A Man and his Penguin

Retailers are complaining that netbooks are too cheap and that there is not enough profit margin in them. This, my friends, explains why retailers are going under at the moment.

You don’t make money from the main product. That’s not entirely true - you make a small profit after you’ve discounted the product for the customer, because they will almost always ask for one. Where you make your money is in the add-ons.

Let’s show how this works with netbooks. Somebody buys a netbook from you, and you make minimal margin. Once you are assured of getting the sale but before the customer has paid, you ask them “Do you need a carry case?”. The customer didn’t think about that, and they will admit that they pretty much need one (netbooks are made to be carried), so you can sell them one. You get the carry cases from the supplier for $15 and you can sell them for $30-40. Money made there.

While selling the product, you can both spruik up the battery life (it lasts 3 hours which is long enough to last a plane trip from Perth to Melbourne) and also try and sell an add-on battery (…but we also have higher capacity batteries available with a 6 hour battery life in case you need to use the machine all day in between charges). I don’t know how much batteries go for or how much they cost the retailer, but that’s an extra add-on sale.

Extended warranties. All electrical retailers have them. There’s usually 50% GP (gross profit) in them. Sell them. Miniature mice - many people don’t like trackpads. Sell them. The Atom chipset can handle 2 gigabytes of RAM, and Windows people seem to think that the more RAM you have the faster the computer will go - sell some more RAM.

Start with the most likely add-on sale and keep going until you get a “no” for two of your suggestions.

When I bought my netbook, I wasn’t asked about any add-ons. I wasn’t asked about a carry case, a battery, extra RAM, a mouse, a warranty or anything else. In fact, the salesperson was practically pushing me to the counter and I had to say “Hang on a moment, there’s something else I want to get, I’ll see you at the counter in a moment”.

Before you all start giving your salespeople extra coaching for selling add-ons, remember that they can only sell addons if you’ve GOT THEM. I tried to buy a carry case for my netbook - “Nup, we don’t have them”. “But you sell netbooks!” “Yes, but we don’t have any cases for netbooks, only for bigger notebooks”.  This happened at several local retailers. I went back to the place where I bought my netbook and asked if they had bigger batteries for them. “No.”

Retailers, if you want to survive you MUST SELL ADD-ONS, and in order to sell add-ons you must THINK about what you can add on for each product (especially low GP or low priced items) and make sure you have them! Of course, once that’s done, you can tell your salespeople “Right, we’ve just got in some big batteries and carry cases for netbooks, so don’t forget to suggest these to the customer.”

If you’ve been wondering where I’ve been for the last little while, the reason I haven’t been posting is not because I’ve been too busy, it’s because my life has been pretty boring. I plan to try and write a post every week, whether it’s about selling, technology, furniture (yeah right…) women, or whatever!

This entry was posted on Tuesday, March 10th, 2009 at 5:58 am and is filed under Advocacy, Web/Tech. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.