So far, we have not had to raise our prices on our repeatable items (a lot of things in the store are one offs, handmade items). Yet you will hear that some of the bigger stores are having to raise theirs. Why is that?
The difference between a big store and a small store is that small store just doesn’t sell as many things as the big stores. Let’s face it, Walmart has over 4500 locations in the US, so if each store sells one of an item, they sold 4500 or more items. If our store sells one of an item, we sold one item. Period.
Sam Walton (who founded Walmart) once told me that if I ever wanted to open a retail store in an area where there was a Walmart, not to try to compete with him. “You’ll lose.” he said. But he went on to tell me that I could run a great store by selling the things that Walmart didn’t or couldn’t sell. Things that are handmade, or can’t be produced in huge quantities. Unless Walmart could order 25000 of an item, they wouldn’t buy it because they need to at least put a few in each store. At the time, he only had opened about 7 or 800 store but it was still a lot.
He made a good point and I learned a lot from Sam that night. But those are stories for another day. The point is that Walmart buys and sells so many items. If they make a dollar on every sale, they made a lot more than me. If I make a dollar on every sale, I only made a dollar! The reason that they can sell items so cheap is because they sell so many of them, so they don’t need to make as much on each sale to pay all their expenses. Sam also said “You can sell 100 hamburgers for a dollar or 10 hamburgers for 10 dollars and either way you made 100 dollars.”
It takes top notch quality, the right location, a special clientele and a certain kind of reputation to sell hamburgers for 10 dollars. But it can be done. On the other hand, the original McDonalds sold hamburgers for 15 cents, and they sold a lot of them!
When places like Walmart sell millions of item with a small markup on the products they can still do very well, but if the tariffs increase the cost by 10 percent, it’s likely that it would now cost more than they sold it for. They also have a much faster stock turnover than our little store. So we still have items, most items actually, that were in the country pre-tariff. so our costs haven’t gone up yet. Walmart has probably gone through their pre-tariff stock already.
So while the big stores are starting to raise prices in their stores, they have to. We haven’t reached that point yet because we are so small we just don’t sell as many items as them, so we have enough to hold our prices for a little while longer. I’m hoping that things settle down before we have to.
