Retail Secrets: How to Sell 1.5 Billion Products

Last Updated Mar 16, 2010 1:26 PM EDT

The great thing about running an "everything under a buck" chain is that competitors won't under price you. Ever.

The bad thing?

You have to sell more than a billion items to make a profit.

"Yes, that's right -- we have to sell a huge number of items to generate that figure," reports 99 Cents Only CEO Eric Schiffer. "Our average price works out to be about 80 cents because we also price many items at well under a buck, so we sell around 1.5 billion items annually. It really is a transaction-intensive business, and our systems have to be able to deal with that."
Anyone involved in retail will have a blast reading this interview, which is in the current issue of Harvard Business School's Alumni Bulletin.

Some other highlights.

Every penny counts. Literally. "If I add a penny of cost to an item, that's 1 percent of my profit... So we try to eliminate waste and increase productivity in every aspect, whether it's compliance, shipping, handling, distribution, storage -- we strive to find ways to deal with costs creatively."

The first sale is the hardest. "Our biggest hurdle is getting someone to come into a store for the first time. They may be nervous: 'Where's this from? Did it fall off a truck?' No, it hasn't -- it's a good quality product. So the first time they may only buy some cleaning items. On the second visit, maybe a name-brand shampoo. Next, they try some Arizona Iced Tea: 'Well, it looks safe. I'll buy it.' Then they buy some bananas."

Don't confuse your taste for the customer's. Schiffer's purchase of shrimp deveiners and clam knives sat on the shelves for years. "I would always walk by the section to remind myself that it doesn't matter if I like something."

Curious. Have you shopped 99 Cents Only? What was your experience? Why are they successful?

Related Reading About Strategic Pricing
Be a Price Maker, Not a Price Taker (HBS Working Knowledge)

Seven steps toward naming your own price.

(Image by loop oh, CC 3.0)

  • Sean Silverthorne

    Sean Silverthorne is the editor of HBS Working Knowledge, which provides a first look at the research and ideas of Harvard Business School faculty. Working Knowledge, which won a Webby award in 2007, currently records 4 million unique visitors a year. He has been with HBS since 2001.

    Silverthorne has 28 years experience in print and online journalism. Before arriving at HBS, he was a senior editor at CNET and executive editor of ZDNET News. While at At Ziff-Davis, Silverthorne also worked on the daily technology TV show The Site, and was a senior editor at PC Week Inside, which chronicled the business of the technology industry. He has held several reporting and editing roles on a variety of newspapers, and was Investor Business Daily's first journalist based in Silicon Valley.