By Bob Phibbs
I don’t care what side of politics you are on, the new administration in its first month in office unleashed waves of uncertainty surrounding the continued funding of federal grants, the work of federal employees and tariffs.
With many retailers already operating on thin margins, the possibility of universal tariffs struck fear. With so much furniture and home goods made in countries targeted for tariffs, home furnishings retailers are in the crosshairs of disruption. But most of you have had to deal with disruption before.
I began my career in a new store when Ronald Reagan got shot; I’ve lived through 9/11, the Great Recession in 2008, and of course, COVID. What I’ve found is that our emotions can override our logic and that we must control them.
So, while you can diversify your supply chain, collaborate with your suppliers and use AI to manage it all, I’d like you to consider that there is a bigger issue here: it’s time to examine your reliance on perceived discounts.
Yes, you can tie up your money by pre-buying everything and hope you’ll make the smart choice. But maybe this is a chance to look at how you’ve tried to show you are a customer’s friend by discounting everything “off MSRP.”
We both know that you never charge MSRP — and so does your consumer. But a more troubling problem is that it comes from you not believing it is worth more than whatever bright yellow tag you hang on it.
The core problem is retailers who can’t maintain prices often don’t believe in their pricing.
There are a lot of ways you can price your merchandise, but pricing based on what you think it should cost may lead to the following:
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- Lack of confidence in original pricing
- Employee skepticism about value
- Mixed messaging to customers
So, when prices have to go up — tariffs or not, you may get scared and try to maintain those false pricings.
Your Path Forward: Embracing True Value
The era of buying low, pricing high and discounting is coming to an end. You can have a special buy, of course. But that recliner that is always on sale? Maybe that’s a wakeup call that you can only sell it at a discount because no one believes it is worth it.
If your crew can frame value in something on sale, why can’t they build value in the product to begin with? That way, no matter what happens with tariffs, you’ll find new ways to communicate with your shoppers.
Your crew will understand that whatever the price, it is their job to sell it, and when you upgrade your selling skills, your customers will rave.
When I was CMO of It’s A Grind Coffee, a 135-location coffee franchise, we had pushback from franchisees over the rising costs of milk. I was doing a store visit when I noticed the owner wasn’t there — she had gone to Costco to buy their daily milk. She stopped her milk delivery service and felt there was no value in paying someone to do that, so she drove every day and loaded up her SUV with gallons of milk.
She had an accident later that month.
We had to show those franchisees it was OK to raise prices, even if Starbucks didn’t. We knew they would eventually. We picked out the most-ordered drinks and raised the prices by 15% so it could give a lift to the whole menu. Then we provided quarters in a dish near the register with a sign “Your favorites just went up, so we’ll help you for a week.” Regulars could grab a quarter or two to help pay for their more expensive drink.
Avoid tariff talk
Don’t talk about tariffs to your customers. It’s a loser’s limp, “It’s not us raising prices, it’s them.” Sell the value. Believe in your merchandise. Upgrade your offerings.
The money is in the showroom that sells the merchandise, not warehouses it.
In the end, that’s how great retailers like you built your business. Concentrate on what you can do to sell more to offset the fear in your head of what might happen.
You’ve been here before; you’ll be fine.
Bob Phibbs, the Retail Doctor, is a globally recognized retail expert, specializing in boosting brick-and-mortar merchants’ success. Author of three retail books, he trains retailers to increase sales by 20-50% through his online platform, SalesRX, currently used by hundreds of retailers including the International Casual Furniture Association. Phibbs speaks worldwide, offering sales, merchandising and marketing strategies to accelerate retail success.
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