A few months ago, I wrote about 99 cent shirts.  I have more thoughts on that subject so, at the risk of being repetitive, let’s call this “part 2”.

There are still plants out there offering 99 cent shirts.  That’s what I’m told anyway.  I can’t say that I’ve seen any first hand in a long time, but I believe what I hear regarding this. 

There are guys out there doing shirts for less than a dollar and we scratch our heads and wonder how.  But a better question is why.  I will answer both questions.  It’s not really that difficult.  Let’s look at the how question first.

The best run Tailwind System plants run their shirt labor cost at somewhere between 38 cents and 43 cents.  This requires a good system (Tailwind), good management, (more on that) and typical wages (usually around $11, burdened).  In theory, such a plant could vend shirts for 99 cents and run in the black, but if you allocate 100% of your expenses over 100% of your pieces, you will very likely run in the red.  It is possible to make the numbers lie to you by pretending that the building that you operate your plant in is “free” space because you own it free and clear or that your equipment is not wearing out every day and will eventually need to be replaced.  There is no such thing as a free ride.  You pay now, or you pay later.  The problem here is that I don’t have any clients that do shirts for 99 cents, so the only way that you can do shirts for around forty cents each is to be paying significantly lower wages that $11/hour.  This is very common among those that want their cost to be lower than the price they charge.  Immigrant labor is widespread in some areas of the country.  However, this does not mean that you are engaging in illegal labor practices if you charge too little for your shirts.  There are some people that simply do exactly what they say they are doing: they use shirts as a loss leader, but that is a possible answer to the question of “why” they charge 99 cents for shirts.

So to recap “how”:  It’s easy, really.  Pay very low wages, do a lot of the work yourself in space that costs a couple a dollars per foot (your garage?), use cold water and bulk soap from Sam’s Club, don’t maintain your equipment and don’t replace silly things like pads and covers.  No cheating by not paying your supplier, but don’t waste money on intangibles like quality and service because your customers won’t pay for that either.  If you laughed, or cracked a smile as you read this paragraph, good for you, but I really wasn’t trying to be funny.  I was proving that you can, indeed, do shirts for 99 cents.  I told you that I would explain the “how”.

There is probably somebody out there that I just really ticked off.  Please don’t be offended if that’s you.  The life I save just might be yours.  The fact is you could possibly be using hot water, Sanitone, good wages and bennies in the high-rent district, but in that case you either 1) have not bothered to figure out your cost, 2) you don’t really have a grasp on how it’s done, or 3) you are aware of your cost enough to know that you don’t care about making any money because you only intend to use shirts as a loss leader in order to get the high-ticket drycleaning items.  Fair enough, but the problem with selling shirts at a discount lies within the pricing structure itself.  Let me explain.  Let’s say that you are discounting your shirts in order to keep the traffic into your store at a brisk level.   By design, your drycleaning prices must be at average or above-average prices (preferably the latter) to compensate for the price reduction on the laundry side.  You are conditioning the customers that you attract to be price sensitive, by definition, because you acquire them by discounting prices.  In theory, your drycleaning prices must also be cut-rate because of the marketing that you have done.  That results in a pricing structure that is doomed.

Have you noticed that, these days, you can get deals on anything.  Cars, appliances, services of all types.  Everybody, it seems, is offering some sort of discount to get you to do business with them.  There is some bizarre comfort in that.  Those offering these discounts must surely be in tune with the times.  These advertisers obviously understand that money is tight and times are hard.  They understand that some of their customers have lost their jobs and consequently are no longer customers.  They have come to terms with the fact that the pie has gotten a lot smaller lately and they want the biggest possible slice of that pie.

But they are doing something else too.  Can you guess what it is?

Look at your local advertising today.  How many businesses are advertising incentives to do business with them?  For what products?  How many are offering unheard of low prices?

You probably think that I am suggesting that you should cut your prices and/or offer price breaks.  Not so.  I am not suggesting that at all.  I am trying to get you to think.  What else are these businesses doing?  It is very obvious, but I am guessing that you aren’t going to guess it.

During tough times, there are a couple of things that business owners tend to cut out of their budgets first.  Ironically, it is probably the last two things that should be cut.  Those things are advertising and consulting.  Hiring a consulting can be the most important thing that you do because during tough times you need to learn how to cut expenses, build sales and maximize profits.

But the point here is this:  Why do you know that these local businesses are offering good deals, price reductions and new reasons to entice you?  Why do you know?  Because they are advertising it!  If they were not advertising their enticements, you wouldn’t know about it!  Think about it!  You could come up with the best possible way ever conceived to gain and retain new customers, but if you don’t tell anybody, you will come up empty!  It’s quite obvious, actually.

So the lesson is clear.  With the pool of customers getting smaller, you want to get the biggest share.  Don’t skimp on getting the message out.  If you believe that customers should pick you to do business with, you must get the message out to them.  And the usual medium for that is advertising.  Tell them all about yourself.  They want to know.

"If you do what you've always done, you'll get what you always got!"