporting small business is more important than ever.
You know what they say when you assume things? You may have heard these next few lines, but for the sake of neither one of us being an … I think you get the picture so I’m going to offer up the following. Shopping local offers a range of benefits over box stores and direct-to-consumer websites (this includes brand websites and third party sites).
Simply put, the value of a single shoe sale has a significantly higher impact on your local specialty shop than it does on a box store or direct to consumer website. What does this all mean. If you have one take away from this post today my hope it is that you’ll take a long look at how and when you make your running related purchases. The truth is our products can be found in a lot of places including box stores and on direct to consumer websites. We cannot stock every brand, color or product. There are many destination races and online coaching platforms too. My team and I are not running from those facts. We are in the arena, taking action, being brave, and working to better our community.
Our team travels to industry events to see the latest and greatest products available. We work hard to curate the best possible assortment of products for South Dakota running. In our store there is a culture of learning; we regularly train on how to best provide our clients with the best possible running experience. Live events for us create opportunities to give back to programs that better our community. At 605 Running Company our mission is to enhance the running community as a locally owned and operated outfitter. No matter what your abilities, pace or running history we are inclusive to all runners. Join us in the arena, be brave, shop local.