Why Is This English Supermarket Selling School Uniforms for £3.75?

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(This post originally appeared on Inc.)

OK, it’s actually not an English supermarket. Lidl is a German supermarket chain with stores all across Europe and the U.K. The store is definitely not high end. There’s one located near my father-in-law’s flat in Northwest London and when you go in there you’ll see lots of discounted, no-name items being sold to lots of people that do not speak English as a first language. It’s cheaper stuff for people on a budget and Lidl has carved out a niche as an affordable supermarket in the U.K. serving this market. Nowthey’re selling school uniforms for the unheard of price of £3.75 (about $5.00). Why and how? English kids wear school uniforms. It’s a thing there. And every school year parents normally have to shell out anywhere from at least £20 to £50 or more for a single uniform (and most kids have a few). This is not an insignificant expense if you’re working an hourly job somewhere. Which is why when a store is offering a way to save significant money on a necessity like a school uniform antennas are raised. Is this a joke? What’s the catch?

There is no catch.

Sure, you can make the argument that the uniforms are of poorer quality than the ones you’ll find at English department stores like Marks &Spencer or John Lewis. And some accuse Lidl of exploiting the low paid workers in other countries who are making the uniforms. However, the low paid worker in the U.K. really doesn’t care about the low paid worker’s plight in some other place. He cares about survival and buying a cheap uniform is attractive. Is Lidl going to make money from these uniforms? No – in fact I’m betting they won’t even break-even on each sale, particularly once you figure in the cost of shipping, warehousing and other overheads. But that’s the wrong question.

The right question is will Lidl make money on the campaign? And the answer to that question is a most definite yes. The lesson is important of all of us running small businesses.

People like free stuff. They are always looking for bargains. They want to get something for nothing. This is human nature. But this is also a reality in an era where not only is the economy slow but wages, particularly in this country, have been stagnant for years. The costs of housing, food and other staples have been going up. But, for most, income levels have remained the same. People are squeezed. Deals become more attractive.

And smart business people, like those at Lidl, realize this. They compete against supermarkets, grocery shops and convenience stores. In the retail business it’s all about getting people in the door. And what better way to get people in the door then to offer school uniforms for an absurdly low price? The executives at Lidl know that shoppers who come inside to buy a school uniform will more than likely stick around to pick up some other items while they’re there. The uniforms are the carrot to lure punters into the trap. The loss from the sale of one uniform would be recovered, and then some, with the purchase of food and groceries.

If you want to increase your cash flow you need to make more sales. And if you want to make more sales you want to attract more customers to your business. Duh. So how do you do that? Look at what Lidl is doing. What can you be giving away that will lure customers into your store? Lidl sells food, not school uniforms. But they’re using school uniforms as bait. Your bait doesn’t even have to be related to what you sell.

So maybe you advertise iPads at 50% off, even though you’re a clothing store. Or discounted Starbucks cards even though you sell shoes. Maybe you sell bottles of water for only twenty-five cents out of your sporting goods shop or underwear for a dollar from your stationary store. You want people to say “Hey, if you go to that sporting goods shop you can always get a bottle of water for twenty-five cents!” Your job is to draw people into your store. If you use a loss leader product as the enticement, you’ll improve your chances of selling more profitable inventory. It won’t work every time. But it’ll work.

So yes, if you need an English school uniform for your child you can get one at Lidl for only £3.75. Oh, and while you’re there can you pick up some milk, a head of lettuce and few bottles of wine please?

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