There’s an old joke in retailing that goes like this: “We’re losing money on every sale, but we make it up in volume.”  It would of course be bad to have such low markup on every item that you don’t break even – but not making a profit on a few things may actually be a good idea.

One example of this is the classic tactic of promoting a “loss leader.”  In this advertising ploy, certain desirable items are offered at an unbelievable low price in order to bring customers into the store.  This can be especially effective strategy if your business is new. In fact, I remember that we offered a Scandinavian slotted spoon that we bought at closeout for just $1 back when we opened Orange Tree Imports.

Loss leaders are controversial, because the offers are sometimes misleading. But as Misha Runic points out in the Medium blog, “retailers who rely on loss leader pricing expect customers to buy other products (that do generate profit) while they’re in the store. It’s much more convenient for customers to purchase products at the same place than to go around different stores, spending additional time looking for the best deals.”

Grocery stores use staples like milk and eggs as loss leaders, and big box stores offer highly desirable electronics in very limited quantities.  But there are other ways that you can use the idea that you don’t need to make money on everything to drive traffic to your store.

The first is by hosting events that you won’t profit from. We recently did a book signing for the author of a privately published cookbook, and invited him to sell his work directly to the public. While it wasn’t possible for us to take any markup on this book, the author’s friends all shopped after they bought their copies.

For a recent Gallery Night, we invited one of our business neighbors to come exhibit her fine jewelry. We didn’t have any investment in her products, so we didn’t feel it was necessary to ask for a percentage of her sales. Her beautiful work drew customers to our store who may not have been in before.

There are also some products that we choose to sell with very little, if any, markup. These are mostly calendars and ornaments that benefit local non-profits.  We generate goodwill by supporting these organizations, and shoppers almost always buy something else.

It wouldn’t be possible for us to sell items without any margin if we didn’t reap enough income from the rest of our inventory.  But these are excellent examples of how you can do well by doing good.

Happy Retailing,

Carol “Orange” Schroeder