Ever wonder how your local coffee shop can make fistfuls of money with a business focus as simple as espresso beans and steamed milk? Sure, $3 lattes don't hurt, and neither does having locations on every other block. But companies like Starbucks and Caribou Coffee also rely on one of the most basic tenets of retailing. In addition to what customers have walked into the store to purchase, they will happily load up on things they weren't thinking about and things they might not even need, including travel mugs, cookbooks, and even compact discs that coffee shops are all too happy to stock near the register.
It's called impulse buying, and since the mid-'90s, Hamburg, Germany–based Tchibo—which claims to be the world's fifth-largest coffee seller—has been taking the concept further by brewing a weekly lineup of new products that can include household appliances, hand tools, and cordless drill/drivers. According to “Starbucks Meets the Sharper Image,” an article on Tchibo's business model by Siri Schubert in the March 2006 issue of Business 2.0, Tchibo annually sells more than 1,800 non-food SKUs, which can account for up to 75 percent of turnover at some locations. Selling 100,000 units of each product it offers on average, Tchibo has not only conquered the cafés to the tune of $4.6 billion in annual sales but also claims to be one of Germany's top 10 clothing retailers.
The combination of power tools and coffee, of course, immediately brings to mind the lumberyard, where pro dealers have been plying contractors with java and boxed donuts for decades. Offering items like garden hoses and snow shovels, however, has traditionally had a stigma of immediately shaving 10 points off your pro sales percentage. But even contractors can be impulse shoppers, and regardless of your pro-to-consumer mix, you shouldn't let throwing some high-margin impulse products into the daily blend give you the jitters.
“It's like the gas station that sells potatoes or the drug store that has stainless steel staples,” explains Jay Curtis, president of Ballston Spa, N.Y.–based Curtis Lumber, who says that the strangest thing the company ever sold was a truckload of metal garbage cans with paisleys painted on them back in the '70s. “It's what I call transient inventory, for-a-limited-time-only type of stuff, and there's nothing complicated to it. It's the old K-Mart blue light special mentality of ‘stack it high and let it fly,' and it's great if you're lucky enough to find what the next hot, trendy item is.”
According to Curtis, the typical lumberyard has a traffic volume where almost any product can be aggressively sold regardless of its hip factor or resemblance to anything LBM, but savvy product plying lies in knowing when enough is enough. “If you've got traffic, you can sell anything,” Curtis says. “I could put a stack of brilliant orange kayaks out there, and in a month they are gone. But when you try to put those things into your regular inventory and make it a ‘part of what you do,'you're making a bad move. You use those products strictly to create excitement, to create something novel, and when they're gone, they're gone.”
So if your end caps are in need of a little jolt, maybe it's time to take a chance on one of your buying group's liquidation specials on Frisbees or take one of your hard-lines buyers up on that shipment of wraparound shades he's been bugging you about. Curtis bought its paisley garbage cans for $2.10 apiece and unloaded them within a couple weeks at $8 a pop. If you've got the retail traffic to support it, and the will power to keep it sporadic, the upshot of impulse selling could be a little bit of customer buzz and a whole lot of margin. At the very least, it's something to think about over your next cup of joe.