Even if your product has a long and happy run in the marketplace, it’s likely to reach the end of its run eventually, and leave you with a significant inventory on hand. Welcome to your first closeout! Think of this as an entrepreneurial rite of passage: If you’re in the game long enough, you’re almost sure to go through it.
Don’t let your commitment to your product blind you to reality. There will be products that you love that just don’t sell. When that happens, and after you’re convinced you’ve done absolutely everything you could have done to make this product a success, it’s time to throw in the towel and move on to another product. Close it out!
When I buy stocks, mail-order king Dona Seta told me, “I spend a tremendous amount of time in research and sometimes I blow it, but I can tell you, I have the discipline so that if I make a mistake, I don’t live with that mistake. I immediately switch or correct it. You have to do the same thing in business.”
The key thing in closeouts is to spend as little time as possible in assigning blame. (Yes, it makes sense to figure out what went wrong so that you won’t make the same mistake again, but scapegoating never made a nickel for anybody.) Move quickly! Get that inventory out of your warehouse, and—one way or another—turn it into cash. Among other compelling reasons for acting decisively, you absolutely don’t want to have an unsuccessful item in your offerings. If a buyer sees one dog in your lineup, he may suspect there are others there.
Think of your closeout options as rungs on a ladder. If you can stay on the upper rungs of that ladder—for example, by offering a sale to your regular customers—great. But if you can’t, be prepared to start climbing down, quickly.
If you’re sticking with your established customers, don’t think about cutting your turkey’s price incrementally; it won’t work. Go for dramatic price cuts. These will not only help move the product, but will get the buyers’ attention.
Who else can help? Can you go overseas? Is barter a possibility? Is there somebody out there who might be able to use your product as a premium? These kinds of options usually require some advance planning, which illustrates an important point: It’s good to have some idea early on about how you may close out when that almost inevitable day finally arrives.
Toward the bottom of the ladder, in terms of dollars returned to you, look to liquidators. This is an industry that thrives on the bad bets made by people like you and me. Liquidators will try to buy your product at 5 to 10 cents on the retail dollar. This hurts, but on the plus side, it frees up needed cash and warehouse space.
In general, I try to get my raw costs back when I close out a product. But at the end of the day, I’ll take what I can get, and move on. Closeouts are a natural cost of doing business. They’re like a trip to the dentist—better done sooner. Get it over with, and concentrate on your next great product.