Why retail owners and CEOs can’t take more money out of their business – and how a waiting culture is the cause.
Why can’t I take more money out of my business? That question lands differently depending on where you sit. If you own one store, it’s personal – your draw, your bonus, your ability to reinvest. If you run a chain, it shows up on the earnings call. RH has been pressure-testing how much price it can hold on a multi-thousand-dollar sofa while the housing market stays soft. The question is the same whether you have one location or two hundred.
And if you’re a manager who lives for bonus, it is no different…
Different scale. Same problem.
Let’s go back to when I was CMO of a startup coffee chain called It’s A Grind – grew it to 135 locations, later featured on Showtime’s Weeds. When I arrived, the owner was running two-for-one promotions. The average check across the chain was around four dollars. Franchisees thought the margin on coffee was amazing- literally pennies for the dollars. Except for most customers’ orders, specialty drinks that require dairy, they want something to eat with it, and labor.
People buy franchises for the money they take out of it, not what they have to put into it.
I stopped the promotions. I created a quarterly specialty drink priced a dollar over the standard menu. The stores that got behind it – sampling, training their crew to suggest the switch, making it a floor-level game – pushed their average check to nearly five dollars.
As new drinks were added we entered their price system-wide. Some franchisees lowered it back. To them it was just the same drink with extra ingredients.
Those same franchisees would later sit across from me and ask why they weren’t making money.
When we dug into it, several had barely sold the premium drink at all – much less at the correct price. They had the answer in their hands and put it back on the shelf.
Back to you…
How many times have you resisted raising prices?
How to Know If Discounting Is Hurting Your Retail Margins
Pull your gross margin – not revenue, not units. How much are you keeping over your costs of goods after you service the debt to bring that inventory in? If that number is below 55% for smaller stores or under 40% for larger chains, you have your first answer.
Discounting, frequent sales, and reactive pricing are almost always the cause for owners who can’t take more out and managers who can’t hit bonus.
Not the economy. Not the lease. Your own floor.
Why Retail Sales Events Train Customers to Wait – And Employees Too
Your big sale brought people in. The parking lot was full. The staff was busy. I hear this from single-store owners and regional VPs alike. And it’s all true. What nobody says out loud is that you just taught those customers to never buy at full price again.
Here’s what’s worse: your employees know it too.
The associate who tells a browsing customer “we have a sale coming up in a few weeks” is not being dishonest. They genuinely believe they’re being helpful. They’re removing the pressure of buying today today. Low risk of rejection. Easy interaction. The customer leaves happy.
And you just trained two people at once – the customer to wait, and the employee to avoid selling.
That’s a waiting culture. It compounds quietly. By the time most owners name it, it’s been running for years. By the time most CEOs name it, it’s embedded in the brand.
Three Ways Retailers Respond to a Discounting Problem
Most owners eventually see it. What they do next is where it falls apart.
The first response is to manage down. Cut shifts. Shrink hours. Pivot to private label and tell yourself you’ll make it up on the wholesale buy. You won’t. You are not a wholesaler. You are a retailer. Your margin lives on the floor, not the cost sheet. Managing down is just losing more slowly.
The second response is the speech. Someone calls a meeting, draws a line in the sand, maybe runs a contest. A leaderboard goes up in the back room. For about a week there’s energy. Then the contest ends and everyone goes back to what they were doing before – which is waiting. I’ve seen this play out in single stores and in chains with three hundred locations. It doesn’t matter how loud the speech is. You cannot motivate your way out of a structural problem.
The third response is the only one that works. You install a selling framework – not for your closers, they’re already selling – but for every other person on your floor. The ones who are perfectly pleasant, know the product, and have no idea what to do with a customer who isn’t already sold. That’s most of your staff. And on most days, that’s most of your traffic.
How to Stop Discounting and Start Selling at Full Price
I don’t care that you have a veteran on your floor who can close anyone already interested in your products. In fact, I often find that great closers can be some of the best worst discounters.
Your opportunity is the casual shopper. The one who wandered in, has no urgency, and hasn’t decided anything yet. That’s the majority of your traffic every single day – and most of them leave without buying because nobody guided them anywhere.
It’s not a script. It’s engagement – real enough and warm enough that the customer is willing to go one step further with you. In a shoe store, that means building enough rapport that they’ll take off their sock and try something on. In an apparel store, it means earning enough trust that they’ll step into the fitting room. In a jewelry store, it means creating enough connection that they’ll let you put something in their hand. In a car dealership, it means making them comfortable enough to get behind the wheel.
The customer decides whether to take that next step based on how they feel about the person in front of them first – not the product and not the discount.
We spend too much time talking about merchandise and not enough time connecting with the person holding it. The associate describes. The customer listens. Nobody commits. The customer says they’ll think about it – and they will, right up until your next sale gives them a reason to come back and spend less.
Of course, any time a shopper leaves your store empty-handed, it’s a chance for another retailer to get your business.
The fix is not a personality. It’s a practice your entire floor owns – not just the ones born to sell. That’s true whether you have one location or one hundred.
Three Questions to Diagnose Your Retail Discounting Problem
- Is your gross margin below 55%? If yes, you have a pricing or discounting problem. Find out which one first.
- Do your employees know about upcoming sales before customers do – and do they mention them on the floor? If yes, you have a waiting culture.
- When a casual shopper comes in, does your team have a clear next move to guide them deeper into the experience – or do they wait to be asked?
If they wait, you are leaving the majority of your traffic unserved. Multiply that by every location and every quarter and you have your earnings problem.
You don’t fix a waiting culture with another sale. You fix it by deciding that what happens on your floor is worth paying full price to experience.
And the next time you ask why you can’t take more money out of your business – whether that’s your personal draw or your quarterly results – look at your floor first. The answer is almost always right there.
If you’re ready to install a selling framework across your floor, start with the guide below.
